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TUI looking to separate Hapag Lloyd despite profitable year

TUI looking to separate Hapag Lloyd despite profitable year

Hamburg: German shipping and Tourism group TUI AG has revealed that it is to prepare a separation of its container shipping division Hapag Lloyd from the group. Although ceo Michael Frenzel has gone on report as saying that the company is not currently in talks with Neptune Orient Lines (NOL), the company is examining options including a spin-off, merger or divestment as a single entity.

The decision to separate the division comes at a time when the container markets are reacting to a slowdown in imports by the US, which may affect Asia-US trade for the next few months. A purchase by NOL would substantially increase the merged entity's market share.

However TUI, which announced its annual results for 2007 this morning, has seen strong results - particularly in its container sector following the integration of CP Ships. It declared a group turnover of EUR21.9bn i.e $34.6bn (7% more than the EUR20.5bn seen the previous year) and a 47% increase in profits fuelled a rise in operating earnings to EUR616m.

Although earnings by the group's shipping division rose by 121% to EUR197m (from EUR89m), TUI has revealed that turnover by the shipping division declining by 0.8% to EUR6.2bn from EUR6.3bn the previous year, which it attributed to the weakness of the US dollar exchange rate against the euro.

It has also identified the unfavourable exchange rate as a factor for the 1.2% decline in turnover by container shipping to EUR6.0bn (as compared to EUR6.09bn). However, shipping volumes for the period rose by 9.0% to 5.45m teu and freight rates bounced back in the second half of the year, bringing the average for the year to just 1.3% short of 2006 levels. Frenzel has stated that he is optimistic for the year ahead.  [18/02/08]