WEBVTT 1 00:00:07.500 --> 00:00:10.500 Hello and welcome to this film whose title 2 00:00:10.500 --> 00:00:13.600 mod look a little bit strange. It's about a mask 3 00:00:13.600 --> 00:00:16.500 a large Danish company the largest one 4 00:00:16.500 --> 00:00:19.100 by the way, and I will elaborate a little bit 5 00:00:19.100 --> 00:00:22.300 later on the reason why I selected this title. 6 00:00:23.300 --> 00:00:26.600 Epler mask is a very large 7 00:00:26.600 --> 00:00:30.400 company. It's a leader in shipping industry 8 00:00:29.400 --> 00:00:32.500 more than seven hundred and 9 00:00:32.500 --> 00:00:35.400 thirty vessels container ships. Right 10 00:00:35.400 --> 00:00:38.900 but also an activity which is across more 11 00:00:38.900 --> 00:00:42.400 than 40 countries 67 terminals 12 00:00:41.400 --> 00:00:45.300 into a modality shipping, 13 00:00:44.300 --> 00:00:48.100 but also hair Transportation ground 14 00:00:47.100 --> 00:00:51.500 transportation a very wide Diversified 15 00:00:50.500 --> 00:00:53.300 company, but focusing on 16 00:00:53.300 --> 00:00:57.200 shipping and it's a family story around shipping. 17 00:00:57.800 --> 00:01:00.500 The story starts at some 18 00:01:00.500 --> 00:01:03.500 time ago. They are basically three phases in the development 19 00:01:03.500 --> 00:01:06.800 of the group first creation a man 20 00:01:06.800 --> 00:01:09.600 and his son Mr. Miller and then 21 00:01:09.600 --> 00:01:12.400 acceleration with the family 22 00:01:12.400 --> 00:01:15.400 still and when the company when the group 23 00:01:15.400 --> 00:01:18.600 became too big and too Diversified there 24 00:01:18.600 --> 00:01:21.400 was a need for rationalization and focus on 25 00:01:21.400 --> 00:01:22.300 shipping. 26 00:01:23.300 --> 00:01:26.600 Peter mask murder was born in 27 00:01:26.600 --> 00:01:29.800 1836 and he created the company 28 00:01:29.800 --> 00:01:32.800 with his son Arnold Peter the 29 00:01:32.800 --> 00:01:35.600 ap of AP murder. He was 30 00:01:35.600 --> 00:01:38.200 a merchant married officer and he's a 31 00:01:38.200 --> 00:01:41.500 first person who introduced a steamboat in Denmark 32 00:01:41.500 --> 00:01:44.300 beforehand. It was just sailboat for 33 00:01:44.300 --> 00:01:47.800 transportation. So is an innovator he's 34 00:01:47.800 --> 00:01:50.200 a Pioneer and his son is also going to 35 00:01:50.200 --> 00:01:54.400 be a Pioneer they are going to create the svenborg 36 00:01:53.400 --> 00:01:57.600 steamship company 1904 because 37 00:01:57.600 --> 00:02:00.600 they created in 1904 and I let 38 00:02:00.600 --> 00:02:03.800 you read the name in Danish. I just 39 00:02:03.800 --> 00:02:06.200 certainly in time when the company 40 00:02:06.200 --> 00:02:09.400 had been very successful but there was a question of 41 00:02:09.400 --> 00:02:12.200 succession now, they created 42 00:02:12.200 --> 00:02:15.400 a foundation in 1953. It is 43 00:02:15.400 --> 00:02:18.400 the AP murder Foundation who is 44 00:02:18.400 --> 00:02:22.000 basically holding a majority of the shares. I 45 00:02:21.300 --> 00:02:22.900 will elaborate on that. 46 00:02:23.300 --> 00:02:26.700 Little bit later now happy murder holding 47 00:02:26.700 --> 00:02:29.400 is in charge of managing the shares which 48 00:02:29.400 --> 00:02:32.400 are owed held by AP motor 49 00:02:32.400 --> 00:02:36.500 Foundation. That was about creation acceleration 50 00:02:35.500 --> 00:02:39.200 mask McKinney 51 00:02:38.200 --> 00:02:41.000 murder. Why makini because 52 00:02:41.600 --> 00:02:45.000 AP motor Arnold Peter married Justin 53 00:02:44.700 --> 00:02:47.600 McKinney mask makini murder 54 00:02:47.600 --> 00:02:51.100 became CEO in 1965 when 55 00:02:50.100 --> 00:02:52.400 is father passed away? 56 00:02:53.200 --> 00:02:56.600 But his father had been to see you up to the moment. He died 57 00:02:56.600 --> 00:02:59.600 when he was 89 Norma has 58 00:02:59.600 --> 00:03:02.600 decided that it was a little bit too long as a carrier 59 00:03:02.600 --> 00:03:05.700 and decided to step down a little 60 00:03:05.700 --> 00:03:08.400 bit earlier when he was only 80 years 61 00:03:08.400 --> 00:03:11.200 old, but he remained chairman up to the moment. 62 00:03:11.200 --> 00:03:15.400 He will 90 years old kind of longevity and 63 00:03:14.400 --> 00:03:17.800 stability long term family business 64 00:03:17.800 --> 00:03:20.600 and there is leadership the company experience 65 00:03:20.600 --> 00:03:24.500 fantastic considerable development. They started 66 00:03:24.500 --> 00:03:28.600 something in retail distribution dance Supermarket, 67 00:03:27.600 --> 00:03:30.400 then they went into all the 68 00:03:30.400 --> 00:03:33.200 oil and gas business. It was a complete part of 69 00:03:33.200 --> 00:03:36.800 the group which was about energy Air transport, etc. 70 00:03:36.500 --> 00:03:39.300 Etc. So the company became a very 71 00:03:39.300 --> 00:03:42.500 big conglomerate now focusing on shipping and 72 00:03:42.500 --> 00:03:46.400 as you know shipping is a little bit difficult business 73 00:03:45.400 --> 00:03:49.300 and eventful profession 74 00:03:48.300 --> 00:03:51.200 you remember we had 75 00:03:51.200 --> 00:03:53.000 stories about Pirates. 76 00:03:53.100 --> 00:03:56.700 And we were young but there is still quite intensive modern 77 00:03:56.700 --> 00:04:00.500 piracy in 2009 closes 78 00:03:59.500 --> 00:04:02.900 Somalian Coast The Mask, 79 00:04:02.900 --> 00:04:05.800 Alabama was hijacked by parrots 80 00:04:05.800 --> 00:04:09.400 mask Alabama and American flag American 81 00:04:08.400 --> 00:04:11.300 Nationals inside. So there was 82 00:04:11.300 --> 00:04:14.200 an American intervention and at the 83 00:04:14.200 --> 00:04:17.500 end of the day it will successful for the company and 84 00:04:17.500 --> 00:04:21.600 for the American intervention and Pirates disappeared 85 00:04:20.600 --> 00:04:23.400 from the screen a few years later 86 00:04:23.400 --> 00:04:26.600 in 2013. There will be a movie around 87 00:04:26.600 --> 00:04:30.500 this story. The name of the movie is Captain Phillips 88 00:04:29.500 --> 00:04:32.800 because the Captain Phillips was 89 00:04:32.800 --> 00:04:35.300 in charge of the Mask Alabama as a 90 00:04:35.300 --> 00:04:38.600 vessel and Tom Hanks walls the actor who 91 00:04:38.600 --> 00:04:41.600 played Captain Phillips, he's performance walls, 92 00:04:41.600 --> 00:04:44.300 so great that he got the Golden Globe for 93 00:04:44.300 --> 00:04:47.300 the best actor Etc as a Captain. 