Good day, everybody. Thank you for listening to our earnings call for the Q1 of 2019 today for Maersk. My name is Soren Skou. I'm the CEO, and I'm joined here by Carolina Dybeck Happe, our CFO. So moving on to the second slide.
I'd like to, as usual, to advise you to read our disclaimer regarding forward looking statements. Let me start out with the financial highlights for the year. I believe we had a good start to the year, growing top line by 2.5 percent to €9,500,000,000 Our EBITDA was up by a third to €1,200,000,000 and it was driven by an increase across both Ocean Logistics and Services and the towage Terminals and Towage segment. Our operating cash flow performed strongly. We came in double of what we did in the same period last year, and the cash conversion was around 120%.
We have, as a consequence of the strong cash flow from operations as well as the sale of the remaining Total shares worth about SEK 2,600,000,000, been able to significantly deliver the company, SEK2.4 billion since the end of last year to SEK12.6 billion. And if we look at it from the same quarter last year, our debt has been reduced by more than CHF 7,000,000,000. So we feel in a much better place. We are in a much better place in terms of our balance sheet strengths. Return on invested capital also improved from negative 0.5% to 1.3%, and we maintain our long term objective of getting to above 7.5%.
Let me end by saying that we our guidance of an EBITDA around SEK 5,000,000,000 including IFRS 16 for the financial 2019 year 2019 is maintained. Now before I go further into the results, let me just recap a bit from what we said when we last had a Capital Markets Day in the beginning of 20 18. At that time, we said we would focus short term on retaining our investment grade rating, on completing the energy separation and distributing proceeds, restoring profitability and having a very strong capital discipline. We have, of course, given the deleveraging of the company a much stronger credit metrics by now. So that's that we feel that we have a solid balance sheet.
We have completed the energy separation. We have commenced the distribution of proceeds with the demerger of Maersk Drilling. And today, we are announcing a share buyback program of CHF 1,500,000,000. And we are restoring profitability. They're not when they need to be, but we are pleased with the progress in this past quarter.
And then finally, on capital discipline, we remain very disciplined. We have not, as you all know, not started any new large terminal projects in the last 3 years as and we have basically not ordered any new ships as well. And we continue to maintain that policy. Longer term, our focus is going to be on growing our integrated offerings, growing our non Ocean revenue disproportionately and becoming a more stable company with a reduced capital intensity. For those reasons, we defined these 4 transformation metrics that we will be reporting on every quarter to give you a better view of not only where we are doing in terms of the operations of the business as it looks right now, but also how we are progressing on the transformation.
So first and foremost, I want to highlight the fact that our cash return on invested capital in this quarter was 6.7%, a reasonably good number, driven, of course, by the fact that we had strong cash flow from operations, but also because our CapEx was half of what it was in the same quarter last year in broad numbers. Also, we continue to make progress on our synergies from putting our Transport and Logistics businesses together and from the acquisition of Hamburg Sud, where our target stated previously is of SEK 1,000,000,000. We are now with the progress this quarter at SEK 870,000,000 and have line of sight to achieving the target by end of the year. We also grew our non Ocean revenue 3.8% when you adjust for the fact that we closed some container factories and we grew gross profit 2.2% in logistics and services. Obviously, we're happy about the growth, but we also need to accelerate in this area in the coming quarters as part of our transformation.
As you all know, we demerged Maersk Drilling and distributed the shares to our shareholders on the 4th April. We believe that has been a good transaction for all and has created value. Maersk Drilling is still included in our numbers as a discontinued business in this Q1 report, Paul, and we have taken a write down negative $628,000,000 which was the difference between the stock the market cap at the end of the 1st day and the book value that we have. Now let me turn over to Carolina.
Thank you, Soren. If we start by looking at last year, then we closed the sale of Maersk Oil, and we booked an accounting gain of €2,600,000,000 in Q1 last year. We also received 97,500,000 shares or almost 4% of Total, which we have then subsequently been selling. And now we have sold the remaining shares in Q1 this year. So the total cash flow from selling the shares were $5,600,000,000 And we spent the first $1,200,000,000 last summer to reduce our debt.
