Hapag-Lloyd: Container shipping giant’s profits plunge amid ‘severe’ shift in market
Hapag-Lloyd profits nosedived this morning as declining freight rates and a “severe” change in market conditions pumelled the the firms’ bottom line.
The container shipping group saw group profit fall from €13.7bn (£11.9bn) to €3.2bn in the first nine months of the years, as the global shipping industry continues to struggle with a huge downturn this year.
Revenues almost halved to €14.1bn, which Hapag-Lloyd said was largely due to a significant fall in freight rates – the charge paid for transporting goods overseas. Shares fell nearly five per cent in early trading.
The German shipping company now forecasts earnings before interest, taxes, depreciation and amortization for the full year to be between €4.1bn and €5bn, down from between €4bn and €6bn.
Rolf Habben-Jansen, Hapag-Lloyd’s chief executive, warned “if spot rates do not recover, we could face some challenging quarters in this subdued market environment.”
In response to falling freight rates, he said the company was “working hard to reduce our expenses even more, such as by achieving savings on the procurement side and making adjustments to our service network.”
The shipping industry enjoyed a historic boom in the post-Covid years, as pent-up demand for consumer goods and supply constraints sent freight rates to record levels. The industry made more money in the three years following the first wave of Covid than in it had in the previous six decades.
But profits have plummetted this year and carriers are facing the affects of profligate overspending on new ships during the record years, with oversupply now eating into cash piles.
Container shipping companies have increasingly resorted to scrapping vessels as they struggle to manage the costs associated with a slew of new pandemic-era orders entering the market.
Hapag-Lloyd’s results come just a week after the Danish shipping company Maersk slashed 10,000 jobs worldwide in a bid to reduce costs.
In an interview with Reuters this morning, Hapag-Lloyd’s boss said the company had its services on key global routes, but that there were no current plans for similar job cuts.
“We have cut one of five (South East Asia) sailings to North Europe and have taken out one of six services to East Coast United States,” Habben-Janesen said.