Hapag-Lloyd lost $981 million in 9 months

Hapag-Lloyd lost $981 million in 9 months    Hapag-Lloyd, the world's sixth-largest container shipping company, had an underlying loss of 675 million euros ($981 million) through nine months of 2009, compared to earnings before interest, taxes and amortization of 212 million euros ($308 million) in the same 2008 period.
   Revenue for the nine-month period ending Sept. 30 was 3.3 billion euros ($4.8 billion) compared to 4.6 billion euros ($6.7 billion).
   The nine-month results were released by TUI AG, the tourism company that owns a 43.33 percent stake in Hapag-Lloyd. (TUI is changing its financial reporting periods so that its fiscal year ends Sept. 30 instead of Dec. 31, and today announced results for its 'shortened' fiscal year.)

Frenzel

   But Michael Frenzel, chief executive officer of TUI, said, 'business development of Hapag-Lloyd has improved gradually over the last few months, with earnings currently picking up considerably due to successive rises in freight rates and notable effects of the cost containment program. Should this development continue over the next few months, we see an opportunity for Hapag-Lloyd to be sailing back to calmer waters earlier than we expected only a few weeks ago.'
   Frenzel said Hapag-Lloyd's transport volumes in the first nine months of 2009 were off 17.4 percent to 3.5 million TEU when compared to the same 2008 period and that average freight rates decreased 22.8 percent to $1,220 per TEU.
   He noted that according to forecasts by the economic forecasting firm IHS Global Insight, worldwide transport volumes in shipping will fall. 8 percent year-on-year in 2009, but that 'transport volumes on east/west trade lanes, which account for two-thirds of Hapag-Lloyd's total cargo volumes and are therefore of particular relevance to the company, are expected to decline by 16 percent on average.'
   He also noted, 'bunker prices picked up again in the course of the year, placing an additional burden on earnings.'
   While Frenzel said he thought the world economic downswing had 'bottomed out, the container business of Hapag-Lloyd, in particular, bore the full brunt of the economic and financial crisis.
   'The effects of the global recession threatened the very existence of Hapag-Lloyd. As the largest single shareholder and former parent company, we felt obliged to do everything in our power to help save Hapag-Lloyd. With our commitment we have succeeded in stabilizing Hapag-Lloyd as a German and Hanseatic showpiece enterprise and preserve the assets for our shareholders.'
   The company sold a majority stake in the company to a group of private investors, which have joined together as the 'Albert Ballin consortium.'
   As the world economy and shipping deteriorated, Frenzel noted that TUI had agreed to increase its stake in Hapag-Lloyd from 33.33 percent to 43.33 percent and provide additional support for the company.
   'Our original goal was to take a smaller stake than 43 percent in the acquiring company. However, we then had to take that stake as an exposure in order not to jeopardize the sale. In the medium to long term, however, we are planning to withdraw further from shipping,' he said.
   The company has the right to dispose of its 10 percent share in Hapag-Lloyd at any time and its other 33.33 percent stake beginning in 2012. He said the company has reached an agreement that it will jointly discuss what to do with its stake with the Alfred Ballin group.
   This summer, Hapag-Lloyd obtained a state guarantee of a credit facility worth 1.2 billion euros, but Frenzel said it was possible that with the improvement in freight rates, the company may not have to tap those funds.
   Meanwhile, TUI said Monday at a meeting of its supervisory board that J'rgen Krumnow resigned as a member of and that the board unanimously suggested Klaus Mangold be made a member. They said they opposed a motion by shipping magnate John Fredriksen to appoint his associate Tor Olav Tr'im to the board. Mangold is chairman of the Committee on Eastern European Economic Relations of the Federation of German Industries and a former member of the executive board of Daimler Chrysler.