Soren Skou – Chief Executive Officer Jakob Stausholm – Chief Financial Officer Claus Hemmingsen – Vice Chief Executive Officer

Lars Heindorff – SEB Neil Glynn – Credit Suisse Dan Togo – Handelsbanken Christopher Combe – JPMorgan Casper Blom – ABG Sundal Collier Johan Eliason – Kepler Cheuvreux Finn Bjarke Petersen – Danske Bank Robert Joynson – Exane BNP Paribas Jorgen Bruaset – Nordea Market Mark McVicar – Barclays

Good morning. My name is Soren Skou. I’m the CEO of A.P. Moller Maersk. Welcome to our earnings call for the first quarter of 2017. I’m joined by Claus Hemmingsen, the Vice – our Vice CEO; and Jakob Stausholm, our Chief Financial Officer. So we will move on with the presentation. First, I want you to notice our comments about forward-looking statements. Please read it and take that into consideration. I’d like to start by giving you my take on our first quarter and the strategic journey we’re on, providing you with basically 3 highlights and 3 lowlights. Starting with the highlights. First of all, we want to make sure that we are clear in saying that the container market, the container market is clearly improving. Rates are up in the quarter – throughout the quarter and freight rates have continued to increase in April. It’s driven by a significant improvement in demand-and-supply situation. Demand grew 4% to 5% in the quarter, and supply grew around 1%, which makes the first quarter of 2007 the second quarter in a row where we saw demand growth significantly outpacing supply growth. And that, of course, had a very positive impact on freight rates. And these freights rates are increasing not only East- West but also now North-South, which is important, particularly for Maersk Line. The second highlight of this quarter is that we are making good progress on our strategic projects or strategic agenda for 2017. First, I want to talk about growth. We are growing revenue in this quarter for the first time since the third quarter in 2014. We’re growing the T&L, our Transport & Logistics, revenues by about 47%. We’re also seeing significant revenue growth in Maersk Oil. But all in all, we are quite pleased with the development in the growth, which is in line with our stated ambition of becoming a growth company again. Also, in terms of growth, at least future growth, we made significant progress on the Hamburg Sud transaction. We received the final board approval from the seller. We have started the regulatory process and achieved approvals both in 2 very important jurisdictions: Europe and the U.S. And believe we’re on track to close the transaction towards the end of the year as we have told the market. Hamburg Sud will add well above $5 billion of turnover to our business in 2018, and obviously, a very strategic transaction for us. We’re also making progress on taking out synergies between the different businesses in Transport & Logistics. And we have a couple of examples in the report concerning Maersk Line growing its volume above market growth in – with APMT, and also Maersk Line and Maersk Container Industry getting much better at joint production planning of containers and that has led to a rather remarkable turnaround in our small but, nevertheless, important Maersk Container Industry business. We are flagging today in the report that we expect our results in 2017 to be positively impacted by about $150 million from synergies. Finally, I also want to just briefly mention that we have made some further progress in terms of building our digital capability during the quarter. We have signed new software partnerships with both IBM and Microsoft. And while that in itself, of course, is not doing anything other than adding expenses, we are doing this to build a world-class platform from which we can build our digital offering. We’ve launched in Damco a new online or digital freight forwarder called Twill, and we continue to operate every month the functionality of maerskline.com. So in that sense, we are making significant progress on the strategic priorities. And then the third highlight of the quarter, I would say, is Maersk Line’s – Maersk Oil’s performance. Strong financial results, very much, of course, driven by higher oil price but certainly also driven by good performance on cost. In terms of lowlights, I have to say, of course, that we cannot be satisfied with the overall level of profitability for the group. We cannot – and first of all – secondly, Maersk Line remained in the red. We had a – we’re reporting an $80 million loss, an underlying loss, so despite higher freight rates, and it’s really driven by a much higher fuel build than we had last year. And then finally, third lowlight, we continue to be very challenged in our drilling business where the outlook remains difficult and we’re running down our order book, so to speak. In summary, however, it’s very important for me to highlight and underline that we believe that the results that we’re delivering in the quarter are in line with our own expectations. And we are very much on track to deliver the full year guidance that we have set out to deliver in terms of result in A.P. Moller - Maersk above last year, where the underlying result was $716 million, result in Transport & Logistics above $1 billion and a Maersk Line result in excess of $1 billion improvement to last year where we lost almost $400 million. So I want to make sure that I’m very clear in reiterating that guidance. With those words, I will turn over to Jakob Stausholm, who’ll talk about the overall results and Transport & Logistics division.