94 00:04:47.300 --> 00:04:50.400 Tom Hanks is very often a captain if you remember at 95 00:04:50.400 --> 00:04:52.800 Polo 13 the crew captain 96 00:04:53.300 --> 00:04:56.500 And if I remember about Private Ryan, 97 00:04:56.500 --> 00:04:59.500 it was also Captain Sam say so it's 98 00:04:59.500 --> 00:05:02.600 very often captain at the end of the day is an outstanding 99 00:05:02.600 --> 00:05:06.100 actor. Now after the acceleration there 100 00:05:05.100 --> 00:05:09.900 was a need for rationalization. Apollo 101 00:05:08.900 --> 00:05:12.400 mask is controlled by API murderer 102 00:05:12.400 --> 00:05:15.900 holding but it behaves like holding 103 00:05:15.900 --> 00:05:18.500 like a conglomerate and there is a need 104 00:05:18.500 --> 00:05:22.000 for rationalization focusing on the business strategy 105 00:05:21.300 --> 00:05:24.500 and the core business of AP mura mask, 106 00:05:24.500 --> 00:05:28.200 which is about transportation and predominantly shipping. 107 00:05:27.200 --> 00:05:30.500 Now, there were a 108 00:05:30.500 --> 00:05:33.800 few Acquisitions and Creations, which we're simply 109 00:05:33.800 --> 00:05:36.500 divested mask air created 110 00:05:36.500 --> 00:05:40.000 in 1969 diversity in 2005. 111 00:05:39.700 --> 00:05:42.800 It's still exists under another brand 112 00:05:42.800 --> 00:05:45.500 name. The retail distribution. Nothing to 113 00:05:45.500 --> 00:05:48.500 do with shipping dance Supermarket is 114 00:05:48.500 --> 00:05:52.200 created in 1964 and divested 115 00:05:51.200 --> 00:05:52.600 in 116 00:05:53.300 --> 00:05:56.800 And 15 after mask makini murder 117 00:05:56.800 --> 00:05:59.800 passed away. Also after he 118 00:05:59.800 --> 00:06:02.300 passed away. There's a divestment for the 119 00:06:02.300 --> 00:06:05.900 big part of it, which is energy mask oil, 120 00:06:05.900 --> 00:06:08.800 which is sold to total energy for a 121 00:06:08.800 --> 00:06:11.800 vast amount of money more than 7 122 00:06:11.800 --> 00:06:14.300 billion dollars now for 123 00:06:14.300 --> 00:06:17.000 some other Equity Holdings. They are going to 124 00:06:17.700 --> 00:06:21.100 be transferred to AP murder holding as a 125 00:06:20.100 --> 00:06:23.400 private Equity company if I 126 00:06:23.400 --> 00:06:26.100 may say this company deserves to 127 00:06:26.100 --> 00:06:29.700 be a conglomerate not AP motor Mask The 128 00:06:29.700 --> 00:06:32.500 Consequence the equity stake of AP 129 00:06:32.500 --> 00:06:35.300 motor mask in dance kabank. It's going 130 00:06:35.300 --> 00:06:39.200 to be transferred salt to the holding Mass drilling 131 00:06:38.200 --> 00:06:41.600 different story demerge. So 132 00:06:41.600 --> 00:06:44.800 the chance I'm going to be distributed to the different shareholders 133 00:06:44.800 --> 00:06:47.400 and the company is going to be separate the listed. 134 00:06:47.400 --> 00:06:50.700 So it's just about Distributing the shares are not cashing in 135 00:06:50.700 --> 00:06:52.600 from that mass. Thank you. He's 136 00:06:52.900 --> 00:06:55.100 Sold by apmolar Mass 137 00:06:55.100 --> 00:06:58.100 to AP motor holding now. If you look 138 00:06:58.100 --> 00:07:02.000 at the portfolio of equity Stakes inside AP 139 00:07:01.500 --> 00:07:04.600 motor Holding You observe 140 00:07:04.600 --> 00:07:07.900 that. The biggest one is apmolar mask 141 00:07:07.900 --> 00:07:11.200 now refocused on shipping Transportation 142 00:07:10.200 --> 00:07:13.800 Supply Chain management, but you 143 00:07:13.800 --> 00:07:16.000 can also see the equity stake of the 144 00:07:16.400 --> 00:07:19.600 company in dance Quebec which was transferred. You can 145 00:07:19.600 --> 00:07:23.800 see mask drilling which is now listed company 146 00:07:23.800 --> 00:07:26.300 completely in dependent from AP motor 147 00:07:26.300 --> 00:07:30.200 you can see Mass tankers because masks 148 00:07:29.200 --> 00:07:32.300 sold the oil and 149 00:07:32.300 --> 00:07:35.600 gas business but kept the tankers that the 150 00:07:35.600 --> 00:07:38.800 way it works. It's a portfolio company. Now AP 151 00:07:38.800 --> 00:07:42.100 motor mask is a company which is focusing on 152 00:07:41.100 --> 00:07:44.700 its Core Business. Now the 153 00:07:44.700 --> 00:07:48.400 evolution of the portfolio business activities inside 154 00:07:47.400 --> 00:07:50.300 AP motor mask and the 155 00:07:50.300 --> 00:07:52.100 relationship with ap Motorola link. 156 00:07:52.900 --> 00:07:55.800 Makes the analysis of the revenue and 157 00:07:55.800 --> 00:07:58.500 revenue growth a little bit difficult. Now if 158 00:07:58.500 --> 00:08:02.200 You observe what happened over the last 20 years there is 159 00:08:01.200 --> 00:08:06.000 a first period 2000 to 2010 huge 160 00:08:04.500 --> 00:08:07.800 Growers fantastic Revenue 161 00:08:07.800 --> 00:08:10.300 growth tripling the revenues from 162 00:08:10.300 --> 00:08:13.100 20 billion to 60 billion. Then there is 163 00:08:13.100 --> 00:08:16.900 a prime crisis with macroeconomic consequences 164 00:08:16.900 --> 00:08:20.500 and impact on Transportation stabilization 165 00:08:19.500 --> 00:08:22.700 of the revenues, then it 166 00:08:22.700 --> 00:08:25.400 goes down and it goes down not only 167 00:08:25.400 --> 00:08:28.600 because the shipping industry but because also there 168 00:08:28.600 --> 00:08:31.900 are some dive investment stabilization and 169 00:08:31.900 --> 00:08:34.300 it's up and it dramatically up in 170 00:08:34.300 --> 00:08:37.400 2021, which is The Lottery by the 171 00:08:37.400 --> 00:08:40.700 way now in order to really understand what happened 172 00:08:40.700 --> 00:08:43.300 in 2015 16 and 17 173 00:08:43.300 --> 00:08:47.900 to drive and use you have to go back to 2014 to 174 00:08:47.900 --> 00:08:51.200 try to figure out what it represents really 175 00:08:50.200 --> 00:08:52.300 and 176 00:08:52.800 --> 00:08:55.300 In the business this year the 177 00:08:55.300 --> 00:08:58.400 company's revenues are about 50 billion 178 00:08:58.400 --> 00:09:01.500 49 billion dollars and the a 179 00:09:01.500 --> 00:09:03.800 bit da represents 12 billion dollars. 180 00:09:04.500 --> 00:09:07.300 If you take oil and gas plus drilling plus 181 00:09:07.300 --> 00:09:10.500 tankers revenues are 12 billion, 182 00:09:10.500 --> 00:09:13.900 which is about a quarter of the revenues. But 183 00:09:13.900 --> 00:09:16.600 more than that the same group of three 184 00:09:16.600 --> 00:09:19.900 companies represent more than six billion 185 00:09:19.900 --> 00:09:22.500 dollars more than 50% of 186 00:09:22.500 --> 00:09:25.700 the earnings before interest taxes depreciation 187 00:09:25.700 --> 00:09:27.300 and amortization of the group. 