Movers, shakers and outliers

Movers, shakers and outliers       Despite the carnage in the container-shipping industry toward the end of 2008, a few carriers had a pretty nice year for themselves.
      And interestingly, the movers and shakers tended to be medium-sized lines that had a recent history of so-so profits and profit margins relative to their top 20 competitors.
      The duo of Hyundai Merchant Marine and Hapag-Lloyd moved up five and three places, respectively. Of those American Shipper examined, they were also the only lines (aside from top dog Maersk) to grow profits in 2008.
      Collectively, the two lines alone made $759 million, or one-third of the $2.25 billion made by the 16 carriers examined in this year's 'Who's making money.'
      Hyundai, in particular, was able to carve out healthy profit margins ' 7.3 percent, compared to 6.2 percent in 2007 ' far in excess of the 1.7 percent average for all the lines on the list.
      Hyundai's margin is especially notable given its relative lack of volume compared to other major carriers. Only three carriers on the list carried fewer TEUs in 2008, but that lack of scale didn't affect the Korean line's ability to establish a strong margin.
      Hapag-Lloyd also didn't seem bothered by the behind-the-scenes machinations that saw it sold to a consortium of Hamburg-based businessmen ' though former parent TUI still effectively controls two-thirds of the container line. The German line grew profits 15.3 percent from 2007 to 2008, and that was on the back of a strong rebound in 2007. Its profit margin slipped slightly, but still tied for fourth-best among its rivals.
      On the other end of the list, the container divisions of two-thirds of Japan's big three ' MOL, NYK Line and 'K' Line ' have been stuck in reverse the past three years after leading the pack for the majority of the 2000s.
      MOL and NYK Line, once the perennial second- and third-place finishers behind Maersk, have plummeted to the bottom of the profits table since 2007. They join a group of lines that have steadily resided at the bottom of the list throughout the decade ' notably Chilean carrier CSAV and Israeli carrier Zim.
      A good juxtaposition is provided by Maersk, which headed the 'Who's making money' list from 2003 to 2005, tumbled down the list in 2006 (mainly due to the costs of integrating P&O Nedlloyd) and ascended to the top once again in 2008.
      Another valid comparison is compatriot carrier 'K' Line, which has made the top five its home since 2003, rising to No. 1 in 2007 (albeit retroactively when CMA CGM restated its 2007 profits this year) and then holding firm at No. 2 this year behind Maersk.
      A last anomaly is NOL/APL, which saw its profits shrink 92.4 percent and its operating margin shrivel from 7.8 percent in 2007 to 0.4 percent in 2008. Indeed, Table 3 shows APL to be the major negative outlier (to use the term du jour) on the list, having averaged fifth place on the profits list the past five years before sinking to 12th in 2008.
      An interesting tidbit is that not a single line made more in 2008 than they did five years ago, and no one was really even close.
      Revenues of carriers on the list grew marginally in 2008, by 5 percent to $130 billion, while profits fell nearly 65 percent to $2.25 billion (Wan Hai was left off this year's list after it dropped out of AXS-Alphaliner's top 20 carriers). If anything, 2008 highlighted the profit margin tightrope carriers walk in a down market. This year, the spotlight will shine even brighter on that fact.
      One note: comparing a carrier's profitably ranking doesn't take into account degrees of profitability. For instance, Hapag-Lloyd finished fourth-highest in 2008, three spots higher than Hanjin Shipping. But Hapag-Lloyd's profits were triple those of Hanjin despite their relative closeness in the standings. Second-placed 'K' Line also made nearly triple the operating profit that fifth-placed OOCL did. And No. 1 Maersk made more than 22 times the profits that 10th-placed Yang Ming did.
      Also consider APL's results. The line had earnings before interest and tax of $34 million. But the carrier's core earnings before interest and tax (excluding restructuring costs at the end of the year to cope with the downturn) were $73 million. Take away those restructuring costs and APL would have jumped three places in the table.
      In other words, the rankings don't represent the distance between lines in a linear fashion. However, looking historically at the rankings indicates which carriers are performing well year-to-year relative to each other and in spite of differing external economic circumstances.
      And one last note about volatility on the list. It's worth pointing out that only one carrier ' 'K' Line ' has finished each of the last six years in the top five. Other carriers have been largely consistent, and Maersk has been in the top three save for one year. But there was upheaval in 2008 and it impacted even solid carriers. Given that Maersk lost $373 million in the first quarter of 2009, even greater upheaval can be expected on the list next year.