AMKBY (AMKBY) Q1 2026 Earnings Report, Transcript and Summary

Welcome, everyone, and thank you for joining us on this earnings call today as we present our first quarter results for 2026. My name is Vincent ClercKirk. I'm the CEO of A.P. Møller - Maersk. And I would like to introduce our new CFO, Robert Erni, who is joining me here in the room for the first time. Many of you will no doubt have the opportunity to meet Robert on the upcoming roadshows and conferences. Let me start with the overall highlights for the quarter. At the macro level, we continue to see strong demand growth across all of our segments and most regions. The big exceptions was North America which has remained weak since the start of the trade tensions about a year ago. This resilient level of demand is easily observable in our own number, but it wasn't enough to stabilize the ocean freight rates. The supply overhang there has worsened as the many new vessels delivered throughout 2025 and into 2026 have outpaced this strong demand. The Middle East conflict has required also operational adjustments, but it did not have a material financial impact in this quarter. This is mainly due to the delayed recognition of revenues and costs in Ocean. I will elaborate on this shortly on the following slides. Overall, we delivered an EBITDA of $1.8 billion and an EBIT of $340 million, impacted overwhelmingly by the lowest rates in Ocean year-on-year. Lower earnings led to free cash flow of negative $874 million for the quarter. Looking ahead for the full year, notwithstanding the disruptions that the Middle East conflicts have brought, we are maintaining our guidance given what we can see right now. On the basis of container volume markets of 2% to 4%, we guide for underlying EBIT of between negative $1.5 billion and positive $1 billion and a free cash flow of negative $3 billion or better. The Middle East conflict is not expected to have a material impact at this stage through the use of both operational and commercial levers. Our maintaining the guidance and the range reflects the fluid environment that we are in, but it also speaks to the agility and resilience of our business such that we can withstand such large disruptions without materially changing our financial outlook. And that is a good segue into the next slide, where I'll add a few more words on the Middle East conflict. It is important to highlight that the outbreak of this conflict is primarily impacting Ocean. Logistics & Services and Terminal have not been and we don't expect will materially be impacted. Thanks to our strategy put in place over the last decade, we have a much more diversified and resilient revenue and cash flow streams today that will cushion the impact on our results that the ocean market is faced with. Let me start by saying that we have of over 6,000 colleagues in the affected countries, and we currently have 6 vessels stuck in the Persian Gulf comprising owned and time charter vessels with crew on board. We also have our gateway terminal at APMT Bahrain, our hub in Salalah. We have warehouses and offices and all the colleagues are safe and accounted for. Safety of our people, vessels and assets is our #1 priority. This means right now that operations also in and out of the strait of Hormuz have been suspended based on our continuous security assessment. The Gulf region before the outbreak of the conflict represented about 2% to 3% of global containerized trade, so direct volume impact is limited on the global scale. The situation in the Strait of Hormuz has also impacted the situation in the Bab al-Mandab Strait, and we have reversed and halted the gradual return to the Red Sea transit for safety reasons since the beginning of the hostilities. We have seen rate spikes since the outbreak of the conflict, which averages on spot rates up to about 40% since the end of February. It is important to note that this rate increase has been roughly in line with the cost increase we have faced. Operationally, the modularity of our Gemini network has helped us pivot with volumes back to pre-war levels and limit the disruptions to our volume delivery and service quality. We have been able to isolate part of the network impacted by the conflict and carry on with our operation while maintaining the highest reliability and in delivery. While the oil prices have surged and bunker availability has become under pressure, we have been able to maintain bunker supply through available reserves on board vessels and in storage facilities on land. We have a coverage at this time of minimum for a quarter ahead, which is in line with normal coverage. We have responded to fuel shortages in certain parts of our network, most notably in Asia by redistributing available fuel from North America and Europe to ensure that our vessels can bunker before departing again for their head ho. The cost impact of this energy shock is unprecedented, both in terms of size, the speed at which it has unfolded and the dislocations it has created in the market. For us so far, it represents approximately $0.5 billion in extra cost per month that we must find a way to pass through. If these elevated bunker prices persist, which seems likely, we would expect to deploy more slow steaming to reduce the cost impact. We remain confident that the impact of the shock can effectively be contained between a combination of commercial and operational measures. In terms of the numbers, there is limited financial impact from the conflict in the first quarter given the accounting effects of delayed recognitions of both revenue and costs. The increased costs that will flow through the P&L in quarter 2 and beyond are being recovered through higher spot rates and a successful implementation of commercial levers with our contracted customers most notably surcharges and bunker formulas. As mentioned, this is about $500 million of extra cost per month, which we are recovering in full today even in an oversupplied market. Overall, despite heavy disruptions to energy markets, Maersk is well diversified and stand well positioned to weather these challenges and take advantage of the opportunities that will undoubtedly arise. You may recall the strategic priorities we set for Ocean as well as the other segments back in February. Looking at Ocean first. On Protect, our high asset turn, we have delivered a 6 percentage point overperformance on volume growth versus fleet growth, driven by Asian exports, which is comfortably above market. This has allowed us to increase our asset turn and bring down our unit cost. This follows similar outperformance we saw in the third and fourth quarter of 2025. It is the new baseline now that we have created through Gemini and the one that we must continue to improve