Soren Skou - Chief Executive Officer Jakob Stausholm - Chief Finance, Strategy and Transformation Officer Vincent Clerc - Chief Commercial Officer Soren Toft - Chief Operating Officer Claus Hemmingsen - Chief Executive Officer for Energy Division

Finn Bjarke Petersen - Danske Bank Robert Joynson - Exane BNP Paribas Lars Heindorff - Skandinaviska Enskilda Banken AB Jørgen Bruaset - Nordea Bank AB Dan Togo Jensen - Handelsbanken Capital Markets Casper Blom - ABG Sundal Collier Edward Stanford - HSBC Bank Plc Frans Høyer - Jyske Bank A/S Johan Eliason - Kepler Cheuvreux Marcus Bellander - Carnegie Investment Bank Christopher Combé - J.P. Morgan Cazenove

Good morning and welcome to A.P. Moeller-Maersk A/SA's Q3 Earnings Call. This is Soren Skou speaking. I'm joined here today by our CFO, Jakob Stausholm; and our Vice CEO and Head of our Energy Division, Claus Hemmingsen; as well as the Chief Commercial Officer in Maersk Line, Vincent Clerc; and the Chief Operating Officer in Maersk Line, Soren Toft. As usual, I invite you to take note about forward-looking statements. So, the third quarter of 2017 was in all likelihood one of the busiest quarters that this company has ever seen with multiple moving parts. I would like to start with the strategic and macro picture. We made in the quarter significant progress towards becoming a focused container shipping, ports and logistics company. First, we entered into an agreement with Total S.A. for the sale of Maersk Oil for $7.45 billion, $2.5 billion in cash and the remaining $4.95 billion in shares in Total. And we expect to close that transaction in the first quarter of 2018. Since the announcement in August, the value of the shares is up more than $600 million. Second, we also sold Maersk Tankers to A.P. Møller Holding for $1.2 billion of cash, plus an upside [ph] model in September. Thirdly, we have this morning announced the sale of our remaining 19% in Dansk Supermarked group for the equivalent of about $860 million, which is in our view an attractive sales price. Fourth, we continue to see strong fundamentals in container shipping. We are positively surprised about demand growth and we upgrade our growth expectations to 4% to 5% for this year. Capacity is growing about 3% this year. The idle fleet has been absorbed and supply growth broadly looks manageable in the coming years, even if bumps on the road can be expected in some orders in 2018, where there will be many deliveries. Fifth, we have made significant progress on the closing of Hamburg Süd. We have cleared the transaction in 18 jurisdictions at this point and have three remaining. And we remain confident that we will close the transaction during this quarter. Given the macro outlook, we believe that the acquisition of Hamburg Süd was reasonably well timed and we're much forward to getting it closed and starting on the integration. In the best case, however, we will close at the end of this month, at the end of November on the same day as we had scheduled to have our Capital Markets Day. And under the circumstances, we have therefore decided to postpone our Capital Markets Day to February 20 next year, as we do not believe having a Capital Markets Day without being able to provide detailed insight into Hamburg Süd makes a lot of sense. Now, let me move to the performance in the quarter and I'll focus my comments on Maersk Line, which I expect will be on most people's mind this morning. The overall headline for Maersk Line is that, we cannot be satisfied with our performance in the third quarter of 2017. As you're well aware, we had a cyber-attack that impacted the business severely in July and into August, mainly in Maersk Line and Damco. This cyber-attack caused volume and revenue loss, as well as additional cost. And we have also estimated this impact to in the range $250 million to $300 million. But looking beyond the cyber-attack, we are not happy with the development in unit costs, driven mainly by the lower network utilization, but also increasing fuel cost in the quarter. Bunker cost increased 11% from the beginning of the quarter to the end of the quarter. We deployed on average 10.7% more capacity year on year, half of which was related to slot sales to Hamburg Süd and HMM. 25% of which was related to cleaning up after the cyber-attack and the remaining 25% to cater for expected volumes that never materialized. We are also not happy with the development in volume growth. We had negative volume growth in the quarter with solid 5% global demand growth. And adjusting for cyber loss, we would have had flat development in volumes. Now, of course, because of cyber it's hard to separate the hot and the cold water so to speaker when looking at the performance in the quarter. And we could frankly have explained everything in the quarter with the cyber-attack and ripples from that. But as a management team, we believe we can do a better job than we did in the third quarter. And we are confident that we will be restoring our operational performance to best-in-class for our industry over the coming quarters. When all that is set and done, I do also think it's fair to say that Maersk Line grew revenue almost $800 million in the quarter, year on year. We are clearly making progress towards more sustainable earnings, moving out of the price war scenario that dramatically hit the industry in 2015 and 2016, and led to consolidation and one bankruptcy in the industry. Maersk Line delivered an NOPAT of $211 million and an EBIT margin that exceeds the competitors that have so far reported Q3. Also after the cyber-attack, and in the second quarter our EBIT margin gap to the industry came out at 2.5% and on absolute EBIT margin in that quarter was second only to CMA for the industry. So, we believe we are making progress. And had we not have the cyber-attack, Maersk Line would have made a delivery in the NOPAT in the range of $450 million to $500 million for the quarter, consistent with almost 10% return on the invested capital. Now, let me finish with the guidance. Spot rates, they dropped almost 20% during the quarter. And in combination with an increase in fuel price, we have decided to adjust downwards our guidance for the year in Maersk Line to an improvement of U.S. dollar $1 billion, instead of more than $1 billion. Even though rates have come up somewhat again, here in November, after the October holidays in China, we're not sure we can deliver the original guidance and hence the downgrade. Now, I'll hand over to Jakob Stausholm, who will discuss the numbers in further detail.

