Two of the largest container shipping carriers, Hapag-Lloyd and NOL, reported second quarter results on Wednesday, both stating lower than average freight rates.
Hamburg-based Hapag-Lloyd said it had a group profit of 20.9 million euros ($27.8 million) in the second quarter of 2013 compared to a loss of 7.3 million euros in the second quarter of 2012.
Revenue in the quarter was 1.71 billion euros compared to 1.79 billion euros in the second quarter of 2012.
“Although intense competition led to unsatisfactory rate levels, substantial cost cuts and a slight drop in the bunker consumption price were the main factors behind the positive net result. Bunker costs in the second quarter averaged $622/ton, which was below last year’s figure ($694/ton),” the company said. But it noted the bunker price is currently still more than three-times the level seen at the start of 2009, when it was about $200 per ton.
“Intense competition in the second quarter meant that, unlike last year, it was almost impossible to implement announced rate increases on the market,” Hapag-Lloyd said, noting its average freight rate in the second quarter was $1,499 per TEU, down from $1,594 per TEU in the second quarter of 2012.
Hapag-Lloyd transported 1.39 million TEUs, 2.3 percent more than the 1.36 million TEUs it moved in the second quarter of 2012.
“Rate increases are indispensable in order for liner shipping companies to return to a sound earnings situation. While we managed to implement small rate increases at the start of July, it is still not enough. Further rate increases have been announced,” said Michael Behrendt, chairman of the executive board at Hapag-Lloyd, in a statment.
The company said it's striving for a positive operating result for the full year 2013.
Meanwhile, NOL Group, the parent company of APL, said it had a loss of $35 million in the second quarter of this year compared to a loss of $118 million in the same period last year. Though based in Singapore, the company reports results in U.S. dollars.
Revenue was $2.06 billion in the second quarter, down from $2.3 billion in the same period last year.
“Market conditions have worsened in the second quarter of this year compared to a year before,” said NOL Group CEO Ng Yat Chung.
The company said there were “few signs of a quick recovery. Along with poor market demand, the container shipping industry remains burdened with over-capacity and weak freight rates.”
APL, NOL’s container shipping business, reported second quarter revenue of $1.7 billion, 13 percent less than the $2 billion in the second quarter of 2012. Volumes amounted to 705,000 40-foot containers (FEUs) in the second quarter, 2 percent lower than the 720,000 FEUs moved in the same 2012 period. Average revenue per FEU was also down 11 percent to $2,315 per FEU compared to $2,615 per FEU in the same 2012 period.
“Weak demand coupled with an over-supply situation in the industry has continued to put severe pressure on freight rates. This has impacted revenue significantly,” APL President Kenneth Glenn said.
In the second quarter of this year, the company had negative core earnings before interest and taxes (EBIT) of $45 million compared to a positive $7 million in the second quarter of 2012. For the first half of the year, EBIT was negative $146 million, better than the $239 million in the first half of 2012.
Glenn said “by maintaining a strong cost discipline, we achieved a better performance despite the deteriorating demand and freight rate environment. We expect that the realisation of our fleet renewal programme will further make significant improvements to our cost base.”
In the first half of 2013, APL took delivery of 19 of 34 new vessels. It said those larger, more fuel-efficient vessels replace smaller, older ones in the fleet, and will increasingly reduce APL’s vessel slot costs.
The company said “yield management remains APL’s focus, as it manages capacity to match market demand. Its headhaul utilisation stayed above 90 percent in the first half of 2013.”
NOL’s supply chain management business, APL Logistics, had revenue of $354 million in the second quarter of 2013, 2 percent less than in the second quarter of 2012, but core EBIT for the segment was up 11 percent to $10 million. In the first half of the year, supply chain revenue was $781 million, a 4 percent increase and core EBIT was up 18 percent to $26 million.
The company said this reflected a “steady growth trajectory.”
“While we were adversely impacted in the second quarter by an unseasonal slowdown in our automotive segment, all our other lines of business have grown on a year-on-year basis,” said APL Logistics President Jim McAdam. “We are also pleased to see that our growth strategy in the emerging markets is being realised.”
As to the outlook for the remainder of the year, NOL said its cost base “will continue to improve through operating efficiencies, aided by lower vessel slot costs with the delivery of its larger and more fuel-efficient ships. Barring unforeseen circumstances, the Group remains on track to deliver a better performance than in 2012.”
Alphaliner's list of the 100 largest container carriers by capacity
ranks Hapag-Lloyd and NOL today as the 6th and 7th largest container carriers, respectively, with fleets of 709,582 TEUs and 637,209 TEUs. - Chris Dupin