Søren Skou – Chief Executive Officer Trond Westlie – Chief Financial Officer

Casper Blom – ABG Sundal Collier Norge Christopher Combé – JPMorgan Securities Finn Petersen – Danske Bank Dominic Edridge – UBS Ltd. Jørgen Bruaset – Nordea Bank Johan Eliason – Kepler Cheuvreux Marcus Bellander – Carnegie Investment Bank Lars Heindorff – SEB Enskilda Thijs Berkelder – ABN AMRO Bank Dan Jensen – Svenska Handelsbanken Søren Skou: Good morning and welcome to this conference call for the Maersk Group's Second Quarter Results. My name is Søren Skou, and I'm the Group CEO and CEO of Maersk Line and with me today is Trond Westlie, our Group CFO. We'll walk you through the development of the quarter. And afterwards, we will have a question-and-answer session with you. But before we get started, I want to say that this morning we reported the result of a profit of just over $100 million. That's a decline from last year's second quarter of $1 billion, where we made $1.1 billion last year. That is clearly not a satisfactory result for a group of our size. It's equally clear that the reason for the result is lower prices in all of our markets, be that container freight rates, oil prices, rig rates, charter rates in tankers and supply, and terminal rates. And it meant that our turnover was down by $1.2 billion, or 16% year-over-year. I also want to say that we have done well on costs. And it's important to highlight that despite the rough season that we're in, we are currently face and we are facing, we continue to be in a very strong financial position. We have an equity ratio of 55% and liquidity above of more than $11 billion. So, now I'd like to turn to page number 2 and just draw your attention to the disclaimer on forward-looking statements, and I encourage you to read that and familiarize yourself with it. In terms of strategy update for the group, overall we see the group performing well relative to the industries that we're in. Pretty much all of our businesses are top quartile, and in some cases, they are leading the industry in terms of profitability in 2015. And we achieved this strong position through operational performance, through utilization, focused efforts on cutting costs, and in production efficiency in the oil business. However, currently we are challenged by market headwinds, as I started out talking about, in the form of low growth and excess capacity in both our industries and that has led to declining prices and declining revenue. It's in recognizing this development and the low growth and returns that the Board of Directors decided in June to initiate a process to develop and consider strategic and structural options for the Maersk Group. And the purpose of that review is to ensure that we remain a strong, profitable and financially viable group, and that we also develop new growth opportunities. We have said that we will communicate progress on this strategic review by the end of the third quarter. And we have to, for that reason, postpone the Capital Markets Day that we have planned for the 22nd of September. I'm sure many of you would like also to answer questions about the progress on this strategic review, but we will have to wait until the end of the quarter to come up with a clear status report on how we're progressing with this strategic review. Until we have the outcome of the strategic review, we will continue with the strategy that we have and the strategic objectives. We want to grow our businesses. We want to have an – we want to achieve a 10% return on the invested capital over the cycle. But we also do reiterate today that given the low interest rate development we have globally, we can be, in some cases, in a situation where we make investment decisions that on a stand-alone basis do not fully comply with the 10% return requirement. We continue to focus on having and want to have a strong capital structure, high operating cash flow, and cash flow conversion. And we want to continue to increase dividends per share over time supported, of course, by earnings growth. Now, to the numbers. So, as I said, we've reported the result this morning of $118 million profit, $134 million underlying, down from about $1.1 billion last year. The return on the invested capital was 2%. We continue to execute well on costs, but that has not been able to stop the deterioration of the results. The main driver of the lower result is Maersk Line, which made a loss in the quarter, but every sector is down compared to last year. And the only company of the main companies that have an improvement result is Damco, which has made a slightly higher profit this quarter than last year. Free cash flow was $326 million and cash flow from operating activities decreased in line with the revenue by – decreased to $940 million. It was $1.8 billion last year. We invested $614 million compared to $1.7 billion last year. Net interest-bearing debt went up by $1 billion, more or less in line with the dividend payments. And then, I can say, again – that we reiterate again that we believe we have a strong financial position with an equity ratio of 55% and a significant liquidity reserve. And that does give us options also in relation to our strategic review. Turning to Maersk Line. Maersk Line posted a loss – and this is certainly not something that we are proud of – of $151 million, $139 million underlying. That means that result was $638 million worse than last year. Clearly, driven by prices, prices were down 24%, and the fact that we did well on cost, we took the cost down 15%, did not mitigate the sharp drop in prices. We did grow 6.9% volume to 2.7 million FFE for the quarter, and we believe that global market grew around 2%. So we, for the second quarter in a row, took a bit of margin. In the first quarter, we had an EBIT margin gap to peers of around 8%. That was helped a lot by impairments made by some of our competitors. If we adjust for that, we were just around our 5% level for EBIT margin gap to the industry. In terms of free cash flow, despite the deterioration of the result, we had only a small negative free cash flow, but driven by the fact that we didn't do much investments in the quarter. Just a few comments on cost in Maersk Line. Costs came in at $1,911 per FFE. That's the lowest level ever, and it's pretty remarkable to be below $2,000 per FFE. If we look back on the graph that is on the chart here, you can see four years ago in the second quarter of 2012, our costs came in at $3,100. So, it has been a remarkable cost journey over the last four years to get to $1,900 level today. Bunker cost, of course, is a big part of it. We also saw a significant decline in bunker prices year-on-year, 42%, and of course, that helped a lot, but we continued also our journey in terms of improving our bunker efficiency, which came down another 3% year-on-year. The cost initiatives we announced in November last year in terms of reducing the size of the organization, they are progressing as planned, and we expect to deliver on the targets that we set out $150 million this year, $250 million reduction in the last year from the SG&A cost. Those were the highlights for Maersk Line. And now, I'd like to turn over to Trond Westlie, who will take you through the rest of the businesses, and the guidance.

