Soren Skou - CEO Jakob Stausholm - CFO Claus Hemmingsen - CEO for Energy Division

Lars Heindorff - SEB Robert Joynson - Exane BNP Paribas Marcus Bellander - Carnegie Christopher Combe - JPMorgan Dan Togo - Handelsbanken Capital Markets Jorgen Bruaset - Nordea Markets Casper Blom - ABG Sundal Collier Finn Bjarke Petersen - Danske Bank

Good morning, and welcome. This is Soren Skou, the CEO of Maersk. Welcome to this earnings call for the second quarter of 2017. So first, I would like to invite you, as always, to read our statement about forward-looking statements and keep that in mind. Now for the quarter, we're delivering an underlying result for A.P. Møller Maersk of $389 million, which is almost 3x the result of this -- underlying result of the same quarter last year. Impairments in APMT and tankers mean that the reported result is a loss of $264 million. What I would like to highlight, however, is that the big story in our view in this quarter is that Mærsk Line is profitable. Maersk Line grew revenue by $1 billion year-on-year. And we're able to deliver result of improvement -- deliver resultant improvement of more than -- around almost $0.5 billion and a profit of $339 million for the quarter. And that means that we are able to reiterate the guidance for the year of a profit in our Transport & Logistics businesses of $1 billion, more than $1 billion, and an improvement in Maersk Line of more than $1 billion. And we are able to do that despite the fact that we are absorbing an impact from our cyber attack of $200 million to $300 million. The main reason for the improvement in the result is the underlying fundamentals in container shipping, and that's, of course, very positive for both Maersk Line, and certainly, also for APMT. We believe that what we see now is probably the strongest fundamentals for container shipping that we've had for quite a while and certainly since 2010 and the financial crisis. The global economy is doing well. Global GDP is edging up towards 3%, driven by the big oil economies in Europe and the U.S. as well as China. And we also see that contraction has stopped in some of the significant economies that are depending on raw materials and oil prices, such as Russia and Brazil. Those economies are no longer contracting. We are starting to see some growth. Adding to that, the rising corporate profitability across the world means a good investment climate. That has rubbed off on container shipping and with demand growth in the first half of the year north of 5%, probably in the area of 6%, which means that global container shipping has grown about twice the speed of global GDP, a very positive development, and much higher multiplier than we saw in 2015 and '16. Since the third quarter of 2016, we have seen effectively demand outgrowing supply. And that positive development in demand and supply balance has meant that freight rates have gone up. In Maersk Line's case, average 22% higher rates in the second quarter this year than -- compared to the same quarter last year. When you look at the industry, idling has gone down. And the idle fleet is down to 2.5%. And rates have maintained the levels that they have, which I think is also a testament to the strength in the market. So far this year, 1.4% of capacity has been scrapped. And when you combine with that -- with the fact that we have seen no new orders of large ships since third quarter of '15 and the order book is now 13% of existing capacity, an all-time low, and significantly down over the last 6, 7 years, it was 32% in 2010, and has just declined steadily since then. We believe that we can say that we have the best fundamentals we have seen in quite a while. Then of course, in the coming years, more ships will be ordered and so on. But all in all, we're quite positive, not, of course, a road without bumps, but a positive outlook. And finally, adding to that, we have seen and are seeing significant consolidation in container shipping, which will also impact the industry. On the energy side, we have again, I think, a solid result from Mærsk Oil that continues to improve earnings and we are able to deliver a breakeven oil price. We have had to take a significant impairment in our tanker business. And our CEO, Claus Hemmingsen, will talk more about that in the energy section. Now let me turn to the cyber attack. As you are all aware, on the 27th of June, we were hit by a cyber attack, which hits about 7,000 companies globally, including many large international companies. It was -- this virus came through a piece of software that is the de facto standard for filing tax returns in the Ukraine. And in our case, it spread globally and made all of our applications and data unavailable for a while. The impact was contained to Maersk Line, APM Terminals and Damco. And the impact on the energy side of the business was very limited and had no impact on customers. We, of course, took a lot of actions to contain this attack. We were able to respond locally and make manual workarounds. And then over the next -- the following 2 weeks, we were able to bring back most of our applications. And after 2 weeks, I think we can say that the business impact or the customer impact was minimal. And our business levels were back to -- the volume levels were back to normal after 2 weeks in July. It's important for me to say that it was access to our data and applications that were -- we never lost any data in the process. We are guiding the market that the impact of this will be $200 million to $300 million mainly in Maersk Line. And it will mainly impact our third quarter results. The cost is really loss of revenue in July and then it's extra cost for running the operation and for rebuilding the IT that makes up the $200 million to $300 million. Before turning over to Jakob Stausholm, our CFO, I'll just briefly touch on Hamburg Süd. We are progressing as planned. We expect to close the transaction in the fourth quarter as we have guided. We are working hard on making sure that the integration becomes successful. We have clean that work on the synergy case and are confident about being able to deliver the cost synergies that we have guided the market, $350 million to $400 million by 2019. We do not have any access to how Hamburg Süd's business is doing. But when we look at our normal market research, it seems like Hamburg Süd's volume and business is holding up quite nicely. And that is, of course, very positive seen from our point of view. What is outstanding is regulatory approval. We have 12 jurisdictions that have now approved. We have filed in a total of 23. But the major jurisdictions that are now outstanding are China or China, Korea, Brazil, Chile and South Africa. As announced in the quarter, we have agreed on the divestment of our Mercosul Line, which is our Brazilian domestic carrier to CMA CGM, subject to the closing of this transaction. And that is done as a de facto remedy in order to ensure competition approval in Brazil. We are in close dialogue in all of the jurisdictions with the authorities. And we expect, as I said, to close in -- during the fourth quarter. Now let me turn over to Jakob Stausholm, who will present the financial highlights.

