German shipping major Hapag-Lloyd has reported a net loss of EUR 42.8 million (USD 48.5 million) for the first quarter of 2016 against a profit of EUR 128.2 million recorded last year due to very challenging market conditions.
During the first quarter of 2016, the average freight rate dropped significantly to USD 1,067/TEU from USD 1,331/TEU in Q1, 2015. The sharp decline in the freight rate prompted revenue to fall from EUR 2.30 billion in the previous year to EUR 1.93 billion in the reporting period.
Despite the difficult market environment, transport volume increased by 2.1% to 1.81 million TEU in the first three months of 2016 from 1.77 million TEU year-on-year, the company said.
Hapag-Lloyd said that the negative effects of the difficult market environment were partly offset by the cost-cutting and efficiency measures already implemented under the OCTAVE programme launched in 2015 and by a significantly lower average bunker consumption price of USD 178/tonne (prior year period: USD 378/tonne).
The OCTAVE programme is scheduled to be implemented in the current financial year.
Hapag-Lloyd reported a positive EBITDA of EUR 123.4 million, but substantially slashed from the EUR 283.6 million from the corresponding period from last year. EBIT came to EUR 4.8 million, also much lower then last year’s EUR 174.3 million.
“In the seasonally weak first quarter we recorded an acceptable result with a small operating profit and an EBITDA margin of 6.4%. This was due in no small part to the synergy effects which have been achieved so far as a result of the merger with CSAV and the improvements to our cost base under the OCTAVE programme, which we implemented in 2015,” said Rolf Habben Jansen, Chief Executive Officer of Hapag-Lloyd AG.
Both factors together represent around USD 600 million in annual long-term earnings effects compared to the cost base in 2014.
“The OCTAVE 2 programme will help improve our cost base further by a high, double-digit million dollar amount,” added Habben Jansen.
For 2016 as a whole, Hapag-Lloyd is still forecasting a moderate increase in EBITDA and a clear rise in EBIT compared with the previous year.
With an equity ratio of around 45.3%, the company believes it has a sound balance sheet.
The German carrier said it has a liquidity reserve of over EUR 794.6 million, which makes it securely financed for the future.