The German shipping line Hapag-Lloyd is not one to bandy about words like “whopping” or “skyrocketed” or “best ever” when describing bottom-line financial results. But the bottom line is Hapag-Lloyd’s first-quarter 2021 earnings before interest and taxes of $1.5 billion equaled the EBIT for all four quarters of 2020.
For Q1 alone, EBIT was up by $1.36 billion — that’s billion with a b — from $176 million in 2020 to $1.53 billion this year.
Earnings before interest, taxes, depreciation and amortization (EBITDA) totaled about $1.9 billion, nearly a $1.4 billion improvement from $517 million in the first quarter of 2020.
Hapag-Lloyd said in its earnings release that Q1 net profit “improved” to approximately $1.45 billion. It improved by $1.42 billion from the $27 million profit reported in the first quarter of 2020.
“Group profit of $1.45 billion was already significantly above the full-year 2020 figure” of $1.06 billion, CFO Mark Frese acknowledged on the earnings call Wednesday morning.
“Q1 in 2021 was really a truly outstanding quarter. We were once again able to improve profitability, strengthen our balance sheet and our cost of capital,” Frese said.
First-quarter revenue improved by about 33% to $4.9 billion, largely due to a higher freight rate, which was up on average by some 38% to $1,509 per twenty-foot equivalent unit (TEU), compared to $1,094 per TEU in Q1 2020, Hapag-Lloyd said.
CEO Rolf Habben Jansen said on the call that Q1 was driven by “continued strong demand, high freight rates but also operational bottlenecks.” As a result, transport volume was “somewhat unsatisfactory,” down 2.6% to about 3 million TEUs and blamed in large part on port congestion and a lack of available ships and containers.
He said regarding “increased container usage, it takes 20% more days to get a container back. That means in reality we need 20% more boxes to carry the same amount of cargo. And we also see voyage delays on average have tripled in the first quarter compared to a year ago for every single ship. So what have we done? We did charter some additional vessels. We also deployed extra loaders” and ordered 150,000 TEU of additional container capacity.
“Schedule reliability was at an absolute low in the first quarter. I think we’re going to start seeing some improvement there. We’ve seen some first indications that schedule reliability is up a little bit. I would expect that in Q3 we would not be back to normal but we will have made a significant step ahead,” Habben Jansen said.
He said the orderbook has been “unsustainably low” and Hapag-Lloyd will be in the market for new container ships.
“There is simply no slack in the global fleet,” Habben Jansen said. “Scrapping has been at a ridiculously low rate. … When we look toward 2030 and 2035, a lot of ships will have to be replaced, and to be a little bit ahead of that curve I don’t think is entirely wrong.”
Looking ahead, Habben Jansen said that “the second quarter will again be very strong and not so dissimilar to what we have seen in the first quarter. After that we expect a gradual normalization of the results in the second half of the year, and how quickly that will go at the moment is very difficult to say. … There is certainly a considerable amount of uncertainty around freight rates, around how quickly some of these operational challenges will be resolved and of course some of the impacts from the pandemic.”
Demand is difficult to estimate in these times, he said.
“I think we’ve certainly learned that over the last year, year and a half. I would think that as the congestion eases, then all of us will be able to produce more allocation — or more space. That should help the market to settle down. I hope that we can do it sooner rather than later because I believe it’s in everybody’s interest,” Habben Jansen said.