on going forward. We also demonstrated strong operational performance by filling our vessels to reach a utilization of 96%, reflecting discipline in fleet deployment. On grow, with an above-market growth of 9%, we delivered a strong quarter and ensure that we leverage the agility created by Gemini to maximum impact. The strong volume performance was delivered against the backdrop of continued downward pressure on rates with rates down 14% year-on-year. This came from contracts rerating at the start of 2026, driven by this industry oversupply. Finally, on the focus on profitability, we have demonstrated a sustained decrease in unit costs, notwithstanding the Middle East conflict, owing to our strong operational performance. This, I'll return shortly to on the next slide. As mentioned, commercial levers are helping us to recover the cost increase from the Middle East conflict. The benefits of Gemini are on track and will incrementally benefit the P&L until the end of quarter 2. From quarter 3, it will become part of the baseline. As mentioned, our strong operational performance is also reflected in the sustained decrease in unit costs driven by our modular network, which I'm particularly pleased with and is due to the hard work of our teams. Since Gemini's inception, we have delivered 7% year-on-year decrease in unit cost at fixed energy. What makes this particularly impressive is that we have sustained this trend in this quarter, even in the wake of the Middle East conflict and the operational disruptions it has brought. Cost leadership remains central across all of our businesses, but especially in ocean with tougher times and more disruption. We will continue to roll out initiatives such as potentially slow steaming or restarting operation through the Red Sea in this regard to ensure that we protect our profit and margins going forward. In Logistics & Services, our priorities in 2026 are twofold: accelerate the margin improvement and improve on our growth performance. So I am very focused on margin expansion and productivity as this will drive better performance this year. On the first priority, we have demonstrated clear improvements in our challenged product, especially airfreight and MinMile with higher year-on-year margins in both. These improvements have come from productivity gains as well as more effective revenue management. Looking at margins more broadly, this quarter marks the eighth consecutive quarter with year-on-year EBIT margin improvement, reflecting the operational progress we have made across the portfolio. This quarter, we improved our EBIT margin by 0.5 percentage points to 4.6%. There is, of course, more to do, and our focus for the rest of the year remains on revenue management and productivity improvements to drive performance. On the second priority of improving growth, we have delivered a revenue growth of 9% overall across the portfolio. While further proof points need to be delivered in the coming quarters to confirm this good performance, we are satisfied with the current momentum. Our job is to grow, but to do so profitably, continuing to make investments where it makes good sense, like we did in Singapore, if we turn to the next slide. Back at mid-March, I had the pleasure of attending the opening of our new modern warehouse in Singapore. World Gateway 2 is a fully automated multi-client distribution centers spanning about 100,000 square meters and strategically located close to major transport infrastructure. The facility marks a major expansion of our contract logistics and e-commerce capabilities in Asia Pacific and represents a doubling of our footprint in Singapore. It is equipped with state-of-the-art robotics and automation technologies. For customers, this will mean faster order fulfillment to end to end customers and shorter lead times as well as improved accuracy generally. The modern technology and scalability will unlock opportunities in new verticals, including luxury to complement the others where we already cover such as lifestyle, FMCG, retail, wellness and technology. We are excited about World Gateway 2 and look forward to delivering value to our contract logistics customers. In terminals, looking at our strategic priorities for the year, in relation to the first one, growth through existing and new location, we demonstrated solid growth of 4% year-on-year. What is equally exciting is that we are the growth plan that we have either announced or executed during this quarter. These investments will allow the business to diversify and increase its portfolio of gateway terminals across the globe while ensuring continued strong value generation. First, we announced the strategic expansion plan to upgrade North Sea terminal in Bremerhaven together with our partners at Eurogate. I'll elaborate on this one shortly on the next slide. We also announced the acquisition of a 13.7% minority stake in Southern Container Terminal in Jeddah, Islamic Port alongside DP World. And further, we executed the incoming transfer of our 49% minority share in the Hateco Haiphong International Container Terminal which is located in an area of crucial importance for Vietnam's growth and for the Asia and transpacific trade. Finally, we completed Phase 2 of the expansion of Lázaro Cárdenas in Mexico with high level of automation, electrification and the use of clean energy sources. We are now proceeding with Phase 3 of the expansion of that terminal. On our other priority, maintain long-term profitability, the quarter generated a very strong return on invested capital of 16%. We do expect the effect of growth investment in greenfield projects to affect the ROIC figure in the coming quarters as invested capital increases ahead of activities during the buildup phase. These are great investments, though, that will secure future growth and deliver strong returns over many decades for our shareholders. The expansion plan of the upgrade to upgrade Bremerhaven is an example of what we do best and comes straight out of our playbook of operational excellence. The EUR 1 billion planned investment together with our partners, Eurogate will significantly upgrade North Sea terminal in Bremerhaven and promise a significant return. As we have recently done in Pier 400 in Los Angeles, we will implement automation to bring down our breakeven level. The learning from Los Angeles means that we expect the implementation and outcome to be even better this time at NTB. In parallel, we will expand NTB's capacity by around 1/3 to 4 million TEUs per annum, which in turn will strengthen the location as a key terminal in the Maersk Ocean network. And I will now hand over to Robert, who will walk you through the detailed financial and segment level performance. Thank you.

