Hapag-Lloyd’s profits dropped in 2023

The sharp decline in freight rates after the end of the pandemic, has left a clear mark on the shipping company, Hapag-Lloyd. This is evidenced by the annual report tabled last Thursday (14MAR24), at the company’s headquarters in Hamburg. Revenue halved compared to 2022, dropping to just under 17.8 billion euros. Profit fell even more steeply, slipping from 17 billion euros in 2022, to 3 billion euros in the past financial year.

Hapag-Lloyd’s headquarters in downtown Hamburg, inaugurated in 2003, stands for tradition and modernity – photos:  CFG/hs

Although the transport volume remained stable at 11.9 million standard steel boxes, freight rates declined by almost 50% year-on-year. Hence, customers had to pay only 1,500 euros on average to ship a 20-foot container. The downward trend intensified towards the end of last year, seen by the negative EBIT posted by Hapag-Lloyd in Q4, 2023. An alarming signal as a quarterly loss has not happened since 2016. On the positive side: the yearly report shows a decrease in greenhouse gas emissions. Fleet modernization measures and other initiatives led to savings of 800,000 tons in comparison to the previous year.

Third-best year ever
Despite the decline in profits, the Hapag-Lloyd management was content with the 2003 annual results. It was the third-best year in the history of the shipping line, which currently operates a fleet of 278 vessels, emphasized CEO, Rolf Habben Jansen. His contract has been extended to 2029. At first glance, it is astonishing that Hapag-Lloyd’s consolidated profit was even higher than the consolidated EBIT of 2.5 billion euros. “Because we generated a positive financial result thanks to our high liquidity,” illustratedCFO, Mark Frese.

The shipping company will pay stockholders a dividend of 9.25 euros per share, subject to approval by the supervisory body. The City of Hamburg holds a 13.9% stake in Hapag-Lloyd and can expect a cash flow of 225 million euros (1.5 billion 2022). At Kuehne+Nagel and the Chilean shipping company, CSVA, the dividend is more than twice as high. Both hold around 30% in Hapag-Lloyd. Other shareholders are Qatar Holding (12.3%), and Saudi Arabian Public Investment Fund (10.2%). Only 3.6% of the shares are in free float.

Sailing around Africa the only option
While fuel prices remained at stable level, the shipping company has incurred considerable additional costs due to the longer sea routes going around the Cape of Good Hope. These prolonged voyages, compared to a Suez Canal passage and operated since the beginning of this year following massive Houthi shelling of merchant ships, were the only option for safety reasons. “The lives of our crew members are much more important to us than a longer journey time of seven days,” argued Mr. Habben Jansen. The Houthi attacks in the Red Sea and the Gulf of Aden, pushed freight rates up again. It is currently unclear how long this situation will last and what impact the enlarged sea route will have on business figures. In any case, the longer transport routes mean a cost disadvantage for Western shipping companies, as Chinese competitors such as Cosco, continue to use the Suez Canal. They are not being shot at by the Yemenite Houthi regime.

New hub and spoke system is coming
When asked about the partnership with Danish shipping giant, Maersk, marketed as ‘Gemini’, Habben Jansen said that this link will be “an enabler for quality, schedule reliability, and accelerated decarbonization.” A hub and spoke system is being set up to increase the efficiency of transportation. Large ships such as the Berlin Express (23,700 TEU), will transport the steel boxes between key ports along their intercontinental routes such as Singapore, Jeddah or Tangier on the West-East-West sectors. There, the shipments will then be transferred from the big vessels to smaller ships that will cover the final leg of the boxes’ voyage, calling at ports such as Antwerp, Wilhelmshaven, or in the case of Singapore hub, harbors in Vietnam, for instance.

Vessels of the Megamax class, such as the Berlin Express (23,600 teu), form the backbone of the hub and spoke system planned jointly with Maersk. H-L has ordered a total of 11 units – CFG/hs.

No integrator intentions
Addressed by CargoForwarder Global, the CEO emphasized that, unlike other major shipping companies, Hapag-Lloyd does not intend to become an integrator. “That is why we will not use Maersk Air Cargo’s freighter fleet capacity for our own shipments,” he clarified. For marine feeder services, Hapag-Lloyd will probably need an additional number of ships in the range of 5,000 to 6,000 TEU, he announced. The exact requirement still needs to be determined and depends on the market situation, he said.

The company’s ‘new kid on the block’, as Habben Jansen called the 2023 incepted Terminal business unit, “got off to a good start.” But he declined further investments during the next two year since prices have increased substantially. In mid-term, however, Hapag-Lloyd intends to acquire new assets, this way growing its self-managed and controlled port infrastructure. “We will continue to grow in our new Terminal and Infrastructure business, as well as our share and portfolio of hinterland transports,” Mr. Habben Jansen assured.

2024 is going to be challenging
For the current financial year, Hapag-Lloyd forecasts the Group EBITDA to be in the range of 1 to 3 billion euros and the Group EBIT to be in the range of minus 1 to 1 billion euros. However, this prediction remains subject to considerable uncertainty given the volatile development of freight rates and geopolitical challenges. Due to the multiple global crises “we expect to see an overall decrease in earnings in 2024. As part of our Strategy 2030, we will be focusing even more intensively on quality and sustainability. At the same time, we will also need to reinforce our top 5 position on the global market and realize improvements in terms of cost efficiency and productivity,” Mr. Habben Jansen rounded off.



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