Yes, thank you, Soren, and good morning. If you look at Page 5, you have the overview of the financial results for A.P. Moller - Maersk. Particularly highlight, as Soren stated, for the first time, after 9 consecutive quarters of lack of top line growth, we grew revenue. We grew EBITDA, but profit remained flattish. We have a particular focus at the moment around the cash flow. You’ve heard us talking about capital discipline, and what you see here is that the capital expenditure is going down significantly. First quarter, we had a little delay expected. A rig coming in the fourth quarter came in the first quarter of $400 million. So if you even deduct that, you can see that there is really remarkable reductions going on in the capital expenditure. Operating cash flow is somewhat – comparisons has to take into account one-offs, as noted on the slide. But good progress on the top line, good progress on the cash flow statement, still work to do on the profit statement. Let me move on to the Transport & Logistics division and start from what I just said here. If you look at the 4 businesses we have in Transport & Logistics, 4 out of 5 actually recorded revenue growth in the quarter, but the overall profitability is not satisfactory. It is, though, in line with our plan and our guidance. Moving to Page 7. Let me start on the right side. I think that’s a very important part of explaining our results. And I think I said on the last call that the container liner business was hitting an inflection point. I think we can confirm that. You saw that the supply – you can see the supply-and-demand curve. They changed from being oversupplied to actually start absorbing supply a little bit in the third quarter, quite a lot in the fourth quarter and certainly quite a lot in the first quarter as well. That’s a very, very important point, and that is what the fundamentals that supports what we currently experience of increases in freight rates. If you then look at the P&L of Maersk Line, you’ll see the revenue growth by 10%, volume growth by 10% and the rates goes up by 4.4%. How does that add all together? Well, the rate you see is what we call the loaded rates, namely the rates when we put the boxes on the ship. IFRS means – rules means that we only recognize revenue as the box is being transported, and that means that we have a delay in the revenue recognition. So in a way, this discrepancy is positive news. It’s telling you that we had an upward trend and more revenue is coming in the second quarter. We did see a positive rate development in the quarter, but unfortunately, we have a significant hike in the bunker price. And that is the reason why we continue to have depressed profit in Maersk Line despite the fact that the business environment improved through the quarter. You’ll see 2 important things as well. We – our utilization was fairly flat year-on-year. We have capacity growing by 8.1% versus the volume growth of 10%. And just to be very transparent with you, we, of course, noticed when we got all the results in from fourth quarter that the EBIT margin GAAP has not been satisfactory. It’s actually been, sort of say, vanishing in the fourth quarter. We still don’t know what it’s going to be – sorry, we still don’t know what it’s going to be in the first quarter. There’s a very particular reason for that. And if you go to the next page, Page 8, I think that is the key part to understand the results of Maersk Line. We have a strong position in East-West, but we have a much stronger position in the North-South. And temporarily, the North- South have experienced very difficult conditions. If you look at the year-on-year change in the rates, although you have seen various trade index going up from April last year, you still see year-on-year declines of 4% in the North- South. And that is the reason why we, in the fourth quarter and the first quarter, have fairly depressed earnings or small losses in Maersk Line. The good news is that we now see a recovery also in the North-South rate environment. If you look at the East-West, you can see that there we record a significant improvement. But the impact has so far been limited in Maersk Line because the annual contract season – contracts are being renegotiated and they’re being settled at a substantially higher level here in the first quarter. But they first kick in, in our accounts in the course of the second quarter. So all indicators are indicating things are going in the right direction but with limited impact on our first quarter result. If we move to Slide 9, there, you see the unit cost development. And the unit cost, absolute unit cost hikes in Q1 and that is mainly due to the bunker price increase, as earlier mentioned. It is worthwhile – I think the key indicator is really to look on the right side at fixed bunker cost, how is cost developing. And in a way, it’s not a positive development in the first quarter compared to the previous quarter, but certainly a significant reduction compared to first quarter last year. And I think the right comparison because of the seasonality, first quarter is difficult with quite a lot of disruptions around the Chinese New Year, just to make that comparison. And certainly, we expect to improve from where we are today. Let me move on from Maersk Line to APM Terminals. They faced challenging market conditions. They are basically hitting into a more deflationary environment where they face decreases in rates. Part of that is exchange rate, and their response – and that was a strategic direction communicated last year, is to reduce cost and improve productivities. The good news about APM Terminals is that the company growth – grow mainly from the acquisitions of TCB. But even on a like-for-like basis, you see volume growth, and revenue is up around 5% year-on-year. Moving on to Damco, Page 11. Damco experienced a difficult quarter. Revenue was up. They’re growing, but so far, struggling to generate earnings out of their revenue. It’s mainly the freight forwarding of air and sea cargo that is burdening the profit and loss statement of Damco. If we move on to the next, Page 12, Svitzer, a fairly stable business, slightly reduction in its revenue but stable business. And then Soren already mentioned it, sort of say, the highlight of the quarter is that the better production planning between Maersk Line and Maersk Container Industry has produced actually a remarkable turnaround, $13 million better profit. And for me, even more importantly, actually $100 million improvement in the cash – In the free cash flow. So Maersk Container Industry was a burden last year and is now a contributor. We are very happy with that. And on that note, I’ll hand over to you, Claus.