Thank you, Vincent. I'd like to take a brief moment to introduce myself as this is my first earnings call with Maersk. My name is Robert Erni, and I started as the Group CFO of Maersk in February of this year. I have 30 years of experience in finance across the global logistics sector, of which about plus 10 years as Group CFO in previous companies. Maersk is a company I've long admired and come to know well from the customer side. I'm very pleased to be part of the team. I look forward to meeting many of you in the days and the weeks ahead. Now let me turn to the results for the quarter. The first quarter was characterized by solid operational execution across the business with strong volume growth. However, this was against a more volatile environment and materially lower earnings in Ocean, driven by deteriorating rates as a result of industry oversupply. We delivered revenue of $13 billion, which was a 2.6% decrease year-on-year. Lower rates were only partly offset by the strong volume growth. The impact from lower freight rates can be seen in our profitability, which declined despite earnings growth in Terminals and Logistics & Services. We delivered EBITDA of $1.8 billion and EBIT of $340 million. This led to a decline in return on invested capital to 3.8%. Free cash flow was negative $874 million in the quarter, reflecting the lower earnings base. Our balance sheet remains strong, and we retain significant financial flexibility. Following the distribution of dividends for the financial year '25 and continuation of the share buyback program, we ended the quarter with $18.4 billion of cash and deposits and a net cash position of $1.3 billion. Let us look at our cash flow generation in Q1. Let me comment on a few of the key developments in the bridge, starting from the left. Our net working capital increased by $913 million in the first quarter as the higher price of bunker drove an increase in the value bunker inventory, while customer receivables also increased. As a result, operating cash flow was $1 billion. Relative to EBITDA, this implies a cash conversion of 59%, down from 102% in the first quarter of last year. This is mainly due to the increase in net working capital, as already explained. Our capital lease installments increased by roughly $400 million over last year to $1.2 billion. The increase is mainly related to installments towards the renewal of the Port Elizabeth Terminal in U.S.A. extension, which was signed in Q2 '25 as well as the exercise of purchase option on some formerly chartered vessels. Gross CapEx remained sequentially stable at $1 billion, but decreased around $400 million year-on-year, reflecting a lower investment level in Ocean. As usual, the majority of gross CapEx related to Ocean investments. After these items and the $231 million proceeds from sale of aircraft, which is included in the other bucket, free cash flow was negative $874 million for the quarter. In addition, we returned $1.3 billion to shareholders through the distribution of dividends for the financial year '25 and the ongoing share buyback. Taking this together with net borrowings and other items, net cash flow for the quarter was negative $874 million. So let us have a closer look at the financial performance of our segments, starting with Ocean. I will start by reiterating the point made by Vincent earlier. The financial impact of the Middle East conflict was immaterial in the first quarter, even as supply chain disruptions led to an increase in both rates and costs towards quarter end. The impact will be more visible in our P&L in the second quarter as we consume our bunker inventory and recognize revenue from containers shipped at higher freight rates from March onwards. Ocean reported revenue of $8.2 billion, down 8.2% from last year. This is driven by the impact from much lower freight rates, partly offset by the substantial volume growth driven by strong Asian exports. The commercial mix was more or less in line with our target with 44% of volumes on longer-term rate products. Operating costs remained broadly stable despite various disruption in the external environment. With the increase in volumes, this means that unit cost at fixed energy was down by 7.1% compared to last year. Profits were slightly lower sequentially with EBITDA of $903 million and net EBIT of negative $192 million. Ocean continues to reap the benefits of the Gemini network. We maintained industry-leading reliability for our customers, and we're seeing sustainable financial benefits from better asset turns and bunker savings. These are helping to cushion the full impact of declining rates. Finally, gross CapEx was $716 million, which is in line with our CapEx guidance. In the EBITDA bridge, you can see how all of these different factors have contributed to the year-on-year development in quarter profitability. The significant rate decline was a dominant factor, driven by lower rates from the supply overhang with a large negative impact of around $1.2 billion. This was only partially offset by stronger volumes. There was a positive