188 00:09:28.200 --> 00:09:31.300 So today you get rid of that. Of course you cash in 189 00:09:31.300 --> 00:09:35.000 the selling price of this business unit, which is about nine billion 190 00:09:34.200 --> 00:09:38.100 dollars remember for drilling. It was a demerger, but 191 00:09:37.100 --> 00:09:40.300 the consequence is that your sales are 192 00:09:40.300 --> 00:09:44.000 going to be down and you're a bit that's going to be dramatically down. 193 00:09:44.900 --> 00:09:48.200 The consequence of caching in 9 194 00:09:47.200 --> 00:09:50.000 billion that you're going to 195 00:09:50.400 --> 00:09:53.700 reduce your adaptedness, you're going to lighten your 196 00:09:53.700 --> 00:09:56.300 financial structure. But then you are going 197 00:09:56.300 --> 00:09:59.400 to be able to make Acquisitions. Now if you look at the final 198 00:09:59.400 --> 00:10:02.800 Source structure of the company and it's Evolution across 199 00:10:02.800 --> 00:10:06.000 the years you understand that the company is quite conservative in 200 00:10:05.100 --> 00:10:08.600 terms of financial gearing financial 201 00:10:08.600 --> 00:10:11.700 leverage leverage that do 202 00:10:11.700 --> 00:10:14.500 a bit one. Okay, it's up when 203 00:10:14.500 --> 00:10:18.600 they be dies down in 2016 2007, but 204 00:10:17.600 --> 00:10:20.800 you understand that the company can page 205 00:10:20.800 --> 00:10:23.400 debt with one year of cash operating profit 206 00:10:23.400 --> 00:10:26.400 dead divided by Equity Book value of 207 00:10:26.400 --> 00:10:29.600 equity is about point five. So 208 00:10:29.600 --> 00:10:32.500 basically you understand that the company again is 209 00:10:32.500 --> 00:10:36.200 quite conservative in 2019 as 210 00:10:35.200 --> 00:10:39.000 a company's cashing in the sale 211 00:10:38.400 --> 00:10:41.800 of oil and gas to tell 212 00:10:41.800 --> 00:10:44.700 the gearing is very much down then stab. 213 00:10:44.800 --> 00:10:47.900 Prices then there will be the lottery in 214 00:10:47.900 --> 00:10:50.600 2021. There is more cash 215 00:10:50.600 --> 00:10:53.300 than interest-bearing debt than you have 216 00:10:53.300 --> 00:10:56.800 a fantastic financial and strategic flexibility, which 217 00:10:56.800 --> 00:10:59.700 you can use to First pay an 218 00:10:59.700 --> 00:11:02.300 exceptional dividend to your shareholders and then 219 00:11:02.300 --> 00:11:05.800 start implementing a share buyback policy in 220 00:11:05.800 --> 00:11:08.400 2021. The company decides to 221 00:11:08.400 --> 00:11:12.000 put an exceptional dividend cashed out in 2022 222 00:11:11.400 --> 00:11:15.200 of 7 billion dollars. And 223 00:11:14.200 --> 00:11:18.200 also the capital is announcing first five 224 00:11:17.200 --> 00:11:20.500 billion dollar buyback for the period 22 225 00:11:20.500 --> 00:11:24.000 23, and then he's going to announce another 226 00:11:23.600 --> 00:11:26.400 share buyback of five billion for the 227 00:11:26.400 --> 00:11:29.500 period 24 25. So it's huge cash 228 00:11:29.500 --> 00:11:31.500 amounts return to shareholders. 229 00:11:32.400 --> 00:11:36.100 The company is also going to complete some Acquisitions in 230 00:11:35.100 --> 00:11:38.500 the shipping industry. The moment 231 00:11:38.500 --> 00:11:41.200 AP motor mask is selling the oil and gas 232 00:11:41.200 --> 00:11:45.000 business. It is integrating Hamburg zoo 233 00:11:44.700 --> 00:11:47.200 in 2017 for three 234 00:11:47.200 --> 00:11:51.100 point seven billion dollars recently June 235 00:11:50.100 --> 00:11:54.400 and August the company's announcing reinforcing 236 00:11:53.400 --> 00:11:57.300 its activity in the logistics and 237 00:11:56.300 --> 00:11:59.900 service business with Senator and 238 00:11:59.900 --> 00:12:02.800 LF logistics for respectively 239 00:12:02.800 --> 00:12:05.800 600 million and three point six billion dollars. 240 00:12:05.800 --> 00:12:08.200 So the companies returning cash to 241 00:12:08.200 --> 00:12:11.600 the shareholders in 2017 increasing its 242 00:12:11.600 --> 00:12:15.100 capacity in the shipping business, but 243 00:12:14.100 --> 00:12:17.200 now is rainforcing in the 244 00:12:17.200 --> 00:12:20.500 logistics and services activity. 245 00:12:21.900 --> 00:12:24.800 Today there are three main segments in 246 00:12:24.800 --> 00:12:27.600 the group. The group is a worldwide leader 247 00:12:27.600 --> 00:12:30.900 of container shipping largest vessels 248 00:12:30.900 --> 00:12:33.900 operator market share 17 18 249 00:12:33.900 --> 00:12:36.500 percent depending on how you calculate that the 250 00:12:36.500 --> 00:12:39.600 mainstream is shipping. The name of the segment 251 00:12:39.600 --> 00:12:42.300 is ocean, which is a former mask line, by 252 00:12:42.300 --> 00:12:42.500 the way. 253 00:12:43.200 --> 00:12:46.900 Growing Supply Chain management Logistics and 254 00:12:46.900 --> 00:12:49.800 services and Port activities 255 00:12:49.800 --> 00:12:52.600 and tugboats very large activity 256 00:12:52.600 --> 00:12:55.300 in science group. Terminals is the name 257 00:12:55.300 --> 00:12:58.900 of the segment. Now, what are the respective contributions of 258 00:12:58.900 --> 00:13:01.300 these segments to the revenues of 259 00:13:01.300 --> 00:13:05.400 the company largest by far ocean mask 260 00:13:04.400 --> 00:13:07.700 line 48 billion dollars in 261 00:13:07.700 --> 00:13:09.100 2021. 262 00:13:09.800 --> 00:13:12.300 With an objective you can read on 263 00:13:12.300 --> 00:13:15.900 the slide which is to reinforce the 264 00:13:15.900 --> 00:13:18.600 long term contract with the 265 00:13:18.600 --> 00:13:21.600 customers. If you have a long-term contract, you 266 00:13:21.600 --> 00:13:24.600 know, what you stabilize your free cash 267 00:13:24.600 --> 00:13:27.400 flows and your revenues which is quite important 268 00:13:27.400 --> 00:13:31.200 in a business, which is not that predictable in 269 00:13:30.200 --> 00:13:34.300 the middle Logistics and services only 270 00:13:33.300 --> 00:13:36.500 10 billion dollars, but then the objective 271 00:13:36.500 --> 00:13:39.700 is to grow and to be profitable but 272 00:13:39.700 --> 00:13:43.900 to grow at a high rate terminals, there 273 00:13:43.900 --> 00:13:47.100 is some potential growth but the business is quite big 274 00:13:46.100 --> 00:13:49.300 five billion dollars to turn over. 275 00:13:49.300 --> 00:13:52.400 It's quite Capital intensive. We are going to discuss that 276 00:13:52.400 --> 00:13:55.400 in a minute and the object is probably a little 277 00:13:55.400 --> 00:13:58.800 bit more too rain falls the commercial and economic 278 00:13:58.800 --> 00:14:01.200 performance of this company. The group 279 00:14:01.200 --> 00:14:04.900 is also communicating on the financial objectives of AP 280 00:14:04.900 --> 00:14:07.200 motor mask and of each and every 281 00:14:07.200 --> 00:14:09.200 second what is very interesting. 282 00:14:09.700 --> 00:14:12.300 At they want to increase the return on 283 00:14:12.300 --> 00:14:15.600 invested capital of the group today. It's 284 00:14:15.600 --> 00:14:19.300 45% but it is absolutely outstanding. It's 285 00:14:18.300 --> 00:14:21.600 a kind of my record. It's exceptional. 