By Mike Wackett
Hapag-Lloyd posted a net profit of $18 million in the second quarter of the year, after a loss of $111 million in the same period of 2016. This is in sharp contrast to many of its peers that have reported their half-year earnings – Maersk Line’s average rates were up 22% on a year ago. However, the carrier still recorded a deficit of $49 million for the first six months of trading, which it partly blames on the $130 million cost of the integration of UASC and a 59 per cent increase in the price of bunker fuel.
The merger, completed on 24 May, also had a negative impact on the container line’s average freight rate. Despite a big hike in container spot and contract rates on many tradelanes, Hapag-Lloyd’s average freight rate was flat compared with H1 2016, at $1,056 per TEU.
Drilling down into the carrier’s different sectors, average rates between Asia and Europe during the first six months were up by 26 per cent year over year, but down 3 per cent for the transpacific and 4 per cent for the Atlantic.
During an earnings conference call, Chief Executive Rolf Habben Jansen explained that Hapag-Lloyd’s average rate had been dragged down by the lower prices offered by UASC. An average rate increase of around 5 per cent would have been “more likely” with the new UASC business stripped out, he said. Moreover, notwithstanding the delayed effect of rate increases – only reflected in accounts at the end of each voyage –surprisingly, Hapag-Lloyd does not appear to be optimistic in its outlook of an improvement in its average rate per TEU for the remainder of the year.
Transported volume was up 14 per cent on the previous year in the first six months, to reach 4.2 million TEUs, but organically (excluding UASC) the increase was just over 7 per cent. And turnover for the half-year was up 16 per cent on 2016, at $4.9 billion, which includes some $52 million from UASC.
Mr. Habben Jansen did not sound quite as optimistic about the industry as did Maersk Group CEO Soren Skou earlier this month, but nonetheless agreed that “sector fundamentals continue to improve”.
In regard to THE Alliance, Mr. Habben Jansen said that he was “pretty happy with what we have seen so far”, but admitted that there had been some small start-up issues with the new vessel-sharing group.
In answer to analyst questions, he confirmed that after the delivery of a 15,000 TEU vessel ordered by UASC, Hapag-Lloyd had no plans to order new tonnage. Mr. Habben Jansen said THE Alliance had the right mix of sizes and believes “20,000 TEU ships are not suitable for every loop between Asia and Europe”.
Hapag-Lloyd expects annual cost synergies from the UASC integration of $435 million from 2019. Since the completion of the transaction, almost 400 staff have left the combined entity. There were 12,947 employees before the takeover: 9,413 at Hapag-Lloyd and 3,534 at UASC.
Hapag-Lloyd’s net debt leapt by $3.6 billion to $8.3 billion as a result of the consolidation of UASC Group.
Reprinted courtesy of The Loadstar (www.theloadstar.co.uk)