impact from the lower price of bunker, which decreased 16% year-on-year to $486 per fuel oil equivalent tonne. Note that this does not reflect the increase in oil price that happened throughout March. Bunker consumption was also down by 5.3%, driven by network efficiencies. Net of the volume effect, we managed to keep both container handling and network costs, excluding bunker price, largely flat year-on-year. There's also a significant revenue recognition element as rates declined sharply between Q4 '24 and Q1 '25, but were stable between Q4 '25 and this past quarter, a pure timing effect. Continuing to our Logistics and Service business. The segment continued to track positively in the first quarter. We are growing and we are growing profitably. Revenue increased by 8.7% year-on-year to $3.8 billion. Growth came from all 3 service models. Revenue was down sequentially following peak season in the later half of '25. This quarter also marks the eighth consecutive quarter of year-on-year EBIT margin improvement with the business delivering EBIT of $173 billion, implying a margin of 4.6%. This represented a 0.5 percentage point increase in EBIT margin compared to the previous year. Let me remind you that from the next quarter, we will be reporting Logistics & Services under a new structure as already advised. And therefore, only briefly on the current service models, which you will be seeing for the last time. You can see the volume growth helped to drive increased revenue from all service models. Profitability-wise, most of the increase came from fulfilled by Maersk through Middle Mile and transported by Maersk through Air. Specifically, Air saw volume increase by 20% compared to last year. We continue to prioritize investments in profitable growth. And whilst CapEx was 30% lower year-on-year, this was only as a result of the phasing of investments. Stepping back, the picture shows that broad-based top line growth is translating into better profitability, particularly in the parts of the portfolio where we have been focusing on operational improvements. Revenue was up around 9%, while EBIT was up 22%, demonstrating good operating leverage and continued improvement. As Vincent says, we are focused on margin expansion and productivity to drive performance. That is our job for the coming quarters. So I round off my financial review of the segments with our terminal business. Through a quarter of geopolitical conflict and supply chain disruptions, our terminal business again demonstrated its resilience and delivered a solid performance. Revenue increased 6.7% year-on-year to $1.3 billion, driven by higher revenue per move and volumes across most regions. The volume growth of 4.3% was largely coming from North America, which experienced growth of 11%. This was due to Gemini, which consolidated its volumes at 2 North American terminals, representing a net gain relative to the former 2M alliance. Revenue per move increased around 3%, driven by improved rates, favorable mix and ForEx, but partly offset by lower storage revenue. Cost per move similarly increased about 4%, mainly reflecting higher depreciation from recent investments, adverse ForEx and investments to extend the life of our cranes and other equipment. This was partly offset by lower SG&A and the benefit from higher volumes. EBITDA reached $488 million with a margin of 37.1%, while EBIT increased by 11% to $436 million, corresponding to a margin of 33.2%. Gross CapEx increased to $171 million, driven by growth investments, including Zwappe in Brazil and Pipavav in India. It should be noted that while return on invested capital on a 12-month basis for the segment increased to 15.7%, capital employed will increase following the recent investments while incremental earnings ramp up. Moving on to the financial guidance. Following the first quarter performance and given what we can see now, our 2026 financial guidance remains unchanged. Assuming global demand remains robust, we continue to expect global container volume growth of 2% to 4% in '26 with Maersk to grow in line with the market. On this basis, we continue to guide for an underlying EBITDA of $4.5 billion to $7 billion, underlying EBIT of negative $1.5 billion to positive $1 billion and free cash flow of negative $3 billion or better. Whilst we maintain our cash flow guidance, we are experienced in higher working capital because of higher bunker costs, which is absorbing additional cash. Our cumulative CapEx guidance also remains unchanged at $10 billion to $11 billion for '25 to '26 and likewise for '26 to '27. The guidance range continues to reflect industry overcapacity from new vessel deliveries as well as different scenarios on the timing of the reopening of the Red Sea and Strait of Hormuz and their consequent impacts. With that, we remain focused on operational execution, cost discipline, capital allocation as we navigate what is still expected to be a volatile year. On that note, we finished the first quarter financial review, and we'll now proceed to the Q&A. Operator, please go $ahead's.