286 00:14:21.600 --> 00:14:24.400 It's not sustainable. What do we want? We 287 00:14:24.400 --> 00:14:28.300 want 12% on the average for the period 2125. 288 00:14:29.200 --> 00:14:32.200 And we want also to have a kind of stabilization of 289 00:14:32.200 --> 00:14:35.100 the return invested capital and it should not be 290 00:14:35.100 --> 00:14:38.500 less than 7.5% each and every year 291 00:14:38.500 --> 00:14:41.700 now. This is for the group. What about the segments 292 00:14:41.700 --> 00:14:44.500 ocean mask line 293 00:14:44.500 --> 00:14:47.600 existing Fleet size. So we 294 00:14:47.600 --> 00:14:50.700 don't want to grow the capacity. We want 295 00:14:50.700 --> 00:14:53.800 to improve the a bit margin with the 296 00:14:53.800 --> 00:14:56.300 same level of capacity same level of capacity means 297 00:14:56.300 --> 00:14:59.600 that you're not going to increase your Capital employed. 298 00:14:59.600 --> 00:15:02.800 You want to increase the numerator of the 299 00:15:02.800 --> 00:15:05.400 return on Capital employed. And then 300 00:15:05.400 --> 00:15:08.500 the objective is six percent to return 301 00:15:08.500 --> 00:15:12.600 on sales. He beat margins today 36% 37% 302 00:15:11.600 --> 00:15:14.100 exceptional. It should 303 00:15:14.100 --> 00:15:17.900 be minimum 6% stabilization and 304 00:15:17.900 --> 00:15:20.500 a bit margin no capacity increase 305 00:15:20.500 --> 00:15:23.600 Logistics and services. There's an 306 00:15:23.600 --> 00:15:26.300 objective which is to grow meaning mom 307 00:15:26.300 --> 00:15:29.000 10% per year, which is 308 00:15:29.200 --> 00:15:33.000 Quite big of course, you have to grow and 309 00:15:32.200 --> 00:15:34.300 you have to be profitable. 310 00:15:35.100 --> 00:15:38.100 When you grow maybe the assets turnover is going 311 00:15:38.100 --> 00:15:41.800 to be affected by the fact that you have to increase your capacity, but 312 00:15:41.800 --> 00:15:44.500 at least the ebit margin the return alsage should 313 00:15:44.500 --> 00:15:47.300 be more than 6% each and every 314 00:15:47.300 --> 00:15:47.400 year. 315 00:15:48.500 --> 00:15:51.700 Last but not least terminals sport activity 316 00:15:51.700 --> 00:15:54.300 check boats return on 317 00:15:54.300 --> 00:15:57.500 invested capital is definitely the objective for this 318 00:15:57.500 --> 00:16:00.600 Capital intensive business. And the return 319 00:16:00.600 --> 00:16:03.600 on invested Capital should be more than 9% in 320 00:16:03.600 --> 00:16:07.000 order to pay the cost of capital that's obvious. Then 321 00:16:06.500 --> 00:16:09.600 you understand that the communication of the company in 322 00:16:09.600 --> 00:16:12.600 terms of guidance in terms of financial objectives 323 00:16:12.600 --> 00:16:15.700 about return invested capital or return Capital 324 00:16:15.700 --> 00:16:18.900 employers. This is the same and a bit margin return 325 00:16:18.900 --> 00:16:19.400 on sales. 326 00:16:20.200 --> 00:16:23.300 There is no direct communication and the assets don't 327 00:16:23.300 --> 00:16:26.400 overbit obviously as they provide all the figures in 328 00:16:26.400 --> 00:16:29.200 terms of invested Capital revenues a bit and 329 00:16:29.200 --> 00:16:32.600 ebida. We can calculate the return capital and 330 00:16:32.600 --> 00:16:35.200 decomposer return Capital into return on 331 00:16:35.200 --> 00:16:38.700 sales and assets turnover the traditional reporting and 332 00:16:38.700 --> 00:16:43.700 more formula What You observe 2020 2021 333 00:16:42.700 --> 00:16:45.700 return on sales assets turnover 334 00:16:45.700 --> 00:16:48.100 and one multiplied by the other is a 335 00:16:48.100 --> 00:16:52.200 return Capital employed. You have to very Capital 336 00:16:51.200 --> 00:16:54.700 intensive businesses inside. The 337 00:16:54.700 --> 00:16:57.700 group one is ocean assets turnover. It 338 00:16:57.700 --> 00:17:00.800 was 1.1 in 2020. It's up 339 00:17:00.800 --> 00:17:03.700 in 2021 why because of grouse? 340 00:17:04.400 --> 00:17:08.000 If you grow you are numerator sales with 341 00:17:07.200 --> 00:17:10.600 the same existing denominator what happens 342 00:17:10.600 --> 00:17:12.300 just says turnover is up. 343 00:17:13.100 --> 00:17:16.600 And the Eternal sales is up as well because of economies of 344 00:17:16.600 --> 00:17:19.500 scale. So you have a double boosting effect 345 00:17:19.500 --> 00:17:22.600 in terms of rozay and this is why today 346 00:17:22.600 --> 00:17:25.400 the ocean activity transportation is about 347 00:17:25.400 --> 00:17:28.900 16% We'll say when it was 12% in 348 00:17:28.900 --> 00:17:31.700 2020 double boosting effect 349 00:17:31.700 --> 00:17:32.800 on the rousse. 350 00:17:33.600 --> 00:17:36.600 Let's go to the third one terminals on 351 00:17:36.600 --> 00:17:39.700 towage. You know, what point four point 352 00:17:39.700 --> 00:17:42.900 five. This is extremely Capital intensive. 353 00:17:42.900 --> 00:17:45.200 You remember that the DuPont and 354 00:17:45.200 --> 00:17:48.100 move formula tells us the moment. Your Capital 355 00:17:48.100 --> 00:17:51.400 intensity is high your assets don't over is low. Then 356 00:17:51.400 --> 00:17:54.400 your return on sales should be high so that you generate 357 00:17:54.400 --> 00:17:57.700 a decent normal return on Capital 358 00:17:57.700 --> 00:18:00.600 0.4 times 22 to 359 00:18:00.600 --> 00:18:03.500 make it simple was about eight percent in 360 00:18:03.500 --> 00:18:07.200 2020. Now, what do we observe in 21 against 361 00:18:06.200 --> 00:18:09.900 20 a small increase but 362 00:18:09.900 --> 00:18:13.100 from 0.4 to 0.5 each 363 00:18:12.100 --> 00:18:15.700 plus 25% of the 364 00:18:15.700 --> 00:18:18.200 assets turnover and an increase in return on 365 00:18:18.200 --> 00:18:21.700 sales. So the eight became 13, it's 366 00:18:21.700 --> 00:18:24.300 not absolutely fantastic, but you 367 00:18:24.300 --> 00:18:28.300 understand that this business is penalized by the facts Capital 368 00:18:27.300 --> 00:18:30.700 intensive you remember the objective is 369 00:18:30.700 --> 00:18:33.000 right. Say more than 370 00:18:34.100 --> 00:18:37.800 Now ocean and terminals, it's Capital intensive. 371 00:18:37.800 --> 00:18:41.300 What about logistics and services interestingly is 372 00:18:40.300 --> 00:18:43.100 the assets don't over a significantly higher. 