Hapag-Lloyd posts profit decline

First quarter 2020 results announced by Hapag-Lloyd reveal a mixed picture with cargo volumes and revenue up, but profits down

“Our financial result is below the first quarter of the previous year as we faced higher bunker prices after the new IMO 2020 rules on 1 January and we had a significant negative bunker stock valuation after the decline in crude oil prices at the end of the first quarter,” explained Rolf Habben Jansen, CEO of the company.

While there was some impact on operations from the COVID-2019 pandemic these were limited during Q1 2020 with the company expecting them to “become more visible” in the second quarter.

In Q1 2020, Jansen said the year had “gotten on to a good start” and pointed to the 4.2% rise in cargo volumes (up to 3.05M TEU) and the modest 1.4% increase in average freight rates (up to US$1,094/TEU) for the 9% rise in turnover. Group revenue of €3.34B compared with €3.06B in Q1 2019.

But earnings before interest tax depreciation and amortisation (EBITDA) and net profit both fell, declining by 4.1% (to €469M) and 74% to (€25M), respectively.

Primarily, the group’s lower levels of profitability were attributable to a 10% increase in transport expenses. Hapag-Lloyd’s bunker costs rose by 23% to US$523/tonne as a result of the transition to low-sulphur fuel oil required by the IMO 2020 regulation, for instance. The group also had a significant negative bunker stock valuation of US$64M at the end of Q1 2020 as a consequence of the slump in crude oil prices during the period.

Looking ahead, Jansen expects the coronavirus pandemic to have significant impacts on the business for the rest of the year. “Our main focus will continue to be the safety and well-being of our employees as well as the supply chains of our customers,” he stressed.

“We have taken a wide range of measures designed to save an amount in the mid-triple-digit million euro range to safeguard our profitability and liquidity. We adjust our service network to the lower demand and seek savings in all cost categories, from terminal, transport, equipment and network costs to overhead.”

He expects the group’s EBITDA to range between €1.7B and €2.2B, but with the upper end of the forecast to “be barely achievable from today’s perspective.” In 2019, Hapag-Lloyd’s EBITDA was €1.99B.