Hapag-Lloyd AG

Thanks, everyone, for making the time to join us here today. As always, we'll try to give you a quick overview and then afterwards be happy to take any questions that you may have. I think a couple of opening remarks. I believe that when we look at the highlights for the first half, I think it's definitely been a challenging market, especially in the first quarter, very weak demand, I think a bit recovering towards the end of Q2. but still challenging and rates, of course, quite a lot down. I think on the HAPAC side, a couple of things worth mentioning. One, definitely the completion of the acquisition of some ports and logistics, which we closed last week, for us an important milestone as we build up our terminal and infrastructure business. And then we also have, meantime, taking delivery of first two of our new built LNG-powered mega vessels, which for us is also something that we've been looking forward to for a long time. Financially, I would say so far the year unfolds more or less as we had anticipated. Definitely significant normalization of earnings. But still, when we look at half one, I'd still say that overall that's a pretty strong result. The average rate, of course, fell further in the second quarter. Even if we see a couple of green shoots, I would say at the moment when we look at some of the spot rates in a number of the main markets, Our balance sheet remains strong. When we look at the market, only slow recovery expected, even if what we said in the beginning of the year, that somewhere between May and August, we would see a bit of an uptick in demand. This is something that we definitely see. Also, when looking at our loadings over the last 10 weeks or so, of course, a lot of new vessels coming in, which partly will be absorbed by increased scrapping and slow steaming, but certainly not all of that. I think it's fair to say that supply growth will likely outpace demand growth in the remainder of this year, but also in 2024, which means that we actively need to manage costs again as we were used to also in the past. Way forward, earnings expected to continue to normalize. We expect to land within the range that we have indicated. We continue to build our terminal business and will also continue to take the measures that we have presented earlier to further improve our business. When looking at global demand, I think we all know these graphs. We see that in the last couple of months, volumes are coming closer and closer to what we saw last year. I personally expect that that orange line will cross the blue line at some point, hopefully in Q3, but latest in Q4. We look at the rates, they're still at unsustainable levels in a number of trades. I can't emphasize enough that when we look at costs, because people always compare the rates pre-pandemic with post-pandemic, but we should not forget that cost is up between 25 to 30% across the industry, and as such, rates will need to follow that pattern at some point in time. When looking at the highlights from our end, probably three things really worth mentioning before I hand over to Mark. First of all, last week we completed the acquisition of sound ports and logistics. As that was an activity that is present in many different countries, the regulatory approvals took, as expected, some time. But we're happy that we managed to get all the okays because that will, again, it underlines our commitment to the Latin American market and certainly strengthens our position. particularly on the West Coast. On the ship side, we've taken delivery of a number of the 13,000 already, but now also the 24K vessels are being delivered and we took delivery of the first two of them. Meantime, apart from that, that will definitely help us to reduce emissions. But of course, we will still have to do more. And in that context, I'd also point out all the efforts we are making on biofuel here, and the ship green product that we have launched, and many of you will also have seen the announcement where we indicated that we are also going to engage in a number of methanol main engine retrofits. That was an announcement together with C-SPAN and MAN. In terms of CO2 reduction target, for now, we are on track. Here you see the numbers until 22. I think based on what we see so far, we are also confident that in 2023, we will achieve the targets that we have set ourselves. But of course, there's still more to be done if we want to get to the numbers that we've committed to for 2030. And then finally, before I hand over to Mark, let me a few words on customer satisfaction. I think many of you know that when we launched our strategy towards 2023, one of our key ambitions was to become number one for quality. In that context, we set ourselves targets for all kinds of quality promises, where you can see on the left-hand side that in many of those, we have made very, very good progress. We still need to work on schedule reliability, which is certainly one of the things on our to-do list for the upcoming couple of years, but also quite happy to see that when we look at our NPS score, which is indeed the recommendation rate or the net promoter score that we get from our customers that this time we got the highest score that we have achieved so far since we started measuring that. So I think that's a big compliment to all the teams out there who have consistently been working on many things to make that customer experience better. And hopefully we can remain on that level or maybe even do a little bit better going forward. So with that, I would hand it over to Mark, for now, who will take us through the numbers?