Yeah, thank you, and good morning to all. Soren said it has been a quarter of massive changes in the company and that also reflects in the accounts we are taking three businesses to discontinued businesses: Maersk Oil, Maersk Tankers and Maersk Drilling. And therefore, you have to look very carefully when you look into the account and when you make comparables. If we go to Page number 6 and look at revenue and earnings, we looked at our continuing businesses here. And what you can see here, you see a positive development on almost all measures here. Revenue is up significantly, so is EBITDA, and so is the underlying profit that we fortunately have turned from negative to positive. The reported earnings is somewhat down as we had to take a couple of impairments in APMT, I'll revert on that. Moving on to the next page, Page 7 on cash flow, first of all, I would caution you of using cash flow this quarter too much for looking at performance, because when you look at the operating cash flow, then of course, the cyber-attack has an impact on the cash flow from the lower NOPAT as we have guided you. But there is, of course, temporary working capital elements related to a cyber-attack. We were somewhat slower on invoicing. And therefore, our desert-days [ph] has gone up. It's temporary, it will come back, and therefore, I'll just caution you against using Q3 too much for measures of performance. What you can look at though is the capital expenditure. And that's something we are monitoring very tightly. It was in a way a big quarter for Maersk. We received five new major vessels versus none the year before. And we also got quite a few - quite a number of new containers and we received one new vessel in Maersk Supply Service. So therefore, it was a quarter of significant capital expenditure. But if you go to the next page, and try to dive a little bit deeper into debt and capital expenditures, then you will see that that part is actually moving in the right direction. The cash flow was negative in the quarter and therefore net interest-bearing debt went up from $11.6 billion to $12.5 billion for the total A.P. Moeller-Maersk here. We don't split between continued and discontinued businesses that is, of course, a corporate item. But if you look on the right side and look at the capital commitments and that is for our continuing business, so we've restated that. You will see that, we continue to reduce our total commitments. And if you look at the amount, we have now $4.8 billion in total commitments, its $4.1 billion in Transport & Logistics, and its $0.7 in Supply Services. Both of those numbers are actually down 24% compared to nine months ago at the beginning of the year. So, you can see our capital discipline is happening, we're getting delivery of earlier made commitments, and we're not ordering new material - we're not making new material commitments. If we move to the next page on consolidated financial information that's where we now have a slightly different new profit and loss statement, where we split between continuing operations and discontinued operations. And as I said earlier, we have three businesses classified as discontinued Maersk Tankers, where we have not only announced the sale, but we have actually here in October as well effectuated the sale. So, it's not our business anymore, and therefore, there are barely any P&L impact. But Maersk Oil, there - we are still waiting closing, and we know we have a major accounting gain waiting, but that will first come when we close opposite through the accounting gain in Maersk Oil, we have taken an accounting loss here in the quarter for Maersk Drilling, when we reclassified that we have to make a fair value assessment. And the fair value assessment, which is very much in line with the markets consensus view, is well below our book value, and therefore we had an impairment of $1.75 billion. There's a couple of things outside the accounts as well. We will receive for the sale of Maersk Oil post cash and Total shares. And as per today, the Total shares are actually worth $0.6 billion more than at the time of announcement back in August. Let me move on to Transport & Logistics and not trying to repeat what's on, I already have said, we want to dive into the individual part of Transport & Logistics, but overall, we have a Transport & Logistics top line that grew by 14% mainly due to higher freight rates in Maersk Line. The underlying NOPAT, 45 times higher than last year all be it from historical low. The cyber-attack ended up in the high-end of the range we gave last time, so $250 million to $300 million primarily in Maersk Line, but quite significantly on the accounts of Damco as well. Hamburg Süd is progressing as planned and the synergy case that we have announced earlier is intact with synergies anticipated to be in the range of $350 million to $400 million synergies in 2019. But let's dive deeper now going to Maersk Line. I'll hand over to Vincent Clerc.