Thank you, Søren, and a very good morning from me as well. Ladies and gentlemen, so continue on slide eight in Maersk Oil, and the Maersk Oil delivered a profit of $130 million for the quarter. And we see that the Brent oil average for the quarter is 46%, down 26% from last year. And you can see that the revenue decline is only 19% from last year. So, it's compensated by the entitlement production specifically in Qatar. So, entitlement production increases to 331,000 barrels a day on average during the quarter and that, sort of, good efficiency both in Qatar and specifically in the UK. But then again, compared to first quarter, we also have – we had a small downtime in the Danish sector. And as a result having good operational uptime during the quarter in Denmark as well, that comes back to normalized levels even though declining from last year. Very good development during the quarter on costs coming down from last year of – operating costs coming down from $632 million down to $475 million, that's a decline of 25%. And that is also the reason why we actually increased our target for cost reduction up to between 25% to 30% for the year and it's really a good traction on the efficiency in Maersk Oil on the efficiency side. On the exploration costs, we are lowering the efforts. And we see that this quarter is $47 million in costs and we also see that it's going to be lower than last year going forward. So, all-in-all, a very good result for the quarter, and we see that the breakeven costs for the quarter is around $42. And that's why we also still guide on the $40 to $45 for the year. The invested capital is $4.3 billion and the return on invested capital is 12.1%, which we're very satisfied with as such given the oil price. The Qatar, Al Shaheen, just to give you the effects, the, sort of, the short-term effects, we see no reason for impairments because it's all under consideration in the contract and there is no effect as to the loss of the contract or basically not having a renewed contract from mid-2017. We do not see any effects on reserves and resources as such. Going then to APM Terminals, as we see, the return remains under pressure. The result is – for the quarter is $109 million, down from $159 million last year. The operational throughput increases about 2.6%. And if we take away the changes in the portfolio, the like-for-like is an increase of 0.2%. The effects that drive this is, of course, that we are focused on some oil dependent markets in West Africa, Russia and also East-South America that drives some of the volumes but also there has been some commercial effects of loss of volumes in the quarter that drives the development. And that is basically what drives the decline in NOPAT. As all of our business units, there is cost efficiency programs and saving initiatives in APMT going on, and we see some of the effects of the difficult markets have been recouped as a result of effects of that cost savings. And just to be very clear, on the returns, we're having a return of 5.8% this quarter. But if we then split in operating entities and take away the development projects, we see a return on the operating units of approximately 8% or plus 8%. Going then to page 10 on Maersk Drilling, a very solid operational performance, very high uptime as the Drilling has shown for a long period of time. We're talking about 98%, 99% for the different segments. So, both high uptime and cost reductions is really what's assisting the underlying profit of $164 million for the quarter. The market situation is, of course, difficult. We had one cancellation with Valiant. It's not affecting the numbers in the second quarter. It will affect the numbers in second half. And we see the effect of – the second half effect of – in excess of $100 million. But you have to bear in mind that that is just rewiring earnings that would have come into 2017, so that the situation as such and the challenging market environment doesn't change as a result of this. Maersk Highlander were acquired during the quarter at a good price of $190 million. It's a five-year contract and the revenue base is $420 million. So, we believe it's a very good contract, and we also have – are very aware of the counterpart, which is Maersk Oil on the Culzean field. So, we have a good conversation with both parties on this. As of now, we have five rigs idle, and we see that five new rigs is becoming idle the rest of the year and that five rigs is including the Valiant. Going then to Shipping Services, in general, we see deteriorating markets. Results for the Shipping Services is $51 million, down from $109 million last year. And in general, as deteriorating markets, we also see cost efficiencies and cost savings being done in all of the units within the Shipping Services. If we then go to Tank, having a result of $26 million, down from $39 million, it's very much driven by rate declines. We see that the – both the refineries around the world, as well as demand and also some of the stocks are high. And as a result of that, we saw a trend going downwards during the quarter. For Supply Services, underlying loss of $8 million from profit last year of $33 million. In addition to that, we have an impairment of $97 million during the quarter, which is very much driven from older vessels and the anticipation of the market situation medium-term on those ships. All-in-all, a very difficult market on supply side and also backlog is challenging so that we do foresee a challenging environment on the supply side medium-term. Svitzer, fairly stable, delivering result of $23 million, down from $30 million. Some integration start-up cost in Americas that's driving this number down, because all the markets, both in Europe, as well as in Australia, are doing well on the harbor towage side. Damco delivering $10 million, up from $7 million last year. It's a continuous improvements program and include processes, as well as focus on customer service that actually continues to keep Damco in the back on $10 million. Then, going more to the financial side. We have seen and have registered that there are some questions about cash conversion and operating cash flow generation. And we have just included