The first question from the phone comes from Cristian Nedelcu with UBS.

Two, if you allow me. The first one is on the Ocean strategy. There have been some statements from the ZIM Board members a few weeks back noting that Maersk made an offer for the acquisition of ZIM. Having this in mind, could you tell us what is your strategy in Ocean going forward? Are you looking to grow capacity? Would you consider acquiring other Ocean assets going forward? And the second one is on the Ocean EBITDA. Historically, seasonality-wise, volumes are up in Ocean in Q2 versus Q1. You earlier alluded to the fact that you're fully passing through the higher fuel costs. Is there any reason why the Q2 Ocean EBITDA should be lower than what you generated in Q1? Any other moving parts that we should keep in mind? Any color would help.

Yes. Thank you for the questions. Our strategy in Ocean is quite simple. We want to deliver the best service to our customers in terms of reliability. We want to have the lowest possible cost, and we intend to grow our volumes in line with the market. Those are the 3 tenets that we have. If we make a deviation to this, such as what we did with ZIM is if we feel that there is something which opportunistically would serve to lower our cost or we can buy assets, which opportunistically would be at a much better price than average because of the current market circumstances, then we look into it. And if suddenly the prices would have to increase to a place where that doesn't make sense and doesn't support our cost leadership, then we get out of the process. So I don't expect us to be active on the M&A front in Ocean. This is not a core tenet of our strategy. But at the same time, we stay alert to what happens. And if there are some -- a few things that opportunistically would advance some of our fleet goals and lower our breakeven cost, then we will look at it because it's aligned with our strategy. On the EBITDA for Q2, I think the only thing that would change -- the 2 small things that to look at is from a volume perspective, you mentioned -- I mean, you're right, in general, volumes are stronger. This time, Chinese New Year was kind of late in March. So the rebound may be a bit less than when Chinese New Year is strong. And then you had some of the disruptions from the Gulf where it started by -- with a few weeks of booking acceptance being actually shut down and then gradually reopened as the situation there, we found ways to bring the cargo. So from a total volume perspective, volumes today are back to their pre-war levels, but there's been a few weeks at the beginning of the conflict where they were a bit lower. From a profitability perspective, I think the real question is exactly at what week the cost start to filter through and the revenue start to filter through. What we know is that we've been able to recover these cost increases. And you can see it, 40% increase on the shipping indexes out of China. It means that we're basically on all the shipments are recovering the full cost increase, and we have similar increases that we have secured in the contracts. Now in the very weeks where this phases in, where the one phases in a bit faster. So if revenue phases in a bit faster than cost, that's very good. If it phases in a bit slower than cost, it's not as good. What is good is that this will quickly be -- it's just a little timing issue at the beginning. So I don't expect major fluctuations in Q2, but I think we -- as Robert mentioned, we have a big range in the guidance, and that is because the situation is extremely volatile and the mood swings around whether we get to a conflict resolution fast or not, they are quite significant from tweet to tweet.

The next question from the phone comes from Muneeba Kayani with Bank of America.

So just following on from the earlier question on 2Q. You've done $1.75 billion in the first quarter of EBITDA. If the second quarter is somewhat similar, we're looking at EUR 3.5 billion, maybe EUR 4 billion of EBITDA in the first half. So can you explain how you've thought about that low end of the guide and kind of what scenario would be needed to reach EUR 4.5 billion for the full year? And then secondly, Vincent, if you could talk a little bit more about what you're seeing in the demand environment. I think you've mentioned that demand has been strong and you've continued to see that. What are your customers saying? And how are you thinking about that volume range turning out for the rest of the year?

Yes. Let me start with the second, Muneeba. Basically, I would say, as we stand here today, we see no impact on demand level from the conflict in the Middle East. As I mentioned, our volumes are back to pre-war levels. So we feel pretty good that the first quarter market will be at the upper end of what we have guided with respect to market, maybe even a hair above. And that -- these strong demand levels we see continuing into April and May. So that's the first thing. So for us, I think if you think about this, the range of 2% to 4% in order to get out of that range for the market for the year based on 5 months with that strength, you would need to see a pretty sharp deceleration coming out pretty soon for it to go out of range. So from that perspective, I think there is quite a lot of resilience in the market. Now -- the cost increase is significant and how this will -- how long this will take to get down into inflation or margin absorption for the different parties involved across the energy markets. I think that is very much an open question. So we have not yet seen impact on demand from the higher energy prices. We do foresee though a softer growth in the second half year in anticipation of that. But how much -- we still think it's going to be enough that we stay in the range, but we need also to see how the conflict evolves if the war starts again or if we really move towards peace, there is a lot of different dynamics there. So that's, I think, the best color I can give on the demand level. With respect to the EBITDA level. So I think we don't guide specifically on the quarter. So I don't want to be too -- get into the math of it. But what we see is continued strong demand, which means whether we are in terminal or in logistics, we should be able to continue the normal seasonality that we have there and in ocean as well. As I mentioned, the one thing that could impact a little bit is the phasing in of the revenue upsides and the phasing in of the cost downsides as a result of the hostilities and how they exactly net out in the quarter, which is too early to comment on. But I feel very proud of the speed at which we have been able to pass these cost increases to the customers. And therefore, I don't think it's going to be a huge impact, but I have yet to see the numbers exactly on how that goes and how this is taken through revenue recognition and cost recognition and so on because as Robert mentioned, our working capital has increased as the inventory -- the cost of holding the inventory of fuel has increased significantly. So we'll see how quickly that phases through on the P&L.