373 00:18:44.500 --> 00:18:47.700 There's a dramatic increase in the return on sales from 3.8 to 374 00:18:47.700 --> 00:18:50.500 6.3. And you remember that the company 375 00:18:50.500 --> 00:18:53.500 wants to maintain the a bit margin at a minimum 376 00:18:53.500 --> 00:18:54.500 of 6% 377 00:18:55.500 --> 00:18:58.600 There is a decrease in the assets turnover maybe because 378 00:18:58.600 --> 00:19:01.700 the company's growing when you grow you first 379 00:19:01.700 --> 00:19:04.600 invest and then you observe Revenue growth. So 380 00:19:04.600 --> 00:19:07.000 you're assets turnover is at first a little 381 00:19:07.200 --> 00:19:10.400 bit pain or Eyes by gross you have to invest in 382 00:19:10.400 --> 00:19:13.300 growing your revenues. But what 383 00:19:13.300 --> 00:19:16.600 is interesting is that the assets to an over is absolutely not 384 00:19:16.600 --> 00:19:20.500 of the same order of magnitude. It's much higher at Logistics 385 00:19:19.500 --> 00:19:22.100 on Services where the 386 00:19:22.100 --> 00:19:25.200 company wants to invest for growth. So you understand that 387 00:19:25.200 --> 00:19:28.800 ocean and terminals. It's not so much about growth. It's 388 00:19:28.800 --> 00:19:31.400 about performance Logistics and services. 389 00:19:31.400 --> 00:19:34.000 It's about Revenue growth in a business 390 00:19:34.400 --> 00:19:37.300 with low Capital intensity. So in a 391 00:19:37.300 --> 00:19:41.200 business which consumes much less Financial Resources, 392 00:19:40.200 --> 00:19:43.800 then it's too Neighbors The 393 00:19:43.800 --> 00:19:46.600 Day The Neighbors ocean and terminals want 394 00:19:46.600 --> 00:19:49.300 to increase their capacity, which is no 395 00:19:49.300 --> 00:19:52.700 more the case and that's the point on which I would like to insist a 396 00:19:52.700 --> 00:19:55.000 couple of minutes. What about Revenue growth? 397 00:19:55.500 --> 00:19:58.500 Performance you remember that performance is returned 398 00:19:58.500 --> 00:20:01.000 Capital against cost of capital and I will have 399 00:20:01.200 --> 00:20:05.100 a small discussion about the cost of capital at Basque 400 00:20:04.100 --> 00:20:07.600 return capital is maternal sales 401 00:20:07.600 --> 00:20:11.500 commercial profitability assets turnover Capital intensity. 402 00:20:12.300 --> 00:20:15.100 What about return on sales you remember that you have 403 00:20:15.100 --> 00:20:18.400 fixed and viable costs. If you are fixed costs 404 00:20:18.400 --> 00:20:21.300 remain fixed then your cost per unit 405 00:20:21.300 --> 00:20:24.700 is going to go down and the return also is boosted by 406 00:20:24.700 --> 00:20:28.200 growth. It's name economies of scale assuming that 407 00:20:28.200 --> 00:20:31.500 fixed cost remain fixed. What about 408 00:20:31.500 --> 00:20:34.200 assets turnover assets turnover is about 409 00:20:34.200 --> 00:20:37.200 revenues divided by Capital employed. If you grow 410 00:20:37.200 --> 00:20:41.200 your revenues, do you need to grow your capacity? Because we 411 00:20:40.200 --> 00:20:43.600 the same existing capacity growing the 412 00:20:43.600 --> 00:20:46.700 revenues is boosting the assets turnover and 413 00:20:46.700 --> 00:20:49.800 then you understand that. What about growth does 414 00:20:49.800 --> 00:20:52.200 it come from price? Does it come from 415 00:20:52.200 --> 00:20:55.500 volume or a combination of this too 416 00:20:55.500 --> 00:20:58.400 if it comes from prices and not from 417 00:20:58.400 --> 00:21:01.900 volumes, that's absolutely great. And you 418 00:21:01.900 --> 00:21:04.600 win the lottery. The question 419 00:21:04.600 --> 00:21:08.000 is always about capacity volume. 420 00:21:07.100 --> 00:21:10.200 Is it available? Is it 421 00:21:10.200 --> 00:21:12.100 saturated? Do you have to increase? 422 00:21:12.300 --> 00:21:15.600 Capacity or do you have enough capacity now? The 423 00:21:15.600 --> 00:21:18.600 lottery is about the freight rates in 2021, which we 424 00:21:18.600 --> 00:21:21.800 all know, there were plenty of difficulties in 425 00:21:21.800 --> 00:21:24.800 terms of supply chain and so on so forth the volume 426 00:21:24.800 --> 00:21:27.400 did not increase very much but the prices which 427 00:21:27.400 --> 00:21:30.400 are the consequence of confronting supply and 428 00:21:30.400 --> 00:21:34.200 demand the prices skyrocketed where 429 00:21:33.200 --> 00:21:36.900 multiplied by three four five. So 430 00:21:36.900 --> 00:21:39.900 at the end of the day without growing the volume you 431 00:21:39.900 --> 00:21:42.200 increase your revenues, it might be a little 432 00:21:42.200 --> 00:21:45.300 bit exceptional but when the cap is disclosing it's 433 00:21:45.300 --> 00:21:49.200 fourth quarter return profitability and 434 00:21:48.200 --> 00:21:52.000 performance for 2021. It's 435 00:21:51.400 --> 00:21:54.200 as okay why they be dies up 436 00:21:54.200 --> 00:21:57.700 not because of volume volume is stable a bit 437 00:21:57.700 --> 00:22:00.700 down, but Freight rates, it is about six 438 00:22:00.700 --> 00:22:03.700 billion dollars of incremental it be 439 00:22:03.700 --> 00:22:06.600 that just because of freight rates. That's a 440 00:22:06.600 --> 00:22:09.400 gift. That's a lottery now you remember 441 00:22:09.400 --> 00:22:11.700 that. I mentioned the economies of scale. 442 00:22:12.200 --> 00:22:15.400 And it's interesting to observe the evolution of the operating expenses as 443 00:22:15.400 --> 00:22:18.200 a percentage to revenues what happened during 444 00:22:18.200 --> 00:22:21.900 the last decade starting in 2013. You 445 00:22:21.900 --> 00:22:24.600 have an increase in the operating expenses as 446 00:22:24.600 --> 00:22:27.100 a percentage to revenues and this is 447 00:22:27.100 --> 00:22:30.300 why the return on sales is going to suffer a little 448 00:22:30.300 --> 00:22:34.000 bit. Then there is a reduction and 449 00:22:33.100 --> 00:22:37.600 there is a dramatic reduction in 2021. 450 00:22:36.600 --> 00:22:39.200 Then you can ask the 451 00:22:39.200 --> 00:22:43.600 question about the evolution of the operating expenses relative 452 00:22:42.600 --> 00:22:45.500 to revenues for each 453 00:22:45.500 --> 00:22:48.300 and every cost item. There are a couple 454 00:22:48.300 --> 00:22:51.600 of cost items for which I would like to do a little bit of Deep dive. 455 00:22:52.200 --> 00:22:55.200 One is Banker the fuel what you 456 00:22:55.200 --> 00:22:58.300 have to put in your engine so that the vessels can move from 457 00:22:58.300 --> 00:23:01.100 one place to the other and the other one is terminal. 458 00:23:01.700 --> 00:23:04.500 If you look at terminal is dramatically down 459 00:23:04.500 --> 00:23:07.700 in 2021, if you look at Bunker it's 460 00:23:07.700 --> 00:23:08.900 a little bit down. 461 00:23:10.100 --> 00:23:13.600 You remember that when you want to figure out the cost 462 00:23:13.600 --> 00:23:16.300 structure for a company, you can 463 00:23:16.300 --> 00:23:20.200 have some conclusions taken from observing growth 464 00:23:19.200 --> 00:23:22.600 in revenues versus growth in 465 00:23:22.600 --> 00:23:26.000 cost when revenues are growing fixed 466 00:23:25.200 --> 00:23:28.800 costs are supposed to be fixed and variable costs 467 00:23:28.800 --> 00:23:31.300 are supposed to be correlated with revenues. 