Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hapag-Lloyd AG (HPGLY, Financial) posted a good financial result for the first half with an EBIT of around $0.9 billion.
- Global container volumes were up 7% in the first half, with May and June recording the highest numbers ever.
- The company successfully renewed lease contracts in Port Everglades for another 10 years.
- Hapag-Lloyd AG (HPGLY) managed to maintain a very solid balance sheet with an equity position of USD20 billion and a liquidity reserve of USD7 billion.
- The company continued to invest in fleet and new service offerings, including the addition of six newbuildings, increasing capacity to 2.2 million TEUs.
Negative Points
- Group profit fell 75% to USD791 million in the first half of 2024 due to lower operating profits and financial results.
- Higher operating costs were driven by increased bunker consumption and the need to deploy more ships and containers.
- Freight rates declined 21% year over year to USD1,391 per TEU in the first half of 2024.
- The Middle East volumes were affected by the difficult security situation around the Red Sea, resulting in 21% lower volumes in the first half.
- Unit costs remained elevated despite successful cost measures, with bunker costs increasing due to the inclusion of the shipping sector in the EU emission trading system.
Q & A Highlights
Q: Can you explain the decline in Far East volumes in Q2? Is it due to longer shipment durations?
A: Yes, the decline is mainly driven by longer shipment durations. If we compare it to the previous year, volumes have actually been up. The longer shipment durations are due to rerouting around the Cape of Good Hope.
Q: Are the surcharges on contracts still in place given the recent spike in spot rates?
A: Yes, in principle, those surcharges are still in place. The standard contract rates are still very far below where the spot market is today.
Q: What is driving the renewed interest in ordering new capacity?
A: The renewed interest in ordering new capacity is driven by the aging global fleet and upcoming environmental regulations. Many of the slots being sold today are for deliveries in 2027-2029.
Q: What impact will the recent explosion at the Port of Ningbo have on operations?
A: We do not expect a major impact on operations at the Port of Ningbo or on our operations. The affected ship will be out of service for a while, but apart from that, no major impact is expected.
Q: How do you see the demand trends for Transatlantic and North-South trade lanes?
A: We see good utilization on the Transatlantic trade lane, but the rates are too low. North-South trade lanes are generally stable, but we do not see the same uptick in rates as we have seen in export rates out of Asia.
Q: What is your outlook for the order book and fleet modernization towards the end of the decade?
A: We are always evaluating options and it is not unlikely that we will order more ships in the next 12 months for deliveries towards the end of the decade.
Q: How much of the current order book is for growth versus replacement?
A: It is difficult to predict, but a significant chunk of the order book is likely for replacement. Given the aging fleet and upcoming scrapping, a significant portion of the order book will be to replace older ships.
Q: What is your guidance for Q3 in terms of EBITDA and EBIT?
A: We expect a strong third quarter, definitely stronger than the second quarter. However, the outlook for the remainder of the year is still subject to a high degree of uncertainty.
Q: Was the strong demand in May and June driven by consumption, restocking, or front-loading?
A: It was a combination of all three factors. There was an element of restocking, front-loading, and strong consumption.
Q: What is the potential for a strike at US East Coast ports and its impact?
A: The risk of a strike has increased compared to earlier this year. Customers may have front-loaded volumes in anticipation of potential disruptions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
