CMA CGM Bonds Drop to Record as Weak Freight Rates Squeeze Profits

Photo credit: CMA CGM

By Joe Mayes

(Bloomberg) — CMA CGM SA bonds hit a record low after the container-shipping line’s quarterly profit plunged on weak freight rates.

The company’s 725 million-euros ($809 million) of bonds due January 2021 fell by as much as 5 cents on the euro in intraday trading to 71 cents, according to data compiled by Bloomberg. Second-quarter earnings before interest, tax, depreciation and amortization tumbled 94 percent to $23.3 million, said Arndt Muthreich, an analyst at Stifel Nicolaus in London. He derived the numbers from quarterly results reported by Marseille-based CMA CGM on Friday.

The world’s third-largest container line is being squeezed by weak global economic growth and a capacity glut that has weighed on prices. Hanjin Shipping Co., one of CMA CGM’s competitors and South Korea’s biggest container shipping line, filed for court protection last month, the latest victim of the slump in global trade since the 2008 financial crisis.

“We are experiencing a market environment that remains difficult, with excessively low freight rates weighing on our revenues and margins,” said Rodolphe Saade, CMA CGM’s vice-chairman, in a statement on the company’s website.

The shipping line, which plans to reduce costs by $1 billion over the next 18 months, completed a S$3.38 billion ($2.49 billion) acquisition of Singapore-based Neptune Orient Lines Ltd. on Monday. The fully cash-financed deal has made some investors nervous given the current downturn, according to Muthreich.

The company’s 300 million euros of notes due December 2018 fell as much as 3.8 cents in intraday trading to 87.5 cents.

© 2016 Bloomberg L.P

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