Last year, the container shipping company almost doubled its profit thanks to sharply increased freight prices.
(Photo: dpa)
Dusseldorf Germany’s largest container shipping company, Hapag-Lloyd, is anticipating a drop in profits of around 80 percent due to significantly lower freight prices for container transport and rising overall costs. For the current financial year, earnings before interest and taxes (EBIT) are expected to fall to two to four billion euros, said CEO Rolf Habben Jansen on Thursday.
At the same time he announced austerity measures at the world’s fifth largest container shipping company. “We will take costs out where necessary and possible,” he said. He did not give any details.
According to the Shanghai Containerized Freight Index (SCFI), spot rates worldwide have fallen on average from over 4,000 to currently 975 dollars per standard container (TEU) since the summer. Because Hapag-Lloyd transports around half of its steel boxes on the basis of long-term contracts, average freight rates there fell more slowly. In the case of renegotiations this year, however, the fall in prices should also have an impact here.
Hapag-Lloyd is made even more difficult by the fact that the transport costs per container have risen by 18 percent over the past year – almost half of this is due to the increase in the price of marine diesel. The shipping company puts the average additional costs at over 200 euros.
In the past financial year, Hapag-Lloyd once again exceeded the record result of the previous year and generated a net profit of 17 billion euros. This put the shipping company, which had been making losses for many years, on an equal footing with the top Dax earners Mercedes, VW and BMW. Even the now targeted EBIT of two to four billion euros would be the third best result for the Hamburg group in its 175-year company history. Hapag had to pay just 1.2 percent of the profit to the tax office because of the favorable tonnage tax.
The results of the past year, which was characterized by delivery bottlenecks and correspondingly high freight prices, are staggering. The profit was higher than the total value of the invested capital, resulting in a return on invested capital (ROIC) of 112 percent. With the cash flow from ongoing business of 19.5 billion euros, Hapag-Lloyd could have bought all of its assets needed for operations a second time.
63 euros dividend per share
First and foremost, the shareholders will benefit from this. According to Habben Jansen, a dividend of 63 euros per share certificate is to be paid out, almost twice as much as last year and thus eleven billion euros in total.
Major shareholder Klaus-Michael Kühne alone, who holds 30 percent of the shipping company, will receive 3.3 billion euros, as will the Chilean family Luksic, who brought their shipping company CSAV to Hapag-Lloyd in 2014 and received a block of shares in return. The city of Hamburg, which indirectly owns 13.9 percent of the shares, can look forward to a distribution of more than 1.5 billion euros.
However, the prospects for the Hapag-Lloyd share, which was down a good 0.6 percent at 280 euros on Tuesday afternoon, were clouded by the announcement of the significant drop in profits. The latest analyst estimates put the price target at just 150 euros on average.
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