And we have previously communicated that we aim to distribute a material part of the proceeds of the Total share, either as a dividend or as a share buyback. And now we have concluded our separation of the Energy business, and the Board of Directors have decided to issue a share buyback program. The size is DKK 10,000,000,000 or around USD 1,500,000,000. The program will start in mid June and will be executed over 15 months max. Well, we have decided to launch the share buyback program already now as we have seen a very strong cash flow from the business.
We have been able, as Soren mentioned, to reduce our debt even further, and we've also sold the final stake of Total. So this has really enabled us to keep up our investment grade rating, which is very important for us. And now after the conclusion of the separation, we are in the moment relatively comfortable with our credit metrics. After this share buyback program has been finalized, the board will evaluate our capital structure and outlook and will make decisions on further distributions, which is the intent. Moving then to the new dividend policy.
A small recap. In the last 5 years, we have dividended out €11,100,000,000 And this year, in 2019, we have dividended out €4,000,000,000 so far. And then, of course, there is the part of the share buyback we're just announcing to come. The new dividend policy will be an annual payout ratio of 30% to 50% of the underlying net result, where we, of course, adjust for the gains, impairments and restructuring. You can divide the work we do in the transformation of Maersk in a number of phases.
And we have now finalized the phase of separating the energy business and are now in the strategic phase of balancing the company between ocean and non ocean. And while in this phase, it is our expectation that the annual payout ratio should be in the low to midpoint range of this policy, so around 30% to 40%. And of course, the annual payout ratio will be set from an evaluation of the outlook, cash flow, CapEx, M and A opportunities and our credit rating. I would say that this means that the new dividend policy really gives us the flexibility to adjust within the range to accommodate the investments that we need to grow our logistic business, mainly inorganically.
Now to the financial highlights. As I said, the revenue grew 2.5% to 2.5 percent with increases both in Ocean and in Terminal Chones, while Logistics and Services was flat. Overall, profitability was up, EBITDA by 33% in Q1, and the EBITDA margin improved 3 percentage points. EBIT was $230,000,000 compared to $7,000,000 in 2018, and the underlying result in the continuing business was a loss of minus 69 compared to a loss of 329,000,000 in the Q1 last year, impacted by higher depreciations and amortizations of DKK 62,000,000.
Turning then to CapEx. And this slide is looking better and better, especially from a CFO perspective. In the Q1, our gross CapEx was SEK778 1,000,000. That actually includes SEK175 1,000,000 from Maersk Supply Service, which we reclassified back into continuing operations. But it's important to notice that we are keeping our CapEx guidance of SEK 2,200,000,000 for the full year.
So SEK 800,000,000 of the SEK 2,200,000,000 in the Q1, but we are sticking to the SEK 2,200,000,000 guidance for the year. And also the you can say the carryover or the current contractual commitments, we are now at the end of Q1 on €2,000,000,000 in sort of carryover, and that is to be compared to a couple of years ago, which was almost SEK7 billion, so a significant reduction here. And really, if we look at that, it's only 2 vessels that are sort of left to be delivered and some smaller terminal concessions. Turning then to cash flow. On the cash flow development, we have also made significant progress.
You can see that the operating cash flow increased with more than 100% to SEK 1,500,000,000. The cash flow from operations was positively impacted also by the working capital improvement of SEK 370,000,000 as well as, of course, the increase in EBITDA up to €1,200,000,000 And the cash conversion was a full 120%. So all in all, for Q1 2019, free cash flow was $3,500,000,000 And if we adjust that for the sale of the remaining shares in Total, which were SEK2.6 billion, the free cash flow was SEK0.9 billion. Also, we have the joy of IFRS 16 in this quarter to compare with. And adjusted for financial leases, the free cash flow was SEK 600,000,000 And with the strong cash flow, that has a good effect on your balance sheet.
So moving on then to the next slide and looking at the net debt. Well, the interest the net interest bearing debt decreased to SEK12.6 billion, and we started the year with SEK15 billion. So we've obviously been positively impacted by the sale of the Total share, the change in working capital, the improvement in the profit. And then we spent CapEx, I would say, in a good way and in a controlled way. We have a positive effect on well, sorry, no, we have a negative effect on the new financial leases, which are increasing with 0 point €9,000,000,000 The biggest part of that is actually a hub in Morocco.
I would say an important thing to remember, here we compare just with previous quarter. But if we look a year back, we were actually on almost SEK20 1,000,000,000 including IFRS 16 then. But we were almost on SEK20 1,000,000,000 in net debt and now we're down to SEK12.6 billion, and that's a big change.