So how do you get to the low end of your guide given you've been happy with the speed so far? I think what you need to remember is there is -- we have 44% of our business that is in contract where we have secured coverage for this cost increase. And we have 56% of our business, which is on spot or monthly rate for which we have secured it through the spot market, as you can see in the freight exchanges, but where this is a weekly battle to keep it there. So I think our concern would be a softening of the demand environment, insufficient capacity management across the industry, which leads to an erosion of the recovery of these costs on the short-term market, which could -- depending on how much you think it will erode, could quickly get you into a not so pleasant place from an EBITDA level in the second half year.

The next question from the phone comes from James Hollins with BNP Paribas.

So start off with the Logistics division. Clearly, you've shown 50 bps of margin growth year-on-year. Perhaps you run us through what more you're looking to do there on margin expansion, where you think maybe you can get to what projects you're working on? I think you noted margin growth was there in Middle Mile, where else we can see progress coming from there? And the second one was that the old favorite of the Red Sea. Clearly, we've all seen headlines around the data showing some of your competitors going back through the Red Sea. I was just wondering if you could update us on your thought process there? Is it potentially sooner rather than later? Do we absolutely need to see an end of the conflict on the uranium side? What do you need to see to start thinking about going back to clearly you had started?

Yes. The Red Sea, we have a review ongoing right now where we're assessing given the situation between the U.S. and Iran, whether we feel that we should also restart the return of some of our services through the Red Sea. There's no doubt that we have a bit of a different threshold than especially some of the competitors that are going through the Bab-el-Mandeb today because that's the same that have had issues in the Strait of Hormuz and have had either people being detained or people getting injured because they took some different chances than we did. So I think we make sure we have a very independent and very cautious approach because we clearly take the safety of our colleagues as our first priority. That being said, there has been no attack in the Red Sea for the entire year so far. And for us, the one limiting factor is the limitation of availability of either escorts or monitoring assets from different European U.S. or other navies to make sure that the crossing is safe. That's what we're working through right now. But it is clearly a topic for us as well to see, and that could free tonnage that we could reinvest into slow steaming opportunities for the services that cannot return immediately because at these bunker prices, that would be a good way for us to bring our cost picture down. On Logistics & Services, I think we're going to continue on the margin expansion. Our goal is still to generate a margin that is above 6% on the portfolio. And I think we'll be able to provide the next quarter as we get through the new breakout on products, a bit more color on what we expect the different areas to deliver. But I think for now, 8 quarters in a row of expansion, we don't expect the theory to end now. We certainly want to continue it. Airfreight, ground freight, contract logistics continue to be the main areas where we're working on. It's reduction of white space in contract logistics. It is continuing the margin expansion and productivity drives in air freight, and it is more revenue management and growth and productivity in ground freight. Those are the levers that we're working on.

The next question comes from Alexia Dogani with JPMorgan.

Right. I have 3. If we start with the second quarter, I think kind of can you explain to us a little bit the bunker fuel adjustment lag for the 44% you said is on contract? Because if I understanding correctly, the bunker adjustment factor will really reprice in Q3 rather than Q2. And in relation to that, Vincent, you mentioned about EUR 1.5 billion extra costs per quarter. What do you include in there? Because it appears quite high if you take into account kind of even the peak of the bunker price. That's my first question. Then secondly, can you discuss a little bit about the order book to fleet ratio? I mean this keeps building and it's approaching almost 40%. And deliveries are accelerating in '27 and '28. So clearly, even without capacity management, we're looking at very steep increases even without the Red Sea return. How do you actually see the outlook when you say today, even in the second half, we could see a not so pleasant place for EBITDA? And then finally, do you have any thoughts on Amazon Supply Chain services? Clearly, the contract logistics part of Maersk has not been performing. I don't know if it's still losing money. But if there is an additional capacity entering the consumer space in the U.S. does make your turnaround even more challenging in that sector?