this slide just to show you the historical trend on the cash conversion and the operating cash flow. So, all-in-all, I mean, historically, the cash conversion over time has been very good. The underlying cash conversion from an EBITDA level is high, but of course, are affected by certain elements like we had in the first quarter with some provisions being paid as a result of settlements and other things that is sort of not averaging out the numbers. Going into the second quarter, we actually see that the cash flow conversion in the second quarter is on standard level. And we see that the operating cash flow for the first half year, even though affected by some provision payments in the first quarter, is as planned. So going then to page 13, on the strong financial position. Starting the quarter on a net debt of $10.7 billion and ending at $11.7 billion. As Søren mentioned, where basically the net change in that is the dividend payment in April. And you can see that the EBITDA column is showing $1.9 billion coming in. And then the change in working capital, taxes, financial items, and investments is basically on standard level. High equity ratio, sort of mid-50%s and also an increased, or a stable ordinary dividend this year. But overtime, as you see, the trend line going forward. Coming to our debt structure, we do see limited refinancing needs for the next couple of years, and we have a high liquidity reserve. So all-in-all, the same applies, even though the markets are challenging, we do see that we are in a very strong financial position with sufficient liquidity is there to cater for difficult markets if they happen to prevail basically, or continue. Going then to the consolidated financial information on page 14. I'm not going to mention too many of the numbers. Revenue down 16%, down to short of $8.9 billion, basically driven by Maersk Oil, oil price and Maersk Line freight rates that is comprising the whole decline. There are some minor changes as well. The EBITDA on $1.8 billion, as I said, countered by a lot of cost savings throughout the Group. And that leaves us at an EBIT of $656 million. Financial cost is higher than last year, mostly due to the effect of valuation of Danske Bank shares. We did have a gain last year. We don't have that gain. We had a small loss this year. So that's basically taking the differences. Having said that, there are a lot of ups and downs in this number due to the fact of deterioration of some currency effects like, Egypt, Angola, Nigeria, Venezuela and some of the more challenging countries to cover your currency exposures on. But that leaves a profit before tax on $502 million. Tax level is the same as last year. The reason for that the tax level is the same as last year, is that we're making exactly the same amount of money in Oil, and that's the high tax rates, and the loss of EBITDA and also the EBIT number comes out of tonnage tax numbers from Maersk Line. And that's the reason why the tax level is at the level from last year. And leaving then profit for the period of $118 million and an underlying profit of $134 million. As I said, cash flow from operation is now close to $1 billion, or $940 million. Some changes in working capital during the period which is the normal way for the Group as such. Earnings per share, $5 a share. And return on invested capital, which is low, as a result of difficult markets, of 2%. Going then to the guidance. We maintain our guidance for the Group of – that we expect an underlying result significantly below last year. We are taking down the CapEx to $6 billion from previously $7 billion. And as I said earlier, that is including the acquisitions of TCB, and also, of course, the acquisition of Africa Oil in Maersk Oil. Other than that, no changes in the overall Group guidance. Maersk Line reiterates the expectation of an underlying result significantly below last year. The global demand, as we have at the same level at 1% to 3%. We don't expect it to grow more than that. When it comes to Maersk Oil, we now expect a positive underlying result versus previous years. And we see a breakeven result still going to reach within the range of $40 per barrel to $45 per barrel. Maintain the entitlement production between 320,000 barrels a day and 330,000 barrels a day for the year. And as I alluded to during the review on Maersk Oil, we expect the exploration cost to be significantly below last year. When it comes to Terminals, we now expect an underlying result significantly below 2015. We see a continuous pressure on the oil-related countries, and also some challenges relative to the market development of pricing. And as a result of that, we have reduced the expectations on Terminals. Drilling on the other side, we have improved our expectations. That is due to the effect of the timing of the cancellation more than the general development of Drilling. On Shipping Services, we reiterate the expectation of the underlying results significantly below 2015. And as always, the sensitivity guidance is of importance, specifically when you see how the oil price, as well as the freight rates is going to affect our numbers going forward. So, you need to consider that. So, with that, I give the word back to Søren for the closing remarks. Søren Skou: Thank you, Trond. I'll make some brief closing remarks. Clearly, as I started out saying, we cannot be happy with the result. We cannot be happy with the fact that the results declined, revenue declined, and cash flow as a result also declined. There are a few highlights of the result though. And the one that I would like to point to is the fact that Maersk Oil makes $130 million in the second quarter at 12% return. It means that we have been able to adjust cost in Maersk Oil to be profitable at the current oil prices. I think that's a great achievement, and also relative to the oil industry, a quite competitive result. And the second highlight in the result is cost performance across all of the companies, as an example, Maersk Line, unit cost down 15%, and at the same time, volumes are up well above market growth. So, with those few words, I'll now turn over to – the word over to the operator for the Q&A. Thank you.

