Nils Andersen - Chief Executive Officer Trond Westlie - Chief Financial Officer

Dan Jensen - Svenska Handelsbanken Christopher Combé - JPMorgan Securities Lars Heindorff - SEB Enskilda Neil Glynn - Credit Suisse Securities Jørgen Bruaset - Nordea Bank Mark McVicar - Barclays Capital Securities Ltd. Johan Eliason - Kepler Cheuvreux Marcus Bellander - Carnegie Bank Angus Tweedie - Bank of America Merrill Lynch Thijs Berkelder - ABN AMRO Bank

So, good morning, everybody, and it's now 9:30 AM. Thank you for joining the A.P. Møller-Mærsk Conference on Q1. It's, of course, a very small quarter, so we appreciate that you take the time to listen into this. So, if we go straight to the forward-looking statements on page two, and then while you read that, I'll just give a little bit of flavor to the accounts as we see them. I mean, we appreciate, of course, that the markets are in a very bad situation. We've gone through Q1 where oil prices - I can't say that they bottomed out, but at least they were lower than even today, down around $30 a barrel during most of the quarter. So, that was tough. And the shipping rates were record low in Q1. They, by the way, are still very low. So, we've gone through a difficult quarter from a market perspective. Nevertheless, we improved the results versus Q4 last year, coming out with a small profit, and we are pleased with that. Most of our businesses are still making money, the two that are not is Maersk Supply Service due to the very poor ordering situation in the sector. And Maersk Oil due to the very low oil prices, but I'll come back to that later. And then also opening up, also very important to underline that despite the fact that we bought back shares, that we also completed on two acquisitions in Terminals and Oil and the poor operating result and also some negative developments in working capital and payment of the result of an arbitration, we still have a very, very strong financial position with a debt of $10.7 billion and equity of $36 million. So, still very healthy and ready to use that force as we go through the year. And also maybe upfront, we also, in this Q1 report normally focuses our reserve situation and the development here has been very positive as well. So, we feel that within the possible, we actually delivered a pretty good performance and hopefully, we would be satisfied as well. So, let's go to page three, the financial highlights. The profit for the quarter was $224 million and the underlying profit in the same level, $214 million, of course, down from - significantly down from last year, not surprising given the oil and container rate development. The free cash flow, as I alluded to before, has been impacted by the payment of acquisitions and some other investments and also normal movements caused by the relatively poor result of the deterioration in the result. And then, it is the first - the Q1, where usually, you have seen in most companies, you run a cash drive during Q4 and then you see some flow back in Q1, so nothing unusual in that. Going to the underlying profit by activity, it's the main impact from - on profit or the drop in profit come from Maersk Line, dropping from $700 million to $0, basically, or breakeven. And Maersk Oil going down from $200 million to a slightly negative result, actually, better than we expected for Maersk Oil. APM Terminals down, and I'll come back to that, of course, but background is deterioration - continued deterioration in the oil exporting markets. Most of them have no money for imports. So, you see massive trade impacts in those countries. APM Shipping Services in line with last year, when you take into account that Maersk Supply Service is impacted by the ordering situation. And Maersk Drilling up compared to last year - jumped that, sorry - is up on last year partly due to good operations, of course. They're still delivering strong underlying result, but also because we had to take some profit from a cancellation or - yeah, cancellation of a rig contract from Chevron related to our Angolan rig. So, it moved some profit from the last quarter to the first quarter, but underlying result which is still very strong on the back of a good order book. So, as I said before, we maintain a strong financial position. In addition to the strong equity and still relatively low debt, we also maintain a very strong financial preparedness with a liquidity reserve of around $12 billion, and we completed our share buyback program, buying back around $500 million worth of shares in Q1. And, of course, we paid out dividend. We maintained our dividend same as last year. So, moving into the individual business units. On page four, you have the Maersk Line result. It's a breakeven result, which is a small profit, despite a very, very tough market situation. And the background for that is, I think, they have number of effects, but first and foremost, that we increased our volume by approximately 7%. I received a question earlier today from the press, well, that was not slightly more than defending our market share position, and it is, but don't forget that we actually did lose some share in the first quarter last year, and we gradually regained that during the year last year. So, probably the 7% growth is more of a, let's say, a short-term development, but we're still keen to at least maintain our market share. Our capacity grew by 2.2% compared to last year and a little bit also compared to last quarter but less than volume. So, our capacity utilization has improved, and that means that our cost has gone down. I'll come back to you later on next page, because we also managed a pretty good cost reduction program. Rates are down 26% compared to last year, and these are record-low levels, on the back of also pretty weak trade developments in most countries for our competitors. We still maintained in Q4, we now got the final figures, our 5% margin gap on EBIT level to our competitors. And we delivered a free cash flow in Q1 of $73 million, even though the working capital did not develop superbly. So, Maersk Line's cost situation is on page five and, essentially, the combination of a 10% unit cost reduction, of which, part is caused by lower bunker, but there is also other reductions, combined with a 7% growth in volume, gives us a 16% reduction in unit cost. This is, I think, also a little