• ITVI.USA
    16,030.520
    117.340
    0.7%
  • OTLT.USA
    2.809
    0.016
    0.6%
  • OTRI.USA
    22.220
    -0.080
    -0.4%
  • OTVI.USA
    16,016.550
    115.560
    0.7%
  • TSTOPVRPM.ATLPHL
    2.950
    -0.570
    -16.2%
  • TSTOPVRPM.CHIATL
    3.610
    0.650
    22%
  • TSTOPVRPM.DALLAX
    1.370
    -0.240
    -14.9%
  • TSTOPVRPM.LAXDAL
    3.550
    0.210
    6.3%
  • TSTOPVRPM.PHLCHI
    2.320
    0.220
    10.5%
  • TSTOPVRPM.LAXSEA
    4.110
    0.250
    6.5%
  • WAIT.USA
    126.000
    0.000
    0%
  • ITVI.USA
    16,030.520
    117.340
    0.7%
  • OTLT.USA
    2.809
    0.016
    0.6%
  • OTRI.USA
    22.220
    -0.080
    -0.4%
  • OTVI.USA
    16,016.550
    115.560
    0.7%
  • TSTOPVRPM.ATLPHL
    2.950
    -0.570
    -16.2%
  • TSTOPVRPM.CHIATL
    3.610
    0.650
    22%
  • TSTOPVRPM.DALLAX
    1.370
    -0.240
    -14.9%
  • TSTOPVRPM.LAXDAL
    3.550
    0.210
    6.3%
  • TSTOPVRPM.PHLCHI
    2.320
    0.220
    10.5%
  • TSTOPVRPM.LAXSEA
    4.110
    0.250
    6.5%
  • WAIT.USA
    126.000
    0.000
    0%
American ShipperShipping

CSAV merger propels Hapag-Lloyd to $175.6m profit in first half 2015

The German ocean carrier estimated last year’s merger with Chile’s CSAV will bring $400 million in synergy savings, $100 million more than originally estimated.

   German ocean carrier Hapag-Lloyd reported group profits of $175.6 million in the first half of 2015 compared with a loss of $237.6 million in the first half of 2014.
   Revenue was $5.2 billion in the first half of this year compared with $4.4 billion in the first half of 2014.
   The company said it expects its merger late last year with the container business of Chilean carrier CSAV will deliver annual savings of $400 million through synergies, $100 million more than originally estimated, most of which will be achieved by next year with the remainder by 2017.
   “Our results prove that the merger with CSAV was the right decision and an important milestone in the development of Hapag-Lloyd, as we already benefit from the integration,” said Rolf Habben Jansen, chief executive officer of Hapag-Lloyd.
   Habben Jansen said Hapag-Lloyd is also benefiting from what it calls “Project OCTAVE,” aimed at improving short term profit through a variety of steps including retirement of 16 older ships.
   Hapag-Lloyd carried 3.7 million TEUs in the first half of 2015, 846,000 more than in the same period last year, but average freight rates fell to $1,296 per TEU, $128 below what they were in the first half of 2014.
   Habben Jansen said the company will continue to improve the efficiency of its container vessel fleet, noting that in July it took delivery of the last in a series of 9,300-TEU ships ordered by CSAV several years ago (prior to the merger) and ordered five 10,500-TEU ships in April. Those ships will primarily be used in the trade between Latin America and Europe.
   The company also invested $105 million on new containers in the first half of 2015. Earlier this month it announced it was purchasing 6,000 40-foot refrigerated containers. According to Habben Jansen, further investment in containers is likely as the company will aim to increase container ownership back to 50 percent, bringing it in line with its peers.
   He said the company will have to order additional ships, including mega vessels. As a member of the G6 Alliance, he said Hapag-Lloyd will discuss such decisions with the other members of that alliance, noting G6 members MOL and OOCL have also recently ordered very large container ships.
   Based on the five year investment plan of the G6 partners, Hapag-Lloyd will “likely also go and play its part and that should be decided roughly by the end of the year,” said Habben Jansen.
   Driven by increased scale of its ships, Hapag-Lloyd has seen transport expenses per TEU drop 17 percent to $1,139 per TEU.
   “We are well on track to achieve clearly positive full year operating results in 2015,” Habben Jansen said. “The market environment remains very challenging, but we are well positioned in the market and remain highly resilient due to Hapag-Lloyd’s well-balanced portfolio of trades and services.”
   Hapag-Lloyd now has a fleet with ships of average age of 7.3 years, he said. The company also has a balanced exposure to global trades: 21 percent in the transatlantic, 18 percent in the transpacific, 17 percent in Asia Europe, 31 percent to Latin America, 5 percent between Europe and the Middle East and Africa, and 8 percent in the intra-Asia trade.
   Habben Jansen said in addition to reducing costs, the company has a pilot program to improve revenue quality and plans to roll this out globally next year, noting even a small increase in rates can have a major impact on profits.
   He gave an upbeat summary of his outlook on the industry despite short term volatility, noting that container shipping has historically grown faster than GDP and that the global orderbook at 17 percent of the world fleet is reasonable for an industry that grows 3-5 percent per year. He sees a balanced supply and demand by 2016 and said with the new Panama Canal locks opening next year, scrapping of ships is likely to grow.
   Habben Jansen said the incremental benefits of ever larger vessels is beginning to decline, saying that while there is merit to investing in ships of 18,000-20,000 TEUs capacity, here are also limitations to them and the logic of going even larger is not very strong.
   Hapag-Lloyd noted that while it has benefited from the reduced cost of fuel, it has seen a need to burn more low sulfur marine diesel oil (as opposed to more expensive marine fuel oil) because more stringent air pollution regulations in so-called emission control areas in Europe and North America.
    In the first half of 2015, it saw the more expensive marine diesel oil account for 13 percent of its bunker consumption compared with just 3 percent in the first half of 2014.

Chris Dupin

Chris Dupin has written about trade and transportation and other business subjects for a variety of publications before joining American Shipper and Freightwaves.

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