Hapag-Lloyd Marked 175th Year with Record Profit, But Significant Decline ‘Inevitable’ in 2023

Hapag-Lloyd posted a record $18 billion net profit in 2022 as the German shipping line celebrated its 175th year in business.

Higher freight rates and transport volumes on par with 2021 helped to drive “extraordinarily strong” results in 2022, but higher costs and lower demand for container shipping will inevitably erode profitability in a big way in the year ahead as the market gradually returns to normal.

Hapag-Lloyd is the world’s fifth largest container shipping company with a fleet of 251 containerships and a total transport capacity of 1.8 million TEUs. The company published its annual report for 2022 on Thursday, showing EBITDA increased to $20.5 billion. EBIT grew to $418.5 billion, while group profit improved 67% to $18 billion (EUR 17 billion) compared to 2021’s $10.7 billion profit.

An increase in the average freight rate to (2,863 USD/TEU in 2022 vs 2,003 USD/TEU in 2021) drove revenues 55.1% higher to $36.4 billion, while the transport volume remained at the 2021’s year’s level at 11.8 million TEUS.

However, by the end of the year average freight rates had significantly decreased due to easing congestion in ports and lower demand. At the same time, higher inflation contributed to rising transport costs.

“Overall, we look back on a very successful 2022 with exceptionally strong results. This has enabled us to strengthen our financial resilience and asset structure once again. In addition, we have improved the quality of service for our customers and invested in terminals and infrastructure as well as in the efficiency of our fleet. However, costs – such as for fuel, charter vessels and container handling – have risen significantly,” said Rolf Habben Jansen, CEO of Hapag-Lloyd AG.

Thanks to the strong results, Hapag’s Lloyd’s Executive Board and Supervisory Board has decided to propose a dividend of EUR 63 per share for the 2022 financial year, corresponding to a EUR 11.1 billion total payout.

Looking ahead, however, Hapag-Lloyd expects earnings to gradually normalize. The company provided guidance of EBITDA in the range of $4.3 to 6.5 billion and EBIT to be in the range of $2.1 to 4.3 billion, but noted the forecast is subject to “considerable uncertainty” given the ongoing war in Ukraine and other geopolitical conflicts, as well as the impacts of high inflation.

“We have got the current financial year off to a decent start, but the economy has cooled and a significant decrease in earnings remains inevitable,” Rolf Habben Jansen said. “So we will continue to act flexibly in the market and keep a close eye on our costs. In addition, we will be working very intensively on formulating the strategic course that we will pursue until 2030. Quality and sustainability will continue to have the highest priority for us, as will the safety and well-being of our employees.”

As for impacts from rivals MSC and Maersk termination of the 2M shipping alliance agreement in 2025, Jansen said it is unlikely to impact other shipping alliances, including THE Alliance which Hapag-Lloyd is a part of.

“The fact that Maersk and MSC will not continue after the end of 2024 is not a huge surprise as the companies have vastly different strategies,” said CEO Rolf Habben Jansen in a call with analysts. “I don’t think that will have massive effect on the other alliances.”

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