Now moving to Ocean and the specific for the different segments. So what we are relatively happy with is the fact that we improved EBITDA by 42% in Ocean compared to Q1 in 2018. EBITDA margin improved by 3.8 percentage points to 13.4%. And we did that despite having slightly lower volume. The improvements were driven by higher freight rates, synergies and a reduction in the total cost base.
We also saw an increase in other revenue, mainly driven by higher D and D income, partly due to higher volumes into North America where the tariffs are higher and where and also a number of places where we saw port congestions. Freight rates increased 3.9%. Volumes were down 2.2%. That was the freight rate increases were driven by high recovery and of fuel price increases, but also general increases across the board. East West trades increased by 4.9%, north south 4.7%, regional trades by 5%.
The positive development was driven by our continued focus on margins. And it's important to for me to say here that at the end of the day, right, we are very much focused on improving earnings more than we are focused, as the numbers also indicate, on improving our market share. Total volumes declined by 2.2%, driven by North South with a decline of 5.6%, weak demand in Latin America and also India. But we also have to say for comparison that Q1 2018 was the Q1 where we had just taken over Hamburg Sud. They had all of their business, so to speak.
So the decline in this quarter compared to this quarter last same quarter last year is a reflection of the retention of the business. Moving on to operating costs. Total operating costs was positively impacted by lower container handling costs and network costs, and our total cost was down by 2.8%. But if we adjust for rate of exchange development, then total cost declined by 0.5%, mainly due to higher entry positioning cost because of lower backhaul volumes. Unit cost at fixed bunker improved slightly.
However, it was negatively impacted by the decline in volumes that came in weaker than what we had expected. Bunker costs decreased by more than 4% despite an increase in the bunker price, and the improvement was partly driven by bunker efficiency, which improved almost 9% and partly due to less capacity in the network. Average nominal capacity in Q1 came in at 4,048,000 TEU, which is on par with Q4, and it's also very much in line with our long stated ambition of maintaining our network around just around 4,000,000 TEU. Now turning attention to Logistics and Services. Revenue declined very slightly, dollars 7,000,000 and it was mainly driven by lower airfreight forwarding volumes.
Gross profit improved by 2 percentage points, positively impacted by higher intermodal and warehousing, and EBITDA improved by $6,000,000 At the beginning of the year, we merged the commercial organization of logistics and services and ocean. And that means and we have lately announced the that we're also adding what we previously called epimolar terminal inland services into this organization. And what that effectively means is that we are now completely organized to execute on the strategy that we have outlined. On the next slide, briefly on Supply Chain Management. Volumes in Supply Chain Management increased slightly, impacted by new customers.
Gross profit also improved to $79,000,000 supported by higher volumes and increasing margins of about 1.4%. On the forwarding side, we saw margins in sea freight decreasing, fed 25 percent per TEU. And in airfreight, we saw an increase in margins of 6.6% per tonne. Our EBIT conversion ratio was 6.8%. It was more or less on par with the 7% in Q1 'eighteen, mainly because of loss on debtors provision and one off gain in Q1 in 2018 in Internet Services.
Adjusted for this, the EBIT conversion improved slightly compared to last year. On terminal and towage, we grew revenue by 9%, and gateway terminals contributed with the increase both increased revenue and EBITDA, while our towage activity faced headwinds was mainly related to foreign exchange. EBITDA in gateway terminals increased by 15% as we added Moin in Costa Rica ramping up and general growth in volumes ahead of the market. And we did see also some increasing in cost mainly because a lot of the growth was in the U. S.
Overall, I want to say on terminals and towage that we've seen significant progress in the terminals business over the last couple of years. And if we go back to Q1 of 2017, EBITDA is up by 61%. And that those improvements in the results are continued good growth. Truput increased by 3% in Q1, driven by volumes from Ocean, which grew 5%, and volumes from external customers grew by 2%. We continue to see strong improvements in the utilization as we by basically 10 percentage points to 79%, driven by the strong volume growth over last year.
