The Monday Interview

October 6, 2013 1:47 pm

Nils Andersen, CEO, AP Møller-Maersk

Nils Anderson©Simon Høgsberg

When the Majestic Maersk, the latest ship from AP Møller-Maersk, docked in Copenhagen in late September, nearly 250,000 people visited it in just one week. With a length of 400m, it is the world’s largest vessel and can carry 69m pairs of Nike shoes from Asia to Europe at a cost of just 35 cents a pair.

The company’s planned 20 new ships, known as Triple-Es, are one of a series of bold moves taken by the Danish conglomerate – by far the country’s biggest company by revenues with a stock market capitalisation of DKr220bn ($40bn) – under the leadership of Nils Andersen, a former chief executive of Carlsberg. Mr Andersen has gradually modernised and opened up the highly traditional Maersk, which has activities spanning from shipping and ports to oil exploration and supermarkets.

Days after launching the Majestic Maersk, Mr Andersen held the company’s second ever capital markets day for investors – a normal occurrence at other groups but revolutionary for the conglomerate. “I never imagined they would do this. It seems a small thing but is a sign of how Nils has shaken things up,” says one investor attending the event.

Speaking at the company’s austere headquarters in Copenhagen later that day, the 55-year-old says they are two reasons for “the opening up of the company”. One is to inform shareholders and stakeholders about what goes on at Maersk. “But the other reason is actually more important to me as the CEO of the group and that is that the moment . . . our teams step up and tell the world this is what we actually want to do, then we also send a very strong signal inside the organisation that this is the way we want to run the company,” he says.

One of Mr Andersen’s biggest challenges on arriving at the group in 2007 was to turn round Maersk Line, which was about to enter one of the most severe downturns in the history of the shipping industry.

It was – and remains – the world’s biggest container shipping line, with a 15 per cent share of the market. But at the time it was also one of the least profitable. He explains the quandary: “Ships last for 30 years so you’re locked in for a long time when you make an investment. Then you tend to be very obsessed with operational efficiency.”

So Maersk worked hard on improving how it used its vessels throughout its network and reducing fuel consumption by slow-sailing. But it also took smaller actions such as repainting ships and optimising propellers, all to improve performance.

Another challenge came at the very end of 2011 when he was hospitalised on a skiing holiday in Switzerland. A leak in one of his heart valves meant he was off work for more than four months. “I had the luxury of having a supervisory board that said ‘you take your time, you stay completely out of the business while you’re ill’,” he says, adding that he was soon back to working at his normal pace.

On his return, he set out a plan to increase the importance of the non-shipping businesses. Mr Andersen has emphasised that Maersk should have four pillars, with oil, drilling rigs and ports standing alongside shipping.

Still, the Triple-E launch has come at an awkward time. Global trade has remained in the doldrums since the financial crisis and some have called the vast vessels a folly. Mr Andersen is having none of it.

He says that the Triple-E ships are “primarily a cost-saving initiative”. Fuel costs are about $300-$400 per container lower for a round trip between Asia and Europe, a big saving in such a competitive industry.

Maersk is very much a conglomerate, still a dirty word in capital markets. One reason for the distrust is a feeling that individual businesses can hide their weak performance if the conglomerate is performing well.

Mr Andersen – in his quest to turn Maersk into what he calls “a premium conglomerate” – has tried to address that very argument, giving each business its own target for return on invested capital and putting executives in the line of fire at the capital markets day.

He explains: “Instead of being part of a conglomerate and proud of when the conglomerate went well, we broke the business down, we installed performance management, a lot of coaching, as well as talking about what is important. If you want to continue to invest and be a leader in this business unit, what do we actually have to achieve?”

Despite Maersk still suffering from a conglomerate discount in the eyes of investors, he remains wedded to the idea that it can make better long-term decisions on where to invest across its wide spread of businesses than investors can.

“Being in all of the businesses at the same time gives us a lot of additional insight into the industries. And given that insight I think we can make superior capital allocations compared to the external market and definitely compared to people who only work in one or two of these [sectors],” he says.

Strikingly, he adds: “Of course, when you invest in a conglomerate like AP Møller-Maersk that has a 100-year horizon, in principle, you should never expect to make short-term gains. If you think you are better at predicting the container cycles than the rest of the market you should go and predict them by buying shares and selling shares in a pure play.”

The CV

Born: 1958 in Aarhus, Denmark
Education: 1982 Business and economics degree, Aarhus University
Career: 1982-83 Financial controller, Nordic Sugar
1983 Joins Carlsberg and has various roles including:
1983-88 International marketing manager at Tuborg
1990-92 Head of Union Cervecera, Spain
1992-97 Head of Hannen Brauerei, Germany
2001-07 CEO of Carlsberg
2007 CEO of AP Møller-Maersk
Hobbies: Skiing, tennis

Mr Andersen started his career in the financial department of Nordic Sugar but quickly realised it was not for him. “What I like is customers and markets and the world. And that [job] wasn’t really me so I went for another job relatively quickly. And beer was a great opportunity when you’re 23. It doesn’t get better.”

He swapped the fast-moving consumer world of Carlsberg – where he had worked for almost a quarter of a century, including as chief executive for six years – for the more long-term nature of Maersk’s business-to-business operations.

However, he sees similarities between the two companies. “I have to say that being in business-to-business, the focus on customers and fulfilling their needs has been very strong here,” he says.

Another thing the two businesses have in common is that they are both owned by family foundations. That protects both Maersk and Carlsberg from takeovers, something Mr Andersen says does not always make his job easier. “You also have to motivate your management team to say we have this long-term protection . . .  but we still have to win at the condition of the market. So that is a challenge of the structure.”

Still, he says, having both the foundation and independent shareholders is “an almost ideal situation to be in” by balancing long-term thinking with some focus on the markets.

In what could be Maersk’s credo, he adds: “You do the things that are right, and for me the things that are right are always linked to ‘what does the market need?’, because that is what creates true long-term shareholder value. And you don’t have to compromise and say we have a bad quarter now [so] I need to cut service to our good, long-established customers.”

Maintaining contact with customers is also a practice that Mr Andersen brought with him from Carlsberg. “I’m definitely not a procedure leader. I thrive through dialogue and having contact with people, and getting ideas, and making plans and fulfilling them,” he says.

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