The value of container terminal investment to ocean carrier strategy

Thomas Pawlik, Lars Stemmler, Alfred J Baird and Manfred Helch
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Thomas Pawlik: Centre of Maritime Studies, University of Applied Sciences, Bremen, Germany
Lars Stemmler: HSH Nordbank AG, Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Germany
Alfred J Baird: Transport Research Institute (TRI), Edinburgh Napier University, Merchiston Campus, Edinburgh, Scotland EH 10 5DT, UK
Manfred Helch: HSH Nordbank AG, Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Germany

Maritime Economics & Logistics, 2011, vol. 13, issue 3, 319-341

Abstract: In the current adverse economic environment, container lines strive to cut costs and secure cash flows in order to remain solvent. A number of container lines have invested in container terminals whose divestment could be an opportunity to raise finance. Here we consider whether a short-term divestment strategy aimed at generating liquidity quickly is more attractive than the continuation of a long-term strategy of sustained investment in terminals. At present, carriers cannot expect to sell any terminal participation at pre-crisis price levels when earnings multiples of up to 20 times were paid. The study evaluates the potential impact of container lines on the financial performance, assuming a strategy of divestment of terminal activities. Key questions addressed in this context relate to the current value of a terminal investment and what value it offers towards a shipping line's strategy, and hence its balance sheet. In other words, what is the trade-off between short-term gains derived from divesting terminal activities as opposed to long-term value creation of these activities for shipping line operations. The article reviews carriers with terminal investments and compares them to maritime terminal operators. The methodology draws on the Economic Value Added® as a risk-adjusted performance measure.

Date: 2011
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