Thank you very much, Jakob, and we will turn to the Energy division and start on Page 14 with Maersk Oil. And as Soren already mentioned, Maersk Oil came out of the first quarter with a very strong financial performance and an underlying profit of $292 million This was positively affected by a one-off income of $42 million, but also, as you can see on the slide, helped tremendously by a continued focus on cost and efficiencies. When we look at our entitlement production, it declined 21%. This was mainly caused by the last decline in Qatar, which again is caused by the higher oil price and lower operating costs, giving us less entitlement productions – less entitlement barrels for cost recovery. However, we also saw a decline in the U.K. when we compared to the first quarter last year. This decline already materialized in the third quarter 2016. And during the last quarters, we have stabilized this production through interventions, and we are now at a stable level at the current production levels. We’ve also seen other good developments in the U.K. Turning to Page 15, showing our reserves and resources for the year-end 2016. They come out as expected, with 1P reserves are 339 million barrels of oil equivalent and with a 1P reserve replacement ratio 40%. There are no write- downs in relation to the Qatari exit here in 2017. And our 2 P reserves are 555 million barrels of oil equivalent. Those also not include the second phase of Johan Sverdrup nor the Tyra rebuild as these 2 projects have not yet been sanctioned. But the reserve development is in line with expectations. Turning to Page 16 and looking at Maersk Drilling. Maersk Drilling posted a first quarter underlying profit of $48 million, and it is still impacted by the lower activity, with no less than 10 rigs being idled in the quarter, including 2 rigs that have actually since gained contracts. The utilization of oil, the economic utilization of oil was 62%. However, Maersk Drilling continue to take out cost. And they have also signed 2 new contracts in the quarter, however, at very low earnings levels. And that is the state of the industry, as Soren already alluded to. Moving fast to Page 17 and starting on the left-hand side with Maersk Supply Service. Maersk Supply Service is still heavily affected by the oil supply in the industry, and they, therefore, also saw a steep decline in both their revenue and bottom line. There’s a continuous strategic focus in Maersk Supply Service in launching integrated customer solutions. As an example of this, they in January signed a long-term partnership agreement with Oceaneering International, and the integrated solutions are gaining quite a bit of customer interest. In the product markets – in the product tanker market, on the right- hand side, we saw the effect of continuous spot rate decline actually by 28%. And Maersk Tankers’ earnings declined as a result of this to an underlying profit of $9 million. We do see continued challenging market conditions for the remainder of 2017 for Maersk Tankers. That was a fast review of the 4 energy companies, and I’ll hand over back to Jakob. A - Jakob Stausholm: Yes, thank you, Claus. So on Page 18, you have an overview of a little bit around our balance sheet and our primary cash flow generation. I think what I would like to just point your attention towards is the slide on the – in the right-hand corner around commitments. I mean, we are very, very careful of not making too many new capital commitments. And as you can see, we have in total commitments to the tune of $8 billion. A quarter ago, I showed you the same graph and it went to $9 billion. And it basically shows that we are executing on the strategy of more capital discipline as we have communicated earlier. It will help the free cash flow generation of the company. And that brings me to the next page, Page 19, where you can see the development in the net interest-bearing debt. It goes up a bit in the first quarter. It normally does so in the first quarter. And this quarter, we actually, sort of say, did something differently. We were a little bit more efficient and already paid out the annual dividend to our shareholders in the first quarter. Normally, we do that in the second quarter. And that’s half of the reason why the net interest-bearing debt increased by $5 billion. You can see in the right-hand corner as well that we have a well-balanced debt structure. I really do feel we’re in a good spot when it comes to financing maturity of our loan portfolio, et cetera. And I would like to add one more thing that’s not on the balance sheet because it’s something we have revealed after the closing of the accounts, namely when we finalized the acquisition of Hamburg Sud, we have also got in place a fully financed facility of – to the tune of $4 billion at attractive terms. So again, we are prepared also for the future expenditure related to the takeover of Hamburg Sud. Then we have a couple of pages just basically for your information, Page 22 showing the consolidated financial information, and Page 21 showing how we are now – and in the future, we’ll show you the segmented results so that we really focus on looking at the Transport & Logistics in total and the Energy in total. There is no kind of group anymore. Things are splitted out. Obviously, the majority of the overhead costs are allocated into Transport & Logistics. We have not yet, but that day will come, allocated all overhead costs into the individual businesses in Transport & Logistics. So let me end here and hand back to you, Soren.

