CMA CGM lost nearly $1 billion in oil markets

CMA CGM lost nearly $1 billion in ill-timed derivatives investments in 2008, largely in oil prices, leaving the world’s third largest container ship carrier financially crippled heading into the shipping downturn last year, according to a newspaper report in France.

The report in the Liberation newspaper said the huge losses came after relatively traditional oil price hedging turned into full-scale speculative investment as oil prices soared to around $150 per barrel in 2008 but then plunged back close to $30 per barrel.

That left the Marseilles-based carrier without financial breathing room as it coped with $5.6 billion in debt this year just as an unprecedented downturn in container shipping demand sent transport prices falling.

The report comes as a new board elected at an extraordinary meeting of shareholders last month prepares to meet Jan. 18 to elect new leadership for a family-run business founded more than 30 years ago by Jacques Saadé.

Saadé has effectively ceded control of the CMA CGM’s day-to-day management as part of an agreement with lenders to provide a $500 million credit line this month.
The carrier, which lost $515 million on $4.8 billion in revenue in the first half of 2009, says it expects to turn a profit this year.

CMA CGM has portrayed its financial troubles as the result of the sharp downturn in global trade, which experts believe led to around $15 billion to $20 billion in industry losses last year.

The report in the Liberation, however, says the push toward derivatives left CMA CGM’s cash reserves dry as debt payments approached. The carrier, the paper said, was “engulfed in the logic of pure speculation.”

Source: http://www.joc.com