GERMANY – KUWAIT – WORLDWIDE – The subject of low container freight rates has again come under the spotlight with the news that shipping group Hapag-Lloyd AG released figures showing the company saw profits decline over 60% in the third quarter compared to a year earlier. Despite this the company says it is optimistic of making full year profits. Whilst the line’s container capacity grew and fuel price dropped, the dip in average freight rates per TEU from $1,647 to $1,476, over 10%, is what caused the damage according to Hapag-Lloyd.
Whilst revenue fell from €1.765 billion to €1.664, a drop of only around 6% and volume of boxes carried jumped over 8.5% to 1.392 million TEU, group profits slumped in Q3, down from €45.6 million in 2012 to just €16.6 million this year. Hapag Lloyd’s current boss, Michael Behrendt, issued a company statement attacking the state of the industry calling a drop in rates during what should be a peak period, ‘disappointing, irrational and incomprehensible’.
Mr Behrendt is to leave the group as we announced in September with the appointment of Damco boss Rolf Habben-Jansen as its incoming Chairman of the Executive Board next April, Mr Behrendt is scheduled to leave in June 2014. Hapag-Lloyd has invested heavily this year replacing both vessels and equipment and, in partnership with others, withdrawn some seasonal sailings and increased basic rates.
Meanwhile, a contrasting picture seems to emerge when one looks at Q3 results from Agility, also just released. The group operates basically as a third party logistics provider (3PL) and thus does not have the expenditure of a shipping line such as Hapag, continually replacing capital equipment. Revenue at the Middle East centred group shrank 10%, from $1.28 billion to $1.15 billion for the comparable three months in 2012 but net profit jumped 26% reaching $42.7 million. Profits for the year to date did even better, up 40% to $119 million against even revenues whilst EBITDA improved by 23% standing at $242 million.
One factor which must be considered however when looking at Agility’s performance is the diverse nature of its core business. Agility Global Integrated Logistics (GIL) revenues dropped 9% to $940 million but the income from Infrastructure, up 8% to $215 million overall, saw Real Estate up 12% and another Infrastructure contributor, Tristar, also ‘showing promise’. Chairman and Managing Director, Tarek Sultan, commented:
“We continue to make steady progress in improving the bottom line, by controlling costs and improving productivity across our business. That said, the slowdown in the global economy impacted our revenues however, yet we were still able to report better on the net revenues level. Our infrastructure group is showing good progress and we are excited about our most recent wins.
“The nature of our business is closely tied to world trade flows. Global economic growth continues to be sluggish. Our focus will continue to be on remaining flexible and responsive to changing market conditions, on holding costs steady and maintaining financial discipline, while continuing to transform and improve our underlying business. We cannot control the market, but we can control our productivity and efficiency. Our focus will continue to be on staying agile to adapt to changing market conditions, while driving steady improvement in our core business.”
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