Hapag-Lloyd Has ‘Optimism’ After Merger Costs Cause Wider Loss

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March 27, 2015

Photo: Wikimedia Commons

By Nicholas Brautlecht

(Bloomberg) — Hapag-Lloyd AG, Germany’s biggest container- shipping line, said it’s looking to the future “with optimism” after costs from merging with a unit of Cia. Sud Americana de Vapores SA led to the company’s biggest loss in five years.

The net loss in 2014 widened to 604 million euros ($654 million) from 97 million euros a year earlier, Hamburg-based Hapag-Lloyd said in a statement on Friday. Charges from disposing of older ships also hurt earnings.

“In terms of results, 2014 was undoubtedly an extremely disappointing year,” Chief Executive Officer Rolf Habben Jansen said in the statement. “We are now looking ahead and focusing our efforts on returning Hapag-Lloyd to profitability and achieving a clearly positive operating result in 2015.”

Hapag-Lloyd agreed last April to take over container- shipping assets from Valparaiso, Chile-based CSAV to create the world’s fourth-largest line with about 200 vessels, taking on industry leaders that include A.P. Moeller-Maersk A/S.

The net result in 2014 compares with a pro-forma loss of 677 million euros in 2009, when tour operator TUI AG sold its majority stake in Hapag-Lloyd to Hamburg-based investment group Albert Ballin GmbH, spokesman Rainer Horn said by phone. TUI plans to sell its remaining 14 percent holding in Hapag-Lloyd, possibly as part of an initial public offering that the container carrier is targeting for late this year or in 2016.

Prices Fall

The adjusted loss before interest and tax last year was 112 million euros, compared with profit of 67 million euros a year earlier, Hapag-Lloyd said. The average freight rate fell 3.2 percent to $1,434 per standard container amid lingering overcapacity from the delivery of vessels coinciding with a trade slump triggered by the global financial crisis in 2008.

Hapag-Lloyd raised 370 million euros in December from two of its biggest shareholders after completing the CSAV takeover. Billionaire Klaus-Michael Kuehne provided 111 million euros and CSAV another 259 million euros, mainly to allow the carrier to modernize its fleet.

“Hapag-Lloyd is currently in negotiations with several shipyards in this regard and will be ordering new ships over the coming weeks,” the company said Friday.

The German container shipper is unlikely to be profitable on a net basis before 2016, Habben Jansen said in January. Cost cuts will “significantly” exceed $100 million this year, from improvements in inland cargo services and boosting vessel utilization, in addition to annual savings of at least $300 million expected from the CSAV merger, the CEO said at the time.

© 2015 Bloomberg News

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