Yes. Thank you, Soren. Good morning. So looking at Page 8, looking at our overall profit and loss statement for A.P. Møller - Maersk. I think one has to remember we don't like so much to remember it, but we are recovering from a dire 2016. I think it's very clear to see in the Q2 numbers and the Q1 numbers and the Q2 numbers that we are in a recovery state. If we start looking at the top line, we started in the first quarter to see year-on-year growth after having had contractions for a period. And that trend continued and actually strengthened in the second quarter. So whereas we grew 5% in the first quarter, we actually grew 8.4% in the second quarter. Encouraging to see as well that the revenue growth followed with the earnings growth. I should say that the revenue growth is basically entirely from Transport & Logistics, and specifically, for Maersk Line as a combination of improved rates and continued volume growth. If you look at the EBITDA, it's up 16% year-on-year. And the underlying profit which, of course, was from a very low state is up three times. Reported profit is negative this quarter entirely due to two business units that have recorded impairments in Mærsk Tankers and in A.P. Møller - Maersk, A.P. Møller terminals. Moving on to the next page. The cash flow statement shows a similar pattern. If you look at our operating cash flow, it's strong. It's 50% stronger than the same quarter last year. And we are also having higher capital expenditures. We have had delivery of two major vessels in the second quarter. But overall, as you can see, it's only around half of the cash generation that goes into capital expenditure. And therefore, we see a significant strengthening of our free cash flow. It's basically twice as high as it was a year ago. Moving on to Page 10. I think it's important to remind ourselves that while we are going through massive changes in A.P. Møller - Maersk, looking at structural solutions in energy, recovering in Transport & Logistics and integrating our Transport & Logistics business, we keep on protecting our balance sheets. And we are committed to remaining investment grade. And I think this quarter, actually shows one encouraging sign that despite a significant capital investment program, we are actually able to deliver as a business. Debt -- net interest-bearing debt is lower at the end of the quarter than at the beginning of the quarter. The other important analysis is our commitments, capital commitments for the future. Last year, we launched new strategies. And as a consequence of those strategies, we decided to be much, much more restrictive in the usage of capital expenditures, but many commitments were already made. And therefore, what we -- a key track of ours is to see what the future commitments are. At the beginning of the year, we had commitments of $9.1 billion. When we reported out to you in the first quarter, that total commitment had gone down to $8 billion. And now here at the end of the second quarter, it's $7.4 billion. So you can see that we are not undertaking many new commitments. We are executing on the CapEx programs already implemented on the major projects in Mærsk Oil, in APMT and on the vessel delivery program in Maersk Line. That sums it up on Page 11, and I don't want to repeat too much the consolidated financial information here. Overall, I would say the recovery is in line with what we had expected, not many, many surprises. And most encouraging for this quarter is to see that the return on invested capital for our major business, Maersk Line, has gone up so significantly and ended the -- actually close to our target range. But let me hand back to Soren to go through the individual Transport & Logistics businesses.

