Hapag-Lloyd slashes 2018 profit outlook

“Significant” increase in operational costs drives down expectations.    Hapag-Lloyd has slashed its 2018 profit forecast amid a challenging and volatile environment for ocean carriers.
   In 2017, Hapag-Lloyd posted an EBIT of 410.9 million euros (U.S. $478.4 million) and an EBITDA of 1.05 billion euros, and in its 2017 annual report, as well as last month when it released its Q1 2018 financial results, the carrier said it expected EBIT and EBITDA for 2018 would be “increasing clearly.”
   However, Hapag-Lloyd said Friday it expects EBIT for 2018 to range between 200 million euros and 450 million euros and EBITDA to range between 900 million euros and 1.15 billion euros.
   Hapag-Lloyd said it had adjusted its outlook due to “an unexpectedly significant and continuing increase in the operational costs since the beginning of the year, especially with regard to fuel-related costs and charter rates, combined with a slower than expected recovery of freight rates.”
   In the first quarter of 2018, the average bunker consumption price for Hapag-Lloyd totaled $372 per metric ton, up from $313 per metric ton the prior year.
   The average freight rate for the quarter totaled $1,029 per TEU, compared to $1,056 per TEU for last year’s first quarter. “Besides the inclusion of the UASC Group, which had a lower freight rate level overall, the main reason for the decline was the ongoing difficult market environment,” Hapag-Lloyd said.
   Hapag-Lloyd is a member of “THE” Alliance, which doesn’t appear to have the upper hand on either the Asia-to-North Europe or Asia-to-North America trades. THE Alliance also includes Yang Ming and the Ocean Network Express.
   BlueWater Reporting’s Capacity Report shows that of the three main ocean carrier alliances on major east-west trades, THE Alliance deploys the least amount of capacity, vessels and services on the Asia-to-North Europe trade and comes in second place on the Asia-to-North America trade, where it beats out the 2M Alliance of Maersk Line and MSC.