Hapag-Lloyd has confirmed it has had a good year. On January 27, the Hamburg based shipping line released preliminary full-year results that showed operating profits had increased by around a third, with Earnings Before Interest, Depreciation and Amortisation (EBITDA) “increased to more than $3bn” compared to the $2.2bn in 2019. Earnings Before Interest and Tax saw an even greater rise, up by $600m to $1.5bn.
Revenues, however, were nearly flat, up just $500m at $14.6m. So, Hapag-Lloyd’s progress has been overwhelmingly focussed on improving margins.
Part of the explanation for these trends is seen by looking at Hapag-Lloyd’s operational numbers. Volumes of containers may have fallen by 200,000 TEU to a total of 11.8m TEU, but average freight-rates increased by $43 per container to $1,115 per TEU. This is a useful but not an enormous increase and does not wholly explain the leap in profits. Indeed, bearing in mind the state of the market such an average rate increase is rather moderate, suggesting that Hapag-Lloyd has less exposure to the spot market, rather relying on the larger and more stable contract segment. Hardly unexpected.
Hapag-Lloyd elaborated on its performance, saying it was the result of “improved freight rates and lower bunker prices as well as cost savings of roughly $500m resulting from the successful implementation of the Performance Safeguarding Program”. Certainly, gains from bunker prices may have been important but it is probable that a major factor in better performance was the high utilisation of ships. No numbers were given around this, yet it is known that services have been blanked through much of the year and thus related running costs are likely to have been amortised more effectively.
Looking at the underlying trends described in this admittedly limited release, prospects for Hapag-Lloyd look bright, at least in the short-to-medium term. Although bunker fuel prices may climb, demand growth is likely to be sustained but fleet sizes are unlikely to keep pace, meaning that freight rates are likely to remain robust.
Source: Transport Intelligence, January 28, 2021
Author: Thomas Cullen
