2019 was characterised by improved profitability for Wallenius Wilhelmsen, despite a decline in volumes. In 2018, Wallenius Wilhelmsen initiated a two-year performance improvement programme targeting USD 100 million in bottom-line impact through operational improvements. The programme gained strong traction early on, and had a significant positive impact on the group’s performance in the ocean segment in 2019.
Contract portfolio improvements have provided increased flexibility to optimise voyages and extract efficiencies in the trade network of EUKOR and Wallenius Wilhelmsen Ocean. Voyage rationalisation and relinquishment of unprofitable volumes helped us achieve higher net freight revenue per cubic meter (CBM) and better utilisation factor on the vessels, contributing to lower voyage costs. In addition, more efficient hull cleaning has contributed to lower fuel oil consumption, by applying robotics and digital images to optimise frequency of cleaning and also use of higher quality, anti-fouling paint. Since the start of the programme a total of USD 74 million in annual savings potential had been identified per end of 2019 and USD 69 million of those have been realised. Most of the remaining savings will come through leveraging digitalisation and introducing new technologies to optimise voyage and vessel management, further increasing operational efficiency and reducing costs.
As a result of this programme, financial results in 2019 showed improvement compared to 2018 despite lower volumes. The performance improvements were all related to the ocean segment, whereas the results in the landbased segment declined when the positive impact from the IFRS 16 accounting standard implementation is excluded, primarily as a result of lower volumes and some increase in costs. In addition to the performance improvement programme, ocean segment results benefited from a favourable cargo mix with a higher share of high and heavy cargo compared to 2018, lower net bunker costs, and a favourable currency impact as the US dollar strengthened throughout the year.
While the financial performance improved, the overall market weakened during 2019, with slower or negative growth for automotive, and a slowdown for high and heavy – albeit from very high growth rates the two preceding years. The ocean segment is still facing the challenge of overcapacity of tonnage resulting in pressure on freight rates, which remain at a low level. On the positive side, the order book remains very low, per end of 2019 at about 3% of the global fleet.
The softening market combined with significant uncertainty regarding the potential impact of trade tensions affected the share price, which declined by 27% during the year.