Hapag-Lloyd AG

Ladies and gentlemen, welcome to the HarperColloid Analysts and Investors H1 2024 Results Conference Call. HarperColloid is represented by Rolf Halpern-Janssen, CEO, and Mark Fraser, CFO. I am Maria, the cross-call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for provocation or broadcast. At this time, it's my pleasure and over to Rolf Haber Janssen. Please go ahead.

Thank you very much and good morning everyone or good afternoon maybe to some of you darling information. Thank you very much for taking the time to listen to us here. As always, we'll give you a short introduction with a couple of key messages and some more detail on the numbers before we roll for Q&A. In terms of what should be the key takeaways, I believe, from the first half, I would say first half, first we had the disruptions caused by the Red Sea, and then in the second quarter, I think we saw unexpected strong demand, especially in May and June. In order to meet those demands, we've taken various additional measures that we will elaborate on. We've had higher operating costs driven of course by bunker, but also by operating more ships and having to deploy more boxes. Nevertheless, we posted a good financial result for the first half with an EBIT of around 0.9 billion, of course driven by indeed higher volumes, but also increased freight rates compared to the last couple of quarters. We updated our outlook already on the 9th of July. I think we reiterate that outlook Here, even if we have to point out that, of course, in today's market, there's quite a lot of uncertainty around that. Maybe if we briefly look at market, I think the picture on the left-hand side gives you a good overview of what has been happening. I think when we look at global container volumes, they have been stronger than many expected, 7% up in the first half. I think that's quite a lot. May and June recording the highest numbers ever. In that context, we can be really happy that the industry has invested in additional ships because that has allowed us to transport all those additional boxes and to cope with that additional demand, even if we had to go around the Red Sea. When you look at the freight rates, here you see the SEFI index, which of course had a spike in January when we had the Red Sea situation. Then it looked like it was going to normalize towards the end of Q1, beginning of Q2. But then we've seen a spike in spot rates in May and June. And in recent weeks, we have seen things normalizing again a bit. Of course, we can speculate about why did we see that spike in demand. I think the most common causes mentioned are an element of restocking and potentially also a somewhat earlier peak season. But in fairness, none of us really knows that. What have we taken as measures to cope with that higher demand? We've been speeding up vessels, especially those that had to go around the Cape. We have adjusted our network and tried to move capacity to those trades where demand was the highest. We have moved, we've charted some additional ships to cope with the additional need for steel. We've also deployed a number of extra loaders to fill some holes that there were in the network. And we've ordered quite a large number of additional boxes as the turnaround times of the containers are currently, unfortunately, quite comparable to pandemic. to the pandemic levels, which means that we can use a box less than four times a year. Then, in line with our strategy, we've continued to build our terminal business, and we have also continued to invest in fleet and new service offerings. We took on board six new buildings, which means that our capacity has steadily grown over the last years to now 2.2 million TUs. We launched a couple of new web products with more still in the pipeline. We've adopted the Ansiatic Global Terminals name as a new brand for our growing terminal business based in Rotterdam. We've also been adding people to that team, amongst them a divisional CFO. We made good progress in the construction of Damietta Container Terminal and managed to successfully renew the lease contracts in Port Everglades for another 10 years. When talking about Gemini, I would say we're very much on track with the preparations for Gemini. We're probably on schedule or maybe even slightly ahead of schedule. I would say the main milestones that are ahead of us now are start of sales in September, start of booking in December, and then we will gradually move into the Gemini network as promised. beginning of next year. Of course, the official starting date is 1st of February, but in reality, that transition from the Alliance to Gemini will probably take about three months. It will start a bit earlier and end, hopefully, towards the end of the first quarter. And with that, I think I'll hand it over to Mark, who's going to talk a bit about Alamos.