Thank you. And I just want to end quickly by saying that – or repeating that we’re clear that – we’re confident that the container market is improving. Prices are up. Demand is up. We are making progress on our strategic priorities when it comes to revenue growth, consolidation, synergies and transport logistics and digital. And we are also confident about the cost performance in Maersk Oil, leading that company to be profitable at today’s oil price. Now we are reiterating our guidance for the year. And that means, of course, that some of what we call the lowlights for this quarter in terms of the overall level of profitability and Maersk Line remaining in the red will have to change for us to be able to deliver on that, and we are confident that we can deliver. So that’s the very brief summary, and we are now ready to take questions.

[Operator Instructions] Our first question comes from the line of Lars Heindorff from SEB. Please go ahead.

Good morning, gentlemen. Couple of questions for my part, regarding Maersk Line. Firstly, regarding the North-South front, I wonder if you could just give us a little bit more flavor. You mentioned just now that it’s an encouraging point that you’ve seen a quarter-on-quarter improvement in the rates. But I guess there’s still a bit of cascading to be done into some of those routes from the East-West. So maybe a little bit about the development there in terms of volume and rates going forward. That’s the first one. And then the second one is a more general question, predominant regarding the East-West rates where we now have the establishment of 2 new lines. I wonder if you could share your thoughts about sort of your experience regarding both behavior of those lines that’s going in here to the second quarter. Have you seen any more aggressive behavior? And also, secondly, regarding the behavior of the customers, particularly with the new Korean – Korea coming in on Transpacific, will that still have sort of an impact on the behavior from the customer side?

Yes. Lars, this is Soren Skou. I think in terms of color on the North-South rates, then I guess what I can say is that, let’s say, the historic pattern have been that the North-South rates have been above the East-West rates for very long periods of time, typically to the tune of $200 to $300 if we look over the last decade. Last year, we saw the rather unusual phenomenon that, that gap closed. And eventually, actually in the third quarter, East-West rates were higher than North-South rates as East-West rates started to improve and North-South rates not improving. We’ve recently seen North-South rates go up faster than East-West. And we are today at a point where we have more or less parity. And we’ll, of course, see what the future brings, but there’s been clear movements in a positive direction for North-South rates.

One thing. Is that cost plan improvement in spot? Or is it contract that is treating this improvement?

The North-South rates are almost all spot rates. So the big markets for contract rates, that’s really – that’s the East-West market, so Asia, Europe and Pacific, in particular. But most of our North-South business, with the exception of reefer businesses, is really spot rates. On the East-West rates, we have basically, since April last year where the rates bottomed out, seen positive momentum in rates and they’ve gone up. And of course, we are now at a much different level from where we were a year ago. The contract rates have been settled at significantly higher levels, about $450 on the Asia-Europe trade and about $300 on Pacific. It’s not finally done on Pacific yet, but we will be here first of – well, when we still have a little bit left. I mean, was 1st of May, but we still have a little bit left. But – so that’s a positive that we will be seeing in the coming quarters. In terms of our new – the new alliances that we are competing with in – It’s too early to say, frankly, what will, if any, impact. We have to recognize that these are vessel sharing agreements, so we still have the same competitors and they’re setting their prices independently.

