Hapag-Lloyd finally completes merger with UASC
Hapag-Lloyd and UASC today pushed through further consolidation in the liner shipping industry as the ...
Hapag-Lloyd outperformed its liner peers in the third quarter of the year, producing a $9m net profit.
The German container line said it anticipated further gains from its merger with UASC and the closer working relationship within the new THE Alliance.
However, liftings grew just 1.3%, year-on-year, over the first nine months of the year to 5.65m teu, with its average freight rate declining 17.7% to $1,037 per teu.
Helping offset the downward pressure on rates, due to chronic overcapacity on the major trades, was a 41.5% fall in fuel prices during the period.
On the top line, for the nine-month period, revenue fell 16.1% to $6.4bn and EBITDA by 44.8% to $425m, resulting in a net loss of $149m, compared with the previous year’s $179m surplus.
“The overall results so far this year remain unsatisfactory,” said chief executive Rolf Habben Jansen.
However, he added: “But the net profit in the third-quarter indicates that we are on the right track and that our efforts to further reduce costs and leverage economies of scale are paying off.”
Mr Habben Jansen said Hapag-Lloyd was “increasingly seeing signs that things are getting better”, in regards to sustainable freight rates, and described the Hanjin bankruptcy and the rush to consolidate liner businesses as “a wake-up call” for “people that thought sub economic rates would be around for a long time”.
He explained that substantial increases in freight rates from Asia to Latin America had been a major driver in Hapag-Lloyd’s third-quarter performance. He also said there had been a “short-term positive effect” on Asia-Europe rates after Hanjin Shipping’s sudden demise, and a more lasting positive impact on transpacific rates.
Echoing expectations recently expressed by rival Maersk Line, Mr Habben Jansen believed contract rates would “be higher next year” for both Asia-Europe and the transpacific. He would not be drawn on a percentage increase, but said the line didn’t need “a dramatic recovery of rates” to achieve satisfactory profits next year.
He hoped the merger with UASC would be completed by the end of the year, following which integration of the two companies would “move ahead very swiftly” to create anticipated annual synergies of $435m from 2019.
He said the “deal rationale” was, first and foremost, scale and the combination of Hapag-Lloyd and UASC would assure the carrier a top-five ranking globally and provide access to a young and fuel-efficient fleet with a large share of ultra-large container vessels.
Mr Habben Jansen was also positive about the THE Alliance next April, not least because of the forthcoming merger of the Japanese lines’ container business. The grouping would work “closer than the other alliances” and that the members were, subject to regulatory approval, hoping to find new operational synergies “not yet been identified by the others”.
With a 44% share, Hapag-Lloyd is the lead line in the VSA, ahead of the combined share of K Line, MOL and NYK at 40% and the 16% share of Yang Ming.
Noting that Hapag-Lloyd had “improved much more than its competitors”, and complimenting the carrier on its impressive vessel utilisation levels, Lars Jensen, chief executive and partner at SeaIntelligence Consulting, said the Q3 result proved that “size is not all that matters in this industry”.