The German ocean carrier posted a net loss of 42.8 million euros (U.S. $48.4 million) on revenues of 1.93 billion euros.
Ocean carrier Hapag-Lloyd reported a net loss of 42.8 million euros (U.S. $48.4 million) in the first quarter of 2016 compared with a profit of $128 million euros in the first quarter of 2015, as the company saw a sharp drop in the average freight rates.
Revenues totaled 1.93 billion euros in the first quarter of 2016 compared with revenues of 2.3 billion euros in the first quarter of 2015, despite the 2.1 percent year-over-year throughput increase to 1.8 million TEUs.
Average freight rates fell to $1,067 per TEU in the first quarter of 2016, a 20 percent decline from the first quarter of 2015.
Despite the loss on the bottom line, the company noted it recorded a positive, if lower operating result. In the first quarter earnings before interest, taxes, depreciation and amortization (EBITDA) reached 123.4 million euros compared with 283.6 million euros in the first quarter of 2015. Meanwhile, earnings before interest and taxes (EBIT) totaled 4.8 million euros compare with 174.3 million euros a year earlier.
Hapag-Lloyd said the negative effects of the difficult market environment were partly offset by the cost-cutting and efficiency measures in what it calls its OCTAVE program, as well as a significantly lower average bunker consumption price of $178 per ton in the quarter compared with $378 per ton in the same period the prior year.
“In the seasonally weak first quarter we recorded an acceptable result with a small operating profit and an EBITDA margin of 6.4 percent. This was due in no small part to the synergy effects which have been achieved so far as a result of the merger with CSAV and the improvements to our cost base under the OCTAVE programme, which we implemented in 2015,” Hapag-Lloyd CEO Rolf Habben Jansen said. Those two factors together represent around $600 million in annual long-term earnings, the company said.
Habben Jansen also noted that a further OCTAVE 2 program this year will help Hapag-Lloyd reduce its cost base by a further high, double-digit million dollar amount.
He highlighted several other actions the company has taken this year including the deployment of two 3,5000-TEU ships in its cabotage niche business in South America, along with a new sales program called “compete to win,” which seeks to improve revenues.
Looking ahead, Hapag-Lloyd plans to form a new vessel sharing agreement called “THE Alliance” with five other carriers – NYK, MOL, “K” Line, Yang Ming, and Hanjin – next April. The company is continuing to hold talks with United Arab Shipping Co. about a possible business combination, Habben Jansen said. The alliance would look not only at port-to-port moves, “but everything we can do together,” Habben Jansen added.
In regards to the second half of 2016, Habben Jansen said he remains “cautiously optimistic.”
Hapag-Lloyd reports net loss of 42.8m euros in Q1