bit more than the trend we normally would have. But you may recall, those of you who listened in on the full year conference, that we were not quite satisfied with the unit cost development in Q4 last year. So, I think, there were some, probably some pent-up effects from the savings there. So, a good result on the cost level and, of course, bunkers have had an impact. So if you look at, if you compare the total reduction of $389 per FFE, the bunker impact of that is almost half. So, that's the way it works. It goes in the right direction and we'll, of course, continue to work on reducing the cost. Moving over to Maersk Oil, we're actually quite satisfied with the development in Maersk Oil. We have beaten our expectations on cost reductions and production. And that means that our breakeven cost has moved down from the $45 to $55 we said at the beginning of the year, down to $40 to $45. So that's a clear improvement, and of course, we don't give sort of a specific guidance for the annual result. But it means that given that oil prices are where we are today, we're quite optimistic that we'll get a result around zero. So, that's improvement compared to last year. Not much more to say here. We had a dispute settlement. That means that the operating cash flow turned negative in the quarter. And we've also had some discussions in the press on the future of production in Tyra West and Tyra East. And the background for that is that the platforms are sinking. We've been taking gas out of the ground for so many years that there is a space to fill. So, that means the platforms have been sinking. And therefore, given wave heights and the need to maintain safety level for our employees at all times that means that we will discontinue operations in 2018 unless we invest in the field. And in order to make that financially viable, we've taken up discussions with the government. And we'll see what comes out of it. Of course, we hope that we can continue, but if not, then, that will be closed out. We also completed, as I said before, our acquisition of the licenses in Kenya and Ethiopia from African Oil, and we completed the divestment of the small-producing Polvo field in Brazil. Also, repeating a little bit from the opening remarks, the situation on reserves and resources is presented on page seven. And starting from the top, we have - the 1P reserves have gone up from 327 million boe last year to 408 million boe this year. And in addition to that, before coming to the 2P reserves, also the probable reserves have gone up from 183 million boe to 241 million boe. So, total 2P reserves from 510 million boe to 649 million boe. It's important to underline that these reserves are excluding reserves in Qatar beyond mid-2017, so it's, of course, an extra hard work to replace reserves that we produce, because we do produce quite a bit in Qatar. And when we can't include the reserves after 2017, we need to do more in the rest. We've done that during last year by starting off the projects in Culzean and Johan Sverdrup, so the reserve replacement ratio was actually 171%, which is, of course, an excellent result. The 2C reserves have declined compared to last year, the contingent resources as they're called and the background for that is partly that we've taken some reserves from there, resources and develop them into reserves at Culzean and Johan Sverdrup, but also because the lower oil price means that some of our oil resources are no longer feasible, and therefore they have been excluded. That was that on the reserves and resources, but a good healthy development. And of course, we've now acquired the resources in Africa Oil, which will come in next year. And, yeah, we think that we had a good development there. If we go to APM Terminals, this is of course still a very profitable business, but we do have a significant decline from last year. So, our ROIC is going down, so 6.2% against 12.9% last year. And really, the background for that is exclusively the troubles that are important operations in West Africa, in - or Angola and Nigeria to be very specific. Russia and Brazil are going through. There's a volume drop, but that is mainly caused by selling activities plus these markets. So, I would say, we're a little bit disappointed with the results here, but it is macro effects that are taking place. We are doing what we can, of course, to cut cost and also moving our important projects further on. We have terminals under construction both in Costa Rica and in Lázaro Cárdenas in Italy and so on. And, of course, we want to move these projects forward as much as we can, provided that there's a market for the services. But all in all, I would say, a disappointing result in Q1 in APM Terminals, but caused by external factors. Maersk Drilling continues its very good operational performance. We do expect for the year, as Trond will come back into a minute, but we do expect a result significantly below last year. But Q1 was very good on the back of good performance, but also on the back of this cancellation of the Deliverer rig in Angola. Not much really to add on - add to what was said or what is already in the text. But, of course, the markets continue to be very tough. There's not a lot of market for rigs that are going off-contracts. We do believe that we have a very strong proposition to our customers. So we are optimistic on the utilization rates long-term, and we do have a relatively good order book. But facts remain that when our rigs go off-contract, they either go into being idled or they go back working, but then, at lower contract rates. So it's a tough market to compete in. And then, on page 10, my last slide before I hand over to Trond, APM Shipping Services. As I said at the opening, a good performance given the market situations. We've delivered result of $71 million. The ROIC is relatively low, weighted down - 6.2%, but weighted down by Maersk Supply Service. But the other businesses are doing well with good results in Tankers, up from last year. We have a stable result in Svitzer. And Damco continues its turnaround, so delivers also. In the quarter that in forwarding is very small normally, delivers a small positive profit. So a good start to the year here, given the problems that Maersk Supply Service is facing. And with that, I'll hand over to Trond. Please take us on from here.