Revenue per move increased 7.5%, reflecting higher revenue from storage in West Africa and Latin America, while cost per move increased by 8.7%, mainly driven by higher volumes in high cost terminals, only partly offset by the increased utilization. On the switcher sides, harbor towage activities measured by jobs grew by 2.3%. However, the revenue was impacted by negative currency developments and volume decreases in Australia. In Terminal and Towage, annualized EBITDA per TOC decreased mainly driven by negative currency impact. And apart from this, new contracts have started in Australia, Bangladesh and Costa Rica in 2018, partly offsetting the decrease in EBITDA per truck.
And now let me move on to manufacturing and others. Mass container industry reported a decrease in revenue to $140,000,000 from basically double $288,000,000 last year, but that was driven entirely by the exit of the dry container business as previously announced and a 30% lower revenue from the reefer business. There we have also closed a factory in 2018 in Chile. And EBITDA was negatively impacted by the restructuring cost in connection with the of $31,000,000 from closing of the DRIVE factory. We also now have Maersk Supply Service in this segment, which report an increase in revenue about 15%, reflecting higher rates and EBITDA increased to $5,000,000 Maersk Supply Service took delivery of 2 new buildings in Q1 2019, which thereby completes the order book of Maersk supply service.
Now I'll hand back to Carolina.
So commenting then on the guidance. At Upper Muller Maersk, we reiterate our guidance for 2019. Our EBITDA guidance is that we will be around $5,000,000,000 for 2019. And this is now, of course, including the effects from IFRS 16. The organic growth the organic volume growth in Ocean is still expected to be in line with the estimated average market growth, which is 1% to 3% for 2019, as we still see uncertainties related to the market outlook, mainly related to the weaker well, the weak global economic growth in addition to risk from a further escalation of trade tensions between U.
S. And China. And please remember, as you can see from the sensitivity table, how volatility really affects our numbers. You can see the changes in freight rates continue to well, to have high impact on the EBITDA and of course also volume. When it comes to the CapEx, the gross CapEx for 'nineteen is maintained at around SEK2.2 billion, and we still expect a high conversion of cash for 2019.
And with that, Soren and I will open for
Well, yes. I'm sorry.
Yes. Questions? Yes, questions.
We'll now begin the question and answer session. The session will end no later than 1 p. M. The first question is from Casper Blom from ABG. Please go ahead.
Your line is now open.
Thank you very much. So I will take the opportunity to ask 3 questions then. First of all, John, you touched a little bit upon this with your comments about focus on profitability. There has been some media reports out stating that you had initiated a, how can you say, new price war in the container industry by cutting rates. Is that something that you can confirm?
Secondly, with regards to your focus on a more capital sorry, reduced capital intensity in the business, would that mean that we would in the future see a larger proportion of chartered vessels and less owned vessels? And then finally, with regards to your strong cash flow generation here in the quarter, when we look ahead, I would expect that at some point you will start to buy vessels again. What kind of CapEx level would you say is fair to assume in more of a steady state? Thank you.
Well, first of all, Casper, let me say that I can absolutely deny that we have started that price war and certainly also say that we have zero intent to do so. We are focused on profitability and on generating cash, as we have said all the way back to the last Capital Markets Day that we wanted to be. And that's also what you see in our result, not just this quarter, but actually over the last many quarters. We brought down our committed investments so that we have much more focus on cash and results. In terms of the question regarding more TC vessels or whether a reduced will mean more TC vessels.
Then given that we are now reporting all of our lease obligations as part of IFRS 16. It doesn't actually matter much for us whether we charter the ships or we buy them as far as our balance sheet is concerned. So CapEx discipline means that we intend to invest less, whether it's direct or through time charter in our Ocean business. And in terms of guidance on future CapEx, then we will wait. We'll be guiding for CapEx in 2020 until we get closer to 2020.
But you can expect to see a very disciplined CapEx. And as you know from our numbers this year, have CapEx below well below depreciation, and we're not expecting to change that anytime soon.
Okay. So you would expect that you could continue having CapEx below depreciations for more than just 'nineteen and 'twenty?
Yes. I don't think I can say much more about it, but yes.
Fair enough. Thank you very much.
Next question is from Robert Joynson from Exane BNP Paribas. Please go ahead. Your line is open.
Good morning, Soren and Caroline. Three questions for me also, but I'll do them one at a time. So first of all, on the share buyback, could you maybe just explain how the DKK 10,000,000,000 figure was arrived at? For example, is that the maximum amount you feel that you can do over 15 months without impacting the share price too much? Or is it simply the amount you feel you can do at the current time whilst maintaining the investment grade rating or any other considerations?
