By Mike Wackett
Another “highly dissatisfying result” from ocean carrier Hapag-Lloyd saw it post a net loss of 604 million euros ($654 million) for 2014, which its Chief Executive blamed on low freight rates and the integration costs of the merging of CSAV’s container business. In a teleconference presentation of the German carrier’s results – significantly worse than the $134-million loss in 2013 – Chief Executive Rolf Habben Jansen claimed that 2015 was “off to a good start”, but warned, “we have our work cut out for us in the next 24 months” to turn the business around.
The world’s fourth largest container line since the takeover of CSAV, Hapag-Lloyd grew volumes by 7.5 per cent last year to 5.9m TEUs, while revenue rose 3.7 per cent to 6.8 billion euros. However, average freight rates fell by 3.2 per cent to $1,434 per TEU. This compares with the $1,325 per TEU average rate of the highly profitable Maersk Line last year.
An EBIT loss of 383 million euros was recorded in the accounts, which includes 107 million euros of “transaction and restructuring costs” and 127 million euros of impairment charges as it off-loaded 16 ships that were “old, inefficient and too small”, according to Mr. Habben Jansen. The restructuring costs were mainly in the form of severance payments, payments to agents and the consequence of office closures, he said, adding that “staff selection is nearly 90 per cent complete” and that the new offices had been selected, which he said would “see us moving around a lot” in the next few months. But, Mr. Habben Jansen admitted that the underlying EBIT loss of 112 million euros was “most worrying”, given that freight rates, which he described as the “big joker in the pack”, continued to be under tremendous pressure on all trades and were unlikely to improve anytime soon. Indeed, Hapag-Lloyd suffered a full-house of average freight decreases on its five main tradelanes in 2014 – with a notable 6 per cent decline between Asia and Europe, which had deteriorated to $1,122 per TEU by the fourth quarter.
Nevertheless, the executive maintained that the integration of CSAV into the ‘new’ Hapag-Lloyd was on track and expected to be completed by the end of June. He remained confident that the promised annual $300 million in synergy savings could begin in 2016/2017. “We are preparing ourselves for rates that do not go up,” said Mr Habben Jansen. In order to achieve its aspiration of a “substantial positive operating result in 2015”, the improvement will have to come purely from cost reduction. Moreover, Hapag-Lloyd will be praying that fuel prices stay at their current levels, not least because around 20 per cent of the fuel now used in Hapag-Lloyd ships has to be low sulphur content.
Mr. Habben Jansen said he hoped that the alliances could bring some stability to trades, but admitted to not being “super-satisfied” with Hapag-Lloyd’s membership of the G6 last year – although there had been an improvement.
At 1m TEU of capacity, Hapag-Lloyd is now the world’s fourth-largest carrier following the integration of CSAV in its quest to “catch up the top three players”. Its position in the rankings could be short-lived however, given that fifth-placed Evergreen, with 900,000-TEU capacity, has aggressive intentions to join the “18,000-plus TEU vessel club”.
Reprinted courtesy of The Loadstar (www.loadstar.co.uk)