Thank you, Nils, and good morning from me as well. Going then to page 11 and looking at the invested capital and the returns, no big changes in invested capital during the quarter and we see that we're delivering almost 3% return in a very difficult market. We see that Maersk Line and Maersk Oil having low returns. Maersk Line with 0.7% and Maersk Oil with a negative of 3% return during the quarter. And we also see that both Terminals, Drilling and Shipping Services is delivering decent to good returns in difficult markets. So, all in all, as Nils mentioned, we are doing decent in a very difficult market. Going then to page 12, seeing the financial frameworks, going then to the top left, on the cash flow development, we see that the net debt increases with $2.9 billion, very much driven from acquisitions, buyback, and the low operating cash flow. So, all in all, we are in acquisition and buyback funding. We are paying approximately $2.1 billion out of the increase of $2.9 billion. And then, as previously mentioned, we also have some provision adjustments of approximately $600 million that drives also the development in the increase of debt of up $10.7 billion. Not too much happening on the upper right. Not too much happening on the portfolio management. The investment in growth on the bottom left, you see that the gross investment is $2.1 billion, but if we take out the how the booking is done on the TCB and African Oil, the underlying gross investment during the quarter is $1 billion. Ordinary dividends, payment of dividends happen in April, so no effect of the first quarter, but the dividend was DKK 300 a share. Going then to page 13, an overview of the total consolidated income statement. On the revenue side, a decrease from $10.5 billion down to $8.5 billion, $2 billion down, and that is really driven by Maersk Line and Maersk Oil; $1.3 billion from Maersk Line due to the 26% decrease in rates but, of course, an increase of 7% in volume adjusts that number and Maersk Oil approximately $400 million, which is done by a change of oil prices of $20 a barrel, but compensated by 15% in increased entitlement production. So, that is really the two main drivers that goes through the changes from the first quarter of 2015 throughout the numbers. So, on the EBITDA numbers, going down $970 million, it's basically Maersk Line and Maersk Oil that contributes to the decline to $1.6 billion. Depreciation at the same level as previous years. And then the EBIT number of $490 million. Financial costs of $121 million, slightly up from last year. There are moving elements into this but mostly we had income in first quarter of 2015 that made the finance costs slightly lower. Otherwise, in 2016, we have some depreciation of currencies like Egypt and Angola and so forth and also Danske Bank has a negative effect during the quarter. That leaves us at a profit before tax on $370 million. Tax approximately the same level as last year on $145 million, and a profit for the period of $224 million. Most of the other numbers, I have commented on earlier, except for the earnings per share and that leaves us at $10 a share in this quarter. Going then to the guiding in page 14, the overall guiding for the group is not changed, and we still expect underlying result significantly below last year. The same with capital expenditures still to be around $7 billion. The guiding on Maersk Line is also the same as previously, significantly below the result - underlying results significantly below last year. And the global demand for seaborne container transportation, we still expect it to increase with around 1% to 3%. For Maersk Oil, following the cost reductions, we now expect a breakeven result to be reached with an oil price in the range of $40 to $45 per barrel. We previously had an estimate of $45 to $55, but as you can see that is taken down due to the significant effects of the cost elements. The entitlement production we have an increasing expectation up to - we now expect between 320,000 barrels and 330,000 barrels a day. For exploration cost, we have adjusted that expectation to be below last year. For APM Terminals, we have also changed our guiding and we now expect the underlying result to be below 2015 due to the reduced demand expectations in oil-producing emerging economies, as Nils mentioned. Maersk Drilling, we reiterate our expectation that result is significantly below last year and that is, of course, due to lower dayrates and more idle days in 2016. For Shipping Services, we maintain our expectation that the underlying result will be significantly below last year and that is due to the difficult market in Maersk Supply Service. And as always, I'll guide you to the sensitivity. There is considerable uncertainty, and market uncertainty adds on to that. But I will guide you to the slight changes in the sensitivity guidance for oil price due to the fact that the low oil price and the tax effects of the different countries have an effect. It is not symmetric at these levels of oil price. So that is slight change to the previous sensitivity guidance. And with that, I'll leave the closing words back to Nils.

