CMA CGM Air Cargo in Q3: profit, loss or breakeven? Not saying
CMA CGM is keeping tight-lipped about its third-quarter airline results. In fact, about all its ...
After sliding back into the red in the first three months of the year, and predicting a “tough” second quarter, Hapag-Lloyd is bullish about the prospects of a recovery in the second half.
The German carrier loaded 2.9m teu in the first quarter, which is 48% higher than the same period of 2017, however excluding the merger of UASC, on a like-for-like basis volumes grew at a below market level of 2.5%.
With the inclusion of UASC, revenue at $3.2bn was up by 42% on the previous year, while the average freight rate slid 2.6% to $1,029 per teu, although on a pro-forma basis there was actually an increase of 7.1%, reflecting the lower rates of UASC’s business.
Hapag-Lloyd recorded a net loss of $42m in Q1, reversing a profit of $28m achieved in the last three months of 2017.
Explaining the setback in an investor presentation this morning, chief executive Rolf Habben Jansen said: “We have had a solid start into the current year, but the market environment is challenging.”
Mr Habben Jansen said that freight rates had been “under pressure”, while bunker, charter and trucking costs were all up.
The average cost of bunker fuel paid by Hapag-Lloyd in the first quarter was $372 per tonne, compared with $313 in the same period last year, but since then the cost has spiralled to over $400 per tonne with oil prices increasing daily.
Mr Habben Jansen confirmed that it typically takes “one to two quarters” to recover fuel increases from customers.
So far the carrier has not felt the full impact of the spike in vessel charter rates on its bottom line, but as extensions to time charters are negotiated Mr Habben Jansen said that the carrier would “sadly start to incur higher rates”.
Nevertheless, the executive pointed out that Hapag-Lloyd’s percentage of chartered-in tonnage at some 35% of its fleet was significantly lower than many competitors, with for instance CMA CGM and COSCO leasing around 62% and 69% of their vessels respectively.
Mr Habben Jansen said he based his H2 recovery expectations on the current strong demand boosting freight rates, underpinned by predictions of “a decent peak season”.
In terms of contract business he said that rates from Asia to Europe were agreed “well above spot rates” and up on 2017 deals, but that for the transpacific it was still “too early” to call, also whether the increases so far obtained would be sufficient to mitigate the extra cost of fuel.
Overall Mr Habben Jansen said that he expected the carrier’s performance in both Q3 and Q4 to be “materially better” but added the caveat, “the proof of the pudding will be in the eating”.
In regard to the looming low-sulphur regulations Hapag-Lloyd is “still evaluating all options” ahead of the enforcement from January 2020, but expected that its fleet would be powered by a combination of higher costing low-sulphur fuel (LSFO), cheaper heavy fuel oil (HFO) on ships with scrubber systems installed, and LNG, given that it inherited 17 vessels from UASC that are ‘LNG-ready’.
The extra cost for ships that burn LSFO, said Mr Habben Jansen, would need to be passed onto the customer as it was “not possible to absorb”.
He added that from early discussions with some major accounts “customers understood” that they had to pay more from 2020.
Hapag-Lloyd’s Q1 performance is in keeping with its peers who have reported their results so far.
COSCO saw its profits slump by a third to $28m, while Taiwanese carrier Yang Ming also fell back into the red posting a net loss of $67m for the first quarter.
But despite the rocky start to the year, analysts at investment banker Jefferies supported the cautious optimism of Mr Habben Jansen.
In an upbeat note to clients today it said: “We continue to believe the container shipping sector is set to benefit from a rapidly improving market balance.”