Yes. Thank you, Jakob. And I'll skip -- actually, the Transport & Logistics page and go straight to Mærsk Line in the interest of time in order to give you as much ability to ask questions. Highlights. Maersk Line made $327 million underlying, which is an improvement of $466 million compared to last year, driven by $1 billion in higher turnover, $0.5 billion in higher EBITDA and $700 million of improvement in the operating cash flow. The return on the invested capital came out at 6.7%, not quite where we want to be, but certainly a much better number than last year. We are, as I said, profitable again. It's driven by higher freight rates, up 22%. And we were able to also become profitable despite the fact that the bunker bill increased by more than $300. All of our trades are profitable at this time. We grew volumes 2%, and many will think that's a low number. But I just want to make sure that I say that in the earnings call for the first quarter, we have clearly said that we've gone through a period of very high-volume growth. We grew 9.4% in 2016 and around 10% in the first quarter of this year. And what I said on the earnings call for the first quarter was that we have grown market share a lot, and it was time to focus on profitability. And that's what we have been doing in this quarter. What I also said and I'll repeat, is that when 2017 is over and done with, if we have grown market share just a little bit organically, that will be fine. It's much more important we grow profitability and deliver on the guidance that we have given to the market in terms of earnings. We will be adding also the acquisition of Hamburg Süd in the fourth quarter, which will mean that Maersk Line will come out of 2017 with a significant market share growth. Finally, I want to just highlight the fact that our capacity increased 8%. And that, of course, is a big number compared to the 2% volume growth. We increased partly because we had to accommodate both volumes from Hyundai Merchant Marine and from Hamburg Süd on the East-West trades. And that meant we had to add capacity, but we do also have to recognize some deterioration in our utilization, basically in order for us to improve the average revenue per container. On the next page, you'll see all of our, the freight rates disclosures. So I think the key point for me to highlight for you here is that while East-West grew a lot, 36%, we now have a situation where North-South again is slightly higher, $30 higher than the East-West rates. And we see a positive development in that, of course. On the unit cost, we seem to have stabilized our unit cost at the current level, a slight increase year-on-year driven by the lower utilization, less backhaul volumes that add to utilization. But overall, stable unit cost development, which on the whole, is acceptable as long as the freight rates have developed in a positive direction as they have. Moving on to A.P. Møller terminals, clearly impacted by a significant impairment of $250 million. But the underlying business came in at $98 million, which we believe is a stabilizing trend. APMT is faced with two changes. One is a decline in revenue per move as that industry is becoming -- coming under more comparative pressure; and the other challenge has been growth in volumes. And we are starting to see APMT again growing more in line with market growth in the underlying business. And obviously, Maersk Line's growth with APMT has been above market growth. We have -- in the business, we continue to have CapEx discipline. We are not seeking to add new terminals to the new building portfolio that we already have. We continue -- we focus on executing on the projects. And you can expect us to see -- you can expect us to be very disciplined in terms of CapEx in APMT in the coming years. Finally -- or not finally, but as far as Damco is concerned, we are reporting a breakeven result. It has mainly been driven by a negative development in the forwarding margins as container shipping rates have increased significantly in the quarter. It has been harder for Damco to maintain its margins. Also, Damco was hard hit by the cyber attack, obviously, given it happened on the 27th of June, not a significant impact on the result, but still some impact in the results. If we are to talk about highlights, its development in volumes, in our supply chain and management business and also air freight, where we're quite pleased with the growth in the business. Svitzer reported results, underlying result of $33 million, up $10 million from last year. But on the whole, I think we can say that the business is very stable in terms of EBITDA and in terms of cash flow and so on. And as far as -- finally, on Maersk Container Industry, Maersk Container Industry improved significantly year-on-year, almost tripling its turnover to $285 million. And EBITDA went from minus $21 million to $28 million, leaving us with an underlying profit improvement from -- of more than $36 million for the quarter. All of this is driven by much better cooperation between Maersk Line and MCI when it comes to production planning and placing of container orders. So now let me take the opportunity to hand over to Claus Hemmingsen, our CEO, who will talk about the Energy division.

