Hapag-Lloyd AG

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Hapag-Lloyd Analyst and Investors Q1 2024 Results Conference Call. Hapag-Lloyd is represented by Rolf-Farben Janssen, CEO, and Mark Frese, CFO. Throughout today's recorded presentation, all participants will be listened to in mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press Start Followed by 1 on your telephone. Please press the Start key followed by 0 for operator assistance. I would now like to turn the conference over to Rolf-Haben Janssen, CEO. Please go ahead.

Thank you very much and welcome everybody. And thank you very much for taking the time to talk to us today on our comments on the first quarter. And let me maybe start with a general introduction before I hand it over to Mark for comments on the financials. And then I'll wrap it up before we take your questions. Yeah, maybe a couple of key messages when it's around the first quarter. I think when we look at the first quarter, we've seen generally quite strong demands, probably a little bit stronger than many anticipated, even if in fairness that also comes on the back of a very poor first quarter in 23, so we also should not overrate it. I believe the industry has reacted quite well on the Red Sea crisis and has been able to stabilize most of the global supply chains, also because we have had indeed some chips available. In terms of numbers, I would say it's been a solid start to the year where we delivered an EBIT of about 400 million. Of course, driven by volumes that are definitely up and trade rates that have also recovered somewhat from the unsustainable levels that we saw, especially in the spot market in the fourth quarter of 23. At the same time, I think we've made a we've made good progress on our strategic agenda, both in terms of building up our terminal unit that Mark will talk a bit more about later, but we also launched our strategy both internally as well as to the capital markets where... ... And we also intend to further build up our terminal and infrastructure portfolio. As we look at the results for the first and also an outlook on the second quarter, we've decided to narrow our earnings outlook in the upper half of the original range. When we look at the market, a couple of highlights maybe to that. I think we can clearly see that global container volumes are up. seasonal pattern actually quite normal, but especially January, February up very significantly compared to 23, which admittedly was also quite low. The two markets where we saw the best recovery was on the Trans-Pacific. And of course, we have seen that it's good that we have some ships available because that allows us to carry also all those boxes even if we see that there are still a couple of holes in the schedule. But as there are no further ships available, that is currently, I would say, what it is. We've seen recently a very steep increase in spot rates. It's a little bit difficult to understand where that spike comes from. We do see very strong demand over the last number of weeks, but the background of that is a bit unclear. Is that a short-term spike or does it really have to do something with an early peak season or some restocking activities here or there? When we look at our strategy, maybe just a very quick glance at that, probably more a reminder for most of you, as I suspect that many of you have joined some of our earlier calls or were participating on the Capital Markets Day. We said in terms of strategic direction, our The view is definitely to remain a pure play or to become a pure play plus player. A little bit of a nuance or a difference compared to what we had in our previous strategy where we said our focus is the liner business. Now we explicitly add in there also the terminals business and also the ambition to further grow our inland share where to put some stakes in the ground. We believe that by 2030 it is realistic to who have stakes or controlling stakes in over 30 terminals. And an inland share of over 30% should also be feasible. In terms of our market position, we aim to remain in the top five globally also by 2030. That means probably that over that seven year period, we need to grow slightly ahead of market. And we also shouldn't forget that As we are, as an industry, likely sailing slower in 2030 than we do today, that anyway means that we need a fair bit of extra capacity. How do we intend to win? Clear objectives when it's around quality. Our net promoter score, very important. We measure that twice a year. We believe we should aim to be above 50 all the time. In terms of OTD, we've always said we'd like to become much more reliable when it's around the schedules. That's where also our new venue with Gemini, of course, plays an important role. We think that getting to over 80% on box level is feasible, but will take some time. And of course, we also need to work on the digital experience. Then on the sustainability front, we committed ourselves to the 1.5 degrees trajectory as agreed in as laid down in the Paris Agreement. That means we have to reduce our absolute emissions with about a third versus 2022 until 2030. That's a very ambitious goal, but we think it's possible. And in terms of performance, of course, we need to make sure we remain profitable, earn back our cost of capital, continue to focus on unit costs, and drive productivity further up. A bit more detail on a couple of those points, customer satisfaction. On the customer side, I think we continue to get good feedback from our customers. We just concluded our last customer experience survey with over 7,000 responses, and those people gave us a net promoter score of slightly over 60. When you look at the Besides, we've taken delivery of a number of ships and also getting some new charters into our vessel. That means that our vessel capacity is now up to 2.1 million TUs, which indeed keeps us in the top five. A couple of other things worth mentioning is, I think, the launch of our new container tracking product. A little bit more about that on the next slide, but also in the context of sustainability, I think some tangible things which we announced over the last three months. uh on the first quarter um to read to start retrofitting some chips to methanol and i believe it's also worthwhile mentioning that we won zemba's first send tender um i think that's a on the one hand a nice illustration of what we are doing on sustainability and that people recognize that but it's also i think a really good sign that that a number of large corporations explicitly commit themselves to be willing to pay for decarbonization because in the end, that will not come for free. Then, my last slide, dry container tracking. I think we announced that to you, or we talked about that to you quite a few times already. I think we've been proud to launch our first dry container tracking product. Light position, we call it. That definitely will improve supply chain visibility for many of our customers. because we are going to provide them with near real-time data on all of their boxes. That means you get door-to-door visibility, you can take better data-driven decisions, and of course you can plan the movements of your goods more accurately. We see a good initial uptake on that, but I think most importantly is that this product will become still a lot better in the course of the year. And it will be very interesting to see what the response of the market will be if we fast forward six, 12, or 18 months. I think with that, I wrap up my introduction, and Marc would hand it over to you.

