11.12.01
Interim report of the
chairman of the executive board of Hapag-Lloyd AG, Bernd Wrede,
on the 2001 financial year,
December 11th 2001, Hamburg
Hapag-Lloyd in 2001 (1.1-30.9):
- Group operating profit in first three quarters €250m, up 19%
- Operating profit as percentage of revenues over 8%
- Record performance expected for full financial year
I. Business development in 2001
Hapag-Lloyd Group achieved extremely good results in the first three quarters of 2001. Compared with same period in 2000, its operating profit after depreciation and interest surged by 19% to €250m, with group sales rising by 6% to €3.0 billion. For the full financial year we expect to achieve the highest profit in company history with at least 10% growth compared with last year.
Liner shipping
In the first three quarters of 2001, Hapag-Lloyd Container Line boosted its operating profit after interest by 17% from €135m the previous year to €159m thanks to an extremely gratifying first half year. Our liner services benefited from higher transport volume and productivity, as well as the strength of the US dollar against the euro. On the other hand, profit was depressed by declining freight rates.
In the first nine months of 2001, Hapag-Lloyd Container Line increased its transport volume by 8% to over 1.2m TEU. This growth was again higher than the market on average, which expanded by 1-2%, reflecting the downturn in world trade. All trades served by Hapag-Lloyd contributed to this increase. Significant growth was recorded for Asian exports, particularly in the first half of the year. As the year progressed, we were faced with a slowdown of the US economy, which - accentuated by the insecurity after September 11th - slowed US imports. The downturn in Europe also made itself increasingly noticeable. With the weaker demand and additional ship capacities coming on to the market, rates declined significantly from mid-year.
Hapag-Lloyd Container Line again handled the volume growth in its worldwide sales and logistics organization with almost no extra staff. This productivity increase was due mainly to the systematic optimization and use of our globally networked IT infrastructure and systems. The refinement of our yield management systems for profit-oriented cargo management also substantially improved our performance.
Unit costs per container transported could be kept stable while capacities were significantly expanded. Here we benefited from the joint management and deployment of ship capacities within the Grand Alliance, the world's largest consortium in container liner shipping.
The dollar exchange rate traditionally affects our profit, as more revenues than costs are booked in US dollars. We benefited from the dollar's appreciation by 6% on average against the euro in the first three quarters of 2001.
Results for the individual regions were as follows:
Region Europe put in a much better performance as of September. The increased profit was due mainly to stable freight rates on services towards both America and Asia. Region Europe also registered volume growth, particularly in exports to America.
Region West again achieved a lower result owing to significant declines in rates on services to Asia and Europe, which were not offset by moderate volume increases, particularly for exports to Europe.
Region East nearly matched its excellent profit for the previous year. It achieved another clear increase in transport volume, particularly for services within Asia and to America. However, declining rates led to a marginal falling-off in profit.
Despite the ongoing slump in rates and much weaker profit growth in the second half of the year, our liner shipping is expected to make another operating profit in the 4th quarter.
Other business
These activities comprise cruises and freight forwarding, the French Algeco Group, whose core business is the production, leasing and sale of container modules for temporary premises, and the logistics provider VTG-Lehnkering, which specializes in services for the chemical and petrochemical sector. Operating profit after interest as of Sept. 2001 totalled €91m, solidly exceeding the overall good performance recorded last year. (€76m)
Hapag-Lloyd Cruises matched its previous year's profit up to September. In her second operating year, the 5-star-plus "Europa" again made a significant contribution to the profit level and could further improve her capacity utilization. The "Columbus" is well established in the 3-star market and again achieved good capacity utilization and a gratifying increase in profit. The "Hanseatic" improved her capacity utilization, but was unable to match the profit for the previous year as a result of fewer voyages due to shipyard work. The "Bremen" registered inadequate capacity utilization.
The events of September 11th will have a very negative impact on results for the 4th quarter due to passenger cancellations for some regions as well as cost increases.
Pracht Freight Forwarding achieved an operating profit slightly below that of the previous year. This was due to lower profit contributions in the area of groupage cargo owing to the economic slowdown, start-up costs for a new customer in warehousing and distribution and e-commerce investments.
In the fourth quarter, Pracht will not be able to offset its decline in profit in the first nine months of the year.
VTG-Lehnkering slightly increased its operating profit up to September, despite the economic slowdown.
This improvement was due mainly to the core business of rail logistics services, which achieved increased profit, despite a planned increase in cyclical freight car maintenance costs. This was attributable partially to a reduction in depreciation volume owing to the change of accounting from a German commercial law to IAS basis, but also to strong demand for freight cars of Transwaggon and a higher profit contribution from the rail tank car forwarder Transpetrol. High capacity utilization was registered for rail tank and freight cars.
Special logistics did not match its performance for the previous year, mainly owing to lower results for tank farms. Despite good capacity utilization, results were depressed by investment in environmental protection with no corresponding revenues. This was slightly offset by the higher profit contribution from hazardous goods distribution. In inland shipping, profit will be lower mainly because of the poorer results for tanker shipping which were depressed by unfavourable water levels and declining capacity utilization.
At the end of the year, VTG-Lehnkering is expected to achieve a higher profit than in 2000.
Algeco, based in Mâcon (France), put in another gratifying performance, well up on the already high level for the previous year.
This improvement was due mainly to Algeco's core business, the production, leasing and sale of container modules for use as temporary premises. Thanks to its leading market position, Algeco achieved steady growth in leading countries in Western Europe, increasing its stock of container modules for temporary premises by 15% to approx. 100,000 units. With clearly increased capacities, capacity utilization in France and Spain/Portugal was only slightly down on the high level for the previous year. In Germany, capacity utilization could even be slightly increased, business being brisker than market average. Gratifying results were achieved for the production and sales activities established in 2000 in the Czech Republic and Poland.
Algeco will continue to put in an extremely gratifying performance up to the end of the year.
II. Investment
Hapag-Lloyd Group's capital expenditures will total approx. €370m for the full financial year.
Liner shipping will account for €180m, involving mainly capital expenditures on the "Hamburg Express" delivered in October - the first of four ships of the latest generation (each of 7,500 TEU) being delivered up to 2003 - as well as comprehensive container procurement and the acquisition of a 25% stake in Container Terminal Altenwerder (CTA).
At VTG-Lehnkering, investment will total approx. €70m. In the rail logistics area, the focus will be on modernizing and expanding rail tank and freight car parks. In the area of special logistics, investment will be mainly on the conversion of oil tank farms into chemical tank farms, meeting statutory environmental protection requirements and the acquisition of rail vehicles for chemical transport services.
At Algeco Group, investment will total approx. €110m, involving mainly expanding the park of container modules.
Investments can be financed entirely from cash flow, which should top €400m at the end of the year.
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