Hapag-Lloyd reaps profit and APL narrows losses despite challenging conditions

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Hapag_Lloyd_ContainerGerman box liner Hapag-Lloyd said it made a profit in 2015 in line with expectations, while Singapore-based Neptune Orient Lines (NOL) said it was able to reduce its losses for the same year.

Hapag-Lloyd announced it achieved its earnings targets for last year and accomplished a significant improvement in fourth-quarter operating results (EBIT).

Based on initial estimates, Hapag-Lloyd increased operating earnings before interest, taxes, and depreciation of intangible and fixed assets (EBITDA) to EUR831 million (US$914 million) in 2015 against EUR98.9 million in 2014. EBIT also rose to EUR366.4 million in 2015 from a loss of EUR382.8 million the preceding year.

The EBITDA margin of 9.4% is in line with the company’s guidance, according to an official release. In the fourth quarter, EBITDA reached EUR140.4 million from a loss of EUR79.7 million in the same quarter of 2014, and fourth-quarter EBIT last year was EUR17.8 million, up from a contraction of EUR304.9 million in the same period in 2014.

Revenue increased in 2015 to EUR8.8 billion compared to the 2014 figure of EUR6.8 billion. “The significant increase was primarily attributable to the merger with CSAV’s container business in December 2014,” noted the company.

The transport volume rose to around 7.4 million TEUs in 2015, in comparison to 5.9 million TEUs in 2014.

The average freight rate in 2015 declined to $1,225 per TEU, down from 2014’s $1,427 per TEU, while average bunker consumption price fell to $312 per tonne in 2015 from the preceding year’s price of $575 per tonne.

NOL shaves its losses

On the other hand, NOL reported it was able to narrow its full-year net and core EBIT losses despite worsening market conditions.

The group revealed a net loss in the fourth quarter of 2015 of US$77 million, saying it is an improvement of $8 million over the same period in 2014. Core EBIT loss amounted to $65 million in the quarter, while the core EBITDA remained positive at $39 million.

On a full-year basis, NOL posted a net profit of $707 million, but this was boosted by the $888-million gain on the sale of its logistics unit. Removing this, NOL incurred a full-year net loss of $181 million, which it described as “an improvement of 30% over last year.”

Full-year core EBIT loss shrank 5% year-on-year to $72 million.

“The last quarter of 2015 was particularly difficult. Container freight rates hit historical lows across major trade lanes as new vessel capacity came on stream amid softening market demand,” said NOL group president and CEO Ng Yat Chung.

“Nonetheless, APL (NOL’s shipping business) continued to reap cost savings and yield improvements. On a full year basis, its total costs of sales per forty-foot-equivalent unit (FEU) continued to offset the decline in total revenue per FEU, helping APL to continue reducing losses.”

APL reported revenue of $1.28 billion in the final quarter of 2015, a 29% contraction from the year before. Average freight rates fell 22% amidst pressure from over-capacity in the industry. Volume slid 12% in the quarter over the prior year, mainly due to a reduction in backhaul volumes out of the U.S. and the Gulf.

“In response to weak global demand, APL maintained prudent management of its deployed capacity, while keeping its headhaul asset utilization rate at 90%,” said the company.

The container shipping line “maintained its rigorous cost management as well as a yield-focused trade strategy that emphasized network rationalization and better cargo selection,” it added.

This led APL to achieve cost savings of $100 million in the last quarter 2015, bringing its full-year cost savings to $435 million. As a result of the cost savings and lower bunker price, APL’s total cost of sales per forty-foot-equivalent unit fell by 17% year-on-year.

APL narrowed its core EBIT loss from $139 million for the full-year 2014 to $98 million in 2015. This is APL’s fourth consecutive year of reduced losses, said NOL.

Photo: Ra Boe