Higher rates help Hapag-Lloyd in ?08

Higher rates help Hapag-Lloyd in Æ08    German tourism company TUI AG said Wednesday that earnings for container shipping giant Hapag-Lloyd are expected to fall substantially in 2009 and the carrier is seeking to reduce costs by $365 million in the current financial year.
   TUI, which spun off majority interest in Hapag-Lloyd earlier this week to a group of Hamburg investors, said the liner business saw operating earnings grow 19 percent to 211 million euros ($285 million) and sales increase 4 percent to 6.2 billion euro ($8.4 billion).
   “The development of business in the shipping division was characterized by the increasingly felt effects of the financial crisis on the real economy as well as the rise in bunker prices until the third quarter of 2008 and the fall of the U.S. dollar against the euro,” TUI said.
   “The successful performance, achieved in a challenging environment, results from a slight increase in transport volumes of 2 percent to 5.54 million standard containers (TEU) and a substantial rise in freight rates of almost 13 percent,” TUI said.
   TUI, which retains a 43 percent interest in Hapag-Lloyd, said in 2009 “container shipping is expected to post a substantial decline in earnings. Apart from the first quarter, still to be fully consolidated, the equity result to be included in the consolidated financial statements following the sale of the division will be negative.”
   This development will be attributable to anticipated declines in transport volumes and average freight rates caused by the financial and economic crisis. On the other hand, the currency effect and the development of bunker prices will also play a crucial role. Hapag-Lloyd developed initiatives at an early stage in order to mitigate potential adverse effects of the worldwide cooling of the economy. A cost-cutting program is planned to create savings of around $365 million in the current financial year.
   “Measures include the decision not to renew some charter agreements and cancel services, particularly on Europe/Asia routes, in order to tighten the portfolio. Concerning land-based services, initial savings effects were achieved through renegotiations with terminal operators and suppliers. Further significant positive effects will arise from major cost savings and a worldwide recruitment freeze. Large parts of the program have already been implemented. Further rationalization measures will be decided and announced soon,” TUI said. ' Chris Dupin