Thank you. We will now begin the question-and-answer session. This session will end no later than 10:40. [Operator Instructions] Our first question comes from the line of Casper Blom from ABG. Please go ahead. Your line is open.

Thank you very much. And I will try to take advantage of the fact that we now have the CEO of Maersk Line on the call and focus my questions on that area. My first question relates to your strong development in unit cost in Maersk Line. It's my impression that a lot of this has been driven by network changes and a high utilization. Søren, could you give some sort of update on where you are in that development? Have we seen the most of the changes? And if the utilization now sort of as high as it can be in the current environment? My second question relates to sort of the coming months, Q3 and Q4. Could we get any type of outlook sort of where you see that heading? We've seen some small increases in rates, but doesn't seem to be really sustainable. And also, would you expect to see any type of peak season this year? And then finally, on the Capital Markets Day last year, you mentioned that you were expecting to see some sort of inventory rebuilding, or a restabilization in Europe, which could sort of give a helping hand to demand. Can you give an update on that situation, please? Thanks a lot. Søren Skou: So, first of all, on network and utilization, we grew volumes 6.9% in the quarter, we grew capacity 2.2%. So obviously, that's in our industry quite a positive development. Our network is now almost as full as it can be. We are operating at very high utilization rates in the head-haul freights, but also our roundtrip utilization is pretty high, as high as it's ever been. And that's of course because a big part of the growth that we've had during the quarter has been in backhauls rates. We will continue to drive cost out of the network. We are in the middle of implementing a 2M Network 3.0. We do regular reviews, and also in the other, in North-South Freight, we continue to upgrade, or optimize on the network. But that is of course only one part of the cost picture for all of the variable cost. We have also seen significant improvements, most notably on Terminal cost. That's not great for APMT, but that industry is also impacted by lower growth and excess capacity. And that means that we have better procurement opportunities in the Terminal space, and Terminal cost is our single largest cost item. So that impacts a lot. On the outlook for third quarter, you follow the indexes just as I do, and you have I'm sure noticed that the spot rates are up significantly out of China. Since March, we've seen more or less quite a clear trend of increasing rates. That has not really spilled over into results or average rates reported yet, because of contract rates being reset at much lower levels this year, and also because of the way we recognize revenue. But it has been actually a positive trend in my view driven by slightly higher market growth this year, but a much more disciplined capacity deployment across the industry. And now are – we have in that peak season, and rates have continued to go up, so we'll see what happens. And then we generally don't want to predict freight rates, that's very difficult to do. But, at least right now there's positive momentum. And then, in terms of the last question, I don't have a lot of data on that. I mean, growth has been stronger through Europe, much stronger this year than was last year. And I think maybe Trond can help me a little bit on this one.

Well, when it comes to the inventory build-up and the sort of the GDP development in Europe, I mean, it is low. And even though you can discuss the sort of the difficult inventory measurement, I do think that we should be very careful on saying that, but the expectation last year were that inventory had come down, and we were expecting it to flatten out and maybe rebuild. But in general, what we see is basically a low growth in Europe. And the Europe trade is not going to sort of significantly help the growth as such.

That's very helpful. Thanks a lot, guys.

Our next question comes from the line of Christopher Combé from JPMorgan. Please go ahead. Your line is open. Christopher Combé: Hi. Good morning, everyone. Just a follow-up. Can you comment a bit on utilization trends especially since late June with the referendum vote in the UK and if that's actually impacted from your perspective ordering behavior from some of your clients? And then coming to CapEx, can you please remind us where you have the most flexibility this year and also where the order book stands? I believe you have about nine 14,000 TEU vessels for delivery in 2017. Can you remind us of the phasing of those deliveries and how you'll approach charter capacity between now and then? And then, lastly, in terms of your growth guidance, you're tracking well ahead of markets in the first half. Any reason to believe that you won't continue down this path to the extent that you can maintain full utilization? Thanks.

Well, just to give you a start on the CapEx size and then Søren can talk about the utilization and the growth. On the CapEx side, the element is, we definitely have some flexibility in our CapEx as always during the course of the year, but we do have also some programs going on both in Terminals, as well as in Maersk Oil. So, we are seeing both Culzean and Johan Sverdrup and other CapEx projects going on. So, I do think that there – of course, I mean, we're guiding on $6 billion due to the fact that we believe that that's going to be the case. When it comes to the phasing of the deliveries in 2017, I mean, they are starting to come in sort of, I believe it's been midyear 2017, and then going on, I think we have 22 vessels being delivered. And overall in 2017, that's a program that we have in our plan for our capacity planning and such. So, we don't see any change in the timing of those kind of phasings, really. So, over to you, Søren. Søren Skou: So, in terms of utilization and volume growth, I mean, we have as a strategic objective to grow at least in line with the market and in line with our leading competitors. And right now, in the last – well, in the last six months, we have grown ahead of the markets, but probably not a lot ahead of our leading competitors. We see in the industry that it's consolidating, and we see that the big carriers are growing more than the small, and we want to make sure we maintain our leading position. In terms of utilization of our network, in the last six months, we have been able to grow volumes ahead of capacity. That's, of course, the situation we will prefer to be in. But, I also have to say that with our current network utilization, our capacity deployment will probably have to grow slightly more in line with volume growth for the coming quarters. We do expect to end the year with a growth above the market given our strong first half. Christopher Combé: Clear. Thank you.