Thank you, Jakob. So, as we mentioned Maersk Line posted a $333 million improvements for the quarter to $211 million. This performance was driven mainly by higher freight rates, because our volumes were actually down 2.4% year-on-year. And the freight rates were driven by the strong fundamentals that Soren mentioned with 5% growth on demand and only 3% growth in total nominal supply. The activation of idle fleet added actually 3% to the supply in the quarter and towards the end of the quarter, we have to recognize some erosion in the freight rates that we were achieving leading or going into the October holidays in China. The quarter was also heavily impacted by the cyber-attack, which took the form both of lower volumes as customers diverted some of their bookings during the initial phase of the cyber-attacks away from Maersk. And also, higher costs, as we have to spend some extra - you have to higher some extra vessels to take care of contingencies around the cargo as we recovered from the cyber-attack. The market fundamentals were strong enough to support a 14% year-on-year rate recovery here in the quarter, with all trades both on North-South, East-West and Intra-regional showing improvement. East-West showed the highest progression on the back of strong demand both in North America and in Europe, and also some discipline on the deployment of capacity in those trades. They were also the trades that were most heavily impacted last year by the price worse that was ongoing at the time. Volumes on the other side dropped by 2.5% with backhaul return like being especially heavily impacted within 8.8% drop in volumes. This is attributable for to a large extent to cyber-attack but also fell short of the plans that we were targeting towards the end of the quarter. I'll now hand over to Soren Toft, our COO for talking on our cost performance.

Thank you, Vincent. Good day everybody. Flip into Slide 14, just a couple of additional comments in addition to what is shared by Soren Skou. First of all, our operations were significantly hampered in the third quarter by the cyber-attack and we are certainly not pleased with where we were able to deliver to the clients, and we're working very hard on restoring reliability of the network. In addition to the comments on capacity, let me also say that the development on our fuel efficiency develop adversely, again mainly attributed to the fact that we have sold slots to HMM and Hamburg Süd, where we account for the kilos, but we don't account for the FFEs. But of course, we get slot charter income. In terms of our unit cost overall flip into Slide 15, that increase quarter-on-quarter was $76 per FFE mainly attributed to the drop in utilization on the headhaul, but also attributed to the overall drop in volumes as unit cost is impacted both by headhaul volumes, but also by the absence of the backhaul volumes. In addition to that, we have seen higher terminal cost, higher positioning cost, higher SG&A cost, all three related to the cyber-attack. We are working very diligently on getting back on track on our cost performance and our reliability performance, and we believe we'll make progress in the quarters to come. Let me hand over to Jakob, who will say a few words about APM Terminals and the other businesses.

Yeah, thank you. So APM Terminals delivered a stable result in the third quarter. The highlight was, and that is really a first important step for recovery in APM Terminals, and then executing on our new strategy is that the volume was up. The volume was up by 6.5% in the quarter, and that is kind of the first pass towards lower unit cost. You still down see it in the unit cost, but the volume increase systems both from increases in Maersk Line, as according to our strategy, we're trying to put more volume to APMT, but we also had increases in third-party volumes. The stable - the satisfactory stable performance of terminals is somewhat overshadowed in the quarter by some impairments and it's really as a reflection of new management team that have very carefully reviewed every single terminal, and unfortunately, we had a couple in the second quarter, and we have a couple here now, we've been through a very rigorous exercise, I don't hope there will be more. We'll do testing every quarter. But really, we have done everything, we can to try to have the right valuation of each terminals for the future. But this quarter, there were impairments in total of $374 million. And if we then move on to Damco on Page 18. I would say the same as I cautioned on cash flow, let's not split, but use this quarter too much to adjust the performance of Damco. Because Damco was probably the part of our business that was hardest hit by the cyber-attack. It is happening to see the revenue grew by 8%, but obviously when you look at profitability there were really hard hit by the cyber-attack. So, I think I'll leave my comments here and I'll move onto Svitzer, which performed very well in the quarter. There was revenue growth. There was significant earnings growth, and the return on invested capital exceeded 10%, so a good stable development in Svitzer. And if you turn to the next business, Maersk Container Industry, there you see that the significant turnaround that we have seen in previous quarters has somewhat stick. Revenue is almost double of the revenue last year. We see positive cash flow and a double-digit return on invested capital. Obviously, it also reflects a period where Maersk Line had to acquire quite a few containers, but it is a good case showing that close cooperation between Maersk Line and Maersk Container Industry is for the benefit of the shareholder, proving our case of moving our T&L business closer together. Let me stop here and hand over to Claus for the Energy businesses.

