Hapag-Lloyd Swings to Q4 Loss as it Previews Sharply Lower 2023 Results

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Hapag-Lloyd swung to an operating loss during the fourth quarter of 2023 with the world’s fifth-largest carrier attributing strong financial result declines to “lower freight rates resulting from the normalization of global supply chains.” The company published its preliminary business figures ahead of a March 14 release providing a glimpse of the strong challenges the container shipping industry encountered in 2023 and the issues that lie ahead.

During the third quarter released in November, Hapag cited market conditions as the biggest challenge to the industry and its operations. CEO Rolf Habben Jansen told investors that freight rates that were below year-earlier levels saying they were working hard to reduce expenses below the already reduced levels. He, however, cautioned investors, “If spot rates do not recover, we could face some challenging quarters in this subdued market environment.”

While only providing preliminary total year results, today’s release shows that the company lost more than $200 million in the fourth quarter on an EBIT (earnings before interest and taxes) basis. At the end of the third quarter, they had stood at $3 billion with the year-end numbers reported at $2.7 billion. On an EBITDA basis, the company earned only $300 million in the fourth quarter reporting the year will be $4.8 billion EBITDA versus $20.5 billion EBITDA in 2022.

“As expected, Hapag-Lloyd recorded a significant decrease in earnings in the 2023 financial year,” the company writes in its press release. After reporting what they called “extraordinarily strong results” in 2022, the company is now indicating it will come in at the low end of its forecast for earnings on an EBITDA basis and near the middle of the range on an EBIT basis. Year ago, EBIT was $18.5 billion versus this year’s $2.7 billion. 

While they are indicating that volumes were basically flat for the year, freight rates continued to be the biggest challenge for much of the year before they rebounded as the security problems mounted in the Red Sea and delays grew at the Panama Canal as daily transits were reduced. Hapag is indicating that freight rates averaged $1,500 per TEU for 2023 contributing to a strong decline in revenues to $19.4 billion for the year.

Management will be providing a discussion of the year and its outlook when they publish their annual report on March 14. However, in today’s announcement, the company pointed to the key issue. They write, “The conflict in the Red Sea negatively impacted transport volumes at the end of the year, as the rerouting of ships around the Cape of Good Hope extended voyage times.”

Hapag began its reroutings after its vessel the Al Jasrah (149,380 dwt) was targeted on December 15. The Liberian-registered vessel was struck by what the company called “a projectile” saying it was unclear if it was a missile or a drone. The crew was uninjured but in later comments, the company admitted there had been a small fire affecting some of the containers. Hours after the incident, Hapag said it was pausing all Red Sea transits. An emergency committee continues to review the situation, but they are still sending all their ships around Africa.

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