Yes, thanks, Rolf, and welcome also from my side to all of you. First half of 2014, I think we were able to deliver good operational performance, which was certainly above our initial expectations at the beginning of the year. And in addition, we also maintained a very solid balance sheet. Transport volumes improved nicely on the back of a global recovery of demand, and despite the necessary rerouting of vessels around Cape of Good Hope. So with that, Group EBITDA came in at $2 billion and free cash flow at $0.5 billion. While this is below the figures of last year, I would like to remind us that last year's performance in the first half was still outstanding due to the exceptional market environment at the end of the pandemic. Looking at our financial figures in a little bit more detail, we can see that group profit fell 75% to $791 million in the first half of 24 due to lower operating profits and financial results. Nevertheless, with a return on invested capital of 9% in the first half, earnings were still on a good level. Even more important is that following the turnaround in Q1, The positive earnings trends accelerated in Q2-24. Group revenue and earnings improved quarter over quarter due to the better profitability levels, mainly in the liner shipping segment. With that, in Q2, EBITDA came in 9% higher at 1,028,000,000 U.S., and EBIT was up 23% at 485,000,000 U.S. dollars. This resulted in a healthy EBITDA margin of around 21% and an EBIT margin of close to 10%. Looking now at segment level, liner shipping recorded a decline in earnings year-over-year due to a lower average rate rate and higher transport costs associated with the rerouting, as mentioned, of our vessels around Cape of Good Hope. H124 EBITDA EBIT in the liner shipping segment amounted to 1,898,846 million U.S., respectively. At the same time, the T&I infrastructure segment revenue increased significantly in the first half of 24 to 270 million U.S., mainly due to the acquisition of the SAM terminal in August the year before in 23. For this reason, the figures for the first half of 24 are only comparable with the prior year numbers figures to a limited extent. Segment EBITDA increased to 71 million US, which resulted in a good margin of close to 33%. Segment EBIT amounted to 33 million US dollars And besides the regular depreciation on fixed assets, this figure also includes the amortization on the purchase price of some terminals, realized asset in August 23. Looking now at the main value drivers of the liner shipping segment, the average freight rate in the first half of 24 declined 21% to $1,391 per TU year-over-year. However, after bottoming out in Q4-23, the average trade rate increased further in Q2-24. At the same time, transport volumes in the first half were up 5% year-over-year to 6.1 million TU, which was mainly driven by the export from Asia to North America and Europe. On the Trans-Pacific trade, we recorded the strongest volume growth with more than 24% year-over-year as demand in the United States picked up and the destocking cycle more or less ended. On the other hand, the Middle East volumes were clearly affected by the difficult security situation around the Red Sea, resulting in 21% lower volumes in the first half. As a reminder, you know that we recognize transport volumes only in the end of the voyage, hence the surge we We have witnesses in May and June will drive the volumes development only in the third quarter because of the time lag. Our unit cost remained elevated despite successful cost measures as we continue to reroute, as already said, all trades from Asia to Europe. This leads in particular to higher bunker consumption, which was up more than 16% in the first half. And in addition, bunker costs increased following the first-time inclusion of the shipping sector in the EU emission trading system. Handling and haulage costs increased due to higher transshipment activities and storage costs. Vessel voyage costs declined mainly due to the lower Suez Canal costs. However, this was partially upset by the higher expenses for short-term charter ships and container slot charter costs on third-party vessels. In total, unit costs in Q2 amounted to US$1,281 per TU. The increase in comparison to the previous quarter is mainly related to the counting treatment of pending voyages. Adjusted for this effect, unit costs were almost unchanged quarter over quarter. The operating cash flow stood at $1,373,000,000 in the first half. The longer voyage times and higher revenue resulted in a negative networking capital development. Investments in our vessels and container fleet, as well as our terminal portfolio, led to a cash outflow of $1,120,000,000. In the first half of 24, we received in total six new-built vessels with a nominal capacity of around 110,000 tu. This includes one long-term charter. And in addition, as already mentioned by Rolf, we have ordered new container boxes with a total capacity of 260,000 tu to account for the increased turnaround times. Interest, income, and dividends from our equity participation resulted in a cash inflow of 248 million U.S. And while the free cash flow was again clearly positive, the cash position declined to 4.5 billion U.S., mainly due to the distribution of dividends in May to our shareholders of 1.8 billion U.S. The cash balance does not include our strategic liquidity position of 2.1 billion, which is recognized under financial assets. And as usual, I would like to conclude with a brief look at our key balance sheet figures. Our net liquidity position shrank following the distribution of dividends and higher charter liabilities. Nevertheless, with an equity position of 20 billion, U.S. and the liquidity reserve of 7 billion U.S. balance sheet ratios are still very solid. And with this, I hand it back to Rolf for the market update and the outlook.