Hapag-Lloyd AG

Good morning, ladies and gentlemen, and welcome to the Hapac Lloyd Analyst and Investor H1 2025 Result Conference Call and Live Webcast. My name is Yousef, the course call operator. Hapac Lloyd is represented today by Rolf Haben Janssen, CEO, and Mark Frese, CFO. 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 question and answer session. You can register for questions at any time by pressing star followed by 1 on your telephone. For operator assistance, please press star and then 0. 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, CEO. Please go ahead.

Thank you very much, everyone, and really appreciate you making the time available to talk to us today. Happy to take you through our half one results. Maybe let me start with a couple of highlights. I would say when looking at the first half, we've seen strong volumes, good revenue growth with roughly flat freight rates compared to the first half of last year. Overall, I would say solid financial performance, even if there was certainly a fair bit of, we had a fair bit of operational issues. And as expected, we had significant network transition costs as we move into Gemini. I think that phasing is now largely concluded. I think we can be really happy with the results that we have achieved so far, delivering 90% schedule reliability every month since the start. That's probably not what A lot of people were expecting, so really good. But, of course, such a transition into a very different network is complex, and that means that we will definitely still do further fine-tuning in the course of the second half when we also expect to start seeing the cost-benefit to come in. We've continued to upgrade our vessel and container fleets, and we've also continued to invest in our terminal business that will continue to grow also over the upcoming couple of years. We narrowed our earnings outlook as we simply have six months under our belt by now, and that means that we have better visibility of what's going to happen in the second half. Looking at the market, I'd say that the U.S. trade policies have certainly caused a fair bit of volatility, both in demand and also in short-term pricing, as you can also see from the graphs here on the chart. I would say, though, that in the end, The first half was probably a bit better than many people feared. When you would talk to all the analysts and economists at the beginning of the year, most people would have anticipated no or maybe even negative growth of the container market in 2025. And now we are looking at 4.5% growth after six months. I would say that that's very positive. That also means that we now see that the forecasts for the full year are being lifted. I think a little bit closer to what we've said earlier because we've always said that we still anticipate some growth. Of course, quite some differences between the trades. Transpacific, very volatile, initially a bit of a rush, then a slowdown after the tariffs were announced, then a rush after there was the 90-day truth, then it settled down again. And I think when we look at the last couple of days, since we see that that 90-day period has been extended, we see again a slight uptick on spot rates. A peak in May and June, which in our numbers you will not see very much of in Q2 as we report end of voyage, but we also saw those rates again coming down after that fairly soon. In terms of routing, we continue to go around again with good hope, and we currently see no signs that we would be moving back to Suez before the end of this year. When we look at the latest situation on those tariffs, Here is a short comparison between what we see as initial announcements and where are we now in terms of base tariffs. I would say that in most cases, we see that those tariffs are a little bit lower with the notable exception for now of India and one that's not on this list is Brazil. But apart from that, we see that with a number of important trading partners from the US, The tariffs are still there, but they seem to be a bit lower than initially announced. I think that's entirely as was to be expected. I do think, though, that in the long run, tariffs are not good for global trade. I think we can all agree on that. But I'd also say that predictability is probably even more important than the exact level that we see. We've seen a lot of people having a wait and see type of attitude over the last couple of months. And now that we have a bit more clarity on what is happening, for example, with the EU, but also with a number of other larger trading partners, I expect things to start settling down again a bit. That will not mean an immediate surge in volume. I would still expect though that when you look at, for example, the Transatlantic, that now that people know what is coming towards them, and they also know that it's not gonna be some of the numbers that they may be feared initially, that we're gonna see somewhat of a recovery there. But admittedly, that still remains to be seen. Two more charts before I hand it over to Mark on the numbers. One on Gemini. I think we can read that expected us. That's also a key factor behind the growth that we are delivering in the first half, as we simply have not lost many voyages, which typically tended to happen in the past years, because if you look at the weekly capacity that we intend to make available, that has not changed all that much compared to last year. But now we're sailing it every week, and we're not blanking a ton of serves or losing them simply because of delays. Also, significant improvement in on-time delivery on box level. That's something that will still go up further. And what's also quite encouraging is that on the back of Gemini, we see improvements also in non-Gemini services. So that means that it lifts our performance overall. In terms of investing into our business, we continue to do that. The last four of the 24K ships that we had ordered had been delivered. Meantime, about 40% of our existing fleet has gone through the upgrade program. We still see customers willing to buy ship green this year. Again, significant growth compared to last year. and then the green methanol thing I think we have announced before. If you look at where we are today, we have an order book of about 300,000 PUs at this point in time for delivery between 27 and 29. We are going to do a number of methanol retrofits that fits, of course, also with the offtake agreement that we have signed. in China, and when you look at the new bills that we've gotten into our fleet over the last couple of years and what we are going to have, you see that we are renewing the fleet as we should for a company of our size. And with that, I'd hand it over to Mark for some comments on the numbers.