Thank you, Soren, and let me just start with repeating what Soren said in the beginning that our work towards the separation of the energy businesses is progressing as planned. And as we communicated earlier, we will revert to the market with an update as soon as we have any news. So at least, we're not keeping anybody in suspense on that. If we turn to Mærsk Oil, Mærsk Oil had a very strong second quarter. There was a profit of $191 million, underlying, $184 million, an increase over $130 million for the same quarter last year. This was positively helped by 9% higher oil price, $50 this quarter against $46 last year, as well as continuing to see lower operating cost in Mærsk Oil. There was also $66 million of one-off that helped the result. These were mainly related to tax and reversals of provisions. And all in all, that meant that Maersk Oil posted a ROIC of 18.5% in the quarter. If we turn to the numbers page, you can see or I can inform you that the operating expenses kept on being reduced by 3%. This is excluding exploration cost and excluding the cost of purchasing of oil and gas for resale. I can also highlight here that the exploration expenses, as you can see in the numbers, were kept low as we've also advised they would be. And the exploration cost in the quarter was all related to Kenya. As also advised, we are keeping tight control on the CapEx, and they are significantly lower than the same quarter 2016. And the CapEx that we saw was all related to the -- mainly related to the two projects of Culzean in the UK and you have Johan Sverdrup in Norway. So all in all, Mærsk Oil, they continue to expect at the end of 2017 and beyond to operate in a NOPAT breakeven oil price of $42, $45. One highlight from July is that we, as you all know, exited Qatar on the 13th of July, as planned. It's after the quarter, but it's worthwhile mentioning that everything went according to plan. On the entitlement productions, on the next page, we saw a decrease in entitlement production by 14% from second quarter last year. It is all as expected. The main decrease came from Qatar, which was a result of the combination of oil price and cost recovery. But as you see from the chart, whereas we saw the expected decline in the UK from second quarter last year, mainly from Balloch and Janice field, then we also saw stabilizing production from the first quarter this year, which is why we have included the first quarter columns. Actually, all the rest of the fields are stabilizing or slightly increasing production. That also means that, as you will see later, that we maintain our guidance for the second half 2017 production to still be within the $150,000 to $160,000 range, excluding Qatar. If we turn to Mærsk Drilling. Mærsk Drilling reported a profit of $28 million, hampered by idle rigs. There were 10 rigs being fully or partly idled during the quarter and nine rigs being idled by the end of the quarter. So of course, activity in the industry is still low. The result was positively helped by continued cost focus and reduction. But it was negatively impacted by equipment issues in two rigs, one on a drillship and a less important one on the newly delivered jack-up. On the next page, we'll just say that the utilization in the quarter decreased to 64%. We do have a backlog in the books that secures utilization in the second half 2017 of 61% and 46% in 2018. The industry is still challenged. However, Mærsk Drilling added 236 days of drilling days in the second quarter and $29 million to the backlog. We do see increased tendering activity, however. And there are still good discussions with major customers on contracting. The backlog for Mærsk Drilling by the end of the second quarter was still $3.1 billion and still one of the highest in the industry. Turning quickly to Mærsk Supply Service. Mærsk Supply Service posted a loss of $10 million, underlying of $11 million, hampered by these operating vessels, but also helped by lower operating cost. Also here, we do see some increased tender activity and contracting opportunities. However, the market is still incredibly slow. Important to note here that we do have cash flow for CapEx increasing due to assets under construction. However, Mærsk Supply Service also successfully postponed the delivery of nine vessels, which had a CapEx impact of approximately $400 million in the year. And finally to Mærsk Tankers. Mærsk Tankers posted a loss of $17 million underlying, a decrease from last year, mainly caused by the decrease in spot rates of 21% and also means that you see earnings from Mærsk Tankers actually decreased by 27%, all due to the lower freight rates and also lower commercial performance. The loss in the second quarter in total was a negative $483 million. As Soren mentioned in the beginning, we took an impairment of $464 million in expectation of the continued low asset valuations in the industry. Yes, I think that's what I have to say at Mærsk Tankers. They, of course, continue to have a strong focus on cost and optimization. So with these words, I will hand back to Jakob.

Yes. Thanks, Claus. Summing it all together, at the beginning of the year, we offered you some guidance for 2017. And despite all the uncertainties, the year actually, so far, panned out quite as expected with some very unexpected events. And I think the way to say it is that the recovery in, particularly, Mærsk Line was somewhat stronger than we expected when we set the guidance. And then on the 27th of June, we were hit by a cyber attack that we now estimate to have an impact to the tune of $200 million to $300 million NOPAT. Summing it all together, we're basically exactly at the same numbers. And therefore, we are able to reiterate our guidance for 2017. We talk about a gradual recovery, and that's how we mentally still think, but you have to bear in mind that the cost we guided to you on the cyber attack of the $200 million to $300 million, they will hit the third quarter results. If we look at the more detailed guidance, then we also committed to be very restrictive on the usage of capital expenditure and we're able to reconfirm the guidance on that front. And overall, the split into the individual businesses also remain unchanged. So not a lot of news here. But in a way good news that we were able to absorb this terrible cyber attack. This ends the presentation, and we would like to open up for questions.

[Operator Instructions] The first question comes from the line of Lars Heindorff from SEB.

So firstly, regarding Maersk Line. I was a bit surprised by the decline in utilization and the increase in capacity. As you explained, this was caused by Hamburg Süd and Hyundai Merchant Marine. But my question relates to these things. Are you able to recoup or improve the utilization going to the third and the fourth quarter? It seems like some of the, this income or alternative with the volume that you carry for Hamburg Süd and Hyundai Merchant Marine have not been sort of increasing, at least not at the same speed as you're increasing your capacity. So that's my first question.

Yes. Thank you, Lars. I mean we're not really able to disclose the volumes of Hamburg Süd and HMM. I guess once Hamburg Süd has been -- the transaction has been closed, we will include the -- those volumes in what we disclose. But nevertheless, it does give us a little bit of an issue in terms of how to explain this. But as I said, we do -- we did see a decline in utilization. It was driven by the fact that we had more focus on getting prices up. And therefore, we did more, let's say, cargo mixing in this quarter. And now what we have, we do have the capacity deployed and I expect that we will see slight improvements in utilization going forward.

