The German ocean carrier’s third quarter profit surged from 3.2 million euros in the third quarter of 2015 to 8.2 million euros, despite a drop in revenues and freight rates.
Hapag-Lloyd reported a profit of 8.2 million euros (U.S. $8.8 million) for the third quarter of 2016 compared with 3.2 million euros for the third quarter of 2015, despite a drop in revenues and freight rates.
The Hamburg, Germany-based ocean carrier had third quarter revenues of 1.9 billion euros, down from 2.1 billion euros a year prior, reflecting a lower average freight rate, which fell from $1,189 per TEU to $1,027 per TEU.
Hapag-Lloyd was able to offset the drop in freight rates by reducing transport expenses by 14.2 percent, and by carrying more cargo, with container volumes for the quarter rising 4.6 percent year-over-year to 1.95 million TEUs.
“The market has been very difficult so far this year, but in that environment, Hapag-Lloyd has performed relatively well, which underlines our competitiveness,” Hapag-Lloyd CEO Rolf Habben Jansen said. “The overall results so far this year remain unsatisfactory, but the net profit in Q3 indicates that we are on the right track and that our efforts to further reduce costs and to leverage economies of scale are paying off.”
He said that going forward, Hapag-Lloyd’s main focus will be to further optimize its costs, complete its acquisition of United Arab Shipping Co. (UASC) and “ensure a smooth implementation of THE Alliance,” the space sharing agreement it will enter into next spring with Yang Ming of Taiwan, along with the Japanese carriers NYK, MOL and “K” Line.
Hapag-Lloyd said that it is buying fuel at lower prices and using less of it to transport each container, noting how its average bunker consumption price totaled $195 per ton in the first nine months of 2016, $138 below the previous year’s figure.
In addition, Hapag-Lloyd said, that bunker consumption per slot totaled 3.28 metric tons compared to 3.48 metric tons for the first nine months of 2015.
Speaking with securities analysts, Habben Jansen said he did not expect material headwinds from rising bunker prices in 2017.
“Maybe the bunker price goes up a little bit, but then we will normally be able to pass it on to customers with some delays,” he explained.
Asked how the election of Donald Trump might affect shipping, Habben Jansen said it was “anyone’s guess. I think we should just wait and see and then we react when we see things coming.”
He noted how the futures for the Dow Jones Industrial Average plunged when it became apparent Trump would win the election only to rebound and close at a record high a couple of days later.
“I think if Trump wants to stimulate the economy, then in the end, that could also be good for trade. Let’s just wait and see what happens and we will just react accordingly.”
Habben Jansen said that rates on the Asia-Europe trade have “slightly recovered since the lows that they had in the first and second quarter,” while rates on the transpacific trade have improved significantly from what he said were “completely unsustainable levels.”
He said it was difficult to judge how much of a role the Hanjin bankruptcy has played in improving rates.
“I think it was a little bit of a wake up call for people in the industy because some people probably felt the rate level that we saw would be around for a very long time, but that also means you were simply neglecting that we were at a rate level where pretty much everybody was cash negative and that is just not sustainable over a longer period of time,” Habben Jansen said.
“We’ve seen a bit more rate stability in the last couple of weeks and months. How sustainable that will be remains to be seen. If we look at the market today, I would say volume is reasonably robust, rates are fairly stable but still at a level where the lines are not able to earn a proper return. How that is going to develop in the future, I think that is probably anybody’s guess.”
He cautioned, “Even when you see spot rates going up in some of the indexes, it takes quite a long time before you see them back in the results – because first you need to sell it, then people need to book it, then you have to move the container. Bear in mind that is only for the piece really moves at spot market and the recovery of the contract rates we will likely only see next year.”
Hapag-Lloyd posts jump in profit despite lower revenues
