News / Hapag books $4.7bn Q1 profit, but the outlook is uncertain as costs rise

“We have to accept that demand is going down,” said Hapag-Lloyd CFO Mark Frese, after announcing a net profit leap to $4.7bn in the first quarter.

He was standing in for CEO Rolf Habben Jansen at the carrier’s Q1 earnings call presentation this morning.

The company saw Q1 net profit, at $4.7bn, more than triple the $1.45bn for the same period of last year, and also expects a “strong second quarter” – but is much less certain about the outlook thereafter.

“Looking at the market data, we see volume growth is expected to be lower than anticipated, due to high inflation and geo-political risks which weigh on consumer sentiment,” said Mr Frese.

“Even if congestion stays at current levels, or there are new reasons for congestion, the overall sentiment we are seeing now is that demand is softening.”

He said demand in North America was “still relatively strong”, but there was “lower demand in Europe”.

And on spot rates, Mr Frese said he expected to see a “strong reduction” in the third quarter, with, in some instances, short-term rates falling back below contract rates.

“Although there are regional differences, the trend is the same; we are seeing a softening of spot rates globally,” he said.

“Newly concluded long-term and multi-year contracts will offer some protection from falling spot rates,” said Mr Frese, confirming that “roughly 50%” of Hapag-Lloyd business was supported by contracts, with about 10% represented by multi-year deals.

Nevertheless, the carrier’s Quick Quotes digital platform, which generally mirrors spot market rates, now accounts for more than a quarter of its total bookings, added Mr Frese.

Previously, Mr Habben Jansen had said the year had “got off to an exceptionally strong start” and, although there were “the first signs that the market has passed its peak”, he still expected a strong second quarter.

Hapag-Lloyd’s liftings were flat in Q1 as it transported 2,987,000 teu for revenue of $9bn, up 82% year on year, for an average rate of $2,774 per teu. This compares with Maersk’s average of $2,276 and fellow THE Alliance partner ONE’s $2,973 for the same period.

Meanwhile, transport expenses surged 21%, year on year, to $3.3bn, driven by a 68% hike in bunker costs and double-digit increases in handling, haulage, equipment and vessel costs.

However, Mr Frese was optimistic that some of these costs could be reduced in due course, but admitted that other costs might remain long-term.

On 28 April, based on an expected strong first-half result that will “exceed earlier expectations”, Hapag-Lloyd raised its full-year earnings forecast by $2.5bn, for an ebit in the range of $12.5bn to $14.5bn.

Hapag-Lloyd is currently ranked fifth in the carrier rankings, with a fleet of 248 ships for a capacity of 1.75m teu, with an orderbook of 416,000 teu.

For more analysis on Hapag-Lloyd’s results, go to Premium.