Hapag-Lloyd AG

Welcome everyone, and thank you for taking the time to join us here today. I'll probably start with a couple of highlights and a couple of things around the third quarter before Mark will take us through the financials. I think when we look at the first nine months of 2024, of course, there were probably two themes that dominated all the narrative. One of them was, of course, the Red Sea crisis, but I would also say that demand has been much stronger. than everyone expected, and I believe that's also one of the reasons why we saw a strong uptick in particularly short-term rates out of Asia in the course of the second and the third quarter. On the back of that, we delivered, which I would say is a very solid result with a group EBIT of 1.9 billion for the first nine months of 2024. That's also why we raised our earnings outlook in October when we also sent you the prelims for Q3. Two other things that are worthwhile mentioning is, of course, the launch of Gemini. A lot of work has been put into that by all of our teams around the globe, and I believe we're in a really good place today, as we will open for bookings in a couple of weeks from today. The network is finalized. I think we are preparing the transition, and hopefully everybody will be able to experience this, indeed, higher schedule reliability and even better service in the course of 25 years. Then we also announced a number of new ships that we bought. We did not buy ships for a while after we did that in 21 for the last time. And as such, I think it was logical that we ordered a number of ships in the 9 and 17K class to help us develop our business further, but also to replace a number of aging ships. If we look at the market, I think many of you know these graphs. Global container volume really quite strong this year, particularly in the beginning of the year, but still today pretty healthy growth. I would also say that after the October holidays, we saw bookings and volumes coming back quite quickly. So that's a positive read looking towards the end of the year. Overall volumes up about 6.3%. If we believe CTS, we are up close to 5%. slightly below market. Hopefully, we'll still be able to catch up some of that in the fourth quarter so that we are going to close the year with a growth which is going to be roundabout market. Particular TP, strong growth also at HAPAC. And of course, on the other hand, we also continue to cope with all kinds of operational disruptions, not only around the Cape of Good Hope, but also, for example, the short strike that we saw in on the US, the East Coast, and now over the last couple of days, for example, in Canada. When we look at Gemini, maybe a few words on that. We announced in October that we are going to, that we assume to start with a network that's going to go around the Cape of Good Hope. Bookings will start in December. That's when we will open up our systems for bookings on all those services. In the end, the network will consist of 57 services will deploy about 340 vessels between Hapag and Maersk, and we will make about 3.7 million TUs of capacity available. Network is alive, yeah, two weeks until we start booking in the beginning of, taking bookings in the beginning of December, and only 10 weeks to go until we start operations. That means we are entering into the hot phase. I think we're confident that we're going to be off to a good start But of course, always many things to do just before you make a change that is that big. Then before I hand it over to Mark, a few words on the ships that we ordered. We added about 300,000 TUs to our order book. Keep in mind that these ships will be delivered between 27 and 29, so it's definitely over a longer period. We call them new workhorses of close to 17,000 TUs, but also some versatile mid-sized vessels In total, an investment of, indeed, as was also mentioned in the press, close to $4 billion, for which we have secured, meantime, the financing needed for that. All of the ships, dual fuel with a high fuel flexibility. We believe, at this point in time, dual fuel RNG is probably the best option. We hope that, at some point, we can sell them on either biomethane or emethane. We also... have the option to retrofit them into ammonia if and when that would be required. But in fairness, that is not trivial if we would want to do that. And one of the things that's definitely very positive about the ships is that because they are so much more fuel efficient than the ships that they will likely replace, that also emissions will be significantly lower and that will help us to achieve the targets that we've set ourselves for 2030 and a little bit further out also in the direction of 2045. So with that, Mark, over to you.

