Hapag-Lloyd keeps 2020 guidance but only just, says CEO

Reuters: German container liner Hapag-Lloyd on Friday stuck with its full-year earnings guidance but warned that supply disruptions and weaker demand due to the COVID-19 crisis may lead to a revision of its forecast in the second half of 2020.

The number five in worldwide container shipping, Hapag-Lloyd reported lower core profits in the first quarter on higher fuel costs and a devaluation of bunker stocks at the end of the period, when oil prices began to fall in a demand slump. The developments masked a positive impact from higher transport volumes – which increased by 4.3% to over 3 million 20-foot equivalent units (TEUs) – while freight rates rose by 1.4% to $1,094/TEU.

Chief Executive Rolf Habben Jansen told Reuters the second quarter would see a significant hit, with transport volumes possibly dropping by up to 10%.

However, with China, Europe’s key trade partner, beginning to resume economic activity, and with the help of cost and liquidity measures, the company might weather the storm and benefit from a recovery in the second half.

“We have held on to our guidance but with clear reference to all the uncertainties,” Habben Jansen said.

“There is still a high likelihood that we could end up within the range,” he added.

Hapag-Lloyd expects full year earnings before interest, taxes, depreciation and amortisation (EBITDA) in a range between EUR 1.7-2.2 billion, and earnings before interest and taxes (EBIT) of EUR 0.5 to 1.0 billion.

In the first quarter, EBITDA decreased to EUR 469 million from EUR 489 million a year earlier while EBIT fell to EUR 160 million from EUR 214 million. Net profit was 74% down at EUR 25 million.

The company has now added several hundred million euros to its EUR 1.1-1.2 billion reserve, allowing its operations to continue unhindered for 12-18 months, should demand problems outside China linger, Habben Jansen said.

If conditions worsened, it would return to the market a “small double-digit number” of charter vessels when contracts expire this year, he said.