Yeah. [Audio Gap] Sorry. Not much to add. So, I think, we can go directly to Q&A.

Thank you. [Operator Instructions] The first question comes from the line of Dan Togo from Handelsbanken. Go ahead. Your line is open.

Yes. Good morning and thank you for taking my questions. On the container side, a volume growth of 7% during Q1. I understand that there are some technicalities you mentioned due to comparisons last year. But could you elaborate a bit on which market you have been particularly strong compared to the underlying market development? That's the first question.

Dan, we don't want to go into too much details on that. But if you take the overall development in the markets, we still see weakness in Asia-Europe. You see weakness in also in Latin America coming from oil and West Africa. So, this is a situation we're facing. And that's why the overall market that doesn't grow more than 1%. But we've had pretty good growth all around, and, of course, also the regional trades have been okay.

Okay. And then on the oil reserve, Culzean and Johan Sverdrup comes in and lifts 2P some things goes out as well due to the low oil price, as you mentioned. Could you, at a gross level, give an indication of how much Culzean and Johan Sverdrup together have lifted 2P reserves?

More or less that is what comes in last year. So, it's basically the full effect. You can - 171% is the gross effect. So, we're talking of them adding around 300 million boe.

Okay. And then, on the Mærsk Deliverer impact on Drilling. Can you give an indication of how much that affects the numbers?

Yes. For the year, it will have basically zero effect. But it's $60 million plus in Q1.

Okay. Thank you.

And the next question comes from the line of Christopher Combé from JPMorgan. Please go ahead. Your line is open. Christopher Combé: Thank you. Just a couple of follow-ups on Maersk Line. To what extent, you maintain such a wide gap between volume and capacity growth? Or in other words, can you give us some sense of where utilization stands versus Q3, for example?

I can't give you any specific figures on where the other's utilizations are, but we have - our ships are basically full, and by that, we mean to say that you have to be around 90%. Christopher Combé: Okay. That's helpful. And lastly, can you give us some color on North American and European inventory levels and if you believe movement in stocks will be a factor in this year's peak season?