I would basically say yes to your comments. That is the reason for taking this period of time and this amount. But we wanted it well, the Board wants it to be clear that in a year's time, they will with the intent of distributing more, they will look at situation then and then come back with more information on further steps.
So just to be clear, it was a first option, but you said yes to in terms of not impacting the share price too much?
That, of course, is always part of it. We have the safe harbor rules and so on. But we also have the liquidity. We have the rating. We have the cash flow.
And we have to look at how where the world is going.
Okay. And just in terms of north south volumes, you estimated that the market was down by 1.4% in Q1, but Maersk's volume was down by 5.6%. Was that entirely explained by Hamburg Sud? Or were there any other factors impacting that? For example, was Maersk maybe pricing at the upper end of the market, therefore, underperformed a little bit on volume?
Yes. So Robert, I think a big part of it is explained by the North excuse me, the Hamburg Sud retention. But we have also been very focused on prices, to be honest. So perhaps we have been more trough on prices than others, and that has led to a small loss. But given the focus on profitability, that was the right strategy, we believe, in that quarter.
Okay. And then the first question just on the net income outlook. The EBITDA in Q1 was pretty much exactly 1 quarter of the €5,000,000,000 guidance for the full year, but the underlying profit from continuing operations was negative. Should we conclude that if the €5,000,000,000 EBITDA target is hit, the net income for the full year will be negative? Or is that too simplistic?
Yes. I, of course, have a view, but we don't guide on net profit anymore.
Okay. Thank you.
Next question is from Frans Hoyer from Handelsbanken. Please go ahead. Your line is now open.
Thank you very much. I have a question about the guidance, the EUR 5,000,000,000 guidance and how spacious is that guidance in your type of business, there will always be some to and fro. So is plusminus5% within guidance? Or is it more like plusminus10 percent?
No. What we have said is that we see this 5% as a plusminus10%. That's sort of the guidance range.
Yes. Okay. And so the €5,000,000,000 does that correspond to 2% volume growth in your I mean, you are mentioning a range of 1% to 3 percent volume growth. So the 5% is that in the middle of that guidance range?
Well, the like you said, the range what we're guiding on is 1% to 3% volume. But in this business, a lot has to do with rates, right? So I would say, unfortunately, a lot of it is dependent on the rates. And that you can see also from the sensitivity analysis that the rates hit so much harder than the volume.
They tend to go in the same direction. Okay. And in terms of your CapEx guidance of SEK 2,200,000,000 does that include the leasing assets that you might employ additional leasing assets that you might employ during the year?
No. That's a pure growth CapEx. And it's also not any inorganic, not acquisitions.
Next question is from Lars Heindor from SEB. Please go ahead. Your line is open.
Yes, good morning and thank you also for taking my questions. The first one is regarding the growth outlook in Ocean. You mentioned you expect to grow volumes in line with the market 1% 3% with a midpoint of these 2%. But can you just clarify and maybe repeat what is your aim in terms of capacity growth? Do you expect to keep the nominal capacity around those 4,000,000 TEUs?
And if the question to that sorry, the answer to that question is yes, how do you expect them to reach the volume growth of 2% in line with
the market?
Yes, Lars. We do actually have an ambition to maintain about 4,000,000 TEU of capacity in the network also for the rest of 2019. We aim to grow in line with market, and we plan to do that by improving our utilization.
And you have recently started to increase capacity. I can see you were taking in a as you mentioned, you saw the number of vessels on time charter. For the Q1, you lowered your nominal capacity by 3%. I mean should we then expect that to gradually increase so that you will see sort of a maybe low to mid single digit increase in the capacity in the second half? Is that sort of what your thinking is about the capacity?
I think we still aim towards this €4,000,000 TEU. But of course, in the individual months or quarter, there might be special circumstances. So for instance, we will be doing some scrubber installations throughout the year, and that means that we will have to we are putting ships dry dock for 6 weeks. So that means that we have to do charter ships from the market to plug those holes. But I think the general message is clearly that we're not aiming to grow our capacity, and we don't believe we have to in order to accommodate 1% to 3% volume growth because we can improve the utilization or design the network in a different in a way where we achieve more capacity with the same amount of ships.
