CMA CGM bonds tumble to near-record lows on earnings collapse

The CMA CGM Benjamin Franklin container ship at the Port of Los Angeles.
The CMA CGM Benjamin Franklin container ship at the Port of Los Angeles. PHOTO: AFP

LONDON (BLOOMBERG) - CMA CGM SA bonds plunged to near-record lows after the container-shipping line's quarterly profit collapsed on lower freight rates.

The company's 725 million-euro (S$1.1 billion) bonds due January 2021 fell 4 cents on the euro to 74 cents, according to data compiled by Bloomberg. Fourth-quarter earnings before interest, tax, depreciation and amortization tumbled 72 per cent to US$115.7 million, said Arndt Muthreich, an analyst at Stifel Nicolaus in London. He derived the numbers from full-year results reported by Marseille-based CMA CGM late on Monday.

The world's third-largest container line is adding debt to support the pending S$3.38 billion acquisition of Neptune Orient Lines Ltd., even as a prolonged slump in shipping rates weighs on earnings. Container lines are struggling to raise fees after a boom in Chinese shipbuilding led to a capacity glut.

"The outlook remains bleak, at least until this summer, while the group is wrapping up the biggest acquisition in its history," said Delphine Chauvin, an analyst at Oddo & Cie. in Paris. "Given continued pressure on freight rates, we anticipated a sharp fall in results." The shipping line didn't reply to an e-mail request for comment on the earnings.

The company plans to pay for the purchase of Neptune Orient through cash and financing from a group of banks, according to a Dec. 7 statement. It intends to raise more than a $1 billion through steps including cost-cuts and asset sales within two years of closing the deal.

The shipping line's 300 million euros of notes due December 2018 lost 2 cents to 87 cents.

Annual Ebitda fell 2.8 per cent to US$1.3 billion, according to the earnings statement. Revenue dropped 6.4 per cent decline to US$15.7 billion, even with a 6.3 per cent increase in container volumes.