Thank you, Jakob. And just a few highlights here, we are now one year into the separation efforts that we announced in September last year and the highlights of the quarter is obviously as Soren already mentioned, that we agreed with Total S.A. to divest Maersk Oil to them at $7.45 billion, $2.5 billion in cash or debt, and $4.95 billion in Total shares. We are progressing as planned in respect of government authority approvals and closing is expected in first quarter 2018. The other highlight was the divestment of Maersk Tankers to A.P. Møller Holding invest at $1.18 billion. And as Soren mentioned, closing already took place on the October 10. A few comments on Maersk Supply Service on Page 22, the market continues to be characterized by oversupply and relatively low demand. And Maersk Supply Service revenue declined compared to same quarter last year due to declining rates and also several legacy contracts expiring. Maersk Supply Service has divested 12 vessels now over the past year for recycling and they have started to take delivery of new buildings which increases the standards and capabilities of the hangar handle and subsea construction fleet in Maersk Supply Service. Maersk Supply Service successfully added contracts and revenue actually in third quarter, thereby increasing the backlog, albeit still at relatively low rates. In terms of discontinued operations, as already mentioned, we have previously stated that we aim to have structured solutions in place for all oil and oil-related businesses within 2018. As we believe, we will be able to determine a viable solution for Maersk Drilling, within the timeframe, we decided to reclassify Maersk Drilling as a discontinued operation. And in this connection, we took an impairment of the assets of $1.75 billion. If we turn to Page 24, we can see that due to the impairment, Maersk Drilling reported a loss of $1.699 billion. However, the underlying profit was $31 million compared to $340 million same quarter last year. However, let me remind you that third quarter last year was extraordinary due to a termination fee received - with a profit element received of $210 million for Maersk Valiant. If we turn to Page 25, Maersk Drilling generated a positive cash flow from operations actually of $183 million and a free cash flow of $165 million. This was helped by efficient operations with an uptime of 98% for both jack-ups and floaters. And furthermore, the cost efficiency continues to support the result with 7% lower cost compared to third quarter last year. The market is still challenged, but we see signs of improving tender activities and Maersk Drilling added more than 14 months backlog during the third quarter. Two rigs came on contract from one-stagging [ph] and one more rig is prepared to come on contract in quarter four. And that leaves coverage at this point for 2018 at 52% for the jack-ups and 48% for the floaters. That's the comments on Maersk Drilling. And let me just say here before the question comes, that in terms of finding a solution, we will obviously as always inform the market as soon as something concrete is to be informed about. But I will hand over for the guidance page, Soren.

Thank you, Claus. And I'll make it very brief. We now expect the positive underlying profit for 2017 and that's compared to a loss last year of $546 million. As I have said, we are expecting an underlying profit in transport logistics of around $1 billion and in Maersk Line an improvement around $1 billion compared to the last year. And for Energy, after all of the discontinuing operations in oil, tankers and drilling, we expect an underlying loss of around $100 million. And with that, that's the end of our presentation and we will now answer questions. Thank you.

Thank you. And we will now begin the question-and-answer session. [Operator Instructions] And the first question comes from the line of Finn Bjarke Petersen from Danske Bank. Please go ahead. Your line is open.

Yes, good morning. Regarding Maersk Line, cyber-attack you were saying it's in the high-end, around the $300 million in the third quarter. But you are obviously losing quite significant volumes and your rates are weaker. And you were saying there is no problem, we should generally expect you to comeback on production and make the normal returns that you had before. But could you take me through how long it would take and how would you actually come back on the cost side as well?

Yes, Vincent here. So, the recovery has been gradual throughout the third quarter and we got into the fourth quarter, would say with the support from customers in terms of volume in line with what we will have seen without the impact of cyber-attack. With respect to cost, there may be some lingering effects that we are still working on. But I will say from a revenue perspective, we should see a normalized fourth quarter. And from a cost perspective, it will normalize in the course of the fourth quarter.

Just a follow-up, you are saying that volumes going into the fourth quarter is on market level, that means 5% growth?

We'll have to see what the market growth is at the end of the quarter.

Yeah, but you are increasing your expectations as well for the market growth to 4% to 5%. So, I would take that if you say volumes are in line with what you could expect from the market, it has to be around 5%. So that - but coming back to the cost, quite significant increase in your unit cost, and how do you bring that back to the normal level?

This is Soren Toft here. Well, I think first of all in a quarter where the market fundamentals are strong, and we also expected to grow in line with those fundamentals, and we end up losing 2.5% volume quarter on quarter, obviously, that's the main explanation. So what Vincent Clerc said, getting volumes back on track with the plan that is really the main reason. The second explanation is that we carried cost in the third quarter over and above what we normally carry to run our efficient and daily operations. Those cost, we expect, and we are already seeing that that they will face out over the course of the fourth quarter. You have one little data point; you can see our reliability in September, it's already improving, and we expect that it will improve over the coming month as well. And when we are more reliable, we will also sail the network at lower cost.

Okay, so normal production in Q1 next year?

Yes, that is what we expect.

Okay. Thank you.

And next question is from the line of Robert Joynson from Exane BNP Paribas. Please go head, your line is open.

Good morning, gentlemen, a few questions on Maersk Line if I may. First of all, on the reported freight rate, which was down by 1% versus Q2, could you please try to quantify the impacts that the cyber-attack had on that number? Secondly, on the other revenue, it was good to see upside strongly versus Q2, which I know was driven by the high-end in Hamburg Süd VSAs. Should we assume other revenue to be maintained close to the Q3 level going forward? And final question, just on the Hamburg Süd closure, could you just explain why you're confident that the three outstanding geographies will approve the deal by the end of the year? Thank you.

