Hapag-Lloyd Raises Lower End of Outlook but Profit Falls
German container firm Hapag-Lloyd on Wednesday raised the lower end of its 2024 outlook amid rising demand and freight rates, but posted an 84% drop in first-quarter net profit.
Commercial shipping has faced global disruptions, including in the Red Sea region, where operators are avoiding the Suez Canal because of attacks on vessels by Yemen-based Houthi militants.
The crisis has raised freight rates because alternative trips around Africa's southern tip are longer and expensive.
"Global container volumes were up quite significantly especially in January and February, mostly on the transpacific routes, and there has been a steep increase in spot freight rates and strong demand," CEO Rolf Habben Jansen told analysts.
Net profit fell to 299 million euros ($324 million) from 1.893 billion a year earlier and earnings before interest and taxes (EBIT) were down 79% at 365 million euros as the company's performance could not match the buoyant post-pandemic conditions of a year earlier.
But full-year EBIT at the world's fifth-largest container shipper by volume, is now expected between zero and 1 billion euros, up from a mid-March forecast of minus 1 billion to 1 billion.
Costs are being passed on to customers not just at Hapag-Lloyd but also bigger competitor Maersk.
Hapag-Lloyd, in anticipation of numerous vessels joining the world fleet, has launched measures to contain costs.
Per-unit expenses in the first quarter decreased by 5% to $1,256 per 20-foot equivalent unit (TEU) compared to the prior year period.
Transport volumes increased by 6.8% to 3 million TEU. Containers can be packed with anything from refrigerated fruit and shellfish to TVs and cars.
"There is an element of restocking," Habben Jansen said, commenting on demand spikes in recent weeks that have pushed up share prices in the sector.
But he was not certain whether the trend could last much beyond the first half.
Hapag-Lloyd shares in a small free float were down 0.3% at 1340 GMT, having gained 11% over the last month.
($1 = 0.9241 euros)
(Reuters - Reporting by Vera Eckert and Elke Ahlswede; editing by Kirsti Knolle, Jason Neely and Rod Nickel)