In loss in the last quarter of 2023, the net profit of the world number five regular airline company has returned to green. But, with the exception of turnover, all indicators have fallen below the symbolic one billion mark. The outlook for the year remains cautious but optimistic.
Coming into the first three months of the year, sentiment is more positive than it was three months ago. Macroeconomic data sends encouraging signs although not uniformly distributed.
In the world’s two leading economic powers, the United States and China, which recorded growth of 5.3% and 3% respectively during the first quarter, forecasts were revised upwards. Imports and exports have regained some momentum, a factor which influences demand for maritime container transport and handling activity in terminals.
Photo credit: ©JMM
Exports and imports are regaining color
In a China paralyzed by the real estate crisis, exports of goods increased by 4.9% and imports by 5% compared to the first quarter of 2023 according to the National Bureau of Statistics of China (April 2024).
Across the Atlantic, imports of goods increased by 1% in the first three months while exports fell by 1.2% according to the US Department of Commerce.
In the Euro zone, consumption and production still remain stagnant but the specter of recession is receding according to financial institutions which are also optimistic about the decline in inflation. European exports increased slightly by 0.5% in the first two months of 2024 compared to the previous year’s period. On the other hand, imports of goods fell by 14.2%.
The improvement is reflected in container shipping. Transported volumes recovered by 12% during the first two months of the year (CTS data) compared to the comparable period in 2023, by 25.4% between Asia and North America and by 11.5% between Asia. and Northern Europe.
Freight rates rebound
Made nervous by geopolitical disruptions, freight rates have rebounded. The increase in distances generated by Houthi attacks in the Red Sea, from which a large part of the fleet has diverted to take the alternative route via the Cape of Good Hope, can only be profitable: it consumes capacity transport and de facto, causes an increase in transport costs
As a witness, the Shanghai Containerized Freight Index (SCFI), which tracks spot freight rates on the most important trade routes from Shanghai, was listed at 1,994 at the end of March 2024 compared to 853 at the end of December. At the end of March, the share of decommissioned ships represented only 0.9% of the global fleet compared to 2.3% in March 2023.
Photo credit: ©JMM
The net result turns green again
In this context, the Hapag-Lloyd group, which, since its stakes in terminals, has now separated its activities into two segments: “Liner Shipping” and “Terminal & Infrastructure”, concluded a first quarter which, contrary to all appearances, reflects the improvement. Because the German carrier was one of the companies that presented a fourth quarter of 2023 in deficit of $234 million.
During the first quarter, the net result returned to green ($325 million), certainly far from $2 billion carried out between January and March 2023. However, all the indicators have left the sphere of billions, except turnover, at $4.62 billion (including $4.1 billion with maritime activity alone), cut by $1.4 billion (- 24.2%) compared to the quarterly financial year of 2023.
Operating profits fall below the billion mark
On the other hand, operational results are now expressed in millions, with a Ebitda (consolidated earnings before interest, taxes, depreciation and amortization) of $942 million and one Operating profit before interest and taxes (Ebit) of $396 million.
The group’s commercial revenues were dragged down by a average revenue per TEU down $640, increased from $1,999 to $1,359. THE volumes transported on the rise of 6.8%, at 3 MEVP, did not make it possible to compensate.
Photo credit: ©JMM
Loss of 2,000 transport contracts
Although it lost 2,000 transport contracts (19,200 customers versus some 21,000 in the first quarter of 2023), the company managed to increase its volumes on trans-Pacific and intra-Asian traffic, due to “ in particular the increase in transport capacities », Specifies the group. Unsurprisingly, they have decreased in the Middle East where companies no longer transit.
The carrier also records its best revenues where it deploys the most services on a network which has 114. Thus its first market, Latin America where it deploys 24 lines compared to 9 between Asia and Europe for example. The South American continent contributed $953 million to the group’s turnover with 753,000 TEUs transported out of a total of 3 MEVP. But it is not with these services that the average revenue per TEU is the most lucrative (1,356 TEU), far behind the transpacific ($1,600) and Africa ($1,550), the latter served by 17 lines .
Rising expenses
Operating expense inflation is mainly related to bunker due to rerouting of ships around the Cape of Good Hope. At $597 per tonne, the average price of low sulfur fuel oil was $48/t lower than the same period last year. “ However, driven by the increase in bunker consumption compared to the prior year period, expenses increased by $9.1 million to reach $686 million. », Explains the management of Hapag-Lloyd.
Also, with maritime transport now subject to the EU emissions trading system, Hapag-Lloyd was obliged to purchase and submit allowances for €22.3 million.
THE container handling costs ($1.6 billion) are down by $19.8 million in connection with the reduction in demurrage and storage costs for containers. On the other hand, the costs generated by the repositioning have increased, mainly because of the additional handling generated by the disturbances in the Red Sea.
A profit of $35 million with the new activity
New segment created in the second half of 2023 following the acquisition of the Chilean port operator, Terminal & Infrastructure activityinto which the stakes held by Hapag-Lloyd in the terminals were paid, achieved an Ebitda of $35 million and an Ebit of $18 million.
“ Although our results are significantly lower than the exceptionally strong figures from the previous year, rates stabilized during the first quarter due to the re-routing of vessels around the Cape of Good Hope and increased demand for capacity. The many new ships that have been and will be delivered in 2024 have helped maintain supply chains without much disruption », says Rolf Habben Jansen, CEO of Hapag-Lloyd.
Cautious outlook
Fearing an imbalance between supply and demand given an additional capacity of 3 MEVP added to the market this year and the “high degree of uncertainty”, the company’s board of directors projects a Ebitda between $2.2 and $3.3 billion and one Ebit between 0 and $1.1 billion. This is nevertheless cautious optimism.
Not a single shipowner fails to highlight the structural overcapacity which risks eating into their profits and making them nervous, but with the exception of Maersk, they have all happily subscribed to it…
Hapag-Lloyd’s fleet capacity stood at just over 2 MEVP as of March 31, an increase of 13.7% year-on-year, of which 60% was owned. On that date, the world number five’s order book included eight container ships of 23,664 TEUs and one of 13,288 TEUs, delivery of which is scheduled for the years 2024 to 2025.
The Hamburg-based company has plenty to deal with adversity if it has to speak out. As with its peers, it holds high liquidity replenished thanks to the pandemic.
Adeline Descamps