468 00:23:32.200 --> 00:23:35.200 A very simple calculation says as a share 469 00:23:35.200 --> 00:23:38.300 of fixed cost as a percentage to total cost is 470 00:23:38.300 --> 00:23:41.600 one minus the cost growth rate 471 00:23:41.600 --> 00:23:44.200 divided by the revenues growth rate 472 00:23:44.200 --> 00:23:48.800 application bunker cost 25% terminal 473 00:23:47.800 --> 00:23:50.500 cost 84% 474 00:23:51.500 --> 00:23:54.800 and it's quite normal for terminal cost because terminal cost 475 00:23:54.800 --> 00:23:57.200 is about the terminals they are 476 00:23:57.200 --> 00:24:00.500 there you have to pay for the terminals and that's it. So it's 477 00:24:00.500 --> 00:24:04.100 quite normal to understand that you have depreciation and wages 478 00:24:03.100 --> 00:24:06.200 and salaries and staff calls and so 479 00:24:06.200 --> 00:24:09.600 on so forth. This is quite stable because the activity 480 00:24:09.600 --> 00:24:12.200 is stable, but what about Banker costs 481 00:24:12.200 --> 00:24:15.500 Bank cost is about the fuel and the 482 00:24:15.500 --> 00:24:18.100 different types of energies which are going to put in 483 00:24:18.100 --> 00:24:21.000 the vessels that they can move but they did not 484 00:24:21.300 --> 00:24:24.500 move more because of volume of activity was quite 485 00:24:24.500 --> 00:24:27.600 stable. So it should be a fixed cost and 486 00:24:27.600 --> 00:24:30.600 fixed costs only 25% So you 487 00:24:30.600 --> 00:24:33.900 understand that the interpretation is a little bit complex. Now 488 00:24:33.900 --> 00:24:36.300 you remember that the freight rates were dramatically up. 489 00:24:37.100 --> 00:24:40.100 But the energy costs where also very much 490 00:24:40.100 --> 00:24:44.100 are the oil prices when dramatically up 491 00:24:43.100 --> 00:24:46.800 and then as a consequence, maybe your 492 00:24:46.800 --> 00:24:49.300 energy conception was the same in volume, 493 00:24:49.300 --> 00:24:52.800 but it went dramatically up in value. 494 00:24:52.800 --> 00:24:56.100 This is why in this case the figures cannot 495 00:24:55.100 --> 00:24:58.200 be interpreted at all, except for 496 00:24:58.200 --> 00:25:01.100 terminal costs. Now, we had a discussion on revenues. 497 00:25:01.900 --> 00:25:04.800 And on cost return on sales a 498 00:25:04.800 --> 00:25:07.300 bit and ebida. What do You 499 00:25:07.300 --> 00:25:10.400 observe You observe that the return on sales walls quite 500 00:25:10.400 --> 00:25:13.300 stable about 25% for a 501 00:25:13.300 --> 00:25:16.300 bit about 15% for a bit 502 00:25:16.300 --> 00:25:19.700 except in 2009 because 503 00:25:19.700 --> 00:25:23.800 of the Prime crisis and the consequences macroeconomics 504 00:25:22.800 --> 00:25:25.500 and international trade 505 00:25:25.500 --> 00:25:28.900 normal. Then there is a reduction then 506 00:25:28.900 --> 00:25:31.900 there is a drop and what is happening in 507 00:25:31.900 --> 00:25:34.600 2016 17 and 18 508 00:25:34.600 --> 00:25:37.800 that the companies are operating 509 00:25:37.800 --> 00:25:41.700 profit is going to go down to zero not 510 00:25:40.700 --> 00:25:43.300 only because there are some problems 511 00:25:43.300 --> 00:25:46.700 in the operating expenses, but also because 50% of 512 00:25:46.700 --> 00:25:49.900 the Bida is getting out of the p&l 513 00:25:49.900 --> 00:25:53.500 of the company consequence of the divestments. Then 514 00:25:53.500 --> 00:25:56.300 you have the beginning of a recovery and you have a 515 00:25:56.300 --> 00:25:59.900 fantastic recovery, which is not due to volume, but which 516 00:25:59.900 --> 00:26:01.300 is due to Freight. 517 00:26:02.200 --> 00:26:05.300 Sustainable. This will be a discussion. Now you 518 00:26:05.300 --> 00:26:08.500 remember that return on capital is return on sales times assets 519 00:26:08.500 --> 00:26:11.500 turnover, which enhances we discuss let's move to assets 520 00:26:11.500 --> 00:26:11.900 turnover. 521 00:26:12.500 --> 00:26:16.000 Assets turnover is very much about Capital intensity Capital 522 00:26:15.700 --> 00:26:19.200 expenditures and working capital requirement cash 523 00:26:18.200 --> 00:26:21.200 conversion cycle interestingly. 524 00:26:22.500 --> 00:26:25.900 When You observe in the long run the cash conversion cycle 525 00:26:25.900 --> 00:26:28.800 is zero so inventories plus 526 00:26:28.800 --> 00:26:32.700 receivables minus payables is Neil and 527 00:26:31.700 --> 00:26:34.900 so what is very interesting is 528 00:26:34.900 --> 00:26:37.700 that the operating cycle does not consume Financial 529 00:26:37.700 --> 00:26:38.400 Resources 530 00:26:39.600 --> 00:26:43.300 What consumes Financial Resources is capital expenditures? 531 00:26:44.200 --> 00:26:47.500 If you look at the evolution of capital expenditures as percentage to 532 00:26:47.500 --> 00:26:50.900 revenues you understand that it was quite High and the 533 00:26:50.900 --> 00:26:53.600 company in the past was investing much 534 00:26:53.600 --> 00:26:57.000 more than it was depreciating you 535 00:26:56.200 --> 00:26:59.400 remember I always calculate capex on revenues 536 00:26:59.400 --> 00:27:02.800 but also investment intensity which is capex divided 537 00:27:02.800 --> 00:27:05.100 by depreciation depreciation is 538 00:27:05.100 --> 00:27:08.200 the average capex of the past capex is what we 539 00:27:08.200 --> 00:27:12.300 invest today. So do you invest more than the average or 540 00:27:11.300 --> 00:27:14.700 do you invest less than the average and very 541 00:27:14.700 --> 00:27:15.600 interestingly? 542 00:27:16.700 --> 00:27:20.300 The company invested a lot to decades 543 00:27:19.300 --> 00:27:23.500 ago and now the capital intensity the 544 00:27:22.500 --> 00:27:26.200 investment intensity is dramatically 545 00:27:25.200 --> 00:27:28.600 reducing the company does 546 00:27:28.600 --> 00:27:31.600 not want to grow any more its capacity 547 00:27:31.600 --> 00:27:34.600 and the company wants to invest and 548 00:27:34.600 --> 00:27:37.600 grow in a business which does not consume a 549 00:27:37.600 --> 00:27:40.400 lot of Financial Resources consequence on 550 00:27:40.400 --> 00:27:43.300 the assets turnover when the company was 551 00:27:43.300 --> 00:27:46.600 immensely investing in capacities. Yes. Let's 552 00:27:46.600 --> 00:27:49.300 do an award was progressively down not because 553 00:27:49.300 --> 00:27:53.000 of the operating cycle but because of the capital intensity 554 00:27:53.700 --> 00:27:56.700 And then as a consequence, it's stabilized the 555 00:27:56.700 --> 00:27:59.400 company dive vested. And now 556 00:27:59.400 --> 00:28:02.700 the company is growing its assets turnover. 