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Hapag-Lloyd back in the black with $180.9m H1 profit after CSAV merger

Hapag-Lloyd back in the black with $180.9m H1 profit after CSAV merger
Container line Hapag-Lloyd reported a major turnaround in the first half of the year with a EUR157.2m ($180.9m) profit, and believes its merger with CSAV will create higher cost savings than expected.

The first half profit of EUR157.2m compared to a loss of EUR173.3m in the same period in 2014. Revenues jumped to EUR4.96bn in the first half of 2015, up from EUR3.21bn in the previous year.

The sharp rise in revenues was due to the merger of Hapag-Lloyd with the container shipping activities of CSAV in December 2014. It said the integration of CSAV, dubbed Project Cuatro, was largely completed by the end of June this year. With the inclusion of CSAV’s vessels the company had fleet of a fleet of 188 container vessels at the end of June compared to 154 in mid-2014. The line operated 128 services at the end of June this year, compared to 101 services a year earlier.

Looking at the state of the container shipping market Hapag-Lloyd commented: “Once again, growth in the capacity of the global container fleet, largely as a result of the commissioning of very large container ships in Asia-related trades, is expected to outpace demand for container shipping services in 2015.”

The line’s average freight rate was down $128 per teu, year-on-year at $1,296 per teu. “Besides the initial inclusion of CSAV’s container shipping activities, which have a lower freight rate level overall, the main reason for the decline was the ongoing difficult market environment with increased pressure on freight rates in the second quarter 2015,” the company said.

“As competitive pressure has remained high and the bunker price has fallen, it has only been possible to implement the necessary freight rate increases to a very limited degree.”

However, the German line believes it results will improve this year. “For 2015 as a whole, Hapag-Lloyd plans to significantly improve its operating result (adjusted EBIT), taking into account the persistently challenging industry environment.” The company expects annual savings from the merger originally estimated at $300m to increase to $400m, with these fully realised by 2017.