Our next question comes from the line of Finn Bjarke Petersen from Danske Bank. Please go ahead. Your line is open.

Yes. Good morning. And I will continue down Maersk Line and a few Drilling questions as well. If we look at rate implementation or the effects of rate increases, you were talking a little about today that we have seen very strong spot rates and rates are continuing into the high season. How long does it take before we will see the results in your books? Second question on Maersk Line is, other income per unit seems to be falling quite dramatically relative to last year. Do you have any comments on that? And finally, in Drilling, you have superior material there. You have or your rigs are state-of-the art. You have almost 10 out of operation at the end of the year. When do you expect that this market should turnaround? And how long could you prevent having impairments? That was my questions. Thank you.

Thank you, Finn. Well, I'll start with the other income and the impairment discussion, and I'll leave the rates to Søren. When it comes to the other income, I do think that we have a general sort of saying to the market that it's around 10%, and it's around 10%. So, in general, I don't think. But it is decline from last year, and I do think that it is the Maersk Detention. And if you remember from last year in second quarter, we had fairly high income from the Maersk Detention in the West Coast of Africa due to some strikes going on and things like that. So, there were certain elements. But in addition to the Maersk and Detention, there are certain elements that also declined. So, there is a decline, as you're rightfully saying, but it's more a change from a very high income into Q2 last year than sort of more the average this year.

So, what we're seeing in the second quarter, is that the average per 40 foot?

Well, as I can only reiterate, what we soon will be telling you that the other income is around the 10% level, and it varies somewhere up and somewhere down, but that's sort of the rule of thumb, if you want to, as we have said on that number. When it comes to the state-of-the-art assets in Drilling, we certainly agree on that statement. We also agree that we are very good operators and have a good uptime on this. When it comes to the impairment discussion, that's always – it's almost an art more than a science to find out how the future is going to be, and how that's going to affect the accounting. But as of now, the evaluations that we do, and we have to bear in mind, we're talking about assets that's going to produce, or be in operation for more than 30 years, the longevity of this means that we have to look at sort of what's happening in the market five years out, and for another 25 years. So, as of now, we do not have any internal indication for impairments. But, of course, if the market prevails, the long-term market, it shouldn't be lower than what we expect. We are coming into that discussion at some point. But as of now, we don't see that happening. Søren Skou: So, if I could just add very briefly to the Drilling discussion, I mean obviously as I highlighted before, Maersk Oil has now in this quarter been profitable at a much lower oil price. And clearly, we believe that the oil companies will probably be successful in terms of driving cost out over the – and have been successful over the last couple of years and continues to drive cost out. So that means that any recovery from the drilling industry will depend on the oil companies starting to become profitable again, and therefore, starting to be interested in investing in new activity. And that we feel confident will happen. 11 years, 12 years ago when the oil price increased to $40, $45, we were very profitable in our oil business. Now it's a huge problem that the oil price have decreased to $40, $45. But I'm confident that the oil companies will work through this and get cost down and become – start to have a business again even at these levels. Now, on container freight rates.

Just one question there. Any horizon to that prediction? Søren Skou: Not yet.

Okay. Thank you. Søren Skou: In terms of container freight rates. I think you said, or alluded, or suggested, I said that the freight rates were strong and that wasn't actually what I said. I said they had gone up, but they're not strong yet. It will take a little while for container – for increasing rates to show in our results for a number of reasons. There are really two drivers. One is the mix of business that we have, so how much are we growing in our head-haul, where the rates are highest, and how much are we growing in our backhaul where the rates are low. Of course, also geographies matter, so the interest rates where we actually have a lot of growth, so into Asia, into Europe, into Americas, they have grown faster than the rest of Maersk Line, there the rates are also lower. The second element is, of course, our contract coverage. So, this year, we have reset annual contracts at much lower levels both in Asia, Europe and in Pacific trades than last year. And the Pacific season is May 1, as you know. So, in May, we reset the whole Pacific at much lower rates. And that has completely wiped out any gains from the spot market during the second quarter. But increasing spot rates will impact our results if they continue in a positive way obviously because they will also help us reset their quarterly contracts every quarter at higher levels, but it will take a while.

Would it be right to see three months to six months? Søren Skou: I don't think I can comment on that.

Okay. Thank you very much.

Our next question comes from the line of Dominic Edridge from UBS. Please go ahead. Your line is open.

Hi there. Thanks for taking the question. Just probably a couple of financial ones, if I may, probably for Trond. In terms of – I know you made the comments about the EBITDA-to-operating cash flow conversion historically. With the exception of the provisions that we saw and, obviously, some degree of the mix of the business now being towards more highly-taxed area, is there anything else that you would be flagging up why it should be particularly different, the conversion of EBITDA-to-operating cash flow this year?

No. Just the normal seasonal change. There are some variation ups and down but relative to our overall cash flow not very. And we do see the same trend line continues. And as I said earlier, I mean, if we look at Maersk as a group and take the hypothesis of an over breakeven result, we are looking at a number averaging out around $4.5 billion in operating cash flow, ranging from $4 billion to $5 billion in average. And that's basically the story that we're going to tell you going forward as well.

