Hapag-Lloyd sinks deeper into the red

Germany’s largest container shipping company, which attributed its 62.1 million euro net loss for the quarter to higher bunker prices and lower freight rates, says its merger with UASC is expected to close by the end of May.    Hapag-Lloyd, Germany’s largest container shipping company, recorded a net loss of 62.1 million euros (U.S. $67.9 million) for the first quarter of 2017, compared to a net loss of EUR 42.8 million for the first quarter of 2016.
   The company attributed the losses primarily to higher bunker prices and lower freight rates.
   Revenues for the quarter stood at EUR 2.13 billion, up 10.4 percent year-over-year, resulting from higher transport volumes and exchange rate effects, Hapag-Lloyd said.
   Hapag-Lloyd transported 1.93 million TEUs during the quarter, up 6.8 percent from the first quarter of 2016. The average freight rate for the quarter, however, slipped 1.9 percent year-over-year to $1,047 per TEU.
   At $313 per metric ton, the average bunker price was 58.9 percent higher from the first quarter of 2016, and the highest level seen since June 2015.
   During the first quarter of 2016, Hapag-Lloyd was still a member of the G6 Alliance along with OOCL, NYK, MOL, HMM and APL, but two new ocean carrier alliances set sail at the beginning of last month, with Hapag-Lloyd becoming a member of “THE” Alliance, which also includes NYK, Yang Ming, MOL and “K” Line.
   Looking ahead, Hapag-Lloyd said its merger with United Arab Shipping Company (UASC), a Kuwait-based ocean carrier owned by a conglomerate of wealthy Middle Eastern states, is expected to take place by the end of May 2017.
   At the end of the first quarter, Hapag-Lloyd had a fleet of 172 vessels, while UASC has a fleet of 60 vessels, according to its website.
   The merger with UASC is expected to generate annual savings of $435 million from 2019 onwards, with a large portion already to be achieved in 2018.
   The two carriers signed a business combination agreement on July 15, 2016, to merge their container shipping activities, and on March 17, 2017, agreed to extend the long-stop date under the agreement to May 21, 2017.
   “The business activities are due to be merged under company law via a non-cash capital increase in exchange for the issuing of approximately 45.9 million Hapag-Lloyd shares,” Hapag-Lloyd said.
   “The business combination agreement stipulates that a cash capital increase of $400 million will be carried out within six months of the completion of the merger,” the company added. “It is currently assumed that the expenses for the transaction and for the integration of UASC’s container shipping activities would total approximately $150 million. The majority of these would be incurred in the current fiscal year.”