We don't have any - apart from what we gave you at year-end, we don't have any real updates on the quarter but trade. If you look at the trade development, Asia to the U.S., we don't have the March figures, but we believe it's up sort of where we expected to be, around 3%. And in and out of Europe, it's still down a bit mainly because of Russia. Christopher Combé: Right. And lastly, can you give us some color on the timing of the Tangier investments? When we should expect to see initial revenues and the return profile?

I couldn't hear what you were saying. Sorry. Christopher Combé: Sorry. I was asking - there's a bit of interference. I was asking if you could give us some color on the Tangier investment in APM Terminals.

Oh, okay, the Tangier investment, we're just starting. We've agreed with the government to take it over. And the investment is sort of almost $1 billion, and it's coming in over the next five years. Christopher Combé: Thank you.

And the next question comes from the line of Lars Heindorff from SEB. Please go ahead. Your line is open.

Yes. Good morning. A few questions from my side as well. Firstly, regarding the oil and gas business, you are now lowering your breakeven levels. Can you give us a bit more details about, I mean, where are you taking costs out? And the OpEx per barrel that you had in Q1, is that sort of what we should aim for, which is the level for the rest of the year?

Well, the - we're taking cost out, of course, everywhere where we can. We've closed down - we're closing down operations in Angola or reducing it significantly in the U.S. But we're also taking down exploration cost and people in Copenhagen. So, it's a broad effort across the company. And, yeah, and the reduction is around 21% when we come to the end of the year. So, I think, we have - there is still a little bit of effect to come in, but it was a good year - or a good first quarter cost-wise, also driven by the lowering of exploration.

This is Angola and the U.S., is that included in Q1? Did they have an impact in Q1 already?

No. And it will not have a big impact this year because of indemnifications for people leaving and so on, but it will help us going forward.

Okay. Regarding Maersk Line, have you made any changes to your rate structure, now thinking between - the mix between contracts and volumes? The sensitivity has changed a little bit when we look into the sensitivity table. Could you give us an explanation for that maybe?

I think for the - Trond may give you some flavor on the sensitivity table. That's a little bit more technical. But basically, what we're seeing is, of course, that the contract rates for this year will be below last year and that means that we will be more - try to be more exposed towards the spot market.

Okay. And the sensitivity?

Well, the sensitivity is basically for containers the same as previously, so nothing fundamental has changed. There are, of course, a few assumptions behind there, so some slight changes occur from quarter-to-quarter but basically the same on the container side.

Okay. My last question regarding the rigs. How do you take care of sort of the risk of impairments when some of those rigs run out of contracts? Do you have a number of rigs running out this year?

We do make value in use and market value calculation on the rigs, both when they're in or out of contracts. Of course, the value in use has supported us quite a bit, because we delivered very strong results both last year. And we'll also deliver good result this year. And then, you're talking about assets that are - will be with us for many, many years. So, it's not that sensitive to short-term developments. But the market rates are going down and that means that there are, of course, valuations, when we come beyond next year. We will be - it will be depending on what do we look - how do we view the future value in use.

Okay, Nils. Thank you.

And the next question comes from the line of Neil Glynn from Credit Suisse. Please go ahead. Your line is open.

Good morning. If I could ask two questions, please. The first one with respect to Maersk Line. Obviously, first quarter was profitable and you avoided a loss. But just interested in terms of how you consider the path back to covering your cost of capital over time? Clearly, a healthy mix of volume, price and efficiency will be ideal, but how do you plan without over relying some macro help? And then the second question, with respect to Maersk Oil, you touched on Qatar and Qatar reserves aren't in your numbers from mid-2017. But in terms of contingency planning with respect to Qatar, what is plan B, if you do end up losing half of Maersk Oil's current productions by losing out on the Qatar tender? Would this significantly change how you think about M&A?

