Hapag-Lloyd Profit Falls As Hormuz Disruption Costs Six Hundred Million
Hapag-Lloyd's second-quarter profit fell to 71 million euros from 306 million a year earlier as the carrier absorbed roughly 600 million dollars of additional costs arising from the conflict in the Middle East. Group earnings before interest, tax, depreciation and amortisation edged up to 712 million euros, while operating profit fell to 150 million and revenue rose 11 per cent to 5.84 billion euros.
The underlying commercial picture was considerably better than the profit line suggests. The liner division carried 3.481 million twenty-foot equivalent units, up 3.5 per cent year on year, and the average freight rate increased 8.9 per cent to 1,475 dollars per unit. Volumes and spot rates both recovered after operational disruption at the start of the year, supported by stronger exports from Asia and improved demand in the United States. The chief executive described the second quarter as better than the first, driven by significantly higher spot rates and robust demand.
What ate the difference was the blockage of the Strait of Hormuz. The additional costs came from bunkers, insurance, storage, service rerouting and inland transportation, and the carrier had previously disclosed that six of its ships were caught inside the Persian Gulf. Those are precisely the categories that do not shrink when a crisis eases: rerouted services carry higher fuel bills for as long as they are rerouted, and inland transport arranged at short notice to reach cargo owners whose normal port is unreachable is expensive by definition.
The terminal and infrastructure business provided a modest offset, with revenue rising to 165 million euros and earnings before interest, tax, depreciation and amortisation of 47 million, helped by the first full consolidation of an Indian container business in which the group holds an indirect majority stake, and by stronger Latin American volumes.
The quarterly recovery was not enough to repair the first half, which produced a loss against a substantial profit a year earlier as first-quarter weakness weighed on the period. The group nonetheless raised its full-year outlook in July and expects group earnings before interest, tax, depreciation and amortisation of 2.7 to 3.7 billion and operating profit between 100 million and 1.1 billion. At the end of June the fleet comprised 300 ships totalling 2.458 million twenty-foot equivalent units across 129 liner services, with interests in 24 marine terminals.