Yes, thanks. Thanks, Rolf, and welcome also from my side to everybody. Looking at the numbers in a little bit more detail now, I think it's clear if we compare our group figures for the first quarter with those of the previous year, the financial performance has clearly deteriorated. However, it's important to remember that last year's Q1 performance was for sure still outstanding and is in no way comparable to normal profitability levels we have seen before. And I think that is true either in container shipping or in most of other industries. Over the course of last year, the earnings of most container lines deteriorated and even turned into negative territory in Q4 2023. This was extreme. You can nearly call it irrational, an irrational swing in profitability in that period. And I believe that we have now returned to a more reasonable earnings level right now. Therefore, we can be satisfied with the financial performance in Q1. And this is all more true given that our balance sheet ratios remain very strong with a substantial net liquidity position and an equity base of 21 billion U.S. dollars. Taking now a closer look at our financial performance, we see that earnings have declined significantly compared to the still exceptional asset performance in the first quarter of last year. However, profitability levels improved strongly quarter on quarter and even compared to Q3 2023 due to the recovery in demand and even more so due to the healthier freight rate environment. Revenue rose quarter on quarter by 13% to $4.6 billion, while EBITDA tripled to $942 million. EBIT amounted to close to $496 million following a loss of $251 million in the previous quarter. Group profit came in at $325 million. On segment level, liner shipping contributed the largest part of group EBIT as terminal and infrastructure segments is still in the process of being formed and ramped up. Terminal infrastructure revenues increased significantly to 107 million US dollars as of some terminals and to some terminal companies were not consolidated until August 2023 and therefore not included in Q1. 23 figures. Segment equity amounted to 35 million U.S. dollars and segment EBIT to 18 million U.S. dollars. And that is very much in line with our expectation and planning of ramping up the terminal business. In the liner shipping segment, revenues declined year on year to 4.5 billion U.S. dollars, while EBIT was down by to 378 million U.S. dollars. This development is mainly due to the lower average freight rate as we can see on the next page. Our average freight rate inline shipping declined by 32% from almost 2,000 US dollars per TU in Q1 23 to 1,359 US dollars per TU in Q1 24. When compared to the previous quarter, however, the negative trend was reversed, and I think that is the most important message, and our average freight rate increased by 14% quarter-on-quarter. At the same time, volumes improved by 6.9% to more than 3 million TU year-on-year and 1.6% quarter-on-quarter, even though Q1 is seasonally a weaker quarter. We recorded the strong volume increase on the Trans-Pacific and on the Far East Trades. The Trans-Pacific volumes were up 28% year-on-year as demand in the United States picked up again and the stocking cycle seemed to be at the end. On the other hand, the Middle East volumes were clearly down as we were forced to suspend most of the services through Suez due to the tense security situation in the Red Sea. The additional cost associated with the rerouting of vessels around the Cape of Good Hope are clearly visible in our unit cost, which amounted to US$1,256 per TU in Q124. Bunker expenses increased quarter on quarter mainly due to the longer voyage times while handling and haulage expenses were mainly due to the higher transshipment costs we have experienced. In the vessel and voyage line item, we benefited from lower Suez Canal costs for sure. However, this was partially offset by higher expenses for our short-term charter ships and container slot charter costs on third-party vessels. In comparison to the previous year, costs were still down by 5%, which is a positive as we implemented cost saving measures already before and benefited from the unwinding of the congestion situation. Coming now to our cash flow development, operating cash flow amounted to 609 million US dollars. The longer voyage times and rising freight rate increased our working capital and therefore negatively impacted our operating cash flow development. Investment cash outflow of 386 million US dollars was mainly attributable to installments for our new vessels and to purchase of containers. Payments received. mainly for interest on our cash investments, and in contrast, resulted in a cash inflow of 109 million US dollars. The financing cash outflow of 370 million US dollars was mainly related to repayments we have done of our debt and lease liabilities. In total, our cash balance stood at US dollar 6.3 billion at the end of Q1 24, slightly lower at the end of 2023. As you can see on the next page, this cash balance does not include our strategic liquidity position of $2 billion, which is recognized under other financial assets. Including the strategic liquidity, which is currently invested in fixed income assets, and including the undrawn revolving credit facilities, our liquidity reserve stands at $9 billion. While a net liquidity position of 2.6 billion and an equity ratio of 64%, the balance sheet ratio remains very, very strong. And following the AGM approval on the 30th of April 24, we have distributed a dividend of 9.25 euros per share. or in total numbers 1.6 billion euros. This outflow will be recognized in Q2 figures. And with that, I hand it back to Raoul for the market update and our outlook. Thank you.