Sure. And just the second question on the CapEx commitment. In terms of those commitments, I'm assuming some of them like, for instance, the new vessel orders will have some loans attached to them. Is that correct? In other words, you don't actually have to provide all of the CapEx yourself out of your internal resources. There's some of it available via, sort of, new loans you'll be taking out. Is that correct?

Well, yeah – I don't want to comment on these exact elements. But, of course, when we contract those assets or vessels and other things, of course, we are using export credit facilities and other types of facilities available to sign up. Whether we're going to use them or not is very much depending on the need and on – and also the pricing of these elements. As I said, if you look at the maturity schedule on our debt and also look at the liquidity reserve we have from the committed off-balance sheet revolvers, we don't' see any short-term or medium-term or any needs as such relative to funding requirement, looking at the group as a whole. So, all-in-all, we don't see this as a challenge. But, of course, if that market prevails over many years, then of course I might answer you in a different way, Dominic.

Yeah. And just one final question on all of this. It is a business question. I did, sort of, heard with interest your comments on the returns obviously from CapEx now, I mean, how does that change the thinking generally within the group? I know in the past you've been very disciplined on looking at CapEx. The fact is you can't make 10% returns in some of these businesses that quickly? How does that change the mindset, I suppose, in the way the budgets are set at the moment? Thanks so much. Søren Skou: Dominic, I think the issue is, here that we recognize the challenge on returns, the challenge on growth, and that's why the board has decided to conduct this review of our strategic options both structurally and otherwise. And I think we will not really be able to come with a lot of meaningful comments around this area before we are ready to communicate at the end of the second quarter.

Okay. Thanks very much.

Our next question comes from the line of Jørgen Bruaset from Nordea Markets. Please go ahead. Your line is open. Jørgen Bruaset from Nordea Markets, if you are muted, please unmute yourself. Your line is open for your questions. Jørgen Bruaset: Thank you very much. Just a couple of questions from me. First of all, I was wondering if it's possible to quantify the level of utilization in Maersk Line. We've been talking about around 90% or some, sort of, critical lines previously. Could you quantify if you're below or above the 90%? And continuing on Maersk Line, could you give any comments on how you see the competitive landscape? And this has been other than what we can see in the rate indexes moreover linked to the consolidation we've seen over the last six months. And my final question is on Maersk Oil, and that is if you could give some comments on the breakeven level, if you take out Qatar from how it looks today, will you still be able to reach a breakeven level in the range of $40 to $45 per barrel? Thank you. Søren Skou: So, first of all on Qatar, I mean, the breakeven level in Qatar is not significantly below the breakeven level of Maersk Oil, so it's not a dramatic impact. On your second quarter, I'll have to ask you to repeat that again. It didn't come quite clearly through. Jørgen Bruaset: It was more in the lines of how you see the competitive landscape with the consolidation now taking place. Do you see more discipline from your more significant peers or haven't you seen any change in, sort of, competitive behavior? Søren Skou: Yes. Thank you. Okay. Well, clearly, the industry is consolidating, and I would even go as far as calling it a wave of consolidation now, that started with Hapag-Lloyd acquiring CSAV and are now merging with UASC, and the Chinese that have merged CMA acquiring APL. And right now, of course, we have the situation in Korea where both of the two Korean carriers are in financial restructuring and in all likelihood that will lead in more consolidation. So, there's a clear consolidation wave in the industry in response to the poor results that many carriers have experienced not just this year, but actually over the last five years. Overall, we believe that's positive for the industry and we do think that there is a chance that the industry will significantly consolidate over the next decade, but obviously, that's a speculation. In terms of how people are acting with – how disciplined or which however way you put it, in terms of capacity deployment, then, we can only say that the number of ships that have been ordered this year is very low and we're certainly not in the industry where we need more ships. So, I consider that also positive. Each of the carriers are now – except for Maersk Line, and we see going into a period where they have to adjust to new alliances, new business sharing agreements and I'm sure that's going to give some volatility in capacity in the coming months. But, that's as far as I can get to that.

And on your question on utilization, we don't – as a result of us having several utilization measures, we don't want to go out and give you guidance on one size of utilization measure such. So, we have to abstain from that. Jørgen Bruaset: Okay. Thank you very much.

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

Yeah. Hi. This is Johan of Kepler Cheuvreux. One question from me remaining here. Going back to Maersk Line and the spot versus the contract rates there, you said after Q1 when we saw the contract rates being down quite dramatically, that focus going forward would now be to look at the spot market. How has that impacted you so far? If I remember it correctly, you've historically said roughly half of volumes through the contract rate. What's, sort of, the ratio right now in Maersk Line, and how do you expect it to evolve in the second half of the year? Thanks. Søren Skou: The contract versus spot rate is not significantly different from that.

So, it's roughly half-half of your volumes? Søren Skou: Yes.

And are you expecting a shift there still? Søren Skou: At the end of the day, it depends also on our customers in terms of how much volume they want to sign up on fixed commitment from side versus how much they want to – how much risk they want to take on freight rates. So, I don't think that Maersk Line is going to change dramatically from a range of 50 to 50.