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

If I could ask 3 questions, please. The first one with respect to Maersk Line. Other revenue, it’s been 9% of total revenue for the last couple of quarters or so. Is the historical rate of 10% or a little bit a little bit higher still applicable? Or is there something structural which should limit that revenue line going forward? The second question, of the 27 newbuilds to deliver, I think 16 more come in 2017. Just interested at this point whether you can guide us to what proportion of those will be replacement versus growth? And then the final question, we saw huge sea and air volume growth at Damco in the quarter. Just interested in terms of how much of the fall in EBITDA came in the gross profit line versus OpEx development. Thank you. Soren Skou.: In terms of other revenue, then I don’t think we have much in way of guidance, whether it’s 9% or 10%, I don’t think we have that, let’s say, level of visibility of that. It is in the order of magnitude of 10%, at least that’s what we expect. But it can, of course, vary a bit from quarter-to-quarter. In terms of replacement versus growth, then our ambition in Maersk Line in this year is to grow with the market and also grow a little bit market share be in line with what we said at the Capital Markets Day. We would like to grow market share a little bit organically every year. We think it’s important to do so. With that being said, we had a lot of market share growth last year as one of our competitors disappeared from the market. And therefore, let’s say, we have focused in the coming quarters on profitability, on being able to deliver on the guidance of $1 billion – more than $1 billion improvement in profitability for Maersk Line. So if we end the year with a market share that is not significantly higher than what we have today, it’s not going to be the end of the world for us. So in other words, we will make – our network will grow in line with market growth. And therefore, we will be redelivering ships, charter ships to fit that network growth as our newbuildings come in. On the last question regarding Damco, then it’s very obvious that we are quite challenged on our margins in Damco. And part of that, of course, is a cost issue. But part of it is also that we, as Damco, when the market shifts rapidly, the freight market shifts rapidly as it did during the third and fourth quarter, sometimes end up with some contracts where you come underwater because you promised freight rates to your customers and then the market shifts rapidly. But the main issue for us in Damco is really a cost issue.

If I could just ask one quick technical follow-up on Damco. I notice there is still zero intersegment or intercompany revenue for Damco, whereas if I look whereas if I look at APMT, about 1/3 of that revenue line is intercompany, obviously, coming from Maersk Line. As you implement the synergy strategy, should we start to see some intercompany revenue at Damco?

No, I don’t believe so. I mean, Damco uses Maersk Line has intercompany revenue from Damco. There could be revenue going the other way, so to speak, if Maersk Line is buying services from Damco such as customs clearance or stuff like that. But the numbers would be so small that you will not be able to register that in a meaningful way.

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

I’d just like to get a better feeling for what it is you’re seeing in the coming 3 quarters. I mean, you need to improve your profits by $1.2 billion in the coming 3 quarters. Is it purely rates that will trigger that? Or are there other things in terms of cost, et cetera, that will support that growth year-over- year? Because when I look back at both 2015 and 2016, profitability in the past 3 quarters were significantly below the $1.2 billion that is required this year. And then on – maybe a question on Hamburg Sud. After the feedback from authorities, what is the magnitude of lost market share that we can expect on Hamburg Sud following that, if you can give some flavor or some idea on that? And then just finally, on the $150 million TL synergies that you have announced for this year, how much was impacted here in Q1? And how is it distributed between the companies within T&L, i.e. in which accounts should we see it appear?

So Dan, I assume the $1.2 billion you are talking about, that’s Maersk Line’s improvement in order to deliver on its guidance?

Yes.

Yes. All right. But obviously, improving freight rates is a significant part of that. But we are also expecting to grow the business in line or slightly above-market growth. And of course, we are also assuming that we can continue to take out cost. If you look at our over the last 5 years in terms of unit cost, we have not quarter-by-quarter but quarter-by-quarter but certainly year-by- year managed to take out cost, and that is also our ambition this year. So we will see improvements in all of the 3 drivers of the bottom line. I mean, prices, volumes and cost. And – but most of the improvement will come from higher prices. In terms of Dan Togo.

Just one follow-up. What will be different this year? Because when I – usually, rates decline from Q1, in Q1. And then on average, actually for the period afterwards, rates notch down. When you look at the average, it’s also what you have reported in the past. So what should be different? Is it contract rates that, sort of say, is kicking in and are more sticky this year?

So first of all, I would probably challenge the view that rates always decrease from the first quarter. But anyway, we can have a separate discussion of that. What is a big difference, of course, is this year is that our contract portfolio has been renewed at much higher rates than they were last year. And that will be having an effect for the rest of the year. And then, of course, the spot rates today are much higher than what they were in April last year when the market bottomed out, so to speak. So we are confident that we can deliver on the guidance. In terms of Hamburg Sud, then I think I need to make it clear that we had – the EU approved the transaction requiring Hamburg Sud to step out of certain vessel-sharing agreements that they were a member of. It does not mean that Hamburg Sud has to step out of the trade, and I think that’s a very important clarification. So what we expect to do is to accommodate Hamburg Sud in those trades on the Maersk Line network but continue to sell a Hamburg Sud service – Hamburg Sud brand using – but the physical product or the physical network will be part of Maersk Line’s network as opposed to another alliance network. And in our view, that should not lead to any share loss in itself. And then on your last question about the $150 million, I don’t think we want to provide any further guidance on that.