Maybe regarding the VSA structure, I don't know if you can explain that to us. Are you getting payments? No? Is it actually Hamburg Süd and Hyundai Merchant Marine are using the slots that they are paying for at your business?

Yes, it's a fixed structure purchase price, yes. If that's your question. So it's not -- they're paying per unit. They're paying a fixed amount for a fixed amount of capacity.

Okay. Then regarding the rates, still -- I mean quite significant improvement in the rates. Sequentially, maybe not as much as we've seen in the first quarter, but still up though. Maybe you could shed a little bit of light on sequential improvement from Q2 into Q3? I mean I must assume that there must be -- still be some improvement on Transpacific, given the fact that most of those rates have been -- at least the contract rates have been agreed upon in May. And also, then maybe on the same note on North-South where we maybe have less evidence for the rate to go up. Maybe a few comments on that?

Well, as I said before, we believe that the fundamentals are relatively solid. When we look at the supply and demand balance, it doesn't mean that there won't be any bumps on the road or outbreak of local price wars here there and everywhere from time to time. But on the whole, we believe that the freight rates are stable. You will have also seen, of course, you follow the indexes. You've seen very little movement in the past few months despite the fact that a lot of idle capacity has been deployed. And I think we'll take that as a sign of strength in the markets. I'm not going to start forecasting freight rate movements in the third quarter. However -- sorry, but I do -- we do see good strengths and then good fundamentals. And yes, that's as much as I can say at this point.

Okay. Lastly, regarding the terminals and the operating margins, which has been sort of declining here for the past, yes, couple of quarters. You mentioned earlier that there will be less new projects coming on stream. Will that mean that the margins will start to improve again?

Well, I mean obviously, we do have to carry the cost for the projects as we do the construction, but it doesn't impact the revenue per move.

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

First of all, I would like to say well done to everybody at Maersk on being responsible for the cyber attack, which -- in what must have been difficult circumstances, I thought was outstanding. So well done to all of you on that. So 3 questions from me, 2 on Maersk Line and 1 on APM Terminals. The first one on Maersk Line unit cost. The 6 bunker unit cost was basically flat in H1 versus H1 of 2016. But you've previously spoken about a reduction of 1% to 2% for 2017 overall. So maybe if you could provide some color on whether that 1% to 2% reduction for the year as a whole is still realistic. So that's the first question. The second question is on the freight rate and it's a little bit of a follow-up to the last question. I appreciate you don't want to comment on freight rates for Q3. But maybe if you could talk about the extent to which the freight rate improved as Q2 progressed, i.e. some color on the delta between rates at the end of the quarter and the beginning. That would be very helpful. And then the final question on the APM Terminals. In the presentation, it was mentioned that during H1, APM terminals won 18 commercial agreements for new volumes, while losing only 5 existing agreements. Could you just provide some color on the extent to which the volume benefit from those new agreements was included in the Q2 figures? Or I guess the -- what I'm really getting at is the extent to which that will come through in the second half of the year?

All right, Robert. Thank you and thank you for the kind words about the cyber attack. First of all, on APMT, the contracts that we have won so far this past quarter has not really had any volume impact yet. That will be in the second quarter. In terms of the rate -- excuse me, in the third quarter and fourth quarter. In terms of the rate development through the quarter, of course, the significant event in the quarter was that the new Pacific contract rates kicked in on the 1st of May, which significantly increased the rates after that as contract rates. As we discussed I think in the last earnings call, it came in -- contract rates were reset at much higher levels. And then in terms of unit cost, our ambition is to continue to take unit cost out as previously announced to the tune of 1% to 2% per year.

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

Two questions from me. First, your reported freight rates was up 8% quarter-on-quarter. If you could shed some light on how much of this increase was due to change in mix, and how much was sort of underlying improvement? And then second and related to the first question, the discrepancy between your sort of reported freight rate and that the freight rate one can calculate by dividing revenue with the number of containers transported. There's a pretty big discrepancy there. Could you say anything about the dynamic there? Will there be a catch-up in the third quarter? Anything you could say about that would be helpful.

All right, I'll leave the reporting question to Jakob, but let me just comment on the question concerning mix versus underlying. We do have a mix effect, and you can read it out of the data because we have been disclosing -- we're disclosing the rates when it comes to East-West and North-South and also the volumes. So you can actually do some assumptions on that. But I think from my chair as a CEO, I think the real story is just solid underlying fundamentals across the trade. I mean, the fact that you were able to see a significant reduction in idle capacity that was absorbed in the market without a massive drop in the -- in freight rates was clearly positive. We do see North-South markets that have been very, very much hit by the drop in the oil price kind of coming back. If I'm not mistaken, I think the Africa volumes, for instance, were growing 6% for the quarter, markets that have contracted significantly over the last few years. So on the whole, it is solid fundamentals that are driving the freight rates up. And of course, we have done some too to really make sure that we saw the financial benefit on that. We have scaled down some of our growth in the backhaul trades and so on, that has helped our averages. So, yes, there is some mix effect. And then let me turn over to Jakob and...