If I start - Soren Toft - with the latter question, then we are going through the motions with the remaining jurisdictions. We expect still as we have said, so far what was reiterated by Jakob Stausholm, that we will close the transaction during Q4. And we'll obviously issue press releases and the likes when we get the next jurisdictions across the goal line. Maybe just if I take the comment on other revenue, then the question around will it remain stable for the coming quarters, the short answer is no in the sense that part of the slot sales that we do today to Hamburg Süd, that will upon closing be converted into our own revenue. So, for the part of the slot sale that will go down. But then, obviously, the question is whether HMM will be buying more space in the coming quarters. But for now, you will see a slight reduction over the coming quarters.

Yes, and Vincent here. For the freight rate development quarter-on-quarter, I mean, they have been impacted by two things. First is in the course of July and the beginning of August, we were not able to participate into the spot market, which was pretty high at that time to the extent that we normally were. That has had some impact on our average rate. But as we mentioned also towards the end of the quarter, we had to recognize a weakening rate picture, as we were going into the October holidays into China. And that also had an impact on how the average rate developed.

Was there some element there of prices being maybe a little bit more favorable to customers to lessen the impact of the cyber-attack from their perspective?

I think, what you have is with the activation of the idle capacity ended up towards the end of the quarter having actually 6% extra capacity. So, you have 3% coming from new deliveries and 3% coming from activation of idle capacity. And you ended up towards the end of the quarter of having actually supply that was growing slightly ahead of demand, and you saw some correction of the big rate increases that we've had in the second and the beginning of the third quarter. So, I think that's really what has been happening here towards the end of the third quarter.

Okay. Thank you.

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

Thank you. I have also few questions regarding Maersk Line. Firstly, regarding the capacity, I think, you mentioned that you believe that you will be back to normal production in Q1. Capacity increased quite significantly in the third quarter. Is that also going to be the case in Q4, and you will hold on to the same kind of capacity that you've been going out of Q3 would into Q4 as well?

This is Soren Toft, here. Last - the answer to that is, yes, basically half of the capacity increase is HMM and the other half is more or less equivalent to what we believe the market should be growing. We will, of course - I should underlying that, we will of course continuously try to optimize capacity and some of the capacity that we had in third quarter really around the cyber-attack that we'll not be needing. But in the main lines, yes, it will be at the same level.

Okay. Excellent. So, we should expect to see that as we go into 2018, if there a significant decline in the share of time chartered capacity, if you go back to oil production in 2018?

Well, we're going to take delivery over the course of the next 12 months of another six second generation Triple-E, and another five 14,000 TEU vessels, and it's correct. We will continue to adjust our time chartered capacity to be in line with basically our on-demand growth and what the market will be growing. So, we still have that well very much intact.

Okay. And regarding the rates, North-South rate is declining sequentially, which is actually a little bit of surprise to me, maybe not to you, but we have seen improvement in some of the North-South with some of the data points that we get on a weekly basis from various sources. Can you just explain, I mean, the trend during the third quarter in the North-South rate development, and then this is something you believe, will continue into the fourth quarter?

Yeah, so, just - Vincent here, so obviously the North-South is a collection of different independent geographies and what we've seen is especially towards the end of the third quarter. Rates into Africa had recovered to pre-crisis level, actually there were about as high as we've seen them for many years. And we saw an injection of capacity in some of the trades that led to rate corrections, especially in Africa and that has had an impact given our large exposure to Africa.

Okay. Then last not least as a - sort of household question here. The write-down and impairments in Terminals, maybe I haven't reading the whole report to be honest. But can you explain me both the actual impairment and also the impairments related to some of the joint ventures. What exactly that is?

Yes, Lars. Jakok, here. It is in total $374 million some are in joint ventures, some are in the main business. You can actually see it in the consolidated account, the negative part you have in joint ventures. But we don't disclose what terminals exactly we're impairing.

Okay. All right. Thank you.

And next question comes from the line of Jørgen Bruaset from Nordea Markets. Please go ahead. Your line is open. Jørgen Bruaset: Thank you very much. Two questions for my side, both related to Maersk Line. So first of all, when you look at unit cost, I think, you previously communicated sort of your average run rate on declining unit cost should be 1% to 2% per year. Should we expect that for 2018 or should it be higher cost up potential given that you have some ease [ph] comes from 2017? That's the first question.

Well, this is Soren Skou here. I'll take that question on behalf of our Chief Operating Officer, and confirm that we continue to expect that we can reduce unit cost and then our ambition is to reduce unit cost by 1 to 2 percentage point at fixed bunker. We are getting in 2018 substantial additional of new ships, we're expecting probably even more importantly to get our performance in terms of reliability and volume performance should back on track. And of course, while again here it will become hard to separate hot and the cold water, we are also expecting, of course, that the addition of Hamburg Süd, we'll have significant positive impact on our unit cost. Jørgen Bruaset: Okay. Thank you. And just a follow-up on that. Are you able to break down a sort of isolative effect on unit cost just by the facing of the new vessels coming into the fleet?