Thank you. Well, I mean, the return of Maersk Line to cost of capital delivery is not something we can plan for very specifically, because it's a matter of rates. We have delivered well over the last years, so we assume we'll get back up there, but it really depends on when the rates improve. We cannot predict it but, of course, we can look at the industry and say that the competitors are doing worse than we are and sort of what we have to support of our hopes of [indiscernible] we are in a tender process. That means that there is a risk but I cannot give you any more details than that. On Qatar, yes, we are in a tender process. That means that there's a risk that we will lose Qatar. But we don't feel that that should induce us to go out and do something dramatic on the M&A activity to replace volume. We would like to grow Maersk Oil, if it can be done in a financially sound way. But if it can't, then the loss of Qatar doesn't impact our decisions. And we're not looking for sort of major, major M&A activity, irrespective of whether we get Qatar or not. We're looking more for additional adjacent investments.

Thank you. Thank you, Nils.

And the next question comes from the line of Jørgen Bruaset from Nordea Markets. Please go ahead. Your line is open. Jørgen Bruaset: Thank you very much and congrats with the nice set of numbers. I have two questions. First, it's more general regarding to Maersk Line. We have seen the outlook for a changing market structure and both the reshuffling of alliances and consolidation. Could you give any flavor on your thoughts on how changing market structure will inflict with rates? And should we expect to see more disciplined behavior with the new market structure? And second question is have you seen any change in the general business momentum in, for instance, West Africa and Latin America on the back of the increase in oil price here in Q2? Thank you.

Let me start with the structure. We basically feel that the consolidation in the market is good. And we also feel that it's positive when, I mean, viable, stable alliances are formed because that enables everybody to concentrate on the offering to the customer and not fight exclusively on rates. Of course, we cannot say anything on M&A activity apart from what you already know. We welcome that. And on the alliance structure right now, we feel that the uncertainty surrounding the other alliances, I mean, we are on a stable situation with 2M alliance, but the uncertainty facing the other alliances, we do feel that that adds to the volatility in the market. And, of course, there is one - seemingly one important alliance being formed now, which is the Ocean Alliance, where CMA and NOL and the Chinese and some others will be in. And then you have the rest of the market that is being led out of those of the two leading alliances. And they will have to find out for themselves what they want to do. Either they will have to consolidate in an alliance and give the best possible offer to the customers or they will have to concentrate on very few long-haul routes or on a local regional activity. But that's all up to them. I think they - everybody will probably have some thoughts on consolidation at least having the discussion right now. But the small and mid-sized companies will need to consider their strategy very radically, in my opinion, if they're not in an alliance that has future. And then, on the oil, what was the question, by the way? Jørgen Bruaset: It was more if you had seen any pickup in business momentum given the sharp rebound in oil price. Do you see any short-term change in behavior or should we expect to see a recovery first when we see oil price moving up to higher levels than we see now?

Well, we don't see any dramatic rebound. But there probably, I mean, a bit - few places where there's a sigh of relief, because the Q1 oil price was really very, very low and also lower than any - there was a reason for being apart from short-term stock movements. So, that's positive, but we do not see any change in activity level and I suspect that most oil companies are still busy repairing the damage of going down from $110 to $45. So, we don't expect any pickup, but, of course, it gives people a little bit more breathing space to plan for the future. Jørgen Bruaset: Thank you.

Thank you. And the next question comes from the line of Mark McVicar from Barclays. Please go ahead. Your line is open.

Thank you. Good morning, Nils and Trond. Could the moderator do anything about that [indiscernible] echo, because we can barely hear each other's questions, I think? Anyway. I have two questions or three questions. First of all, that wasn't quite clear for me the answer to earlier question. Do you expect the breakeven on the oil price to go lower than it is now or is the $40 to $45 where it's going to kind of settle at or incrementally can it go under $40?

I think that's difficult to answer because it depends, of course, in our case, a lot on the future of Qatar because that impacts the volumes quite significantly. We feel that we've done a good job and we're now down to this level of $40 to $45. And we'll keep working at it. Of course, our lifting cost across the group are quite low and divesting the Polvo field in Brazil and concentrating on larger fields, we do, in general, have quite low lifting costs. So, cash flow wise, we are well set and we will have - at $40 to $45 oil price, we will also have good room for investing in the future. But it's tough to say whether really - whether we can reduce much from there.

