Hapag-Lloyd preliminary profits exceed expectations

Hapag-Lloyd

Hapag-Lloyd has just released some preliminary figures ahead of the formal publication of its half-year numbers. It has also updated its forecasts. The latter are optimistic.

In what it described as “preliminary and unaudited figures” Hapag-Lloyd reported that “Group EBITDA” (Earnings Before Interest, Depreciation and Amortisation) was €1.8bn for the first half of 2024, as compared to €3.5bn for the first half of 2023.  Group EBIT (Earnings Before Interest and Tax) was €0.8, down from €2.6bn in 2023. Understanding these numbers is not straightforward. Not only do they reflect the fall in freight rates away from the highs of the 2020-2022 crisis period, but they are also heavily influenced by the Red Sea Crisis.

The prospects for the second half are less complex but just as volatile. As Hapag-Lloyd states, “Because recent strong demand and increased short-term freight rates have exceeded expectations, earnings momentum for the second half of the year is likely to be above previous expectations”. In other words, the Red Sea Crisis and its effects have not only lasted longer than considered likely in early 2024 but the impact on the freight rates has been even greater.

The effect of this on Hapag-Lloyd’s profits will be substantial. The company’s outlook for results for the whole year is that “Group EBITDA for the full year is now expected to be in the range of €3.2 to 4.2 billion” which is up from a forecast of “€2.0 to 3.0 bn”. EBIT will be between “1.2 to 2.2 bn” as compared to the forecast of “€0.0 to 1.0 bn”.

The present container shipping market is a difficult environment to make predictions. Not only is there a strong possibility that the Red Sea Crisis could resolve itself, leading to a violent correction downwards of container freight rates, but the opposite could happen, with the problems around congestion could getting worse with issues emerging this week around labour disputes at the German ports. All of this makes projections of the performance of container shipping lines so hard as to be dangerous.

Author: Thomas Cullen

Source: Ti Insight

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