Now, we would not be able to do that. Sorry. Jørgen Bruaset: Okay. Thank you. And my second question is, you mentioned that you see some bumps in the road for 2018 with regards to supply. Can you just elaborate a bit on your thoughts on the supply demand going into 2018?

Yeah, I think we had just say that, I think, we can expect to have about somewhere between 5% and 6% of new capacity delivered. It's kind of as far as we can see bouncing together a little bit in the second and third quarter. But, of course, many things can happen, and ships can certainly be postponed and delayed without us being able to see that. So that's all that I meant with the company. With the comment around possible bumps, I do other thing that I want to reiterate that overall supply demand fundamentals look good. I mean, we have broad-based strong economic growth in the U.S., in particular, but certainly also in Europe. And in the form of - in the BRIC countries, we have seen strong growth in China and India, and even Russia, and pursue that have been hard hit by the lower commodity prices showing good growth as we speak so. So that's really the underlying reason for why we are optimistic on demand and we see the supply pictures reasonable. Jørgen Bruaset: Okay. Thank you. And then just finally on scrapping, should we expect that scrapping should continue to come up on the back of more capacity being into the markets, or do you think that the run rate we've seen so far in the second half of 2017 is the sort of the baseline for what we should expect next year? Thank you.

We expect scrapping will continue at this level, obviously, they also depend a little bit what happens to the fuel price, if - is that continues to develop, but it has done recently, obviously, the case for scrapping changes. But we would expect, it's continuing the same level, which is approximately 500,000 to 600,000 TEUs, be it. Jørgen Bruaset: Excellent. Thank you so much.

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

Yes, thank you. Just I had one question on Terminals. You mentioned that Terminals is also impact negatively from the cyber-attack, and you mentioned an increase to $170 per move in the quarter. Can you elaborate a bit of what would that have been sort to say without cyber-attack?

Well, this is Soren here. We had significant down time in our new fully automated terminal in Rotathem [ph] as a consequence of the cyber-attack, and actually a number of operated terminals had - most of the them very short lift, but still three, four, five days of period, where they were unable to either move continues to the gain, so otherwise operate the terminal. We will high hit - we will hit in New York and LA, which are both terminals with very high cost to begin with.

Okay. And then, just regarding to the deliveries, you were taking on in 2018. Do you have any flexibility? I know you had a few postponed here in 2017. But does that go for the 2018 as well, if sort to say fundamentals turn for the worse?

Soren Toft here. Well, we have a delivery plan agreed with the yard, but how can I say, I mean, if we find that fundamentals are different than we'll surely take of the dialogue with the yard, if that's meet to do so. But as we've always stated previously, we do have in excess of 800,000 TEU on - of chartered capacity on liquid contracts, so 12 months or shorter. So, we have all the wells just postponing new deliveries.

Okay. And it's just - I also had a question here on the unit costs as well here, on the cost side I'd rather say, because are there any sort to say increasing absolutely increases in cost base. I think, for instance our pentanol [ph] cost in connection with increasing oil prices, et cetera. Maybe also on the Terminal side, are you seeing an underlying fundamental inflation in the cost base, absolutely?

Well, as we have said previously, we are still working on making sure our cost base remains deflationary, but sure that couple of things on feeder cost and so on that are fluctuating a little bit with the fuel price. But we're working on curbing that and making sure that we continue to drive down cost for the coming quarters.

And then just a final question, if I may here on, I know, annual contract negotiations are coming up for Asia, Europe. And are you finding good arguments for another increase in annual contracts for 2018, as they were world is looking right now?

We always have good arguments whether they carry the increase at the end of the tender is always the big question, and that's a bit too early to talk about, because we're really in the very early stage of the tender session.

I understood. Thank you.

And next question comes from the line of Christopher Combé from J.P. Morgan. Please go ahead. Your line is open. And Christopher Combé from J.P. Morgan. Your line is open. Please feel free to ask your question. Okay. So, the next question is from Casper Blom from ABG Sundal Collier. Please go ahead. Your line is open.

Thanks a lot. A couple of questions from my side also first regarding your balance sheet is a little bit of increase in the debt level here. Can you just confirm that that doesn't impact your expectations regarding paying out proceeds from the total deal? And maybe also a little bit in connection with that, if you could talk a little bit about CapEx expectation for 2018 and 2019 back of the rather low commitments that you right now? That's the first part of my question.

Thank you. So yeah, I can confirm that we have given a very open-ended statement, but - and how to distribute the proceeds from the Maersk Oil deal, but with the clear intension of distributing as much as possible. The balance sheet - the increase in the debt I mentioned that to you, we had a negative cash flow partly because of a lot of deliveries, which also reduce a future CapEx commitment, and a temporary increase in working capital. So, I don't think, you should deduct anything from what the balance sheet shows here end of third quarter, we are on track on that. We're not giving new guidance, we'll do that early next year when it comes to CapEx, but obviously our flexibility goes up by the day.

