Financial News

Hamburg, 13 May 2014

Hapag-Lloyd competes well in a difficult market environment in the first quarter

5.5% greater transport volume / Freight rates remain under pressure / Persistently aggressive competition burdens earnings / Weak US dollar affects revenue development

Hapag-Lloyd competed well in the first quarter of the current financial year, despite a very challenging market environment and persistently high energy costs. Revenue reached EUR 1.55 billion in the first quarter (prior year period: EUR 1.65 billion). Adjusted for exchange rate fluctuations as a result of the weaker US dollar - the main currency in the shipping industry - the decline in revenue came to just 2.3%. This means that revenue was only slightly below the level of the corresponding prior year period. Aside from the weak US dollar, this development was also attributable to freight rates, which remained under considerable pressure. At USD 1,422/TEU, average freight rate in the first quarter of 2014 was USD 124/TEU down on the previous year. Hapag-Lloyd was nevertheless able to make the most of growth opportunities in this difficult market environment, thanks to its global service network and good positioning among its customers, increasing the transport volume by 5.5% year on year to 1.4 million TEU in the first quarter.

Hapag-Lloyd was also able to further reduce its costs compared with the prior year period. Transport expenses were cut by EUR 86 million to EUR 1.404 billion overall, despite the growth in volume of 5.5%. In particular, it was possible to reduce the cost of purchased services by more than EUR 53 million, notably with regard to container transport costs as well as rental charges for charters, leases and containers. Furthermore, bunker expenses declined slightly, due, on the one hand, to the use of more modern and efficient vessels such as the 13,200-TEU newbuildings and, on the other hand, to an average bunker consumption price which fell to USD 595/tonne in the first quarter (prior year period: USD 627/tonne). However, this still represents a very high overall level that cannot be compensated for in any way by current freight rates, which are far too low.

In the first quarter, which is traditionally the weakest quarter of the year in the liner shipping industry, Hapag-Lloyd achieved an EBITDA of EUR 2.9 million (prior year period: EUR 24.0 million) and an operating result of EUR -63.2 million (prior year period: EUR -53.2 million). The Group generated a net result of EUR -119.1 million (prior year period: EUR -93.6 million). This, however, includes one-off costs for the takeover of CSAV's container business, agreed on 16 April.

The aim for the 2014 financial year as a whole continues to be improving the overall freight rate compared with the previous year. "Our success in achieving this target will depend largely on the development of freight rates in the second half of the year and, above all, on the peak season," said Michael Behrendt, Chief Executive Officer of Hapag-Lloyd. "With the expansion of the G6 Alliance to include all east-west trades, which is currently being implemented in our service network, together with the takeover and integration of CSAV's container segment, which still has to be approved by the competition authorities, Hapag-Lloyd will again significantly improve its ability to compete. This means that we are well positioned for the future and for additional growth."

With an equity ratio of around 40% (as at 31.3.2014), Hapag-Lloyd has a sound balance sheet. With liquidity reserves of around EUR 535 million (including unused credit lines), the Company is also securely financed for the future.