Yes, thank you. So there is a big difference, and there should be a big difference. Basically, when you see the freight rates, it's the rates of the boxes when we put them on the ship. IFRS accounting requires us, because our business is seen as a service business, to record the revenue over the course of the journey. And that means that you can have one freight rate, and if the freight rates change a lot, in this case goes up, then you quickly see higher freight rates, but first over time get the higher revenue. So, yes, in periods of increasing freight rates you will see the revenue impact coming later, and it's probably to the tune of 30 to 40 days. So it does have us quite a bit lower from one quarter to another.

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

Just a follow-up on the unit cost development. You also comment on fuel efficiency, which seemed to go a bit backwards on utilization points. And you mentioned utilization should get a bit better. So does that mean you could maintain sort of a flattish development over the second half, alongside the ex-bunker development sale, it sounds like about 2% to 4%? And then second question. What do you make of the speculation around the sizeable forthcoming CMA CGM order? And what that may mean for capacity discipline, granted it will take some time for those orders to reach the market? And lastly, do you have any view on the level of restocking activity that's taking place? Some in the industry have commented on maybe as much as 1% of the demand growth feeding inventories.

Yes. So we maintain our ambition on fuel efficiencies. We certainly don't like fuel efficiency to deteriorate. And we will work very hard to do whatever we can to make sure that it doesn't end up like that for the year. In terms of the rumored orders from CMA, then what I can say is that, as I said earlier, the order book is 13%. And the runoff is quite fast. So if no more orders are made, then it will be 7% by the end of next year and 1% in 2019, which of course, is a very -- quite a positive outlook for supply seen from an industry perspective. No doubt, ships will be ordered. Shipyard prices are really low. And that could of course and will, in all likelihood, impact this picture. But from where I'm sitting, I think it's important to consider the following. There is no incentive to order ships from a cost perspective right now. I mean when we go back three, four, five years, ships -- large ships were ordered because of fuel economics. And that incentive has kind of disappeared given the current -- or has been minimized given the current oil prices. Secondly, the charter market is still in the doldrums. So when you do compare ship capacity to buying ships to chartering them in the old market, I mean it's actually, it's a hard case to make to actually go out and build new ships. So I do think that additions to the order book will be driven mainly by the need to grow capacity in order to meet market demand and nothing else. We'll see what happens. But it's a fact that no large ships have been ordered since the third quarter 2015. And I can also say that we don't have any ambitions, plans or considerations about ordering new large ships this year or next year.

Great. And then the last one was just about restocking. Do you have any view on how much of the demand we're seeing in the upturn, especially the spring might be feeding inventory?

Yes, so we have been positively surprised about the macroeconomic strengths so far this year. Who knows whether that very high level of activity will continue. We now start seeing monetary policies in some countries tightening, but so far, a good macroeconomic outlook. And there has been a container demand multiplier to GDP that has been higher than we had expected. It's -- there are some indications of a little bit of restocking, and then you will see some destocking later on, but not strong statistics for it. We will probably expect somewhat lower demand later in the year, but still a good market. Overall, we have said 2% to 4%. We said last quarter, that's probably in the upper interval, and who knows we might end up just on the high side of 4% for the year. But I don't think we have conclusive evidence for the restocking at this point in time.

The next question comes from the line of Dan Togo from Handelsbanken Capital Markets.

A few questions regarding Transport & Logistics from my side as well. Firstly, profitability in the North-South trades. You have previously indicated that the EBIT margin was diluted by the North-South trades. But the marked -- or significant recovery you've seen in rates in Q2. Is this still the case that the North-South trades is significantly diluting EBIT margin for the group or for Maersk Line? That's the first question.

Yes, I think what we can say is that we've clearly seen an improvement in the profitability of our North-South business. As I said earlier, all of our trades are profitable. And we also are seeing rates that are now higher than East-West not to, let's say, the level that we have seen historically of, I believe, $200 difference. It's marginally higher right now. And it's difficult to predict too far out in the future. But clearly, the profitability of our North-South trades has improved.

But is it a fair assumption to say that unit costs in North-South are higher than it is East-West?

Yes.

Then on the rate development on markets, I would like you, if you can elaborate a bit on which markets has very well -- as Claus indicated earlier, we have low transparency from our side into these North-South routes. So if you can just pinpoint which market, in particular, has driven the rate recovery you've seen in Q2 compared to Q1 North-South?