Fair enough. And then, just a little follow-up on the unit cost that question that you have had - when try to estimate unit cost for 2018 looking aside from bunker cost. Should we really use 2016 as the base, and then include 2% to 4% improvement rather than usual 1% to 2%?

Soren Toft here, I guess, I can delegate this question - what you should look at is that we can come back on the right volume levels. And when we do that you should certainly expect that we come back at the right run rate. So, 2006 was maybe an outstanding year in terms of really having all through the year, perfect utilization, and we're, of course, optimizing for utilization, but also for overall profitability. So, 2016 is not a best start.

Thank you.

And next question is from the line of Edward Stanford from HSBC. Please go ahead. Your line is open.

Good morning, everybody. Yeah, two questions, please. So just come back on the question, if CapEx and the committed CapEx. I should one expect an amount for things like maintenance CapEx over and above that number each year. And if so, do you have any indications were that might be? Secondly, there has been, obviously, your alliance partners have already quite a lot of new ships for two years' time. Has that - does that impact how the alliance planned its capacity? Does that have any implications for how you might react to those additions? Thank you.

So, I think, unfortunately, we're not giving new guidance, I mean, we are as a management team totally committed to be - to continue the CapEx discipline that we introduced last year. And as I showed you very clearly, our future commitment goes down by the day. So, we're in a good position to be capital efficient, but we're not giving guidance right now, we'll do that early next year. We have no immediate plans of ordering ships, and I think we will not say anything further, we're getting the ships that we need for now.

And that's if one of the supplementary question. You obviously written down drilling now, and write down the Tankers business before you sell them. At what point do you have to consider, how the carrying value of the supply services division, if at all.

We are considering that every quarter, we did make a write-down in the fourth quarter account you might recall, so it's actually in the books at a fairly low level. So, we're continuously monitoring that.

Thank you.

We - could you repeat the first part of your question, we were not sure, we fully understood that.

No. I think, you answered it. I was really asking whether you felt the value of supply services was perfect…

The original first part about alliances in capacity.

Well, I just - I mean, clearly, you presumably have conversations with your alliance partner about future capacity plans, and presumably you were aware of their intention to order new vessels? I just wonder, whether that how that balance plays out with the alliance planning in the next couple of years.

Well, Soren Toft here. We - you could see plan capacity based on our home requirements, obviously, we have dialogue on this, but at the end of the day, MSCs requirements and requirements for additional capacity is the thing that they can freely decide. But obviously, we take our requirements and their requirements into account, when we plan the future capacity. And that's really the dialogue that's going on, and there you'll see that we're putting more competitive vessels in the 19,000 to 20,000 TEU segments.

Thank you.

And next question is from the line of Frans Høyer from Jyske Bank. Please go ahead. Your line is open. Frans Høyer: Thanks very much. Coming back to the non-freight revenues at Line with an increase sequentially of $250 million or so? I just wanted to understand a little more, how that sequential increase could be so big even that the vessel sharing agreements with Hamburg Süd and Hyundai were also in place in Q2?

This is Soren Toft here. They were partly in place in Q2, they've got implemented during the course of Q2. So, you have a buildup between Q2 and Q3. That's the simple answer. Frans Høyer: Understood. Thank you. Second question is regarding the strategy for recovering your volumes at line in the fourth quarter. Is it going to be driven by the recovery in service quality or are there other levers that you will bring to bear on that subject?

So, I think there are different parts for that. The first part is that, actually a lot of the volumes have already recovered. Customers with whom we have contract and so on, may have diverted some bookings, during the height of the cyber-attack, but they moved them back as soon as we recovered, and they need our service to continue to maintain their supply chain. So that part is already in place. And some of the rest will come from the stabilization also of the network and the gain that we - as we return back to our normal reliability and quality then it's easier for us to get the customers back on track where there is still a tail where that we need to get back on our network. Frans Høyer: Okay. Thanks very much.

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

Yes, thank you. I was just wondering about this write-down in drilling, taking down your, I guess, invested capital to around $4.7 billion or so in that business today. We heard news sources that you had been in discussion, divesting this business for around $4 billion. Is this asset write-down is an effect of discussions that you have ongoing with potential buyers or are you just looking at where the market valuations are on peers and similar, any input of that would be interesting?

Yes, it's pure accounting. We don't comment on rumors, but the accounting is actually pretty simple. And that is it's now 12 months ago that we said within 24 months we will have structural solutions in place. And accounting-wise, if you are confident that within the next 12 months, you will find the structural solution, you should classify it as held-for-sale. When you classify it as held-for-sale, you have to make a fair-value assessment. That's what we have done and that has led to the impairment.

Okay. Thank you. And then going back to the unit cost down in Maersk Line, you mentioned this you have the banker cost, but you don't have the volumes. Of course, you have basically sold the slots, which you account for revenues rather than volumes. Can you give any indication on sort of these volumes from Hamburg Süd or HMM to make it a bit more easy for us to do the numbers next year when obviously the Hamburg Süd volumes will be there rather than the VSAs? Thank you.