Okay. Thank you, Alexia. So the bunker fuel adjustment factor, you're right. market -- normal market practice is that it is adjusted quarterly. In this case, here, we have implemented surcharges and in some cases, changes in the bunker formula so that we can actually start recover immediately simply because of the size of the price hike, it was impossible for us to just shoulder it for a quarter. And that's what we'll be talking about more in 3 months when we meet for the second quarter, but we have been able to basically move forward the recovery of costs so that we match cost increase and revenue increase to the best of the abilities that we have. So that's also similar to some of the questions we had before. So that's the first one. The -- what is important to realize on the cost is we have actually 3 buckets of cost that we're faced with to get up to the EUR 1.5 billion. The first one is the fact that actually bunker cost has increased more than oil price. If you look at it, not all products, not all oil-derived products have increased by the same and actually, bunker has increased more than the average oil price. The second thing is that you have dislocations in the market where the premiums that we pay today over the WTI or the Rotterdam index are higher in many ports than what they are. So what you would normally accept to be your average given where you bunker in the world, that average has been further increased by these locations. And then the other thing is that we have had to take on more cost, we have had to move -- physically move bunker from North America and Europe into Africa, Middle East and Far East in order to secure supply where we need the supply. This comes at a cost. And as well, and it's very high cost because the tanker market has exploded. And we have also a time charter market that has increased significantly as a result of this. So we see significant cost increase out of all of these factors, the biggest one being obviously just the nominal cost increase on the price per ton. Now of course, it depends very much on the price of oil that day. So it has been swinging a lot between $90 and $110. If it's $90, it's going to be a bit less than the 1.5 -- it's going to be a bit less than the $1.5 billion, but still well in excess of $1 billion. If this was to go to $120 or something, then that price could even -- that price tag could even increase. I'll take the order book last, if that's okay, and I'll just go to Amazon SCS. I think the expansion of the Amazon offering is a logical continuation of efforts they have made to build delivery networks in the U.S. domestic market across both ground freight, airfreight and last mile. So Amazon is a great partner of ours. We do a lot of business together. For the most part, I think we're going -- we don't see that at all as being threatening to what we're doing for different reasons. We are active much more on the international scene where they are active much more on the U.S. domestic scene. We are not so active in the express and last-mile delivery compared to what they are. And we -- a lot of the customers that we have are actually customers that price data sovereignty and are extremely cautious in committing data to Amazon systems who would be able to both train their systems further and also learn a lot about how these customers' supply chain and demand and so on works out, which a lot of them have serious quants about. So we see certainly that this is going to be something that becomes a factor in the -- especially the U.S. domestic logistics market in the years to come, for sure. But that we feel that we have sufficient differentiation with Amazon that we don't really see this as being a threat for us at this stage. Finally, on the order book, the order book is in -- as far as I can see, I mean, I would wish that it was smaller, Alex. That's pretty clear. I think that we see that there is a capacity overhang today in May of about 1 million, 1.5 million TEUs. And there was about 2 million TEUs that are basically used to serve the longer routes around the coast of Africa for the service affected that cannot sell to the Red Sea. So it's about 3.5 million TEUs overall that is the capacity overhang, the total capacity overhang to a normalized trade routes today. And the deliveries are okay this year, but they are picking up significantly next year, and that's going to put further pressure on the overhang that we see. My theory is still that it is of a size where if people are disciplined, it's manageable. But we need to see that discipline come into effect. And so far, we're getting disruptions upon disruptions, and that delays actually the need for people to take this on. The higher energy costs are going to trigger a whole new wave of so steaming, I believe. I mean, I can -- we're looking at it ourselves and the cost benefit is quite compelling. So I think that will certainly demand -- high energy costs will demand more ships to cope with -- effectively with the demand. But if we don't pick up scrapping and actually retiring some of the ships that have not been retired over the last 7 years, this is going to be extremely bumpy. But I think that what you can see with this crisis in how quickly and rapidly costs are being recouped there is -- I still have -- there are reasons for optimism that the conduct in the industry is different despite the fact that the CapEx conduct is not very encouraging, conduct on the ground on the P&L is much better than what we have seen in the previous years, and we'll have to see this play out even more in '27 and '28 for sure.

And sorry, if I just ask a very quick follow-up. Obviously, we've now had the second quarter of EBIT losses in Ocean. And in the past, you have talked about this on-the-ground discipline that the industry won't allow too many quarters of losses. So we're now in the second quarter. What did you mean then by saying not so pleasant place on EBITDA for the second half? Because I think that's something that the market doesn't want to understand? Like why would the EBITDA not be less in the second half?

I think the risk that you have on EBITDA is actually temporary pressure on it from -- the worst that happened to us is if demand softens slowly because before people act on capacity, they first start to use the pricing lever for a while to see if it's -- if that's going to solve the problem for them. If demand was to soften rapidly, just like we can see here, when the cost increase rapidly to get them recovered is good, and we can do it. When cost increases slowly, then it's much more difficult because the you don't have the same urgency. So I think if we saw a gradual softening of demand, you would see a period where people -- or you could see a period where people use pricing levers for a while to try to shore up their utilization. And until you go to an EBITDA-neutral freight rates, that might be tempting until then they start to switch to more capacity-driven tools. That's the concern that -- I don't think it's necessarily likely. But we're trying to have a range that encompasses both the most concerning and the most optimistic scenarios with what we know today. Again, there's a lot of things that have happened since we talked 3 months ago that may also change that. But with what we know today, we feel that the range that we have covers some of the worst scenario we can think of and some of the better scenarios we can think of.

