Unsurprisingly Hapag-Lloyd saw profits fall in Q1 2024 as compared to Q1 2023. On a year-on-year basis, revenue was 23% lower at US$4,623m whilst EBITDA (Earnings Before Interest Tax Depreciation and Amortisation) was down 60%, EBIT (Earnings Before Interest and Tax) down 79% and total group profits was 84% lower at US$325m. At the core Liner Shipping business, volumes were up by 6.8% to 3million TEU but compared to the year before average freight rates were down 32%. Of course, the profits in 2023 were exceptional and comparisons are not that useful.
What is useful to measure is the degree to which the Red Sea crisis has driven-up both freight rates and profits in the sector, as compared to the latter half of 2023. As Hapag Lloyd commented “Even though our results are significantly below the exceptionally strong figures from the previous year… rates stabilised in the first quarter due to the rerouting of ships around the Cape of Good Hope and higher demand for capacity. The numerous new ships that have and will be delivered across the industry in 2024 have been instrumental to keep the Supply Chains going without too much disruption”.
The “rate stabilisation” of course is what has delivered Hapag-Lloyd’s profitability. There remains of course, the question of whether this will be sustained. Hapag-Lloyd’s commentary on this is interesting as it admits the high degree of uncertainty in the container market at present. The company said that it expected EBIT for the year to be in the “in the range of USD 0 to 1.1 billion” and that “it is still assumed that a large part of the projected result will be generated in the first half of the year” continuing that “in view of the highly volatile development of freight rates and major geopolitical challenges, this forecast remains subject to a high degree of uncertainty”.
Hapag-Lloyd is one of the most focused and profitable of the large container shipping lines, yet even it is facing a very uncertain short-term prospect.
Author: Thomas Cullen
Source: Ti Insight
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