Aviation
HAPAG-LLOYD EXPECTS "VERY SIGNIFICANT" IMPACT OF COVID-19 STARTING Q2
May 15, 2020

Hapag-Lloyd said it was able to register a decent start to 2020 despite the coronavirus pandemic, but uncertainties remain for the year and the impact of the health crisis could start manifesting from the second quarter.

 

In a statement, the German shipper said for the first quarter of 2020, Hapag-Lloyd recorded earnings before interest and taxes (EBIT) of US$176 million lower than the corresponding prior-year figure of US$243 million. The Group net result also declined to approximately US$27 million.

 

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“Despite the coronavirus pandemic, we have gotten the year off to a good start. Higher transport volumes and better freight rates have boosted our revenues. The financial result is below the first quarter of the previous year as we faced higher bunker prices after the new IMO 2020 rules on 1 January and we had a significant negative bunker stock valuation after the decline in crude oil prices at the end of the first quarter,” said Rolf Habben Jansen, chief executive officer of Hapag-Lloyd AG.

 

IMO 2020 regulation

 

Transport expenses increased by almost 10% due to higher bunker costs, which increased by US$98 to US$ 523 per tonne as a result of the transition to low-sulphur fuel oil required by the IMO 2020 regulation.

 

Hapag-Lloyd said this had a negative impact on earnings, as did a devaluation of bunker inventories of around US$ 64 million due to the rapid decline in crude oil prices that began at the end of the first quarter.

 

“Although we were able to pick up a bit of tailwind at the beginning of the year, we anticipate that the coronavirus pandemic will have very significant impacts in 2020, beginning in the second quarter," Jansen noted.

 

He said Hapag-Lloyd's "main focus" however will continue to be the safety and well-being of its employees as well as the supply chains of its customers.

 

"We have taken a wide range of measures designed to save an amount in the mid-triple-digit million range to safeguard our profitability and liquidity. We adjust our service network to the lower demand and seek savings in all cost categories, from terminal, transport, equipment and network costs to overhead,” Jansen added.

 

2020 guidance kept

Taking into account the prevailing uncertainties and building on the planned cost-cutting measures as well as based on the premise that the pandemic will peak in the second quarter and give way to a gradual recovery in the global economy in the second half of the year, Hapag-Lloyd said it is substantiating its earnings forecast from the start of the year.

 

This means that Hapag-Lloyd still continues to expect EBITDA of EUR 1.7 to 2.2 billion and EBIT of EUR 0.5 to 1.0 billion for the current financial year.

 

"However, unless there is a recovery in demand for container transport services earlier and stronger than expected in the market studies cited in the financial report for the first quarter 2020, the upper end of the forecast ranges is barely achievable from today's perspective," it said.