Yes. Dan, I think I'm probably going to abstain here and say we don't want to disclose very detailed -- I mean we're already disclosing North-South and East-West and intra trades. So I think we want to keep it there, otherwise, it gets very complicated for us. Sorry.

That's fine. And then just a final question. On the synergies that you have highlighted between the integration between Maersk Line, Damco and the APM Terminals, it's difficult to see any impact yet in this quarter with both Damco and terminals with low profitability and Maersk Line with high unit cost. But could you maybe just highlight if there are any or if there is any impact in the quarter and what it is and maybe also a bit on the nature of these synergies and what we should expect for the full year?

Well, there's one area where you could see it very clearly, that's in MCI's results.

That's true, yes.

And the impact is also in APMT's books and quite significant. So we have grown Maersk Line's volume 7 -- more than -- between 7% and 8% at APMT's facilities during the quarter, which is much more than APMT's total growth. So you are seeing APMT getting help, so to speak, from Maersk Line with volumes. And Maersk Line is paying APMT market-related rates, so the positive impact is in there. But we have had adverse developments in other areas. So overall, APMT is starting or is getting back to a growth on a like-for-like basis after the TCB acquisition, that is in line with or close to market growth. But we have higher ambitions. We want to see APMT growing volumes on a like-for-like basis slightly faster than the market. And that's really where you'd be able to see the impact.

Can I just challenge that view, because isn't it the fact also that business has been lost at APMT as you highlight yourself because Maersk Line is pushing in as well? Isn't there a consideration there?

No, I actually don't think that we can see that development. I mean we have gone through this spring, as I say, a renegotiation of many, many contracts because of the reconfiguration of the global alliances. And I think we can say after that, that APMT has won its fair share of [indiscernible] It has been well-known in the industry for a long, long time that APMT is part of A.P. Møller Maersk. And the fact that Maersk Line is now making more of an effort to place volumes with APMT, I don't think, is to the disadvantage of APMT's other customers.

The next question comes from the line of Jorgen Bruaset from Nordea Markets. Please go ahead. Your line is open. Jørgen Bruaset: A couple of questions from my side on volumes. Could you please give some more color on the backhaul dynamics? I know that you have negative volume growth of roughly 5%. But from data, I think we've seen -- it looks like backhaul demands have been quite solid and also on rates, so a bit of color on why you see negative growth. Also the second question, on that note, what should we expect on growth rates for the second half of '17 for Maersk Line? You have significantly higher comps. And will we continue to see backhaul diluting the reported volume growth, which probably should bring us closer to 0 growth in volumes for the second half of '17?

I'm sorry. Could you just repeat the first part of your question again? I'm not sure I got it exactly... Jørgen Bruaset: Yes, just if you're able to provide more color on the backhaul dynamics. So from what I can see, it looks like both backhaul demand and rates have been quite solid over the quarter. So why do you see negative growth on the backhaul in Q2?

Okay, yes. So I think in backhaul, we have done some, we have done some, basically, cargo mixing. I mean many of the backhaul trades, of course, are characterized by rates that are very low. And sometimes, it's -- you're kind of weighing what is the marginal cost for loading an empty container versus loading a full, which then comes with other consequential costs, including that the container is out of commission, so to speak, for a longer time when it gets to the head haul destination. So we see the improvement in our freight rates partly driven by more, let's say, a more disciplined approach to what backhaul cargo we have taken. And that has helped our profitability, frankly. Jørgen Bruaset: And on the outlook for the rest of the year? I understand that it's hard to give any firm predictions. But you have significantly higher comps in Q3 and Q4, so should we expect the volume growth we've seen in Q2 to set the stage for the coming quarters?

So as I said earlier, we don't have an ambition to gain a lot of market share this year. We grew almost 10%, 9.4% last year, taking share. We grew 10% in the first quarter here taking share. We really focused on profitability. And our aim is really to end the year at or about or slightly above where we started the year from a share point of view, not including Hamburg Süd, of course. And that means that focus in the coming quarters will be on profitability rather than volume growth. I think we are in -- frankly, I think we are in a good position. We used the price war to gain a lot of market share. Now the business is profitable. And we want to enjoy that and make sure that we can deliver on the guidance that we have provided to the market. So I'd be surprised if you see significant volume growth year-on-year in the coming quarters, let's put it that way. And by the way -- and of course, we do also and will have, in the third quarter, impact from our cyber attack.

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

Actually, if I can just pick up where you just left off, Soren, on the cyber attack. The volume impact that you talk about in Q3 due to this, can you put any quantifications on it? And secondly, is it so that you sort of feel that you are back to normal after the cyber attack now, i.e. in the way that you are getting the business that you would have expected to have been receiving if it hadn't been for this unforeseen event? So that -- I mean -- that there hasn't been any impact on client relationships or people that took their business elsewhere for a temporary period and then decided to stay there -- if you could comment on that. And then secondly, you touched a little bit upon it previously. But any signs of what we sort of historically would call the peak season happening this year. That's the two things for me, please.