Okay. And then lastly, on the cost side, also a little bit related to the capacity development. You disclosed 2 cost items in ocean, bunker and all other costs, which is a fairly big number. I think it's around SEK 20,000,000,000 on a yearly basis. I'm trying to get at how we should think about those SEK 20,000,000,000 because in the Q1, you reduced the capacity by 3% and other costs declined by 2%.
Should we expect that other cost item to grow roughly in line with how you develop your capacity?
Sorry, say that again, the last part?
Yes. I'm trying to get at the other cost item in Ocean. If we should expect that, that will follow the development in the capacity growth. I mean, you had minus 3% in capacity in the Q1 in nominal capacity, and other costs declined by 2% in the Ocean. So if you expect maybe to see an increase in capacity in the rest of the year in order to get to those 4,000,000 TEUs, What kind of growth should we expect in that other cost item for the rest of the year?
Perhaps I can suggest you refer to Page 15 in the report. There we have actually broken out the different cost items. And you can see the capacity cost, that's basically network cost and bunker cost. And then we have container handling costs, which are, of course, completely driven by volume, whereas bunker and network are semi fixed or fixed and as is SG and A. So maybe that will be able to answer your question.
Okay. All right. Thank you very much.
Next question is from Neil Glynn from Credit Suisse. Please go ahead. Your line is now open.
Hello, everybody. If I could ask two questions, please, both focused on free cash flow generation.
Neil, we cannot hear you probably. You're kind of speaking into something other than your phone, I think.
Can you hear me now?
Yes, much better. Thank you.
I wanted to ask 2 questions on cash flow generation, please. The first one, you obviously don't guide on free cash flow like you don't guide on net income. But just interested, given your Q1 performance in free cash flow and the EBITDA guidance for the year, It seems like something like $2,500,000,000 or maybe even $3,000,000,000 of free cash flow underlying might be possible this year. Just interested in your thoughts on that. Then the second question, again, on the cash flow subject.
Your, I think, disclosure on management incentivization is improving. But can you provide us some detail in terms of how management is incentivized on cash flow generation with some figures in terms of thresholds, for example. As I think given the stage of life of the company and the cash flow generation is a bigger priority, it would help the market understand how much incentivization there is and how much commitment there is to cash flow generation going forward.
Okay. So first to the cash flow generation. I would have to say, of course, I was very happy to see the free cash flow in the quarter with SEK 3,500,000,000. But you have to remember then a big part of SEK 2,900,000,000 is the Total and then SEK 0.9 is sort of the well, I was going to say the real cash flow, but you know what I mean. The cash conversion is 120% in the quarter.
That was very high. I would say a good company, high cash conversion, which is what we have guided. We have said that we aim to have a high cash conversion this year as well. That will be somewhere just below, well, probably 90% to 100% or around 90%, right? So I think we should keep that in mind also for the full year when we talk about cash flow and the high conversion.
As to management, well, we don't guide on the bonus targets and sales, But I think you can hear from our comments and our focus in the discussions that it's very high up on our agenda. And I will certainly personally make sure it stays high on the agenda.
Understood. And just to follow-up on that. Is there a chance that we might get further disclosure on that in the foreseeable future?
No plans now, but we can't say anything about the future. We'll see then.
Next question is from Dan Togo from Carnegie. Please go ahead. Your line is open.
Yes. Thank you. A few couple of questions from me as well, one at a time. Firstly, again, on cash flow. The cash contribution from net working capital, how much is that a reflection of, so to say, the lower volumes that you have in Q1?
And I. E, if volume starts to increase, how much can we expect of this cash contribution from net working capital in the future? And will not just reverse in coming quarters? That's the first question.
Okay. So I mean, when we talk about working capital, it's always important to have a little bit in context and seasonality and so on. But we had a good improvement of the €400,000,000 or 3.17 in the quarter. So that was good. But I mean, sales are up in total.
So we don't really see anything from that. I think it was a bit better considering that it's the Q1. It's usually a bit weaker after year end, but it was a good result in this quarter.
I'm just thinking about how much of this is sustainable going forward. And I'm referring to, of course, the lower volumes that you have in Q1.
No. I would say that, again, normally, Q1 is weak in cash flow after year end, but this was not the case in this one. So I think we have to take that into context. It is 1 quarter and it's a bit unusual. So I don't think we can draw a trend from that.