Yes, thank you, Rolf, and good morning, everyone. Let me start with a quick recap of our key group figures. And as Rolf indicated, we are very pleased with the course of the business so far, which has exceeded our initial expectations. And as you know, although earnings for the first nine months of 2024 are below last year's exceptionally high levels, operational and financial performance showed a steady improvement throughout the year, and this progress was driven by strong contributions from both business segments. In addition, we succeed in generating robust pre-cash flow, once again, despite increased investments in fleet, in our fleet extension asset, and in our container asset base. The good earnings trend has not only funded our strategic initiatives, but also reinforced our liquidity, keeping us well positioned for future growth and stability. And let me now elaborate more in detail on the results on the next page. Group revenue in the first nine months of 24 was almost stable at 15.3 billion U.S., as lower freight rates were compensated by higher volumes. in the liner business and much higher revenues in our newly formed terminal business. At the same time, earnings in the first nine months of 24 are still down considerably. This is mainly the result of the higher cost in the liner business. However, the earnings trajectory this year is very different to the previous year. Earnings bottomed out in Q4-23, as we all know, and started to improve thereafter. And as a result of higher demand and improved freight rates, Group EBITDA increased quarter-on-quarter by 58% to $1.6 billion, and Group EBIT more than doubled to $1.1 billion for the single quarter. The annualized return on invested capital amounted to 13.1% in the first nine months of 2024, which is well above our cost of capital. On segment level, we can see that both businesses delivered strong earnings growth in Q3 2024, which was driven by, on the one hand side, higher volumes and by The pricing, liner shipping revenues increased close to 5.7 billion U.S. in Q4, in Q3, sorry, 24, while EBIT jumped over the billion U.S. dollar mark after 224 million the year before. And this represents a strong Q3 EBIT margin of 18.3%. In terminal infrastructure, Revenues also increased clearly in Q3, as well as in the first nine months of 24, which is mainly related to the acquisition of the SAM terminals in August 23, as we know. Segment EBITDA increased to $43 million in Q3 and $114 million in the first nine months of 24, which results in a solid margin of 35%. Segment EBIT amounted to $22 million in Q3 and $56 million in the first nine months, 24. And while profitability in this segment is moving in the right direction, I think it's good to remind us that this business is still in the process of being formed and built up. We have started already to realize the first synergies between both businesses and expect for sure more to come. However, I think it's important to mention here we also expect further ramp-up costs, which is why profitability levels may fluctuate from quarter to quarter a bit. Looking now at the main value drivers on the next slide, A slide for the liner shipping segment. After reporting out in Q4 23, the average trade rate increased gradually and stood at $1,467 per TU for the first nine months in 24, which is 9% below the last year. Trade rates improved on all routes out of Asia, while out of Europe to North and South America, they remained on a comparatively low level. At the same time, transport volumes in the first nine months of 24 increased by 5% to 9.3 million TU. Q3, 24 volumes of 3.2 million TU were the highest number in Hapag-Lloyd's history. While almost all trades saw an increase in demand, the strongest growth in transport volume was recorded on the Trans-Pacific, as already mentioned, where volumes grew by almost 20% in the first nine months, 24. On the other hand, the Middle East volumes were clearly affected by the tense security situation all around the Red Sea, resulting in 19% lower volumes. Now, jumping to the unit costs, they remained impacted by the necessary rerouting of our vessels around the Cape of Good Hope, but also operational disruptions in the ports around the world and stricter, for sure, environmental regulations which impacted us. While volumes were up 5% as set in the first nine months of 24, our total bunker consumption increased by more than 17% due to longer voyage distances. And in addition, bunker costs increased following the first-time inclusion of the shipping sector into the EU emission trading system at the start of this year. And with the planned increase of the EU ETS scope from 40 to 70% of relevant emissions on the first time application of EU regulation, these cost components will increase further in the next years. Handling and haulage increased due to higher transshipment activities and storage costs, which are related to longer dwelling times in the ports. Vessel and voyage costs declined mainly due to the lower US costs, and however, this was partially offset by higher expenses for short-term charter ships and container slot charter costs on third-party vessels if it couldn't be fully compensated. In total, unit costs in Q3 amounted to US$1,298 per TU. Now to our cash flow, operating cash flow for the first nine months of 24 was around 3.1 billion U.S. dollars, slightly impacted by negative working capital effects due to increased volumes and freight rates. Investments in our vessel and container fleets as well as our terminal portfolio led to a cash outflow of close to 1.8 billion U.S. dollars, And until the end of September, we received in total seven new-build vessels with a nominal capacity of around 135,000 TU, including one long-term charter, and one additional 24,000 TU vessel was delivered after the reporting period a few weeks ago already. In addition, we have ordered, as said by all, new container boxes, with a total capacity of 640,000 TUs to account for the increased turnaround times, higher volumes, and preparation for Gemini. Interest income dividends from our equity participation and divestments resulted in a cash inflow of $355 million U.S. dollars. And free cash flow was, again, clearly positive with $1,066,000,000. The cash position declined to $5.2 billion, mainly due to the distribution of dividends to our shareholders of $1.8 billion and to repayment of debt and lease liabilities of $0.9 billion. Regarding the announced order of 24 vessels, we expect to pay the first installment of around 400 million US dollars in Q4 24. And the next payment will not be due before the year 26. And installments will initially paid from our cash balance. And upon delivery, long-term financing will be drawn down, from which we have already received firm commitments from various financial institutions. As usual, I would like now to conclude with a review of our key balance sheet figures, which remain very solid and far above our financial targets. Net liquidity position is lower as compared to the year 2023, following the distribution of dividend and higher charter liabilities asset, but we still hold a substantial liquidity reserve of $8 billion. In addition, with $21 billion, the equity position and equity ratio are almost on the levels of year-end 2023. And having said that, I hand it back to Rolf for market update outlook and key priorities. Thank you.

