CP Ships integration gives TUI shipping loss
Hapag-Lloyd and CP Ships, the liner shipping carriers of Germany’s TUI AG, posted a combined net loss of 41 million euros ($52.6 million) in the second quarter, following a one-off 30-million-euro ($38.5 million) expense relating to the integration of CP Ships.
In the second quarter 2005, the standalone Hapag-Lloyd posted a profit of 91 million euros ($116.7 million).
Shipping revenue in the second quarter 2006 benefited from the takeover, jumping 109.8 percent to 1.61 billion euros ($2.06 billion) with CP Ships contributing 706 million euros ($905.7 million). The group moved 1.29 million TEUs in the three month period with 791,000 TEUs attributed to Hapag-Lloyd and 496,000 TEUs to CP Ships. Hapag-Lloyd’s average freight rate declined 1.8 percent to $1,303 per TEU “primarily due to the decline in freight rates in the Far East trade.” CP Ships’ average rate improved 4.1 percent to $1,632 per TEU.
“The second quarter was characterized by a positive trend in tourism and a negative freight and cost development in shipping, the scope of which had not been expected,” said Michael Frenzel, TUI’s chairman.
After six months, the shipping unit posted a net loss of 66 million euros ($84.7 million), from a profit of 123 million euros in the first half 2005. Revenue soared 126.3 percent to 3.2 billion euros ($4.10 billion), compared to 1.4 billion euros last year.
“The development in the shipping division was characterized by declining freight rates and high costs. In particular the oil price-induced drastic increase in bunker costs had a negative impact,” TUI said. “Without the high one-off restructuring costs half-year earnings would have been positive.”
TUI confirmed its prediction from the first quarter that its shipping unit will not match the results of 2005. “In shipping, earnings in the 2006 financial year will be influenced by the integration of CP Ships into Hapag-Lloyd.
“Most of the integration costs of around 100 million euros ($128.3 million) will be incurred in 2006. Although volumes are developing positively it is expected that the shipping division will fall significantly short of last year’s high earnings,” TUI said.