Okay. Understood. And then on the synergies, you referred to SEK130,000,000 from Hamburg Sudeten in the Q1. Can you give any flavor on how that is distributed between Ocean and Terminals, Towage?
The SEK130,000,000 is the combined synergies from both the Hamburg Sud integration and the Terminalling and Towage part. So it's all in. So for the full year, we are planning to reach SEK 1,000,000,000 and now we're up to SEK 870,000,000 and SEK 130,000,000 of that was now in the Q1.
And how much is included in Ocean? And how much included, so to say, in or impacted in Terminals and Towage?
It's very hard to say. And I mean that's it's sort of towards the end. It usually comes in a bit into each other. So that's why we give this number as a total.
Okay. And then there's contribution in both in Ocean, but basically also, I guess, also in terminals from demerge and detention. Can you elaborate a bit on how that impacts EBITDA as well so to say the margin on demerger and detention?
Well, we can say like this that it's of course very high margin on that business.
And can you be a bit more specific of the impacts in Q1? You're just mentioning it as one of the but is can you quantify it in any way, the impact here?
I think in the U. S. And in Africa, it's been unusually high. But no, we don't give any separate guidance on exactly how much that has impacted. But it was one of the contributors, like you say.
And then just a final question. You are now well into Q2, and I guess you're also starting to receive some bookings for the peak season. Can you give any flavor on how you see, so to say, peak season and volumes going forward? Are we looking, so to say, for a slowdown? Or what should we aim for here?
I guess you got a bit more transparency now than you usually do when you report on Q1.
Well, we do. And but I think we're saying it relatively clear that we expect to grow in line with the market, and we expect the market to grow 1% to 3%. And we have also, of course, told you what our Q1 number was. So you can do some math on that, I think, is probably the way to go.
Okay. Thank you.
Next question is from Finn Bjarte Petersen from Danske Bank. Please go ahead. Your line is open.
Yes. Thank you. My question goes in line of your growth. You're saying growth and relative performance to peers. If we look at the Q1, you're probably down a couple of percentage.
The market is up the same. In the Q4, you were down underperforming the market. Looking at a very good peer down in Hamburg, Hapag Lloyd is increasing by 2.5% in the first quarter. Your rate developments are the same. You continue to underperform on EBITDA margins and also EBIT margin relative the German peer.
Could you explain to me where I should find the market growth that you keep saying is coming in line with the market now we have 2 quarters, you underperformed? That's one question. The second question, when should I expect to see economy of scale in Maersk Line, meaning that you are actually outperforming on an EBITDA and an EBIT to the German peer?
Well, actually, Finn, we did that in Q4. We actually had a better margin than Haapaglot. I think it's really, really difficult to look at this and compare 2 companies on a quarter by quarter basis because we don't recognize revenue in the same way, and we don't have the same approach to hedging fuel. And as you know, we don't hedge fuel. Therefore, when the fuel price goes up as it did from Christmas throughout Q1, it impacts us quite negatively.
And but when it goes down, it's the other way around. So I'm not going to have spend a lot of time comparing quarter to quarter with Harpockloyd. They had a really good first quarter result, But we are absolutely happy with our result. We believe the company is moving clearly in the right direction in terms of earnings, in terms of cash flow generation, deleveraging of the balance sheet, doing what we said we were going to do on transformation and so on. So we are in a much better place than we were a year ago.
It's not because I want to compare the quarter on quarter, but if you look the last 8 quarters, it's a constant underperformance on EBIT margin, if you look at your group versus their EBIT margin. And that's one thing. I'm just wondering when we should expect to see a sustainable lift in your EBIT margin compared to peers, so we can start talking about cost leadership again. I still would want that's still my question, number 2. But if we return to the first question, I just wonder where the growth should come from.
If you have literally have 2 quarters where you're underperforming, you keep saying that you are performing in line with the market. So I just have to understand why where the growth should come from in the last three quarters for you to fulfill your profits.
I think it's important for me to say that our focus is on driving profit and cash flow in the business. We have a size now in Ocean where we are certainly not going to
be at a disadvantage from a scale
point of view. And more or less is not going to ruin my day. Obviously, we need to drive as efficient a business as we possibly can. In the Q4 last year, we had the highest margin in the industry. This time, this quarter, we'll maybe have the 2nd highest.