We're not going to - and we are not disclosing those details. Sorry about that.

Okay. Then just about CapEx, you have said, you will not start ordering any big time any time soon for new ships for Maersk Line. When is sort of the normal replacement cycle expected to need to commence in the Maersk Line business in your view, is that two years out or three years or how do you see it?

So, this is Soren Skou, I think it's very important for us to reiterate what we have said continuously and starting at our Capital Markets Day last year that we want to be extremely disciplined with CapEx. In the coming years, it's a fundamental part of our strategy to actually - well, not surprisingly but to actually deliver free cash flow every year. I think you should be - you should check note of the fact that we are depreciating in Maersk Line in the neighborhood of $1.8 billion to $2 billion and that is you should also take note of the fact that actually if you look over the last five to six years, the invested capital in Maersk Line have been just around $20 billion, so that means that basically we are investing more or less in line with depreciation over a long-time period. And we don't see a change in that dramatically, of course, excluding the acquisition of Hamburg Süd.

Okay. Thank you very much.

Next question comes from Marcus Bellander from Carnegie. Please go ahead. Your line is open.

Thank you. Three questions, if I may. First, other revenue in Maersk Line, you said in conjunction with the cyber-attack that you would waive detention and demerge [ph] fees for the first few weeks of July. Could you quantify that impact?

Yeah, we have waived. It's true. Our demerge and predeem [ph] charges for the first two weeks of July. We don't really disclose the details of these amounts.

Okay. Second question, reported freight rate was down 1% or 2% year on year, but if I look at the sort of recognized freight rates, so reported revenue divided by volumes, it's actually up about 3% quarter on quarter. It's just seems like there is an unusually big difference there. Some headwind quarter on quarter on reported line and pretty significant tailwind on the recognized line so to speak, if you could comment on the dynamics there.

Yes, so as I mentioned, we saw some decrease of the rates towards the second part of the third quarter, as capacity was adjusted, they're actually higher than what the demand was warranting. And that's, actually, what you're seeing in the delta between loaded and recognized freight.

Okay. So, it's just that lag effect.

Yes.

Okay. Thank you. And last question regarding the possibility to postpone deliveries on new ships. What's the sort of contractual flexibility there, if you want to postpone deliveries, are you completely at the mercy of shipyards, and if so, are they less eager to allow for postponements now that they are struggling more than ever perhaps?

It's Soren Toft here. Sorry to be boring, but we are not disclosing our contractual engagements with the yards.

Okay, can't blame a guy for trying. Thank you.

And today's last question comes from the line of Christopher Combé from J.P. Morgan. Please go ahead. Your line is open. Christopher Combé: Hello, all, apologies earlier. We had a fire drill here. It took down my phone. Just two quick ones, looking at your guidance for market growth in the fourth quarter, it seems to imply 3% to 4% growth. Could you elaborate a bit upon that number and what gives you confidence in that level, given the very tough comparison? And then second, in light of what you said in terms of correcting unit cost performance as volumes get back to normal levels, does that imply that you'll be taking back some share or lost ground from the third quarter quite possibly near-term? Thanks.

Okay, so Vincent here. So, for the volumes, I think we have also to look at how our market share has developed during the course of the year. So, whether we go to the full extent of market growth, given the fact that we were already lagging a little bit this growth that was higher than what we expected in the second quarter. That is something that we'll have to see in the coming weeks. But we expect the volumes to come back on what we see as our basic trend line prior to cyber-attack. Yeah. Christopher Combé: Okay. Great, and with respect to the market growth that looks pretty robust at 3% to 4% implied. Can you comment a bit on how you see inventory levels developing? I think last time you spoke, you mentioned perhaps some inventory build. Any color on that front?

I don't think we should elaborate. I mean, the world economy is growing very well. We probably had a little bit tailwind on the stock side at the beginning of the year. We probably have plan for we are trying to be a bit conservative for the opposite in the fourth quarter, but it's - we will see. Christopher Combé: Thank you.

And that is our last question of today. Please go ahead, speakers.

Yes, thank you. So that means that we will close the session here. I just want to say that, reiterate again, that we believe we have made a very significant progress on our strategic agenda of becoming a focused container shipping and ports and logistics company, separating out the energy businesses and closing eventually of Hamburg Süd. We have - we believe reasonably good market fundamentals in container shipping or good market fundamentals. So, we are expecting continued improvements. We have a quarter now in Q3, which was weak both caused by cyber-attack, but also other weak in terms of our own performance. But I want to emphasize that it's mainly factors under our control such as capacity deployment and cost takeout. And we as a management team believe we can do a better job in the coming years. Overall, we feel good about the development of the business. We are clearly moving in towards more sustainable earnings overall. With that being said, thank you for joining. We look forward to seeing you at our Capital Markets Day, which will now be on the February 20. Thank you.