Okay, thank you.

Our next question comes from the line of Christopher Combe from JPMorgan. Please go ahead your line is open.

Good morning everyone. Just looking at the rate of growth at Maersk Line, if you look at your upwardly revised fourth quarter at 6% market growth, it looks like you grew at 2x the market. And I had the impression based on guidance that, that should moderate perhaps over the course of this year. So once again, we saw 2x growth in the first quarter. First of all, was that above your initial targets? And if so, can you elaborate as to why you opted for more? And then second, did you notice any advance or deferral of volumes around contract negotiations or the alliance that starts in April 1? And then lastly, we see reports of poor industry service levels since of the year and especially recently with Chinese port congestion. Does that artificially add to rates and sort of favor earnings short term? And also, what does this do to your unit cost if you get this kind of congestion? Thank you.

So in terms of growth, then we did grow quite a lot last year. Part of it was, of course, due to the fact that a lot of volume became available in the market with the demise of Hanjin Shipping. We have also grown significantly this first quarter, also probably more than we had expected. And we should – you should – we expect that our growth rate will come down somewhat towards the next few quarters as we continue to focus more on profitability and cost. And we are designing the network to not being able to grow as much as 10%. Then I’ll take your third question concerning industry service levels. Your question was whether leads – helps us drive prices up. Is that correctly understood?

Yes. Well, generally, there’s a bit of logistical chaos as alliances, the reshuffles and the congestion. Did that, let’s say, constrain capacity, effective capacity, t o some extent?

Yes. Well, I mean, well, certainly, what I can say is that we also have much higher cost when you have the situation that you have in – have had in China for the last month. We missed connections, containers that are rolled and so on in the hub ports. So it’s not really something that is very helpful for us and for our customers. And in general, I’m not a strong believer in having a crappy product so you can charge more. So it is what it is. We – and it’s some of these things that happens. I don’t think it’s something that we can build a case that prices will go up. And then can you just repeat your second question again?

Yes. The second question was, looking at the very strong demand last couple of quarters, is there any evidence of customers having shifted volumes in advance of or after the contract negotiations or perhaps in advance of April 1, given higher risk of some disruption?

No, no, I don’t think there’s any evidence of that.

Okay, thank you.

Our next question comes from the line of Casper Blom from ABG Sundal Collier. Please go ahead, your line is now open.

Thanks a lot. Couple of questions regarding the container business from my side also. First of all, regarding volume, you grew 10% here in the quarter. We’ve also seen some other competitors being out with fairly aggressive volume growth. We’ve also seen it from some of the freight forwarders. Still, you’re talking about 2% to 4% growth in the market for 2017 on your guidance slide. Is there any chance that we are underestimating how much the market is really set to grow this year? That’s my first question. Secondly, regarding the development of bunker price, I would expect this to be something that eventually passes through to the customer. Is it also your expectation that we will see the negative impact here in Q1 sort of neutralize when looking into the second quarter of the year? And then finally, coming back a little bit to the whole structural set-up of the industry after Hanjin’s failure last year. Are you seeing any change in the dynamics as to whether it’s becoming increasingly difficult to be a small player? And do you have any sort of evidence of customers that are choosing not to do business with the smaller players? That’s my two questions, please.

So on the growth in the first quarter, I mean, we have to keep in mind, of course, that we’re comparing a first quarter this year with a first quarter last year when Hanjin was still in business. So that share that we captured during the third and fourth quarter is still here. We didn’t have it in the first quarter last year. So the comparables are also a little bit into this. In terms of your question on whether we are too conservative on our market growth guidance or whether there’s a risk of that, I guess, the answer to that is yes. We have been surprised on the upside with growth in this first quarter. Remarkably, growth in the euro trade has been really, really high. And hopefully, that says something positive about the European economy. We already, for a number of quarters, have flagged that growth has been high in the U.S. market. But we have decided not to, let’s say, upgrade our market demand growth forecast yet because we are not 100% sure about what is actually – what is the driver and is this just, let’s say, some quarterly inventory movements that is blurring the picture. In terms of bunker cost then for our contract portfolio, which is about half of our business, we have bunker adjustment clauses. So with delays, increases and decreases in the bunker price will flow through to our customers and to our rates. As far as the rest of the business or the other half where we are trading on the spot market, the spot market is not really driven by the bunker price. It’s the supply and demand in the individual trades that decide what the rates are, irrespective of what the fuel cost might be. And in terms of your last question around the small players and whether it’s difficult for them and so on, I think you really have to ask those carriers. The only thing I can say, to add just a little bit of color, is that we have been able to sign up a contract portfolio this year with our customers with growth in it, mirroring the overall growth that we have had as a group, as a company.