We were not beating Hapag Loyd, but we beat everybody else who's reported by this at this point in the reporting cycle, and we're just waiting for CMA. So for us, really driving focus on improving earnings in Ocean and then driving growth in Logistics and Services and the Terminal and so that's really our focus at this point. We still believe, given the volume plans that we have on Ocean, that we will be able to deliver 1 to 3 percentage point of growth for the year. And that means, of course, that we have to accelerate in the coming quarters.
Okay. Thank you.
Next question is from Markus Bellander from Nordea. Please go ahead. Your line is open.
Yeah. Thank you. Just one question for me, a follow-up question on a previous question regarding price wars. You said you certainly didn't start a price war, but you did cut your FAK rate on Asia Europe pretty significantly. So couldn't that be perceived as starting a price war?
And also, why did you cut that rate by so much? Is it because volume growth was weak in Q1 and you want to get volumes back up?
I have to say, I'm simply not aware of us having dramatically cut the rate on FAK from Asia to Europe. So I don't believe that, that's the case. And we have zero interest in doing so.
Okay. Thank you.
And our final question for today is from Johan Eliasson from Kepler Cheuvreux. Please go ahead. Your line is open.
Yes. Thank you for taking my question. I hope you can hear me well. I have some problems hearing, Sarah and Julian are replying to it. But I hope you will be better this time.
So I was wondering about this CapEx and ship ordering. You are saying no new ships before 2020. Your German competitor is basically saying the same. What's the magic about 2020? Why not saying no new ships before 2025?
Or what will happen in 2020? Is this there are other some specific drivers that will imply that we should expect the ship ordering from June, the competitors, to increase 20 17 going forward, but obviously don't change your CapEx profile much near term as it's a 2 year delivery time or so. But should then the CapEx profile, let's say, 2024 be significantly above today's level and potentially above the depreciation? Or how should we think it? What's basically the magic thing with 2020 and order intake for new ships beyond that year?
Maybe I should let my CFO answer the question. But what I would like to say in general is we have, as a company, a long history of not being disciplined on CapEx. And I think we are changing that, and we have changed it since basically since 2016. We have made no significant investment decisions. And that's why our committed CapEx have continued to drop.
And if you look at it, we now only have about $200,000,000 of committed CapEx for 20 20. And we continue we want to drive a culture of much more focus on CapEx and not driving gross CapEx above depreciation again and again. And then I'll turn it over to Carolina to comment as well.
Yes. Well, I think, Soren, you should have the credit, and you've got a very disciplined CFO in on this. But I think it's important that with the visibility we have, we have said now for this and next year, and I think the carryover is very important. It's important to remember that, that did start a couple of years ago, and that is why we are in a situation we are now. I think another comment in the Selim sort of area is to say that what we want to invest more in is, of course, the growth in LNS.
So we want to create a lot of space to grow and do both organic and inorganic investments on the LNS side to balance the ocean and non ocean side, right?
But is there any underlying driver that will come into 2020 requiring you to do more shipyard ordering like a replacement cycle? Or is it just the way you expect demand in a few years' time to be?
Yes. So we don't see 2020, IMO 2020 as a driver of significant new CapEx for us. We have a relatively modern fleet, and we don't see any reason for why higher fuel mix should mean that we have to invest in a lot of new ships. All right. I believe that was the last question.
So let me just give you a few final remarks. As I said, the Q1, we believe we were off to a reasonably good start. We continue to improve profitability. We, of course, are not where we need to be, but the level of improvement was good, and we also had positive return on invested capital, although very small. We have significantly deleveraged the company.
The focus on free cash flow and disciplined CapEx is really starting to pay off, and that means that our balance sheet is in a much better shape than it was a year ago. That gives us opportunity and flexibility to move further with our transformation. It was a highlight that we have now finished the energy separation with the demerger of Maersk Drilling as well as the announcement now of the commencement of a share buyback program of around 1.5 $1,000,000,000 that moves us forward. And we look forward to continuing the progress in 2019 with the transformation of the company, building a bigger and stronger non ocean revenue side of AP Molar Maersk. And that's what all of our focus is on as we speak.
So thanks again for listening in, and we look forward to talking to you again in 3 months' time. Thank you.