Sustainable freight rates are the key to success for Hapag-Lloyd

“We will continue to work hard to make Hapag-Lloyd even more competitive and to build on our strong position,” explained Rolf Habben Jansen

Sustainable freight rates are the key to success for Hapag-Lloyd

Hapag-Lloyd closed the 2016 financial year with EBITDA of EUR 607.4 million (previous year: EUR 831 million) and an operating result (EBIT) of EUR 126.4 million (previous year: EUR 366.4 million). These figures are taken from the 2016 annual report, which was just published. The group’s net result came in at EUR -93.1 million (previous year: EUR 113.9 million).

“We had a very challenging market environment in the first six months of 2016, but were able to improve revenue and results significantly in the second half of the year. Even though we performed relatively well in the industry in 2016, the bottom line is still that this result is not satisfactory,” said Rolf Habben Jansen, Chief Executive Officer of Hapag-Lloyd.

In 2016, Hapag-Lloyd’s transport volume rose by 2.7 percent year on year to 7.6 million TEU. The average freight rate was USD 1,036/TEU, which was 15.4 percent lower than in the previous year (USD 1,225/TEU). Revenue fell from EUR 8.842 billion in the previous year to EUR 7.734 billion in 2016, mainly due to the significant decline in rates.

Despite an increase in transport volume, Hapag-Lloyd successfully reduced the costs of purchased services (e.g. hinterland container transport costs; chartering and leasing costs; and port, canal and terminal costs) by 8.3 percent (compared to 2015). This was primarily due to synergy effects achieved through the merger with CSAV and the OCTAVE cost-cutting programme but also due to market driven cost reductions (e.g. bunker).

The Hamburg-based shipping company is expecting some market improvement in 2017. “But our success will largely depend on our ability to achieve more sustainable freight rates. Longer term, the lack of orders for new builds and the continued high scrapping figures point to a better equilibrium between capacity supply and demand,” Habben Jansen explained the market environment.

Based on forecasts for global trade growth (IMF: 3.8%) and global container ship capacities, Hapag-Lloyd anticipates a moderate increase in the average freight rate and transport volume in 2017 (excluding UASC). The preparations for the closing of the merger with UASC are in their final stages. From 2019 onwards, the merger is expected to result in annual synergies of USD 435 million. “The key areas of focus for us in 2017 will be the launch of our new alliance as at 1 April and the rapid and seamless integration of UASC into Hapag-Lloyd after closing”, said Rolf Habben Jansen.

With a fleet of 166 modern container ships with a total cargo capacity of 963,000 TEU, Hapag-Lloyd is one of the world’s leading shipping lines. The company is has around 9,400 employees at 366 locations in 121 countries. Hapag-Lloyd has a container stock of 1.6 million TEU – including one of the largest and most modern reefer container fleets. 128 liner services worldwide ensure fast and reliable connections between all continents.