The German container carrier attributed its swing to a $127.5 million profit in 2015 from a $675.6 loss in 2014 to the merger with Chilean carrier CSAV, internal cost-cutting, and lower external costs, including a big drop in fuel prices.
German ocean carrier Hapag-Lloyd on Wednesday reported a net profit of 114 million euros ($127.5 million) in 2015 compared to a loss of 604 million euros ($675.6 million) the previous year.
The company attributed the turnaround to synergies resulting from the quick integration of Chilean carrier CSAV’s container business, which it acquired in 2014, as well as cost-cutting, and a more competitive fleet as the company replaced older ships with more efficient newer tonnage.
Following the merger with CSAV, Hapag-Lloyd’s revenues jumped from 6.81 billion euros ($7.61 billion) in 2014 to 8.84 billion euros ($9.88 billion) in 2015.
“The result for the year is in line with our expectations. Hapag-Lloyd has delivered what we promised. Also, in comparison with our main competitors, Hapag-Lloyd has made up tremendous ground and is back among the top performers in the industry,” CEO Rolf Habben Jansen said of the turnaround.
He said the company’s internal cost-cutting and efficiency program, dubbed OCTAVE, will contribute total earnings of $600 million from 2016, onward, but over “70 percent of the expected result improvements have been realized in 2015 already.”
“On the back of this success, we already launched OCTAVE 2 towards the end of 2015. In this program we have again identified promising potential that should further improve our efficiency,” he added.
In 2015, Hapag-Lloyd’s transport volumes rose 25.3 percent year-over-year to 7.4 million TEUs, but the average freight rate was $1,225 per TEU, a decline of $202 per TEU or 14.2 percent from 2014.
The Hamburg-based carrier said its transport expenses per TEU decreased by 20.1 percent from $1,363 per TEU in 2014 to $1,089 per TEU last year. This was the result of both lower fuel prices — $312 per ton in 2015 versus $575 per ton in 2014 — as well as less fuel used per TEU transported and the “OCTAVE” program.
“In 2016 we will continue to work on our competitiveness, to maintain and further strengthen our performance in the industry,” said Habben Jansen. “We are well positioned thanks to our balanced portfolio across all trades and our strong presence in attractive niche markets such as reefer, special cargo, dangerous goods or cabotage.”
Looking forward to the remainder of 2016, he said, “We believe that the ongoing consolidation and the upcoming new alliance set-up should add stability to the market, and that there will be some recovery of the market.”
Under these conditions, with a normal peak season, further synergy effects, additional cost reductions and efficiency projects, Hapag-Lloyd plans to achieve a moderate increase in EBITDA and a clear increase in EBIT in the current financial year when compared to 2015.
Hapag-Lloyd also said it expects the oversupply of containerships to ease in the coming year. While supply grew 8.3 percent and demand just 1 percent in 2015, the company expects supply growth of just 4.7 percent in 2016 and demand for container transport to expand 3.5 percent this year. The supply demand picture will improve further in 2017, when it expects demand to increase 4.9 percent and supply to increase just 4.4 percent, Hapag-Lloyd said.
The company added it believes vessel sizes are reaching their economic maximum, a trend that it says will help reduce the orderbook for new ships going forward.
Habben Jansen said he expects to see more scrapping and ships being idled this year, but that it was still unclear at the end of January how quickly rates would recover.
Habben Jansen also said he expects more clarity on the future shape of liner shipping alliances within the next couple of months. Hapag-Lloyd is a member of the so-called G6 Alliance with APL, Hyundai Merchant Marine, MOL, NYK, and OOCL. Neptune Orient Lines, parent of APL, is being acquired by CMA CGM, which has said it will make APL part of the Ocean3 Alliance it has set up with United Arab Shipping Co. and China Shipping (CSCL). CSCL, however, recently merged with fellow state-owned line COSCO, which part of yet another alliance, the CKYHE, along with “K” Line, Yang Ming, Hanjin and Evergreen Line.
Hapag-Lloyd gets back in the black for 2015 despite ‘challenging environment’