557 00:28:02.700 --> 00:28:05.600 Why because it is investing less than 558 00:28:05.600 --> 00:28:08.800 it depreciates. The increase 559 00:28:08.800 --> 00:28:11.500 in the assets turnover in 2021 is a 560 00:28:11.500 --> 00:28:14.200 consequence of the numerator dramatic increase 561 00:28:14.200 --> 00:28:15.300 in the revenues. 562 00:28:15.900 --> 00:28:18.200 Now once you have the assets turnover, which is 563 00:28:18.200 --> 00:28:21.600 declining and up and you have the return on says 564 00:28:21.600 --> 00:28:24.400 which is stable and down return capital 565 00:28:24.400 --> 00:28:26.100 is just a combination of system. 566 00:28:27.600 --> 00:28:30.800 Stable Eternal sales declining assets turnover 567 00:28:30.800 --> 00:28:32.100 declining rosé. 568 00:28:33.200 --> 00:28:37.000 Eternal cells is zero return capital is zero return all 569 00:28:36.300 --> 00:28:39.500 Celsius up assets to an ovaries app 570 00:28:39.500 --> 00:28:42.300 return capital is the immensely up and 571 00:28:42.300 --> 00:28:45.800 today it's more than 50% Of course. It's 572 00:28:45.800 --> 00:28:48.100 an accident and the company 573 00:28:48.100 --> 00:28:51.400 says in the long run this exceptional year will not 574 00:28:51.400 --> 00:28:54.800 be experienced again, and they 575 00:28:54.800 --> 00:28:57.400 are quite right you remember the freight rates. 576 00:28:57.400 --> 00:29:01.100 That was a freight rate evolution in 2021. 577 00:29:00.100 --> 00:29:03.800 What about 2022 with 578 00:29:03.800 --> 00:29:06.200 two sources of data You observe that it 579 00:29:06.200 --> 00:29:08.600 will flat dramatically up and down. 580 00:29:09.700 --> 00:29:13.100 For Freight rates at large for the 40 feed 581 00:29:12.100 --> 00:29:15.500 container. It's exactly the same story. We 582 00:29:15.500 --> 00:29:18.800 are not yet back to the initial Evolution 583 00:29:18.800 --> 00:29:21.900 for basically some reasons which are problems 584 00:29:21.900 --> 00:29:24.400 are not solved today, but it 585 00:29:24.400 --> 00:29:27.700 can't be considered as sustainable this huge level 586 00:29:27.700 --> 00:29:30.200 of freight rates. Now, we have observed the 587 00:29:30.200 --> 00:29:33.800 return Capital as return sales times assets turnover, 588 00:29:33.800 --> 00:29:36.400 but you remember that the financial performance for a 589 00:29:36.400 --> 00:29:39.600 company is not the return Capital. It's a 590 00:29:39.600 --> 00:29:42.600 return Capital minus confronted with the 591 00:29:42.600 --> 00:29:45.200 weighted average cost of capital the cost 592 00:29:45.200 --> 00:29:48.800 of the financial results. The whack. So economic 593 00:29:48.800 --> 00:29:51.500 profit is real same miners. Walk. What about 594 00:29:51.500 --> 00:29:54.300 the walk? I don't want to elaborate too much on the one but there's 595 00:29:54.300 --> 00:29:57.200 one point I would like to discuss with you during a 596 00:29:57.200 --> 00:30:01.300 couple of minutes. It's evolution of these systematic 597 00:30:00.300 --> 00:30:03.600 risk coefficient. The very 598 00:30:03.600 --> 00:30:06.700 famous beta the beta for group 599 00:30:06.700 --> 00:30:09.400 is the average bit of the different businesses. 600 00:30:09.600 --> 00:30:10.600 inside the group 601 00:30:11.300 --> 00:30:14.200 An interestingly When You observe the evolution of the 602 00:30:14.200 --> 00:30:17.500 beta for AP motor mask in 603 00:30:17.500 --> 00:30:19.100 the long term, you have two periods. 604 00:30:19.900 --> 00:30:22.600 You have one period when in the portfolio 605 00:30:22.600 --> 00:30:25.500 of activities that were high beta businesses and 606 00:30:25.500 --> 00:30:26.800 low beta businesses. 607 00:30:27.700 --> 00:30:30.500 The banking business is lower better 608 00:30:30.500 --> 00:30:34.200 than the shipping business distribution retail 609 00:30:33.200 --> 00:30:36.900 distribution oil and gas low bass 610 00:30:36.900 --> 00:30:39.400 activities the consequences what the 611 00:30:39.400 --> 00:30:42.400 consequence is at the beta of AP Motorola mask walls 612 00:30:42.400 --> 00:30:45.600 about 0.80.9 a 613 00:30:45.600 --> 00:30:49.100 bit less than one but when you take all 614 00:30:48.100 --> 00:30:51.700 these assets out of this company and 615 00:30:51.700 --> 00:30:54.800 what remains is only High beta businesses, 616 00:30:54.800 --> 00:30:57.400 you understand that the low beta businesses are 617 00:30:57.400 --> 00:31:00.700 out what remains is 1.5 beta activities. 618 00:31:00.700 --> 00:31:03.300 The shipping industry is a very 619 00:31:03.300 --> 00:31:05.000 Risky Business. 620 00:31:05.900 --> 00:31:09.500 Interestingly the 1.7 became 621 00:31:09.500 --> 00:31:12.700 1.5 a little bit down a little bit up. We'll 622 00:31:12.700 --> 00:31:15.700 have to observe the sustainability of this beta 623 00:31:15.700 --> 00:31:18.400 but if you look at what is expected by 624 00:31:18.400 --> 00:31:21.100 the company in terms of the shipping industry, which is 625 00:31:21.100 --> 00:31:25.300 the big chunk of business is more long-term 626 00:31:24.300 --> 00:31:27.200 contracts in order to 627 00:31:27.200 --> 00:31:31.100 reduce a sensitivity to macroeconomic conditions 628 00:31:30.100 --> 00:31:33.200 as a consequence to reduce the 629 00:31:33.200 --> 00:31:34.500 beta. 630 00:31:35.400 --> 00:31:38.600 That's a strategy of the company. Now if you compare the 631 00:31:38.600 --> 00:31:41.400 beta of apmolar mask with some 632 00:31:41.400 --> 00:31:45.600 competitors and peers in the shipping industry hapagloid 633 00:31:44.600 --> 00:31:48.800 1.3 Cosco Evergreen 634 00:31:47.800 --> 00:31:51.500 1.9 1.6. These 635 00:31:50.500 --> 00:31:53.600 are high beta firms 636 00:31:53.600 --> 00:31:56.500 as a dominant business is still shipping. 637 00:31:56.500 --> 00:31:59.700 The beta is high and the walk is 638 00:31:59.700 --> 00:32:02.300 high accordingly. Now, you calculate the 639 00:32:02.300 --> 00:32:05.100 economic profit and what You observe is that 640 00:32:05.100 --> 00:32:08.100 it's negative because the return on 641 00:32:08.100 --> 00:32:12.200 Capital does not pay the high walk. Of 642 00:32:11.200 --> 00:32:14.100 course in 2021. It's not 643 00:32:14.100 --> 00:32:17.900 the case, but this is an exceptional year again and 644 00:32:17.900 --> 00:32:18.200 again 645 00:32:19.200 --> 00:32:22.300 You remember that? I always confront the 646 00:32:22.300 --> 00:32:26.100 market to book which is a relative value creation indicator and 647 00:32:25.100 --> 00:32:29.100 a price value divided by Capital employed Capital 648 00:32:28.100 --> 00:32:31.300 employed in the books is what you 649 00:32:31.300 --> 00:32:34.800 invested in the operations and Enterprise Value market cap plus 650 00:32:34.800 --> 00:32:37.800 net debt is the value of your operations. If the 651 00:32:37.800 --> 00:32:40.500 market to book is more than one it means that you created value 652 00:32:40.500 --> 00:32:42.700 less than one it means that you destroyed value. 