Hapag-Lloyd AG

Good morning, ladies and gentlemen, and welcome to Hapag-Lloyd's Analyst and Investor Q1 2025 Result Conference Call and Live Webcast. I am Yousef, the course call operator. Today's conference is represented by Hapag-Lloyd CEO Rolf Haben-Janssen and CFO Mark Frese. I would like to remind you that all participants will be in listen-only mode and that this 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 followed by one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or for broadcast. At this time, it's my pleasure to hand over to Rolf Haben Janssen. Please go ahead.

So from our side, a very warm welcome and thank you for making the time to join us here today. A couple of things maybe from our side to start with before Mark talks, takes us through the numbers. I think when we look at the first quarter, I think we can say we had a good start to the year with clearly higher volumes and solid earnings, despite some continued operational challenges not last in the Red Sea. I think market demand remained quite robust, probably a little bit ahead of what a lot of people expected with, according to CTS, 4.2% up globally. And we did clearly better than that. We continue to grow our terminal business, especially with the new terminal that we added to our portfolio in La Hava. And I think for us, the highlight of the quarter was definitely the launch of Gemini, which has gone really, really well. And very happy to see that after now a little bit over 100 years, we are indeed delivering on that 90% schedule reliability, even if there are definitely quite a lot of challenges that our teams need to handle every day. We confirm our earnings outlook, but if we look back a couple of months, I think it's fair to say that risks have certainly not gone down. A bit on volumes. I already mentioned overall volumes up 4.2% in the first quarter. Trans-Pacific remains strong, especially up to Chinese New Year. Post-Chinese New Year, we did see a fairly strong decline of the spot rates, as you can also see on the graph on the left-hand side in the bottom, where you see the SCFI. We continue to reroute ships around the Cape of Good Hope, for the time being, difficult to predict on when that will change, and we plan for now, at least, that that will take until at least the end of the year. Also important to note that if it becomes safe again, we need to make sure that it is also safe for a longer period of time because we will then gradually bring the network back to a Suez network and cannot do that from one day to another because otherwise the ports, especially in Europe, but to some extent also in North America, would collapse and that is something that we definitely need to avoid. When looking at the last couple of weeks, I think we all saw and read in the papers that China-US bookings dropped clearly in April. But of course, now on the back of the preliminary tariff agreement that was closed over the weekend, we see a surge in volume. When we look at the last couple of days, we see very strong demand, not unexpected on the one hand, of course, because tariffs are down, but for sure also because some cargo was buffered in in China, and that now needs to move. Whether this is going to be a surge that's going to take 60 or 90 days, or whether that's going to last longer, I think is very difficult to predict at this point in time. It will also depend on the further talks between China and the US. And then before I hand it over to Mark, I think we really had a successful launch of Gemini in the first quarter. Of course, there's further work going on to fine-tune the network, make it even better, and also to ensure that also in the long run we maintain that 90% schedule reliability. But I do think that we're starting to see more and more proof points that this is really working. 95% of the chips is meantime phased into the network. All the services are up and running. We've had well over 3,000 port calls since the first of February, and our schedule reliability is still around 90%. I think the last two weeks have actually picked up again a little bit, and if we compare it with competition, there is a very clear gap. And I think the numbers that are quoted here are the CNTEL numbers. There are also the EEC data that are a little bit more detailed and granular. If you look at those data, then the gap is actually even bigger. So with that, Definitely off to a good start. Very promising. I think that's also the feedback we start getting from our customers. So with that, overall, a good first quarter. And Mark, probably good if you take us through the numbers.

