Latin America, Africa and many parts of Asia are the new “ports” of growth says APM Terminals

Today’s ports are facing multiple challenges, from improving infrastructure to handle larger vessels, to “must-have” gains in productivity, the list goes on, not to mention the need to have a responsible environmental policy. APM Terminals’ CEO, Mr. Kim Fejfer discusses all of the above in an exclusive interview with Hellenic Shipping News Worldwide. Mr. Fejfer, a member of the Maersk Group for the better part of two decades and CEO of APM Terminals since June 2004, recognizes development opportunities in many parts of Asia, Latin America and Africa, where Nigeria stands out as a prime example of dynamic growth.

How would you evaluate APM Terminals’ performance during the first quarter of the year?

We are satisfied with Q1 results. We were profitable, delivering USD 166m profit and ROIC of 12 pct. (Adjusted for after tax gains due to the sale of Maersk Equipment Service and half of the stake in Xiamen, China, Q1 of 2012 was USD 153m, against USD 161m in Q1 of 2013). And, despite the challenging economic conditions, we continued a good development pace (+ 5.2% profits, excl. sales gains). We further diversified and balanced our customer portfolio. Our volume growth was flat due to lower volumes in Western Europe, USA – but higher in growth markets.

In terms of business growth, which were the highlights of the period (including agreements to operate more terminals)?

We continued our expansion activities in growth markets, i.e. Izmir, Turkey, and were named preferred bidder for a terminal project in Abidjan, Ivory Coast together with our joint venture partners. And, we have a new terminal in Santos, Brazil, opening this year.

Hellas has been moving forward with reforms and a massive privatization program, which will see the country’s ports handed over to private operators. Will APM Terminals be among the contenders for some of these projects, like for instance the Port of Thessaloniki, in northern Hellas?

We look at all port opportunities worldwide as a normal business practice but have nothing specific to say about Greek ports at this time.

Do you expect the rest of 2013 to move towards the same direction in terms of profitability?

We continue to see good growth potential in ‘high growth markets’ i.e. in Latin America, Africa and many parts of Asia.
Our growth and expectations for volumes rest of year are based on our ongoing customer dialogue.
We are confident, but with caution on the macroeconomic environment. The global outlook today seems more stable than last year and there is still a large global need for more port capacity, so we will continue to invest in high growth markets and in upgraded facilities to cater for the needs of our customers.

Lately, we’ve been witnessing more and more shipping companies (with Maersk at the forefront) investing in bigger vessels, modern-day Leviathans, one could say. Is the ports’ industry capable of handling these giants of the seas?

The average vessel size on Asia/Europe is increasing with the goals of lowered costs and economies of scale. As a result, shipping lines also expect their port stays to be fast, reliable and with high productivity. We are ready and have been focusing on productivity for 2-3 years now. Last year, we recorded an 8% crane productivity improvement which gives us lots of confidence in what we can do to handle the mega ships in port.

A lot has been said about the need of ports around the world to catch up with a fast changing shipping industry, in terms of building up proper infrastructure. Which parts of the world have addressed this need and which have fallen behind?

East and West Africa and Southeast Asia/Indian subcontinent are the areas needing more infrastructure.

Which is your long-term strategy in terms of growth? Which are the markets you’ve identified as the most promising and suitable for your company?

East and West Africa, The Middle East, Southeast Asia and China offer high growth rates.

We are pursuing a Nigerian port called Badagry which will be Nigeria’s future largest port.
When you look at Nigeria – you see a lot of port congestion. The country is booming. Container volumes grow 8-10% annually and by 2017 there will be no more capacity available. Lagos is the gateway for cargo in and out of Nigeria, handling almost 90% of the container traffic. The city has 10 million people, is the second fastest growing city in Africa and the seventh fastest growing city in the world right now. So there is immense pressure on the city’s transport infrastructure.
We are already present in Nigeria: in Onne – and in Apapa, the port of Lagos. We are improving and expanding our current facility. But the really exciting thing that we are working on right now is the port of Badagry.
Located 55km west of Lagos, we chose Badagry after looking at every location in the country. It is a greenfield project and will include a multi-purpose port for containers, bulk, liquid and general cargo, Ro-Ro, as well as support facilities for oil and gas exploration and a free trade zone. It will be by far the largest port in Africa with 7km of quay wall. .
We will work with our partners: Macquarie, Terminal Investment Limited (TIL), and Nigerian companies Orlean Invest and Oando to make it a success. It is backed by the Nigerian Port Authority, the Lagos state, and the federal government so we feel the project is on the right track. Construction is due to start early 2014.

Besides ships, ports as well have a role to play, when it comes to improving their carbon footprint and adopting more environmentally-friendly practices. What types of measures are you taking in your terminals?

We are putting a lot of emphasis on this area because it makes sense and is long term. We are retrofitting RTGS at our existing terminals, using automation when possible with electric-powered vehicle and are in active dialogue with equipment manufacturers to find new ways to make equipment more eco-friendly, safer and better. We also use alternative energy like wind to power our Rotterdam and Zeebrugge ports.

How dramatic of a change do you think that the Panama Canal’s widening will bring to the maritime business? How will this affect your company’s terminals? What have you done to prepare for this?

As one of the most important waterways in the world, the Panama Canal widening will bring larger, newer vessels into more markets. In fact, with the new wave of larger tonnage entering Asia/Europe, the current vessels will be cascaded into other trades. We feel everyone wins with a larger canal. Shipping lines can do more with their vessel rotations. Customers will benefit with lower unit costs due to the economies of scale large ships bring.

Going forward, when do you expect the world’s economy to bounce back, thus supporting more container handling in APM’s Terminals around the world?

We refer to it as the “new normal” that has uneven growth. We and other industry analysts like Seabury see three speeds of growth:
1) Decelerated growth: North, South, West Europe, USA, Northeast Asia excl PRC.
2) Healthy but volatile growth: Eastern Europe, Central and South America, South Asia.
3) Strong and solid growth: East and West Africa, Middle East/Gulf, Southeast Asia, PRC.

Nikos Roussanoglou, Hellenic Shipping News Worldwide