Hapag-Lloyd Profit Skyrockets With 'Stellar Performance'

Hapag-Lloyd Group's HPGLY 2020 net profit was up a staggering 155.4% to $1.06 billion from $418 million the previous year. 

"2020 has been exceptional, with stellar performance in the industry," Chief Financial Officer Mark Frese said during Hapag-Lloyd's presentation of its 2020 annual report with audited financial figures on a call Thursday morning. 

The figures were not surprising as they were in line with the preliminary numbers released in January, but they reinforced just how good the second-half performance was for the world's ocean container carriers. 

Full-year 2020 earnings before interest, taxes, depreciation and amortization (EBITDA) were $3.08 billion, a 38.6% hike from the $2.23 billion posted in 2019. Earnings before interest and taxes (EBIT) took a 65.3% leap from $2.22 billion in full-year 2019 to $1.5 billion in 2020.

Hapag-Lloyd said the main drivers of the "improved" results were cost savings of more than $500 million as well as "slightly improved freight rates and lower bunker prices."

The cargo surge of the third and fourth quarters was not the case in Q2, when "transport volumes plummeted" and full-year transport volumes were down 1.6% from 12 million twenty-foot equivalent units (TEUs) in 2019 to 11.8 million TEUs in 2019.

Despite the revenue surge of the third and fourth quarters, full-year revenue was up only 3.3%, from $14.11 billion in 2019 to $14.57 billion in 2020. The average freight rate full the full year was up 4% from $1,072 per TEUs in 2019 to $1,115 in 2020. 

Because of the "very successful financial year," Hapag-Lloyd said it was able to pay down about $1.3 billion in debt and proposed to pay out a dividend of 3.50 euros (about $4.18) per share.

Frese said Thursday, "In spite of COVID-19, we were able to improve our profitability, strengthen our balance sheet and earn our cost of capital for the first time in a decade."

Port congestion

Habben Jansen said congestion, particularly in San Pedro Bay as container ships wait at anchor for days before berthing at the ports of Los Angeles or Long Beach, remains a problem.

"That will take some time to get that resolved. We see a slight improvement — or a reduction of the number of ships waiting outside ports — but we also still see dwell times are really long and it takes a lot of time to get the boxes back out," he said. "I don't think that the congestion there is going to go away very soon. It's going to take a couple of months before things settle down. I hope we're going to be back to a bit more normal situation towards the end of Q2 to the latest early Q3."

Habben Jansen said port backups are not limited to Southern California.

"The port congestion has been very significant. A lot of people talk about LA/Long Beach and yes, it's an issue there, but it's definitely not the only place. If we look at the average delay we have seen in our voyages, in December we had three days. When we look ahead to January and February, it actually deteriorated further," he said.  

Hapag-Lloyd has tried "to provide additional flexibility if and where that is possible. We've offered discounted detention rates for all shippers. And then we've also had a number of initiatives to improve the customer service in our quality service promises," Habben Jansen said, adding that the "service quality is getting back up, even if I do believe we can get even better than where we are today. "

Strategic investments

Hapag-Lloyd announced Wednesday that it was acquiring NileDutch, a container shipping company that specializes in the African market. 

Habben Jansen said Hapag-Lloyd was lucky to acquire NileDutch as "options out there are limited" and that it was a good addition to the portfolio. 

"If you look at global trade and if you try to look ahead to the future five or 10 years, I think that one of the markets that for sure is going to grow above average is the African market. If you want to grow with the global market, then you need to make sure that you are also present in those markets that are growing above average," he said.

Habben Jansen said NileDutch has a little over 300 employees and moves about 200,000 TEUs annually. He expects the deal to close in the next three months.

Idle fleet is ‘basically zero'

Adding to the Hapag-Lloyd fleet through newbuilds is another strategic investment. 

"We invested for the first time in quite a few years into new ships, where we've chosen to go dual fuel" to help achieve sustainability goals, he said. 

Hapag-Lloyd announced in December that it had ordered six ultra large container ships for delivery between April and December 2023.

"We have chosen to go dual fuel energy. We've also chosen to go for large ships, which has a lot to do with the composition of our fleet. We are underrepresented in that large segment and as such I think it's a question of time before we would go to the yards to order those ships, so we are very happy we managed to sign that contract and I look forward to getting those ships from 2023 onwards," he said. 

"The orderbook is creeping up a little bit compared to the all-time low that it reached last year.

"The idle fleet is down to basically zero these days," Habben Jansen said. "In terms of our fleet, all ships that we have are sailing. We have invested significantly in making more boxes available. … We deployed many more extra loaders than we normally do and in terms of our network, we've certainly moved ships around to try and accommodate demand in those places where demand is the strongest and then where possible we try to avoid congested ports, but that's not all that easy." 

Regarding equipment, Habben Jansen said, "We've certainly seen a container shortage as well, driven by the fact that it took us about 20% longer the last couple of months to get the boxes back compared to a normal time, which means you need about 20% more boxes to move the same amount of cargo."

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