653 00:32:43.700 --> 00:32:46.300 But it is quite easy to understand that when the 654 00:32:46.300 --> 00:32:49.400 return on capital is matching the cost of capital. 655 00:32:49.400 --> 00:32:52.700 It's a kind of neutrality on the financial performance point 656 00:32:52.700 --> 00:32:55.500 of view. There is no value creation. No value 657 00:32:55.500 --> 00:32:58.900 destruction. So a zero economic profit is 658 00:32:58.900 --> 00:33:01.500 consistent with a one market 659 00:33:01.500 --> 00:33:04.200 to book one in terms of Market to book means that 660 00:33:04.200 --> 00:33:07.600 the Enterprise Value exactly matches with the capital employed 661 00:33:07.600 --> 00:33:10.100 interestingly. If you look at the evolution of the market 662 00:33:10.100 --> 00:33:14.000 to book, it's quite stable. It's about one but 663 00:33:13.400 --> 00:33:16.500 one in Market to book with mean 664 00:33:16.500 --> 00:33:19.400 that the economic profit is zero. It's not 665 00:33:19.400 --> 00:33:22.100 zero it's negative and there is 666 00:33:22.100 --> 00:33:26.100 a gap between the market to book and Rosie against 667 00:33:25.100 --> 00:33:28.600 a walk now. It's not that easy to observe 668 00:33:28.600 --> 00:33:31.400 that on the graph. This is why I made a zoom 669 00:33:31.400 --> 00:33:34.700 in the graph. And what You observe is exactly the 670 00:33:34.700 --> 00:33:37.900 same Market to book one and an 671 00:33:37.900 --> 00:33:41.800 economic profit, which is on the average minus five 672 00:33:41.800 --> 00:33:43.300 percent, which is 673 00:33:43.600 --> 00:33:44.700 quite significant 674 00:33:45.500 --> 00:33:48.400 now in 2021, of course, it's up, but 675 00:33:48.400 --> 00:33:51.300 it's not sustainable because the fridge rates 676 00:33:51.300 --> 00:33:55.600 are not sustainable as they were in 2021. Now, 677 00:33:55.600 --> 00:33:59.100 let's go back to the strategy of the company stable 678 00:33:58.100 --> 00:34:02.300 capacity vessels terminal the 679 00:34:01.300 --> 00:34:04.800 objective is to improve the performance why 680 00:34:04.800 --> 00:34:07.300 because the economic profit has to be up 681 00:34:07.300 --> 00:34:11.400 it has to become positive acceleration is 682 00:34:10.400 --> 00:34:13.700 a segment growth in 683 00:34:13.700 --> 00:34:16.400 a segment organic external growth. 684 00:34:16.400 --> 00:34:19.500 But in a segment, which is largest Dixon Services, which 685 00:34:19.500 --> 00:34:23.700 consumes very few Financial Resources, then 686 00:34:22.700 --> 00:34:25.000 if you accelerate you're not 687 00:34:25.200 --> 00:34:28.800 going to consume capital and you are going to contribute to the ROK of 688 00:34:28.800 --> 00:34:31.600 the company the objective is that the company becomes 689 00:34:31.600 --> 00:34:34.900 economic profit positive. That's 690 00:34:34.900 --> 00:34:38.300 a great strategy design. But 691 00:34:37.300 --> 00:34:40.500 what is a reaction of the market if 692 00:34:40.500 --> 00:34:43.600 you look at the stock market index the last 693 00:34:43.600 --> 00:34:45.200 12 months you understand? 694 00:34:45.400 --> 00:34:48.100 It was reasonably stable and then it went down 695 00:34:48.100 --> 00:34:51.600 by 10% over the same period AP motor 696 00:34:51.600 --> 00:34:54.700 mask went down by 40% then you 697 00:34:54.700 --> 00:34:57.800 can conclude this is dramatic. Yes, but if 698 00:34:57.800 --> 00:35:01.600 you remember that the company in April 2022 699 00:35:00.600 --> 00:35:03.800 distributed a huge 700 00:35:03.800 --> 00:35:06.900 dividend 7 billion dollars these seven 701 00:35:06.900 --> 00:35:09.700 billion dollars represent exactly 18% of 702 00:35:09.700 --> 00:35:13.000 the market capitalization of the company that it 703 00:35:12.200 --> 00:35:16.600 was distributed to return to shareholders consequence stock 704 00:35:15.600 --> 00:35:18.200 price went down by 18% 705 00:35:18.800 --> 00:35:21.900 So, of course there is a minus 40 Which 706 00:35:21.900 --> 00:35:24.400 is less than the minus 10 and the 707 00:35:24.400 --> 00:35:28.000 Gap is 30% but 18% out of 708 00:35:27.900 --> 00:35:30.100 30% 60% of 709 00:35:30.100 --> 00:35:33.200 the Gap is explained by the fact that 710 00:35:33.200 --> 00:35:36.300 the company paid an exceptional dividend and return the cash 711 00:35:36.300 --> 00:35:37.100 to the shareholders. 712 00:35:38.100 --> 00:35:41.800 Probably another part of the explanation is the evolution 713 00:35:41.800 --> 00:35:44.600 of the freight rate and maybe also part 714 00:35:44.600 --> 00:35:47.900 of the explanation is the strategy credibility 715 00:35:47.900 --> 00:35:50.200 of the company, which is maybe a little 716 00:35:50.200 --> 00:35:53.300 bit at stake. But what happens when 717 00:35:53.300 --> 00:35:56.400 you're stuck price is done by 40% is that 718 00:35:56.400 --> 00:35:59.200 you are the perfect Target for a whole 719 00:35:59.200 --> 00:36:03.100 style takeover, but there won't be any hostile take 720 00:36:02.100 --> 00:36:06.000 over easy Equity of the company is perfectly 721 00:36:05.700 --> 00:36:08.500 control, which is exactly how 722 00:36:08.500 --> 00:36:11.700 it works. You remember that. The AP mode 723 00:36:11.700 --> 00:36:14.600 of foundation is holding a very 724 00:36:14.600 --> 00:36:17.400 significant Equity stake. There are some 725 00:36:17.400 --> 00:36:21.100 old family funds and supporting phones 726 00:36:20.100 --> 00:36:23.800 April based fonts, which 727 00:36:23.800 --> 00:36:28.000 are all in all controlling 71% of 728 00:36:27.200 --> 00:36:30.300 the voting right? Then you understand 729 00:36:30.300 --> 00:36:34.000 that even though you're strategy is not fully credible 730 00:36:33.600 --> 00:36:36.300 today. There's no reason that the 731 00:36:36.300 --> 00:36:37.900 company is taken over. 732 00:36:38.100 --> 00:36:41.800 Her and at the end of the day. This is a nice part 733 00:36:41.800 --> 00:36:44.600 of being controlled as a 734 00:36:44.600 --> 00:36:44.900 company. 735 00:36:45.700 --> 00:36:48.400 You have a strategy the strategy is not 736 00:36:48.400 --> 00:36:51.900 yet. Credible. You don't care and you 737 00:36:51.900 --> 00:36:55.000 wait up to the murmur. The market will accept the 738 00:36:54.600 --> 00:36:57.500 strategy if it happens one day. 739 00:36:58.600 --> 00:36:59.100 Thank you very much.