Volume recovery, cost-cutting measures help Hapag-Lloyd deliver strong results

German container shipping major Hapag-Lloyd reported strong earnings in the first nine months of this year, benefitting from volume recovery in the third quarter combined with stable freight rates and low bunker prices.

Afif containership. Image Courtesy: Hapag-Lloyd

The group’s net income stood at $605 million in the first nine months of 2020, an increase of $272 million over the previous year.

In addition, EBITDA amounted to more than $2 billion, representing a rise of $347 million over the prior-year figure.

In the third quarter alone, Hapag-Lloyd’s net income grew to $290 million from $168 million seen in Q3 2019, while EBITDA increased to $756 million from $617 million recorded in the corresponding quarter last year.

On the other hand, at around $10.5 billion after the first nine months of the year, revenues were about 1 per cent below the prior-year figure.

As explained, this can primarily be attributed to pandemic-related effects, including a double-digit drop in demand in the second quarter and an overall transport volume that was 3.5 per cent lower than the prior-year figure, at 8,696 TTEU.

The average freight rate was up 2 per cent, to 1,097 USD/TEU, compared to 1,075 USD/TEU in the first nine months last year, which had a positive impact on earnings. In addition, transport expenses decreased more than proportionately by 6 per cent, due to a combination of lower transport volumes, a lower average bunker price of USD 402 per metric tonne, and rigorous cost management as part of the company’s Performance Safeguarding Program (PSP). The first two factors have been contributing to Hapag-Lloyd’s cost-cutting strategy designed to save an amount in “the mid-triple-digit million range” in order to safeguard its liquidity and profitability.

“In this nine-month period, we have achieved a good result and strictly managed our costs while at the same time benefiting from improved market conditions in the third quarter,” Rolf Habben Jansen, CEO of Hapag-Lloyd, commented.

“However, with its increasing number of cases worldwide, the COVID-19 pandemic continues to pose high risks to the logistics industry and the supply chains of our customers. We will stick to our present course, continue to implement our Strategy 2023, and keep a close eye on the well-being of our employees, the needs of our customers and our operating cost.”

Based on the earnings forecast that was adjusted upwards in October, Hapag-Lloyd expects an EBITDA of EUR 2.4 to 2.6 billion and an EBIT of EUR 1.1 to 1.3 billion for the full financial year 2020.

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Hapag-Lloyd has a fleet of 234 containerships and a total transport capacity of 1.7 million TEU. 

Container shipping companies enjoy profitable third quarter but risks persist

Next to Hapag-Lloyd, other major shipping companies reported a strong third quarter of this year despite challenges related to the coronavirus pandemic.

South Korea’s HMM saw a net profit of $20.5 million in Q3 2020, compared to a loss of $103.4 million seen in the same period of 2019.

According to HMM, the result was driven by its efficient fleet operations, a string of cost-cutting measures and increased freight rates.

However, the reemergence of the coronavirus in the winter season is seen as a serious threat to the global economy. In addition, the continued trade tensions between the US and China will have a considerable impact on global trade, HMM believes.

For the past quarter/Q2 FY2020, Singapore-based Ocean Network Express (ONE) also said that its profit significantly increased to $515 million compared to the same period last year.

This increase has been attributed to the improvements in the short-term freight market following a return to steady cargo demand.

However, despite the currently steady cargo demand, with COVID-19 still spreading globally including the largest consuming areas such as the US and Europe, the cargo demand and short-term freight market continues to remain uncertain, ONE added.