High freight rates lift Hapag-Lloyd's H1 profit

High freight rates lift Hapag-Lloyd’s H1 profit

Germany’s largest shipping company Hapag-Lloyd reported a jump in its net profit for the first six months of the year on the back of rocketing freight rates. The company posted a net profit of €2.7 billion ($3.3 billion), which compares to €285 million ($334.5 million). 

Commenting on a “very good first half year”, Hapag-Lloyd CEO Rolf Habben Jansen said the company has also reduced its net debt by $1.5 billion despite paying a higher dividend compared to the prior year.

Revenues increased in the first half year of 2021 by approximately 51 percent, to $10.6 billion (€8.8 billion), mainly because of a 46 percent higher average freight rate of 1,612 $/TEU (H1:2020: 1,104 $/TEU). The freight rate development was the result of high demand combined with scarce transport capacities and severe infrastructural bottlenecks. Transport volumes were up to 6,004 TTEU and thereby 4 percent higher than the comparable figure for the previous year, which was impacted by a slump in demand in the second quarter due to the Covid-19 pandemic. In addition, a roughly 6 percent lower average bunker consumption price, which amounted USD $421 per tonne in the first half year of 2021 (H1 2020: $448 per tonne), had a positive impact on earnings.

Capacity shortage to drive Hapag-Lloyd’s earnings in H2

While demand remains high in the current congested market environment, it is leading to a shortage of available weekly transportation capacity. For this reason, Hapag-Lloyd expects earnings to remain strong in the second half of the financial year.

Rolf Habben Jansen, “We are naturally pleased by this extraordinary financial result. But the bottlenecks in the supply chains continue to cause enormous strains and inefficiencies for all market participants and we have to do our utmost to resolve them jointly as soon as possible. Looking at the market environment today, we however do not believe that the situation will return to normal any time soon – despite all the efforts made and the additional container box capacity that is being injected. We currently expect the market situation only to ease in the first quarter of 2022 at the earliest.”

Hapag-Lloyd bumps FY2021 financial outlook

At the beginning of the second half-year, global demand for container transport remains at a high level. At the same time, operational disruptions along the entire supply chain continue to cause significant delays and thereby contribute to the shortage of available transport capacity. Hapag-Lloyd therefore expects earnings momentum to remain very strong in the second half of the financial year.

Previously, a gradual normalisation of the earnings trend had been expected for the second half-year. Given these circumstances, Hapag-Lloyd raised its earnings outlook for the 2021 financial year on 30 July 2021. EBITDA is now expected to be in the range of $9.2 to 11.2 billion or €7.6 to 9.3 billion and EBIT in the range of $7.5 to 9.5 billion or €6.2 to 7.9 billion, respectively.

The earnings expectation for the 2021 financial year is based in particular on the assumptions that the transport volume can be increased slightly and the average freight rate clearly compared to the previous year. At the same time, a clear increase in the average bunker consumption price is assumed, which should have a dampening effect on the development of earnings.

In view of the current above-average high volatility of freight rates, operational challenges due to existing infrastructural bottlenecks and the unpredictable further course of the Covid-19 pandemic and its economic effects, the forecast is subject to considerable uncertainty. The earnings forecast does not take into account impairments on goodwill, other intangible assets and property, plant and equipment in the course of the 2021 financial year, which are currently not expected but cannot be ruled out.

Author: Adnan Bajic

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