Hapag-Lloyd Reports Another Quarter of Net Profits
Following on from the second quarter, Hapag-Lloyd once again generated a profit in the third quarter of the current financial year, primarily as a result of substantial cost reductions. Between July and September 2013, the group recorded a profit of €16.6 million, despite freight rates that continued to deteriorate. The average freight rate in the third quarter was $1,476/TEU, which was well below the previous year’s figure of $1,647/TEU. In contrast, the transport volume increased by 8.6%, from 1.28 to 1.39 million TEU. Revenue came to €1.664 billion, a decline on the prior year’s quarter (€1.765 billion), largely due to exchange rate effects. The group achieved an operating result of €66.9 million and EBITDA of €133.6 million in the third quarter.
“The freight rate developments in the third quarter, the peak season for the liner shipping industry, were very disappointing,” said Michael Behrendt, Chairman of the Executive Board of Hapag-Lloyd. “But as in the second quarter, we were able to offset the adverse impact that this had on earnings with additional cost reductions. As a result, we can report a group profit for the third quarter, in spite of the difficult market environment.” There has been no let-up in the pressure on freight rates in the fourth quarter, which is seasonally weaker anyway. “The irrational behavior in the industry, which once again caused rates to drop drastically in October, is totally incomprehensible,” Michael Behrendt added.
Hapag-Lloyd has therefore announced further rate increases for various trades in November and December.
The rate increases announced in the third quarter could not be achieved sufficiently in the market. This also had an impact on the average freight rate for the first nine months, which at $1,506/TEU was 4.3% lower than the prior year ($1,574/TEU). In contrast, the transport volume between January and September increased by 3.6% year on year to 4.11 million TEU (previous year: 3.96 million TEU), although this was not enough to fully offset the decline in the freight rate. At the nine-month mark, revenue totaled €5.022 billion. The approximately 2.7% year on year decline (from €5.160 billion) is almost entirely attributable to exchange rate effects, in particular the weakness of the U.S. dollar. Adjusted for exchange rate effects, revenue remains at the same level as the prior year.
At the end of the first nine months of the current financial year, cumulative EBITDA came to €305.4 million, which was a sizeable €60.4 million increase on the previous year’s figure. There was a more than fourfold increase in the positive operating result to €80.4 million (previous year: €17.9 million). Hapag-Lloyd was able to use the third quarter to further reduce the losses incurred in the first quarter, which is always weak, but failed to offset them due to the disappointing freight rate level. The group posted a cumulative net result of €-56.1 million in the first nine months of the year, which is €38.0 million higher than in the previous year.
The improvement in earnings in the first nine months was due to the company’s sizeable, global cost savings as well as a slight drop in the bunker consumption price. Fuel costs averaged $617/ metric ton between January and September (previous year: $665/ metric ton) and therefore remain very high in conjunction with freight rates that are clearly too low.
Investments of €588.5 million were made in the first nine months of 2013, in particular in ships and containers. Long-term financing has already been secured for the vessels on order and all the investments in containers which have been made and are planned. Equity of approximately €3 billion and an equity ratio of 41.8% (as of September 30) illustrate that Hapag-Lloyd’s financial structure remains sound. With liquidity reserves of over €690 million (including unused credit lines as at 30 September), the company is securely positioned for the future.
Hapag-Lloyd successfully placed a bond with a volume of €250 million on the capital market in September, to further optimize its financial structure and the maturity profile of its existing bonds. The bond has a maturity of five years and a coupon of 7.75%. Due to high demand, an additional volume of €150 million was placed on October 9 at an issue price of 101.75%. In October and November, half of the proceeds from the issue, €400 million in total, was used for the early redemption of portions of the existing Euro Notes issued at a higher rate of interest in 2010. The residual volume of the Euro Notes due in October 2015 has therefore been reduced from €480 million to 280 million.
The remaining €200 million from the current bond will be used for general corporate purposes, including the refinancing of outstanding financial debts.