Hapag-Lloyd’s shipping profits rise 7 percent

Hapag-Lloyd’s shipping profits rise 7 percent    The container and cruise shipping activities of Hapag-Lloyd increased their combined operating profit 7 percent to 279 million euros ($358 million) in 2004 from 262 million euros in 2003, despite the depreciation of the dollar and higher fuel prices that ate into the earnings of Hapag-Lloyd Container Line.
   The German conglomerate TUI, which owns Hapag-Lloyd, reported Wednesday that profits from shipping division “rose by 17 million euros to 279 million euros — thereby even surpassing the good results for the previous year.” It cited the continuing strong market in container shipping.
   “The high transport volume and improved freight tariffs were crucial factors in achieving this result,” said Michael Frenzel, chairman of the tourism-and-transport parent group.
   However, TUI added that the increase in earnings at Hapag-Lloyd Container Line was lower than its increase in revenue. “The improvement in earnings was restricted by the fall in the value of the U.S. dollar against the euro, amounting to an annual average of 10 percent, and the impact of high crude oil price,” it said.
   Revenue from container and cruise shipping activities increased 13 percent to 2.7 billion euros ($3.4 billion) in 2004 from 2.4 billion in the previous year. The average operating margin of container and cruise shipping activities as a percentage of revenue declined to 10 percent in 2004 from 11 percent in 2003.
   The modest 7-percent improvement in earnings at Hapag-Lloyd for 2004 suggests that other container carriers, whose profit increases were more substantial, are catching up with the German shipping line in terms of profitability.
   Expressed in local currency, Hapag-Lloyd Container Line increased its revenue 14 percent year-on-year to 2.6 billion euros ($3.3 billion) in 2004. This growth was due to higher volumes and an increase in average freight rates in dollars, but mitigated by the weaker dollar.
   “With the persistently high level of demand, they (average freight rates) rose by 8 percent year-on-year to $1,252,” TUI reported.
   TUI said Hapag-Lloyd’s growth in the container shipping market last year exceeded average market growth. Hapag-Lloyd Container Line shipped 2.4 million TEUs last year, 15 percent more than in 2003. whereas worldwide container traffic rose 9 percent to 71 million TEUs in 2004, TUI said. “The driving force behind this growth was primarily the Chinese economy, but also the American market, which saw an increase in domestic demand and growth in exports due to the fall in the value of the U.S. dollar.”
   TUI does not publish a breakdown by shipping sector of the combined operating income from its container and cruise shipping businesses.
   Commenting on the trading prospects of the group’s shipping activities, Frenzel said 2006, previously expected to be characterized by an industry downturn, is now regarded more positively.
   During 2004, Hapag-Lloyd disposed of most of its non-shipping logistics activities, as part of a policy to concentrate on shipping.