Okay. Thank you very much.

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

Thank you. Three questions, if I may. First, if you could say something about what kind of information you will provide at the end of September regarding the strategic update. Will it be a new date for the Capital Markets Day, or will you actually give us an indication of which direction Maersk will be going? Second question relates to Maersk Line and the strong volume growth we saw there. Was that strong volume growth an effect of the market, or war for market share that was going on at the end of Q1 and beginning of Q2, or was it something else driving it? And third question regarding Terminals, you mentioned some commercial effects or loss of volumes in North Western Europe and Egypt, for example, if you could add some color to that, and explain what's going on in those regions? Thank you. Søren Skou: Okay. In terms of the strategy, we really cannot get closer to that. We are working on the options as we speak, and engaging in the discussions internally. And we are not ready to conclude on where this is going to end at this point in time. We will communicate what we can by the end of the quarter. In terms of Maersk Line's volume growth of 6.9%, and whether it's a part of war for market share, we've set out to grow in line with the market, and we have deployed capacity to grow in line with the market. As I said before, we grew capacity just over 2%. We have seen higher volume growth. We attribute that to a number of factors, strong growth in our intra-trades both in Asia and North America – excuse me, Latin America and in Europe for that matter. But we also have seen strong growth in our backhaul volumes. There might also be market effects from the fact that the Korean carriers are in a restructuring mode and has – and therefore, I'm sure, we expect that some customers might have wanted to move their business away from them and that has benefited us. But of course, that's pure speculation on my part. And then thirdly, I mean, I do think that we have worked very hard in Maersk Line over the last few years to continue to upgrade our service levels, both the physical service levels, in terms of geographic coverage and transit time and frequency and reliability and so on. But also, the customer service in terms of the functionality and on our website and digital solutions and so on. So, we attribute the volume growth both to growth in certain markets, but equally as much to, hopefully, providing a good product that the customers are interested in buying.

And when it comes to the loss of volumes in terminals, we basically say that we have not been able to regain earlier lost services. And those lost services is basically coming out of renegotiation and as a result of alliances and VSAs, and so changing the end dynamics in a market. That's basically what we haven't been able to regain in basically the three areas. So, Latin America, Northwest Europe and Egypt, as you mentioned.

All right. That's very helpful. Thank you.

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

Yes, morning. Lars Heindorff. A few questions from my part as well. I think I'll take them one at a time, if I may. Regarding Maersk Line, normally the third quarter is by far the biggest quarter for the carriers. I wanted to sort of hear your thoughts about whether that will be the case this year, given the rate decline that we've seen thus far going into the peak season and whether you expect that the improvement that we have seen in rates, that will stick into the slack season when we get into October, November, December? That's the first one. Søren Skou: So, in terms of volume, I guess your question was whether the third quarter will be the biggest quarter in terms of volume, and we still expect to see a good third quarter volume-wise, and therefore it will in all likelihood be the biggest quarter volume-wise during the year. As I said before, I'm not keen to project a lot about freight rates, but I can point to the fact that they have actually gone up consistently spot rates over last four or five months. And if we do get a strong third quarter, then it's likely that they're not going to drop at least, but that's pure speculation.

All right. Thank you. Then second, regarding oil and gas, you are still maintaining your production guidance for the full year despite being somewhat above for the first half. What is the reason why you maintain that guidance and what you expect – which area do you expect a decline here in the second half in terms of production volumes?

Well, it's the usual elements coming into sort of maintenance seasons in the third quarter and the element of – and then it's also an element of what kind of oil price you expect, specifically on the profit over the year, the PSA agreements in Qatar. So, it's basically those two elements driving it.

Okay. And then the last one still regarding oil and gas. I mean, you have done quite impressive job in terms of lowering your OpEx over the past year or so, and you also lowered your guidance for the full year. Just curious to find out if what kind of OpEx we should expect and what kind of thoughts you have around cost structure in Maersk Oil when Qatar will be gone by the mid of next year. Will that significantly change the breakeven oil price, and then what's your thoughts about that?

Well, when it comes to what kind of OpEx we're looking at, we're basically both looking at sort of the hired in and the consultant part and the assistance that we get at also on our internal structures. So, I think that we have closed down offices. We have looked at the amount of resources we have in all the different areas that we're doing business. When it comes to Qatar, it basically comes down to what Søren said that the breakeven in Qatar is not that significantly different from the average. But, of course, by losing Qatar, we need to take some actions relative to capacity and so forth, depending on how the development on other growth opportunities arises. But the likely effect is that there will be some consequences as of losing Qatar as well.

All right. Thank you.

Our next question comes from the line of Thijs Berkelder from ABN AMRO. Please go ahead, your line is open.