Yes, good morning. Thank you for joining us today. Let me start with a short overview. In the first half of 25, as you can see here, we recorded strong volume growth, which outpaced the market and solid financial results, and that is despite the challenging environment, and Wolf alluded on that, and we'll talk about that a bit. Group EBITDA and group profit remained broadly stable compared to the prior year period. We continue to generate robust free cash flows while investing in fleet modernization and maintaining a strong balance sheet, which ensures that we are well positioned to execute on our strategic priorities. Let us now take a closer look at the financial results. We delivered strong revenue growth of 11%, reaching $10.6 billion in the first half of 2015. This solid top-line performance was driven by robust volume growth across both our liner, shipping, and terminal segment, and despite uncertainties around the U.S. tariff situation. Group EBIT amounted to $677 million, with strong revenue momentum tempered by temporarily higher costs related to port congestions. and the face-in of the new Gemini network. Group profit for the first half of 25 came in at $775 million broadly in line with the last year's level. Looking now at the financial performance of our operating segments, the liner shipping segment recorded revenue growth of 11%, mainly driven by higher volumes, and that is why the average trade rate remained stable in the first half of 25. High expenses related to operational issues, imports, the ongoing ship diversion around the Cape of Good Hope, and for sure, startup costs for the new Gemini network that impacted the operating result as expected. Despite this challenging market environment, liner shipping posted an EBIT of 639 million US. In second quarter, our growth momentum accelerated further with transport volume exceeding 3.4 million TU. For the first half, volumes rose by 11% due to more than 6.7 million TU, and that is significantly outpacing overall market growth. This performance is particularly notable given the tariff-related demand fluctuations we have. to navigate through. The strong growth is a direct result of our sustained investment in fleet capacity and the successful transition to the new Gemini East-West network, which delivers a compelling value proposition for our customers. Growth was particularly strong on the Pacific and Asia-Europe trade routes. On the Atlantic, volumes between Europe and North America increased moderately, while growth between Latin America and Europe, as you can see, was constrained by operational disruptions in ports. And the overall average rate for the first half stood at $1,400 per TU, which is virtually unchanged compared to the prior year period. However, we have to say the trend within the year differed markedly to 24. The downward trend pressure on trade trades persisted into Q2, resulting in a sequential decline of 11% to US$1,324 per TU. For Q3, we expect this trend to reverse due to higher spot trade rates at the end of last quarter with a positive effect on at least Q3. Coming to unit cost in the first half of 25, they increased by 4% to $1,320. This increase was driven by higher storage cost per container, and that is the result of poor congestion, operational delays, higher hinterland transportation costs due to a growing share of door-to-door business and planned startup investments associated with the Gemini network. These cost increases are transitional. The reshuffling of alliances combined with highly volatile demand from the U.S. has added to operational challenges for both carriers and ports. At the same time, we fully acknowledge that rolling out an entirely new network structure in this market environment is a complex task and that certain startup costs were unavoidable. While Gemini phase-in now is completed, we have turned our attention to further fine-tune the network, and delivering cost efficiency. In addition, we have launched a comprehensive cost program that targets more than 1 billion U.S. dollars in savings by the end of 2026. And this program will extend across the entire haplochloric network and will include the synergies and efficiency gains already anticipated from the Gemini Corporation. Furthermore, we will also streamline our non-Gemini network, focusing even more on procurement excellence and review our SG&A expenses. The terminal business delivered good revenue and profit growth in the first half of this year, supported by higher throughput, driven by Robo's overall demand and additional volumes resulting from the transition to Gemini. The performance also benefited from the terminal business the new terminal in Tuticorin in Southeast India, and the acquisition of our new terminal in Le Havre. The improving operational performance together with the gradual realization of synergies with our liner business was partly offset by ongoing ramp-up costs associated with this new business segment. And as we said, it's our ambition to develop Handeati Global Terminal, our terminal brand, into one of the leading global terminal operators, and that has some investments as a consequence. Over the next five years, we aim to expand our portfolio from the current 21 terminals to a total of at least 30 terminals. For this reason, Handeati Global Terminals has established its first regional headquarters in Santiago in Chile on the 1st of August, which will serve as the operational hub for both North and South America. In addition, we expect a new terminal in Damietta in Egypt to commence operations by the end of this year and become our 22nd terminal participation hub. Now jumping over to the cash flow development, operating cash flow for the first half of 2025 amounts to the 1.8 billion U.S. At the same time, we invested around about 1.3 billion U.S. dollars, mostly investors and containers, as well as the modernization of our existing under the fleet upgrade program. These investments are aimed at enhancing cost efficiency and reducing CO2 emissions especially and emissions across our operations. And I can tell you payback times are short. Income from interest dividends and divestments generated a cash inflow of 200 million US dollars. The total cash outflow from investment amounted to $1.1 billion. As you can see, as a result, our free cash flow amounted to over $700 million. And following the approval at the AGM, we distributed more than $1.6 billion to our shareholders, including debt intake and interest payments of a combined $0.5 billion Total financing cash outflows reached $2.2 billion, and at the end of Q2, 25-day cash position amounted to $4.2 billion. As usual, I would like to conclude now my remarks with a brief outlook at our key balance sheet metrics, mainly due to the lower cash position following the dividend distribution in May and investing activities. Net debt increased to 0.9 billion US. Nevertheless, we continue to maintain substantial liquidity reserve, which includes cash and fixed income investments and undrawn revolving credit facilities. And that in total amounts to 7.1 billion US dollars. And with this strong liquidity reserve, which provides us with ample flexibility to fund our strategic initiatives and to navigate effectively through periods of market volatility, we are very well equipped. And having said that, I hand it back now to Rolf for a market update and our outlook. Thank you.