Yes, thank you, Rolf. Also from my side, very good morning to everyone. As we will see, and as Rolf already said, the first half of 2023 was characterized by declining demand and, for sure, significantly weaker freight rates for container transport. And in this challenging market environment, we have again delivered a good operating result and maintain a very strong balance sheet. Now, taking a closer look at the financial performance, we see that the normalization of earnings set in as anticipated in the first half of 2023 revenue decreased by 42% to 10.8 billion US dollars. And that is mainly due to significantly lower freight rates, but also to some extent due to a bit lower volumes. And while we were able to reduce our cost base, it was evidently not enough to compensate for the revenue shortfall for sure. As a result, EBITDA and EBIT fell to 3.8 billion US dollars and 2.8 billion US dollars respectively. Nevertheless, margins and return on invested capital continued to be relatively high and well above historical levels. Group profit came in higher, than the operating profit at 3.1 billion US as we generated a positive financial result mainly due to the interest income on our substantial cash balances and fixed income investments. Transport volumes in H123 declined by 3.4% to 5.8 billion TU. The highest volume declines were recorded on the Far East and Middle East trades. while the intra-Asia trade benefited from the redeployment of capacity following the normalization of the global supply chain. The Africa trade continued to keep up well, also due to our successful acquisition, as you know, of NASDAQ in 2021 and the container liner business of Deutsche Afrika Linien in 2022. As already outlined, the average rate rate in H123 decreased significantly by 38% year-over-year to $1,761 per TU. Asia-related connections recorded the highest declines. Our high contract portfolio, including multi-year contracts and our balanced geographic exposure, have helped us to cushion the severe spot rate declines we have seen this year or since end of last year. At the same time, the average bunker consumption price was down 11% on the back of lower oil prices. The decrease in unit cost was mainly driven by lower bunker prices and handling and haulage expenses as a result of the steady normalization of the supply chains. However, inflationary pressure dampens the positive cost trend, and that's why it's so important to focus on that. For example, port and canal fees included in the vessel and voyage line item increased clearly. In total, unit costs in H123 were down by 5%, around about 66 US dollars per TU, as compared to H1 2022. In comparison to the peak unit cost of US$1,458 recorded in Q4 2022, we were able to reduce the cost level in Q2 2023 by US$250 to US$1,207 in that respective Q2. Taking a closer look at our cash flow, we can see that free cash flow was again clearly positive in the first half of 2023. Operating cash flow amounted to 4.1 billion U.S. dollars due to the good operating results and positive working capital effects. We invested around 1.6 billion U.S. dollars in terminal participations, as mentioned already, for sure also in vessels and in our container fleet. In January 23, we acquired 49% minority interest in the Italian Spinelli Group, and in April, a 40% interest in the Indian J and Baxi ports and logistics. You know these transactions, they were closed and paid at that time. In addition, we received our first 24,000 TU LNG-powered vessel and made installment payments for our vessels currently under construction, so also the health wars. In our investment, anti-investment cash flow included also a net cash inflow of $1 billion from the liquidation of time deposits. Financing cash outflow of $12.9 billion, mainly related to our dividend payment in May. Cash balance stood at $7.4 billion at the end of H-123. The consideration of $1 billion for the SAM transaction, which was closed last week, we will then see included in the Q3 figures. So I would like to finish my presentation with a brief outlook on our strong balance sheet and credit ratios. We were able to maintain a net liquidity position of $3.9 billion at the end of the first half of 23, despite the high dividend payouts. At the same time, the liquidity reserve, which also includes fixed income investments of around $2 billion, and our undrawn revolving credit facilities stood at $10.1 billion. And with an equity base of more than $20 billion, our equity ratio stood at 66%, which is well above, as you know, of our target of 45%. And having said that, I would hand it back to Rolf again for a market update and outlook. Rolf, please.

Thank you very much. Yeah, when we look at market outlook, I think the slide that we tend to show gives you a bit of a flavor of where the order book stands, what we see as deliveries and orders that are being placed. I think in fairness, order book is still relatively high, although nowhere near to what we saw in 2009. And I can't emphasize enough that the situation today is different than what we saw at that point in time. The global fleet is significantly older. On average, 28% is a lot less than 56% that we saw. And we also have the need to absorb more capacity because of the new CII rules in particular. All in all, still definitely an order book that's on the high side, but not the situation as we saw it in 2009. Deliveries quite a lot in the pipeline, as was expected. Not that many orders being placed anymore, but still ordering, I would say, at an elevated level. And inactive fleet still fairly low, most likely also on the back of a lot of long charters that have been closed throughout the pandemic. I would expect the idle fleet to go up latest in the first half of 24. When we look at the supply-demand balance, I think when you look realistically at what's going to happen there over the next 12 to 18 months, that it's quite likely that supply growth will outpace demand growth because, yes, we see some recovery of demand, but probably not at a huge pace. we do see an inflow of capacity uh we will see some slippage i think we will see scrapping going up but it will take a little bit of time to to absorb all of that new tonnage and as such i think the picture that's painted here is is fair when looking at our outlook we basically confirm the outlook we have expected a gradual normalization uh in 2023, and I believe that's also what we are seeing. We still think that our transport volume is going to grow a bit, yeah, bunker consumption is going to go down, freight rate obviously as well, and the ranges that we have indicated for EBITDA and EBIT remain unchanged. What are our priorities for the remainder of the year? First and foremost, make sure that we continue to focus on service quality and customer satisfaction because having happy customers will still put us in the best position to remain stable also if there is a somewhat more difficult period ahead. We'll continue to have a prudent financial policy. We're focusing on integrating the recent terminal acquisitions that have been closed in the first half of this year. We will continue to look at further efforts to accelerate our efforts on the sustainability front and to do more on decarbonization. Where needed, we will adapt to market positions. We'll continue to focus on cost. We'll invest in our teams, and as we've said, we're working this year to complete our strategy towards 2030, and we hope to wrap that up before the end of this year. So with that, I think that concludes our introduction, and we would happily hand it over to you for Q&A.