Okay. Thank you. And the second question was you mentioned there was a couple of times that you're bearing restructuring cost redundancy as another cost within the different divisions, which are not specified. If you add in all those together at the group level, what's the sort of run rate? Is it tens of millions of dollars a quarter or is it bigger than that?

I think for now it's not bigger than that, but it is, of course - I mean, there are relevant costs, when you cut the number of employees. With the speed that we're doing, yes, you have compensation costs that are significant. But you're not talking - if it was hundreds of millions, we would probably specify a little bit better. So, it is - we're talking tens of millions.

Okay. Thank you. And my last question was really for Trond. Trond, you mentioned working capital pressures in a number of areas. Could you be a little bit more specific about where you're seeing that and what you're going to be able to do about it?

No. When it comes to the working capital, I do think that it's the normal pressure of the year coming out of the year-end, where everybody pushes their working capital for some reason, and then basically, recouping again in the first quarter and staying there for second quarter and third quarter. So, when it comes to working capital, not any significant changes, except for the yearly trend. But when it comes to the provision part, of course, that has been more significant this quarter due to the fact of, well, different kinds of settlements both commercial as well as tax-wise during the quarter.

Okay. That's great. Thank you, both, very much.

And the next question comes from the line of Johan Eliason from Kepler Cheuvreux. Please go ahead. Your line is open.

Yes. Thank you. I was wondering about APM Terminal and the CapEx profile. You, obviously, guided for the full year CapEx level on the group level, $7 billion. But recently, you have announced a lot of new projects. You bought this Spanish operator where you promised to spend some CapEx going forward. I think that was one new Greenfield in West Africa and then, this Tangier. How should we think about the CapEx profile of APM Terminals in the coming years? Will it increase steadily? Or what's the plan there? Thank you.

The investment level of APM Terminals is quite high at the moment. And as long as I think the world economy is under pressure, and people are concerned about investment in developing markets, of course, opportunities are more abundant in the uptime. So, we will try to keep a good level of investments in APM Terminals, which can differ a lot, but I think the relevant level to think of is somewhere around $1.5 billion a year in that company. We will once in a while also sell a terminal, so it's not - it doesn't go one way, but that's sort of the level I would expect, and it can go up to $2 billion in periods. And in last year, of course - or this year, of course, with TCB, it will go above $2 billion.

Yeah. And this number is including acquisitions, as I understand it.

Yes, because basically, the expansion of the terminal business is a mixture of brownfield development, Greenfield developments, and also buying of existing businesses, so yes.

You have been talking about consolidation in the Terminals business, many port with a number of different port operators. Are you seeing anything possibly happening there on this front in the near-term?

I don't recall that we've talked specifically about consolidation in the sector. I think it's, I mean - obviously, we have a plan to expand, but there is also ample room for more privatizations and other structural changes in the port landscape. So, I don't think we need to go out and do consolidation in the sense of working with other very large operators. And TCB was a - what we think and still think fortunately, a nice opportunity to get a stronger foothold in some interesting areas, but it's just sort of, I think, a normal - I wouldn't call it organic because it's, of course, a 2 million TEU terminal operation we bought, but it is in line with our normal expansion strategy. So, targeting sort of adjacent acquisitions and individual terminals will be the way forward.

Excellent. And then, just on the cost in Maersk Line, you said that there were probably some catch-up effects in the cost development from Q4. How should we look at the unit cost in the coming quarters? I think you've talked about sort of 3% down on an annual basis. So, is that the rate we should have for the coming quarters or...

I can't answer that question simply because we don't - I mean, we wouldn't give it if we had it, but we will continue to focus on reducing cost. When I said sort of [indiscernible] a pent-up effect from last year, it wasn't in the sense that we had some costs that were over-accounted for last quarter, but simply that we actually felt that we should do better on the cost side, and certainly the effect came in the first quarter. So, many moving parts in that.

Okay. Thank you very much.

