Hapag-Lloyd in 1999/2000

Hapag-Lloyd in 1999/2000 (1.10-30.9):

- Group operating profit up to €253m (1998/99: €130m),
- thereof liner shipping: €172m (1998/99: €84m)

I. Results for 1999/2000

Hapag-Lloyd Group, focused on the growth areas transport and logistics since 1.10.1999, has made an excellent start, its operating profit before interest rising from €130m to approx. €253m. Liner shipping has accounted for the highest share of the operating profit and growth in profits. Group operating profit after interest is expected at €230m (previous year: €109m). Group sales have surged to approx. €3.6bn (+18%).
 Liner shipping

Liner shipping will increase its operating profit before interest from €84m to approx. €172m. Also revenues will grow significantly from €1.6bn to €2.0bn. Profit margin on revenues will be at 8,6% after 5,2% the year before.

Our liner services have benefited from increased transport performance and productivity, the strength of the US dollar against the euro and slightly higher freight rates, increasing for the first time after steady declines in previous years. On the other hand, much higher bunker costs will have a very adverse effect on the results.

In the course of the financial year Hapag-Lloyd Container Line has commissioned 5 new 4,900 TEU containerships and increased its transport volume by 10% to 1.6m TEU. All regions served by Hapag-Lloyd have contributed to the good result. In Asia the imbalance between imports and exports still noticeable in the previous year is normalising at a high level. The economic recovery in Europe and the on-going boom in North America have also contributed to volume growth. This development resulted in a substantial increase in demand on the North Atlantic, and also led to further imbalances on the Pacific, while exports from the USA are still on low level.

Given the high demand, rate increases could be achieved in several trades, particularly in view of a decline in surplus capacity for the first time in many years.

This year Hapag-Lloyd Container Line has continued to handle volume growth by its worldwide sales and logistics organisation with almost no increase in its headcount. This productivity increase has also been supported by a further expansion of our globally networked IT infrastructure and systems. Our yield management systems, which facilitate profit-oriented selection of cargo, have also made a considerable contribution to our improved results.

Ocean transport costs per container unit transported have been reduced even further, thanks to our cooperation with four Asian and European partners within the Grand Alliance, the world's largest consortium in container liner shipping.

Hapag-Lloyd liner shipping's result is traditionally affected by the US dollar exchange rate, as it books more revenues than costs in US dollars. In the 1999/2000 financial year the strength of the dollar, increasing on average by 13% against the euro, has had a very favourable effect on our results. On the other hand, the substantial increase in bunker costs has had a considerable negative impact on our results. The fuel price calculated on a euro basis doubled on average over the year.

Results for the regions were as follows:

Region Europe will produce a much better performance, thanks chiefly to strong volume growth, particularly on the North Atlantic. Region Europe also registered stable freight rates on services towards both America and Asia.

The results of Region West will be down on the previous year because of further rate declines in services to Asia and Europe. This negative development will not be offset by strong volume growth on the North Atlantic and on the Pacific, where we have introduced additional ship capacity.

Region East will achieve a considerably higher operating profit, compared to previous year. An above market increase in transport volumes, particularly in services to America, and export rate increases have contributed to the higher result. A further optimised container flow has led to lower costs for the positioning of empty containers. Intra Asian services have stabilised at a gratifyingly high level.

Rickmers Line, which provides conventional liner services was sold with effect from 1.1.2000.

Other business

Other business accounted for revenues of €1.6bn, or about 40% of the total turnover. These activities comprise cruises and freight forwarding, the logistics provider VTG-Lehnkering, which specialises in services for the chemical and petrochemical industry, and the French Algeco Group, whose core business is the production, leasing and sale of container modules for use as temporary premises. Operating profit will total approx. €80m, well up on €46m the previous year.

Hapag-Lloyd Cruises expects to improve its result, thanks mainly to the good performance of the new 5-star-plus EUROPA, which had a successful first year of operation. MV COLUMBUS has established herself in the 3-star market with gratifying capacity utilisation and a satisfactory result, while the HANSEATIC has continued to achieve stable capacity utilisation and profits.

Pracht Freight Forwarding will repeat its operating profit, despite the sale of German Parcel to the British Post Office in 1998. Pracht's activities in the highly competitive German and European market for groupage services will achieve increased results. The warehousing and distribution activities, in which business with a major customer was restructured, will also make a higher contribution to the result.

VTG-Lehnkering, assisted by an upturn in the chemical sector, has recorded generally gratifying business developments with a higher operating profit. This increase is attributable mainly to the core business of European rail logistics, which has benefited from an expansion of scope as well as operating improvements. VTG-Lehnkering has raised its share in Transwaggon (Switzerland), the largest private-sector lessor of freight cars in Europe with a fleet of 8,000 units, to a majority interest of 54%. VTG-Lehnkering has also considerably expanded its fleet of rail cars with its acquisition of the rail car fleet of the former competitor IVG (Bonn) and the procurement of rail tank cars. Good vehicle capacity utilisation and low maintenance costs have also contributed to the increased financial performance.

Further contributions to the profit growth came from inland shipping and contract manufacturing of chemicals.

Algeco, based in Macon (France), expects to achieve a gratifying improvement in its performance. Thanks to its leading market position in western Europe as provider of mobile container modules for temporary premises, Algeco has benefited from the strong economic growth in France, Germany and Spain/Portugal. Though clearly increased capacities in leasing business in these countries utilisation could be maintained at least at the gratifying level for the previous year. Production and distribution activities have been established in the Czech Republic and Poland.


II. Capital Expenditure

Capital expenditure will total approx. €500m in this financial year.

Liner shipping will account for €240m, mainly consisting of final payments for containerships delivered this year, down payments for the order of 4 vessels of the latest generation (each 7,200 TEU) and container new buildings.

VTG-Lehnkering has invested approx. €150m, mainly in rail tank and freight cars for rail logistics, and Algeco Group approx. €100m, primarily in its fast-growing park of container modules.


Cash-flow

Capital expenditure has been covered mainly by cash-flow, which will come to approx. €380m.