Thanks, Rolf, and good morning. Let me begin with a brief overview of our key financial indicators, and then we dive into the detailed performance of Q1. We started the year on a strong note, driven, as said, by higher transport volumes and favorable freight rates. In our liner shipping segment, volumes increased by 9%, and that was the highest year-on-year growth we have seen in several years. The volume growth translated into a clear improvement in both revenue and earnings. Group EBITDA rose to 1.1 billion US in the first quarter, while group profit reached 0.5 billion US dollars. And this solid operational performance once again supported robust free cash flow of 0.6 billion US dollars and enabled us to maintain a very strong balance sheet, and it underscored by a net liquidity position of $1 billion at the end of Q1, our financial solidity. With that, let's now take a closer look at the financial results. Earnings improved on a year-on-year basis and profitability was at a healthy level. While that was the case, we observed a continued normalization in the earnings trend following temporary peak in Q3-24, and this was primarily driven by a decline in spot freight rates. Group revenue increased by 15 percent year-over-year to 5.3 billion U.S., and that was supported by higher transport volumes and freight rates, as said. Group EBIT rose by 24 percent, as you can see here, year-over-year, to $487 million U.S. while group profit increased by 45% to $469 million. The ROIC, or return on invested capital, stood at a solid 9% level. Turning now to the performance of our two business segments, and both benefited from solid underlying demand. In the liner shipping segment, we delivered a strong first quarter with an EBIT of 1 billion and 67 million U.S. dollars and an EBIT of 472 million U.S. dollars, which represents a clear improvement over the period of the last year. The terminal infrastructure segment reported stable operating earnings with an EBITDA of 36 million U.S. dollars and EBIT of 50 million U.S. dollars. Latin America and Indian terminals posted double-digit throughput growth, supported by continued demand momentum and the successful launch of a new terminal in India. Our terminal participation in Wilhelmshaven recorded even stronger volume growth, and that was primarily driven by the start of the Gemini services. However, this positive operational development was offset by temporary capacity constraints at the CTA terminal here in Hamburg due to replacement activities and ramp-up costs for the new business segment. Looking now at the key value drivers of our liner shipping segment, we observed growth in both core metrics during the first quarter of 2025. Transport volumes and the average freight rate increased by 9% year-over-year each, reflecting resilient demand. Volume growth was particularly strong on export routes from the Far East to North America and Europe, driven by robust consumer demand and increased service reliability. We also achieved solid volume growth on Africa trade lanes, supported by additional capacity in the expanded port coverage In contrast, volumes on the Europe-North America routes rose only modestly, while Latin America volumes were held back by port congestions and operational disruption in some key hubs. Turning to our cost development, our unit cost remained under pressure due to several operational and structural factors. Rerouting of vessels around the Cape of Good Hope and persistent port disruption continued to impact vessels, schedules, and efficiency. Additionally, the phase-in of Gemini Network contributed to transitional costs in Q125. On the positive side, bunker expenses declined to 221 US dollars per TU, which was supported by lower oil prices. However, this benefit was partially offset by the increased cost of emission certificates and that was following the gradual increase of relevant emissions under the emission trading scheme, which were 40% for the last year, and as you know, increased to 70% for this year. Handling and haulage expenses rose primarily driven by higher container storage costs due to longer dwell times at congested ports. Hinterland transportation costs increased Partially, you're reflecting our strategic ambition to increase the share of door-to-door business. On the vessel and voyage expenses, which were up as well, were driven by larger owned and chartered fleet, higher cost of slot charter and third-party vessels, and increased canal fees. As a result, unit cost rose by 5% year-over-year, reaching $1,350 $17 per TU in Q1. And while the higher unit costs in Q1-25 were largely driven by temporary factors, such as the rerouting assets around Cape of Good Hope and port congestions, we must also acknowledge the more structural impact of broad-based inflation, which has led to permanent increase in several cost components. To safeguard our long-term competitiveness, we have launched a comprehensive cost reduction program, which aims at lowering our cost base by more than $1 billion over the next 18 months. This program will span the entire Harper-Claude network and includes already announced synergies and efficiency gains from the Gemini Corporation. He has to name a couple of key focus areas. They include enhanced vessel and container productivity, which will be supported by improved schedule reliability and better equipment utilization. With almost our entire container fleet now equipped with tracking devices, we are actively leveraging the resulting data to drive down equipment-related costs, and we also will generate procurement efficiencies by taking full advantage of our scale to negotiate better terms across categories. Also focusing on SG&A savings through increased organizational productivity and the adoption of digital tools and technology. And in parallel, although not a direct cost measure, we also review our pricing strategies with the objective of responding more dynamically to volatile market conditions to ensure and remain agile and resilient in these changing environments. And with that, turning now to our cash flow development, operating cash flow amounted to over $1.2 billion in the first quarter of 2025. In addition to our robust operational performance, we benefited from positive working capital effect, which further supported our liquidity development. Cash outflows for investments totaled to $810 million, and that reflects our continued effort to expand and modernize our fleet and to execute on our strategy 2030. In contrast, Interest, dividend income, and divestment contributed $132 million in cash inflows, resulting in a total net investing cash outflow of $678 million. As a result, we once again generated a substantial free cash flow of $556 million. Financing cash outflows amounted to $367 million, which was primarily driven by scheduled repayments of debt and lease liability. Overall, our cash balance stood at $5.9 billion at the end of Q125, and that is slightly above the recorded level of end of Q24. And to close, just shortly highlighting our key balance sheet metrics, and they remain very strong, solid, and above our financial targets. At the end of Q1, our equity positions stood at $22 billion, and that corresponds to an equity ratio of 62%. Net liquidity position was approximately $1 billion, And after paying our dividend, which we just distributed the other week, a dividend of 8.2 euros per share, which totaled to a payment of 1.2 billion euros. And this payment will be reflected in our Q2 financials. Even after this dividend payment, we retained a substantial liquidity reserve consisting of cash fixed income investments and undrawn revolving credit facilities. And this reserve provides us with significant flexibility to support our strategic initiatives and will help us in support to navigate through volatile markets. And as usual with that, I'll hand it back to Rolf for the market update and the financial outlook. Thank you.