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

Just a short question on Hamburg Snd. It was good you said about this 8-year antitrust impact, but I think you have also said that you will put your older Brazil cabotage business up for sale. Do you have any size impact what that could be of Hamburg Snd? Then secondly, coming back to the bunker trading again. I noticed, I think, that when the bunker prices were falling, you were lagging a little bit on the impact for your behalf. But now when the bunker prices are going up, it seems that you are catching up with the spot price development quite rapidly. Is there any changed strategy here on the bunker costs? And then finally, just – yes, please.

So on Hamburg Snd and the Brazil situation there, Hamburg Snd is the owner of a Brazilian cabotage business called Alianta. We have a similar business called Mercosul. Together, these 2 companies have 70% or 75% market share in Brazil. And therefore, we, in all likelihood, will not get that approved by the regulatory authorities in Brazil. And we have, therefore, initiated work to divest off Maersk Line’s cabotage business, Mercosul, and intend to keep Hamburg Snd’s cabotage business, Alianta, which is the bigger of the 2. It’s not something that is hugely material to the Hamburg Snd acquisition, and it’s something that we have planned all along because we knew that we would have a regulatory issue. In terms of bunker, I can just say that we have not changed strategy or anything like that. We’re not hedging our bunker costs, so it flows into our accounts, so to speak, as it happens.

Thank you very much.

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

A few questions regarding the rates. I’m not sure whether I catch it. You said something about contract rates previously. Could you repeat how much the increase have been in Asia, Europe and what you expect on the Pacific? That’s one thing. And please explain again the North-South rate development. You said that historically, $200 to $300. Was that manned by 40-foot containers? And is that where the North-South rates are heading, in your view? You said you had currently at the level?

Yes. Finn, I did say at – on rates, on contract rates, Pacific, about $300 up compared to last year on Europe, Asia, Europe, about $450 per 40-foot FFE. And also, on North-South rates, I did say historically we’ve had a – we’ve had a difference in the favor of North-South of $200 to $300. And then actually, last year, rather remarkably, it dipped down below – North-South rates dipped down below East-West rates and now we are back up at parity. I’m not going to make any calls on whether they’re going to go back up to $200 to $300 positive difference, but I can tell you I hope so.

But it’s right. If you look at the first quarter, you would add $100 million more on the bottom line if it’s just at parity, so to speak, on East-West and North-South routes.

Exactly.

Is that correct?

Yes.

Our next question comes from the line of Robert Joynson from Exane BNP Paribas. Please go ahead. Your line is open.

I have 3 questions, if I may. A couple on Maersk Line and then one on APM Terminals. If I start off on Maersk Line, just looking at the fixed bunker unit cost, could you talk about the extent to which that was impacted by temporary costs during Q1, including the network of updates that you mentioned in the presentation? And could you also provide some color on the outlook for the fixed bunker unit cost during the remainder of this year? That’s the first question. The second question on the round-trip utilization rate. That increased quite a lot during 2016, but it was flat year-on-year in Q1. Would it be reasonable to assume that the round-trip utilization rate will remain flat for the remainder of this year as well? And then just the final question on APM Terminals. Could you please talk about the extent to which the BSA with Hyundai together with the slot purchase agreement with Hamburg Sud will benefit throughputs in that business during the remainder of this year?

Yes, so our unit cost at fixed bunker was down 5% year-on-year, about $108 if I’m not mistaken. And of course, that was a reasonable result for us and in line with, let’s say, the cost decreases that we have been able to deliver over the last 4, 5 years. The quarter was actually impacted by quite a number of, let’s say, negative events for cost, especially in some of our hub ports and some of the things that were already discussed in terms of delays in Asia that led to delayed arrivals in the U.S. and in Europe, which causes everything to come out of sync and, therefore, adding to our cost base. So it was not a particular positive environment for our operations in the first quarter. We also had, if not an outright strike, we had, let’s say, a number of slowdowns in our main hub in, I guess, U.S. and Spain, which is also very costly for us. So that’s the color I can give on that. In terms of round-trip utilization, we grew a lot last year. I don’t think that – I mean, we’re not guiding on it, but it seems unlikely we will be able to increase our round-trip utilizations dramatically this year. I mean, after all, there are and continue to be differences in trade flows eastbound and westbound, and there’s a limit to how much we as one company can balance that – that’s balanced that out. On APMT, all I can say is that as we do BSAs with Hyundai and with Hamburg Sud, it will have a positive impact for APMT as those companies will drive more value – volume and, hopefully, therefore also value over APMT’s terminal network.