Okay. Good morning. I have one question on Maersk Line, on the effect of the annual contract rates. Can we see another effect in Q3 versus Q2? Second question on Maersk Line and APM Terminals. Maersk Line, of course, benefits from lower pricing in terminals. If I look at APM, I think price pressure is around 6%. From a Maersk Line perspective, what can we expect further in terms of pricing coming down in the terminal costs? And then coming back on APM Terminals, do you see potential to, indeed, compensate price pressure with cost savings? Those were my questions. Søren Skou: Yeah, so in terms of annual contract rates, I mean, impact in the third quarter, the only thing I can say is that the Pacific rate season is May – resets at 1st of May, so that's not all of the second quarter. So that will have a negative impact in relatively speaking in the third quarter, because we're going to get a full quarter effect. But, of course, it will be mitigated by increasing spot rates. So, I think it will be hard for me to come any closer than that. If we look at Maersk Line's cost development and the journey we have been on from $3,100 per FFE to $1,900 per FFE, one of the last cost items to become deflationary, so to speak, has been terminal cost, because generally terminal operators have been in good negotiating position. Increasingly, we see, let's say, more opportunities for procurement from the carrier side, both because the carriers are consolidating, but also because there's too much excess capacity also on the terminal side now. And therefore, we do believe that terminal cost will become deflationary. For APMT, that has, of course, a negative impact. It has a positive impact from Maersk Line, but APMT is only about 25%, 30% of our spend in the Terminal business. So, for the Group, I think the overall benefit is positive. And what we do have internally in the Group as a mitigating factor as well is that we can place – we can try to drive more Maersk Line volume to APMT terminals going forward.

Okay, clear. Thanks.

Our next question comes from the line of Dan Togo from Handelsbanken. Please go ahead. Your line is open.

Yes, good morning. A few questions from my part as well regarding Maersk Line. You enter or come out of first half for Maersk Line with a loss at the EBIT level. To reach profitability, do you rely on the cost initiatives that you introduced solely or do you also need higher rates? And in connection with that, the higher rates that we are seeing in the spot market at the moment, is that compensating for the high bunker costs we are also seeing? That was the first question. Søren Skou: For Maersk Line, we have, as a core element in our strategy, to be – to have cost dealership, and for us that means that we need to continue to drive down cost, and that's what we plan to do. There are, as we have also, I believe, illustrated at the Capital Markets Day last year, quite a tool box that we can dig into in terms of continuing to reduce cost. And I certainly will never say that we have exhausted all opportunities for reducing cost. If we had said to ourselves four years ago that we were going to go from $3,100 to $1,900, we wouldn't have believed ourselves and nobody would believe it either. But it just shows that we can continue and there's lots of opportunities; digitalization, just to mention one. With all that being said, clearly for the profitability of Maersk Line to be restored to where it were in 2014, making double-digit returns on invested capital, it will be very helpful with some revenue increases or revenue per FFE increases. And, of course, if it can come to price increases, that's helpful, but if not, then we're going to have to figure out other ways to generate more revenue per TEU.

And do you see these higher spot rates as compensating for higher bunker cost more than sourcing? Søren Skou: So, this – I mean, just to be clear – I mean, there's no bunker element in the spot prices. So, the spot market is what supply and demand will get you at any given point of time, and it's completely independent of the oil price in both directions actually. I mean, we have seen fuel price go up during the second quarter. Right now, it's actually come down again somewhat, so we expect that we will continue to see the volatility from the oil price in our results. And if there's a sustained increase or decrease, it will show clearly in our result with a certain time lag.

Okay. And then a question on 2M, I believe you previously communicated synergies from that of more than US$200 million. Are you still seeing that feeding through or is that more, should I say, difficult to achieve in this slow growth environment that we are in? Søren Skou: No, we continue to drive benefits out of 2M, and I believe when we announced it, we said we would have benefits of $350 million annualized. And as we grow volume and grow the network, the benefits actually increased. I mean, we are right now in the process of implementing our third version of the 2M network. That will take even further cost out and improve unit cost. And if we end up doing, kind of, like a small addition to – doing an addition to the 2M network with Hyundai Merchant Marine, then we'll see even further benefits.

Okay. Good. And then a final question. You mentioned, Søren, in your opening remarks that you have business areas that are leading within the industries. Could you point to which businesses you are seeing as leading and what measure you're using here and also which ones are below at the moment? Thank you.

I do think that we have an overview of that done in our enclosures, because we say basically on page 6 on the Appendix where we basically have seven out of eight businesses deliver top quartile returns. And basically on the top quartile above WACC and top quartile performance, we have Drilling, Svitzer, Terminals, Tankers, and Supply Service. When it comes to being top-quartile performers, but not delivering return in 2015, it's Maersk Line and Maersk Oil. And the one not performing accordingly in 2015 is Damco. And you have that on page 6 in the Appendix.

Okay. Thank you.

That was the last question for today. And I will now hand back to Søren for any final remarks. Søren Skou: Thank you very much and thank you for the good discussion. As I said in the beginning, we're not happy with the results and the decline in most financial metrics. We have believe – we believe done on a decent job in terms of mitigating the negative market effects of lower prices in every single industry that we're in. And particular in Maersk Oil, we are very pleased with the developments and the fact that we can be profitable at an oil price in the $40s. So, with that being said, clearly for us, still a lot of work to do both in terms of running the day-to-day business in a very challenged environment, and also in terms of going through the strategic review that we are now doing. And we look forward to being able to communicate around that to you at the end of this quarter. So, thank you very much.