News / Hapag-Lloyd's 2019 profits soar, but it fears the shape of things to come

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Hapag-Lloyd outperformed its ocean carrier peers last year, recording a net profit of $418m against $54m in 2018.

Nevertheless, the carrier has warned that the impact of coronavirus on global demand would require capacity adjustments and adversely affect its earnings in the first half of this year, and beyond.

During an earnings call presentation today, chief executive Rolf Habben Jansen said “2019 might seem a long time ago”, given the current coronavirus crisis.

He said current expectation was for a financial hit from May onwards, after volumes carried at the beginning of Q1 were ahead of projections and current bookings were holding up.

Due to Covid-19 restrictions, he said the majority of Hapag-Lloyd’s staff were working remotely, with a “crisis committee” meeting every other day.

Hapag-Lloyd’s turnover increased by 3% in 2019, compared with the previous year, to $14.1bn, earned from carryings of 12m teu, which were only up 1.4% in line with the carrier’s strategy to target better-paying cargo.

Its “deliberate reduction of volume in the intra-Asia trade and focus on more profitable services” saw Hapag-Lloyd’s average rate per teu increase by 2.7% to $1,072 per teu.

The carrier saw a massive 65% increase in ebitda to $2.22bn, which included the positive effect of around $523m from the impact of the IFRS 16 new accounting rules on vessel charters.

By contrast, French carrier CMA CGM attributed part of the blame for a $229 net loss last year on the same IFRS 16 regulations.

“Today we are in rapidly changing and uncertain times, but that does not take away that 2019 was a very good year for Hapag-Lloyd,” said Mr Habben Jansen.

“We benefited from higher volumes and better freight rates, kept a close eye on our costs and brought down our debt significantly. We also continued implementing our Strategy 2023, and achieved a group net result that is well above the prior year result.”

After a “decent start” this year, Mr Habben Jansen said Hapag-Lloyd’s guidance of an ebitda of €1.7bn to €2.2bn was subject to “considerably higher uncertainties than normal”.

Earlier today Maersk suspended its 2020 guidance, citing “current uncertainties”.

Mr Habben Jansen said: “Hapag-Lloyd anticipates that transport capacity deployments may have to be adjusted in light of coronavirus in the coming months to cope with lower demand. The extent of the coronavirus outbreak cannot be accurately predicted, but Hapag-Lloyd expects it will have an impact on the development of earnings, at least in the first half of 2020.”

He said the carrier had been obliged to lease an additional 80,000 teu in Asia and 25,000 teu in Europe, due to equipment shortages resulting from the extended blank sailing programme after the Chinese new year.

As the lead line in THE Alliance, Hapag-Lloyd, along with its VSA partners ONE and Yang Ming and new member HMM, is preparing to launch a revised network from 1 April to coincide with the South Korean carrier joining the group.

However, given the virus-induced expected demand slump in Europe and the US, the alliance could be obliged to postpone the launch.

“2020 will be a very unusual year”, with “conditions in many markets changed very quickly over the last weeks”, said Mr Habben Jansen.

He said the carrier would take “precautionary financial measures to weather the storm”, if it lasted longer than anticipated.