Hapag-Lloyd has continued its successful adaption to crisis conditions with an increase in profits over the past half-year.
In the results published on Friday (August 14), Hapag-Lloyd saw Earnings Before Interest and Tax (EBIT) of $563m, a rise of 27% compared to the same period last year. EBITDA and ‘Group profit’ showed a similar trajectory. If anything, the results for the second quarter were better, with EBIT doubling year-on-year. In contrast revenue over the first-half was flat, falling by 1% to $7bn. Volumes of containers carried fell by 3.5% year-on-year to 5.8m TEUs over H1, although in the second quarter they crashed by 11% year-on-year.
One of the reasons for the increase in profits was that costs fell. Although Hapag-Lloyd is using more expensive fuels than last year, resulting in 4% higher bunker fuel costs, what the company calls “positive effects from a volume-related decline in transport expenses”. However, the cost picture must have been helped by a sharp fall in bunker fuel prices in the fourth quarter.
What did help was that freight rates remained firm, with the average rate edging up 3% to $1,104 per TEU over the half-year, although again rates seem to be slightly firmer in Q2.
It seems that it was the “Performance Safeguarding Programme” that Hapag-Lloyd embarked at the beginning of the crisis has delivered real cost savings. Presumably, this has been concentrated around the better utilisation of vessels. As Rolf Habben Jansen, Chief Executive Officer of Hapag-Lloyd commented, the company had “benefitted from the sudden drop in bunker prices, adjusted capacity to lower demand and took additional cost-cutting measures as part of our Performance Safeguarding Programme. On the whole, we have a good first half-year behind us despite the Coronavirus crisis”.
Hapag-Lloyd seems optimistic about the future. Its assumptions about the fall in demand proved to be too pessimistic and although the number of idled vessels in the container fleet is falling, new-builds are very low, suggesting that rates in the medium term may continue to remain hard, although the company notes that bunker fuel prices may rise. What has really changed at Hapag-Lloyd is its ability to control costs and keep rates, something it shares with most of the rest of the sector. If this is sustained profitability may strengthen further.
Source: Transport Intelligence, August 18, 2020
Author: Thomas Cullen