And the next question comes from the line of Marcus Bellander from Carnegie. Please go ahead. Your line is open.

Thank you. Just a housekeeping question from me. In Maersk Line, you usually pay taxes of between say $20 million and $50 million per quarter, but in Q1 2016, there was a tax gain of $21 million. What cost that tax gain?

To the provision adjustments, as I said, we do settle some tax issues and do revaluation on our provision sometimes and that comes into that bucket basically.

Okay. Thank you.

And the next question comes from the line of Angus Tweedie from Bank of America Merrill Lynch. Please go ahead. Your line is open.

Hi. Sorry. Two questions from me. Firstly, you mentioned that you had low time charter in Q1. Can you just remind us what proportion of your fleet is on time charter at the moment? And how that's moved over the last 12 months? And then, just on the alliances, to touch back on this, in terms of your 5% EBIT margin gap, how comfortable and how realistic do you think that will be with a sort of similar size peer out there competing with you? Thanks.

I can't remember the exact percentage of time charter tonnage but it's about 300 vessels, so it's about half the vessels. And if I'm not mistaken, the time charter proportion in tonnage is somewhere in the high-30%s, so that would be my best guess. There's not been a lot of movement over the last 12 months, but we - of course, when we go into new large vessels that we think are strategic and long-term owned, then we buy them more than some of our competitors do. So, in terms of consolidation, I think it's a constant gain to battle to stay ahead of the competition and we are still helped by being larger than the competitors. But we also have a number of other factors such as our ships being more fuel efficient, not because they are larger because they are not, but because we invest more into the fuel saving technologies that are available than the average shipping company. So, there, I think there are many factors in staying cost-competitive. Most importantly, of course, being also willingness to not grow your fleet ahead of what you realistically forecast to be the market development and your opportunity to maintain your share.

Perfect. Thank you.

And the last question comes from the line of Thijs Berkelder from ABN AMRO. Please go ahead. Your line is open.

Yeah. Good morning. What I still do not fully understand is, let's say, the cash flow statement in Q1. You talked about a provision adjustment. I think, especially Maersk Line, is that around $600 million? Did I understand that correctly? Then secondly, can you maybe give us a bit of flavor on A.P. Møller-Mærsk's strategy going forward? Last year, more or less, it was a kind of black swan in the sense that, from a holding perspective, your operations were not balancing each other out. Is there a discussion ongoing to maybe add a new division in, let's say, a totally different industry or so? Can you maybe explain there?

So, let me start on the cash flow statements. If you then go back to the slide of number 12 and basically look at the last portion of that bridge of the $1.9 billion, it's basically as a result of the bridging of that slide, since we're starting on EBITDA number and not on an operating cash flow number, changes in the balance sheet when it comes to provisions goes into that number. And total of that number of all provision changes is around $600 million during the quarter, which we did expect and we're planning for.

And to the strategy, I wouldn't say it's black swan, because we are in very volatile businesses. I think we hope probably for the Oil business to be a little bit more stable and resilient than it prove to be. But with Shipping, we're used to a high level of volatility. Of course, we do all the time look at our portfolio of businesses, and we try to - I wouldn't say we're trying to reduce volatility, but we try to make sure that if we in volatile businesses that the average return is acceptable, and we can make over the cycle a good return. So, that means that if we don't like a business, yes, we will have a look at how we can structure differently. And we are also looking for entering other areas of activity. I think, for now, we probably feel that we have a lot of good investments opportunities in our own businesses, in our present businesses, but we are looking, of course, how we can build additional activity in adjacent areas or in areas where we feel we have special expertise to operate. So, we do all of it, but we don't really think it's a black swan as such. It's a down market in the container business and that will recover at a point in time. And then, our job is to make sure we are optimally prepared and, for instance, in the Oil and Terminal business also, taking advantage of the downturn.

So, I think that was the last question, as said by the operator. So, thank you for listening in and thank you for making clear where we need to be clearer next time with your questions. I wish you a good day and look forward to talking to you in August, hopefully, on the back of a booming global economy and better figures here. Thank you. Bye.