Okay, thank you.

Our next question comes from the line of Jorgen Bruaset from Nordea Market. Please go ahead. Your line is open.

Thank you so much for taking my questions. Three questions for my part, 2 on Energy and 1 on Maersk Line. If we start off by Energy. First of all, it looks like you’ve done a very strong job on taking out cost in Maersk Oil, also very strong development in cash conversion. Could you give some color on where we are in terms of the full potential of taking out cost in Maersk Oil? And also, should we expect the exploration cost in Q1 to be the given run rate for the full year of ‘17? That’s the first question. Also, on Maersk Drilling, when you look at the – or objective to maximize shareholder value in terms of separation process, where do we see sort of Maersk Drilling fitting into the outlook on the cycle with respect to finding a solution by the end of 2018? And my final question on Maersk Line. Just on the North-South rates, could you give some color on the development quarter-on-quarter? Had that been stronger than what you expected when you provided guidance at Q4?

If I start answering the Energy question first on Maersk Oil on cost developments. And absolutely, we are quite proud and happy with the development of our cost savings and cost efficiencies so far. We don’t wish to guide on the – on how that trend will continue. All I can say is that the effort will be relentless to keep on taking out more cost and providing higher efficiencies. What we have said is that when we exclude the Qatar production, then we will aim certainly to be profitable in an oil price scenario of the $40 to $45 per barrel. And the cost efforts will certainly help that, and we are well positioned there. In terms of exploration for the first quarter, we have guided that exploration cost will be in line with what we saw in 2016. And I can maybe just add that the exploration cost we expect is mainly centered around Kenya, drilling 2 wells in the Kenyan oilfield, both development and exploration – or predevelopment and explorations, but also drilling a few wells in the U.K. sector but primarily Kenya. Last question on the Maersk Drilling separation, all I can say there is that a lot of work is ongoing in all 4 business units to progress toward separation. But you will have to await further announcements as they occur and as we [indiscernible] them.

And on the question on North-South rates and whether the quarter-on-quarter development has been stronger or compared to our expectations when we guided, then I don’t think I can provide any more color than simply reiterating that we are repeating our guidance for Maersk Line and for the whole A.P. Moller - Maersk and I don’t think I can add to that.

And our last question comes from the line of Mark McVicar from Barclays. Please go ahead your line is now open.

Thank you, good morning everybody. Just two questions. First one which sort of relates back to what you just talked about, Claus, it’s now maybe eight months since you announced the plan to separate the Energy businesses. Have you, to a degree, narrowed down the options? And should we still expect something to happen with at least one or two of those businesses in ‘17? Or is it much more pushed into 2018 as you look at it?

Well, I think I naturally have to repeat the answer that the news will only come out when they come out. But we are progressing solutions. We have ourselves to the end of ‘18 to announce those solutions, and we are pretty much on track for that. That’s all I can say at this stage.

Okay. And my second question was clearly for Jakob. Have you agreed with the rating agencies how they’re going to treat the Hamburg Sud acquisition? Because obviously, if you consolidate it at the end of the year, the $4 billion of debt is going to go on the balance sheet, but you won’t have consolidated any EBITDA. So mathematically, that leverage ratio will be much higher. And if you haven’t, when does that happen?

Thank you. I have to say to you we are not only taking over debt, we’re also taking over our cash-generating business that has a lot of debt capacity in itself. But naturally, we have a deep, high-quality dialogue with the two rating institutions. They’re corporate insiders, so we can actually have a very deep conversation. And I can assure you that not only I and my team, but the management and the board are reviewing the overall balance sheet. When we go through such major changes as we’re going through, actually, you really start from the balance sheet and work yourself around from there. Thank you.

Okay. So you don’t think consolidating bad debt would limit any of your balance sheet capability until further into 2018 when you’ll clearly then be consolidating Hamburg Sud’s EBITDA and cash flows now?

It’s all in our plans. I think the other thing you can look at is that with the guidance we have given, then, of course, the cash generation and the profitability of Transport & Logistics will improve in the course of the year. And then there will be contributions from Hamburg Sud when we take over Hamburg Sud. So we have looked at all those things, including the debt.

Okay, that’s great. Thank you very much.

I think that concludes the questions, and I would just like to say thank you again for joining the call, and we look forward to talking to you again after the second quarter. Thank you.