• Group EBIT: $1.9 billion for the first nine months of 2024.
• Group Revenue: $15.3 billion for the first nine months of 2024.
• Group EBITDA: Increased by 58% quarter-on-quarter to $1.6 billion.
• Annualized Return on Invested Capital: 13.1% for the first nine months of 2024.
• Liner Shipping Revenue: $5.7 billion in Q3 2024.
• Liner Shipping EBIT Margin: 18.3% in Q3 2024.
• Terminal and Infrastructure Segment EBITDA: $43 million in Q3 2024.
• Terminal and Infrastructure Segment EBIT: $22 million in Q3 2024.
• Average Freight Rate: $1,467 per TEU for the first nine months of 2024.
• Transport Volumes: Increased by 5% to 9.3 million TEU for the first nine months of 2024.
• Operating Cash Flow: $3.1 billion for the first nine months of 2024.
• Free Cash Flow: $1.66 billion for the first nine months of 2024.
• Cash Position: $5.2 billion as of the end of September 2024.
• Liquidity Reserve: $8 billion.
• Equity Position: $21 billion.

• Warning! GuruFocus has detected 7 Warning Signs with BOM:500199.

Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Hapag-Lloyd AG (HPGLY) reported a solid group EBIT of $1.9 billion for the first nine months of 2024, leading to an increased earnings outlook.
• The launch of the Gemini network is expected to enhance schedule reliability and service quality, with bookings starting soon.
• The company has ordered new ships, adding 300,000 TEUs to its order book, which will help replace aging vessels and support business growth.
• Global container volume showed strong growth, with Hapag-Lloyd AG (HPGLY) experiencing a 5% increase in transport volumes.
• The company generated robust free cash flow, reinforcing liquidity and funding strategic initiatives despite increased investments.

Negative Points

• Earnings for the first nine months of 2024 were below the exceptionally high levels of the previous year due to higher costs in the liner business.
• Operational disruptions, such as rerouting vessels around the Cape of Good Hope and port strikes, impacted unit costs and operations.
• The inclusion of the shipping sector in the EU emission trading system increased bunker costs, with further cost increases expected next year.
• The company faces challenges with contract rates being significantly lower than current spot rates, impacting profitability.
• The transition to the Gemini network may incur higher costs and operational challenges during the initial phase.

Q & A Highlights

Q: How do you see the current state of the market, especially with potential preordering ahead of tariffs and the impact of the US-China trade war? A: Rolf Habben Jansen, CEO, noted that there might be a rush towards the Chinese New Year, similar to pre-summer trends. Demand is currently healthy, and while the impact of tariffs under a new US administration remains to be seen, global trade flows may change but are expected to remain robust.

Q: Are there concerns about a potential destocking phase post-Chinese New Year, and what is the outlook for demand growth next year? A: The CEO expects a growth of around 3% for 2025, acknowledging the possibility of destocking but also potential economic growth surprises. The current demand is strong, and the company is cautiously optimistic about future trade growth.

Q: Can you explain the significant increase in December online quotes for Transpacific services? A: The CEO explained that strong demand and tight space are driving up rates. The Gemini alliance aims to offer better quality and schedule reliability, which could justify higher rates over time.

Q: Regarding the new vessel orders, why choose 17,000 TEU vessels instead of larger ones? A: The decision was based on fleet composition rather than economies of scale. The company has a diverse range of vessel sizes, and the 17,000 TEU class fills a gap in their portfolio.

Q: How is the EU ETS impacting costs, and how much of this is passed on to customers? A: The CFO, Mark Frese, stated that the EU ETS cost is approximately $8 per TEU, totaling around $100 million. These costs are passed on to customers through a separate surcharge.

Q: What are the expectations for contract rates in the Asia to Europe trade lane? A: Contract rates are expected to increase, driven by higher spot rates and increased costs, including EU ETS. The CEO noted that early contracts show rates are up, although not reaching spot levels.

Q: How will the Gemini network affect market share and costs during the transition? A: The CEO does not anticipate a significant loss of market share. While there will be extra costs during the transition, the expectation is that improved service quality will eventually lead to market share growth.

Q: Will the Gemini network result in shorter transit times compared to current industry standards? A: The CEO confirmed that the Gemini network is expected to offer shorter transit times compared to current industry realities, enhancing service reliability and efficiency.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.