The next question from the phone comes from Lars Heindorff with Nordea.

The first one is a follow-up on the slow steaming, Vincent, you mentioned that. I mean I don't know if you can quantify -- I think the average speed around is maybe slightly below 15 knots. I mean how much further down can it go? And what kind of impact will that have on supply? What -- how much can you actually tie up in terms of slowing down? And then the second part is on the savings from the slow steaming. And then a question regarding the costs. There is an other cost item of almost USD 250 million in the first quarter in Ocean. You said that you've been moving -- typically been moving bunker around. Is that related to that? And is that something that you expect to continue to do into the second quarter?

Yes. Thank you, Lars. On slow steaming, I think the global networks today, at least on the long haul, they are sailing probably in 16, 17 knots area. And it would be quite -- it would be economical to bring the vessel speed down to about 14, 14.5, 15 knots depending on the service and the route and how you can secure berth windows and so on in the ports. at the current price for bunker is actually it's quite a positive thing. The other thing that would be extremely positive from a fuel cost perspective is actually to reopen the Red Sea, as I think one of the questions previously I was alluding to because when you're sailing from India to the Mediterranean, it's a lot -- you're going to burn a lot less fuel by going through the Red Sea than you will -- if you have to go the long route as we do today. So those are the 2 things that we certainly are looking at. And it depends on the industry. It's pretty hard to assume exactly what people are going to do. I don't know. I only know what we're looking at. But if people were to do something similar to what we were to do, you could absorb between 1 million and 1.5 million TEUs in slow steaming effectively by reducing your cost in an economically positive way. So that's about the order of magnitude that there would be for me. And then on the other costs, let me -- let Robert give you an answer.

Yes. You might know that we obviously, like many others, we are trying to hedge some of the bunker costs. So this is, let's say, an unrealized loss on derivatives that we had to take according to the accounting standards. Again, it's unrealized. We'll need to see how this evolves, but that is the additional cost that we have seen.

And just, Robert, just on that one, which means that the physical movement of bunkers from North America to Asia, where the cost of that? It sounds terribly expensive. And as Vincent mentioned, DKK 1.5 billion on a quarterly basis. I mean, is that in network cost? Where is that showing up?

We will move to the next question. The next question from the phone comes from Arthur Trans Citi.

The first question I had was just around the Red Sea reopening. So if you imagine a scenario in which the hostility is ended tomorrow, what would be the earliest point that you could realistically imagine a full industry reentry to the Red Sea? Second question, just following up on the previous one. Are you able to just articulate how much of the [indiscernible] that you use is hedged? And then final one, if I may. Obviously, consensus EBITDA for the full year is towards the upper end of the range. It sounds like you are talking to a few uncertainties in H2 and potentially around timing even in Q2. Are you comfortable with consensus near the top of the range? Or would you rather it was somewhere else within that range?

Yes. So I think first on the guidance, I mean, I don't guide on the guidance. We provide a guidance, and I think that's I'm not going to be able to voice an opinion about where in the guidance is we should be. On the bunker, we don't have -- we don't hedge bunker. So the only thing that we have is how much we have on hand. And -- but we do not do speculative hedging of bunker. And then finally, on the Red Sea, it's really hard for me to talk to when -- how fast this could happen. I mean, as I mentioned, we are looking at it ourselves. It would have to be gradual because at least today, we would not -- we would have to go with either escort or monitoring, and there is limited capacity for that. So there is only so many services that we could send through. And I would think that others would have the same. And for it to be a full return, you would need to feel comfortable with the safety and security assessment that you can sell without any monitoring. And I have no idea given the volatility of the situation between U.S. and Iran for when that is going to be. It could be very soon or it could take a while.

Ladies and gentlemen, thank you. That was the last question. I would now like to turn the conference back over to Vincent Clerc for any closing remarks.

Thank you again for joining us today. To summarize, we have started 2026 with a quarter marked by strong volumes across all segments and equally important with is the strong cost containment that we have demonstrated, especially in Ocean, where we have seen a downward trend in unit cost since the inception of Gemini. Oversupply continues to affect container shipping, extend exerting downward pressure on rates that are visible in this quarter. While demand remains strong, this continued oversupply makes the ocean market environment very volatile. Nevertheless, as far as the Middle East conflict is concerned, its financial impact in the first quarter was limited, and we expect it to be managed without material financial impact in the coming quarters. Ultimately, notwithstanding the ongoing disruptions brought about by the conflict, the strength and the resilience of our business means that we are in a position to maintain full year guidance for 2026. Thank you for your attention, and we look forward to seeing many of you on the upcoming roadshows and at conferences. Thank you very much, and see you soon.