Yes. So Maersk Line's volume was impacted effectively two weeks of July. We believe we have lost somewhere in the neighborhood of 70,000 FFE. We had, just prior to the cyber attack, we had a run rate of about 210,000 FFE per week of loadings. It dropped -- in the week of the attack, week 26, it happened on a Tuesday of week 26, we actually offloaded 212,000 FFE because we had so much cargo in the system. And then it dropped down to 160,000 then back up to 180,000 and the following week, we were at 200,000. And after that, we have been averaging this level of 210,000 again. And the 200,000 that we had in week 29 was within the normal variance. I mean, it's not like we're loading 210,000 exactly every week, so that's within the normal variance. So basically, it's this week 27 of 160,000 and week 28 of 180,000 was the impact. So that's how we get to the loss of business. We do not have any indication whatsoever that customers are walking away from Maersk Line because of this. Actually, to the contrary, we believe our customers were very supportive. Honestly, this type of cyber attack, I think most business leaders see it as, this could happen to us, to our company. It's criminals and others that try to destroy the business or hold us up for ransom. And companies actually try to help each other. We received an enormous amount of people wanting to help, customers that wanted to help provide IT staff, provide office premises, whatever we needed in order to get going. And the message was very clear, particularly from our large customers, we think you're going to work your way through this and if we can help you do that, we'll do so. So I don't see that there's any negative long-term impact. And we will do -- we'll take all of the learnings of this cyber attack and we will certainly share that with those of our customers who are interested in hearing this because this is a fundamental problem for business globally and we need to figure out how to deal with it. And in your last question in terms of peak season, I think we are seeing good demand. And that's also why prices are keeping relatively stable. We have -- we're delivering on our volumes, and I don't see any reason why we shouldn't be continuing to do that for the next few months until the October holidays in China.

Okay. So is it fair to say that hadn't it been for the sort of special impact from the cyber attack, you would have had sort of a normal pattern with Q3 given your higher volumes than Q2?

Yes, and hopefully, we'll still see that. We'll see.

And today's last question comes from the line of Finn Bjarke Petersen from Danske Bank.

Yes. Just two questions, one on the cost side and one rate. On the cost side, I'm just wondering in the second quarter, we saw consumption per box going up 5% and other costs going up as well. And you're looking into a second half where you're talking about some flattish volume development. How do you see unit cost develop in that environment?

We see unit cost flattish. I mean our ambition is to continue to take costs out to the tune of 1% to 2%. That's our ambition for the year. So they have to go down in the second half to make that happen if I can work out the math in my head. And the second part of your question, Finn?

It was just to follow-up on the cost. Because I was just wondering, if we look at other costs takeout there's a bunker. We've actually seen an increase in the second quarter for the first time since first -- since the end of 2012 or something so it's just a trend. And we also had, in the first quarter, some weakness on the cost side. I'm just wondering, what is the -- what are the things that you will do to make sure that costs are coming down in the second half of the year?

Well, I mean I think the most important thing for us is to get the utilization slightly up. That's really what can drive our cost down on the short term. But I do also want to make sure that I say that cost is flattish, but look at the results. I mean that is really, at the end of the day, what matters. And we will be getting also, of course, more of the new ships that we have on order and they will also help us lower unit cost as the average fleet size increases.

But that means that you have to improve volumes as well in the second half?

No, not if we deliver at least...

Okay. So capacity will be almost flat?

Yes, that's our ambition.

Okay. Final question on rate, which is developing in line with my expectations. But you're saying in your report the improvement in market fundamentals in past quarters have started to reflect in the freight rate. Could you elaborate on what you mean by started to reflect in the freight rates? For me, it sounds like there's much more to come.

Well, let's say, let's hope so. That would be nice.

But what is the meaning behind the phrase you have in the report saying that it's started to reflect in the freight rate?

If you look at our -- the freight rates that we have reported, we are -- I mean, of course, there's been variation every quarter, but it's really now it's starting to be reflected. And maybe Jakob want to add something...

Maybe I should just elaborate. The kind of conversations we have had with you over the last few quarters is that we have seen an improved environment. But there are some delays before you start seeing it in the revenue. And what is really nice this quarter is that it's very visible. You can see that the improved business environment leads to a huge swing in the profitability of Maersk Line. That was what was meant by it.

All right. Thank you, everybody, for calling in for this second quarter earnings call. We appreciate your interest, and thank you for the questions. Talk to you, if not before then, in the next quarter. Thank you.