Thank you, Mark. Yes, just maybe quickly from my side, a couple of things on supply and demand and active feed, because I believe it is interesting to look a bit at that. When we look at supply and demand, of course, on the one hand, it's about demand growth, but it's also about how far do we have to sail. And as such, I do think that the growth in TU miles is also relevant. And as you can see, that, of course, because of the reroutings a round of cake, good hope, has been, the growth in TU miles has been very steep this year. That's also the reason why we, in essence, need all the ships that we have available to deliver those goods to our customers, more or less on time. I think in hindsight, we can be happy that we all ordered a fair number of ships, because if that would not have been the case, we would have had a lot more disruption than we have seen in the course of 2024. As you can see, the inactive fleet still very, very low, also in a historical perspective. And of course, that also means that time charges remain fairly expensive. If we then switch to the order book, and please keep in mind the previous page, then we see that the order book is indeed at the moment at something like 26%, which is certainly not a small number. But we should also not forget that these deliveries are scheduled over quite a long period. In the past, we used to have an order book that covered two and a half to three years. Now you'll see that many of the orders that are in the book will only be delivered in 27, 28, and 29. And if you keep in mind the picture from the previous page, then I do believe that even if a fair number of ships will be delivered next year, that's a bit dependent on what your assumption is on whether we will go around the Cape of Good Hope or not. I think it's pretty clear that if we have to continue sailing around the Cape, we will also next year need pretty much all the ships that are available. And let us not forget that scrapping has been exceptionally low over the last 15 years, as you can see on the right-hand side. But as the number of ships that is becoming older than 25 years is steadily growing, I think it's a fair assumption to assume that until the end of this decade, something between 3 and 4.5 million to use will need to be scrapped. And if that's the case, that of course covers also quite a bit of the order book that we see at this point in time. So that means we see growth, net growth of the fleet that's probably not all that far from what we will see with demand growth. So I would say that that picture is actually not that unhealthy. In reality, we probably still need a few more ships as I expect that over time also to comply with the IMO rules, people will have to sail a little bit slower. Moving forward, you will have seen that we raised our earnings outlook to between 4.6 and 5 billion EBITDA, and in terms of EBIT, between 2.4 and 2.8 billion. We did that on the back of a fairly strong Q3, as Mark has just elaborated. And we also see that the decline in spot rates that we have seen since the peak mid-July has sort of stopped. And over the last three, four weeks, I would say rates have actually stabilized on a level that's actually not so different from what we saw after the first correction, after the first spike that we saw after the Red Sea crisis. So if you look at where we are now and you compare that to what we had in March, April of this year, we're actually not that far apart. What are our priorities for the remainder of this year? And after that, of course, the first priority remains to keep our people safe, and we will also continue to invest to make our team stronger. Then we need to make sure that we have a successful start of Gemini Corporation, which is where a lot of the work that we're doing at this point in time is focused on. We continue to implement Our strategy, 2030, I think really good progress throughout 2024, and hopefully we can maintain that momentum also into 2025. And, of course, we need to remain agile because if something changes, we need to make sure that we react swiftly to that. So with that, I would hand it back for Q&A.