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HAPAG - LLOYD AG / Key word(s): Half Year Results
Hamburg, 12 August 2014
Unsatisfactory rate development affects business in first half-year
Transport volume increased by 5.8% / Average rate down 6.4% / Currency-adjusted revenue remains stable / Transport expenses significantly reduced / Further cost-cutting measures in the pipeline
Hapag-Lloyd increased its transport volume in the first half of 2014, even though the market environment remains difficult. At around 2.9 million TEU, 5.8% more cargo was shipped this year than in the first six months of 2013. In contrast, the average freight rate developed negatively as a result of persistently tough competition across the market. After a weak first quarter, which is usual in the liner shipping sector, the upturn in the second quarter failed to live up to expectations. Consequently, the average freight rate in the first half of 2014 fell by 98 USD/TEU year on year to 1,424 USD/TEU. Revenue in the first six months amounted to EUR 3.21 billion - EUR 144 million lower than the prior year period, due to the poor freight rate development and the much weaker US dollar. Adjusted for exchange rate effects revenue remained stable (-0.1% compared to the prior year period).
As far as costs are concerned, Hapag-Lloyd reduced its transport expenses by EUR 79 million year on year to just under EUR 2.9 billion in the first half-year - despite the sizeable increase in transport volume. Overall, transport expenses per TEU averaged at USD 1,372 in the first half of 2014 - USD 57 per TEU less than the prior year period.
Even with reduced transport expenses, it was impossible to make up for the massive impact that falling freight rates had on earnings. In the first half of 2014, Hapag-Lloyd achieved an EBITDA of EUR 67.2 million (prior year period: EUR 171.8 million) and an operating result of EUR -73.7 million (prior year period: EUR 13.5 million). The Group net result of EUR -173.3 million (prior year period: EUR -72.7 million) includes one-off costs relating to the CSAV transaction.
'The fact that we ended up with this unsatisfactory result despite clear efforts to cut costs is down to the disappointing development of freight rates across all trades', said Rolf Habben Jansen, CEO of Hapag-Lloyd. 'We expect, however, to see a better result in the second half of the year even though the environment remains tough. We'll continue to cut costs and our merger with CSAV will enable us to realize synergies worth at least USD 300 million per annum in the future', he added.
The transaction is still subject to the approval of approximately a dozen competition authorities around the world. However, the first major milestone was reached at the end of July, when the transaction was rubber-stamped by the relevant US authorities. The transaction is expected to be concluded in the fourth quarter, once all the key competition authorities have granted their approval. Where legally permitted, preparations are already under way to integrate CSAV's container business into Hapag-Lloyd, in order to benefit from the synergies as soon as possible after the closing.
In view of the negative impact on earnings in the first half of 2014 resulting from the persistent pressure on the freight rate and in consideration of an unchanged difficult sector environment, Hapag-Lloyd aims for a positive operating result for 2014 as a whole, albeit clearly lower than in 2013.
12.08.2014 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
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