Hapag-Lloyd AG

Ladies and gentlemen, welcome to the Havoc Lloyd Analyst and Investors 9 Months 2025 Results Conference Call and Live Webcast. I'm Iruna, the course call operator. Havoc Lloyd is represented by Rolls-Royce Nielsen, CEO, and Mark Fraser, CFO. I'd 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 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rodha Mnjancin. Please go ahead, sir.

Thank you very much and welcome, everyone, and thanks for taking the time to be with us today. Yeah, short presentation as always before we jump into the questions that you may have. I would say that when we look at the first nine months, a couple of things to mention. I think good, strong volume growth over the first nine months, again, a decent quarter in Q3. On the back of that, good revenue growth. When we look at Q3, I think earnings improved sequentially, but of course, yesterday's performance remained below last year. When looking at Q3 in isolation, I think that was actually a fairly solid result. I think we start to see that that the first cost savings from Gemini are starting to come in. We see the network running smoother and smoother, so that gives us a lot of confidence that we'll see further improvement as we go towards the end of the year and moving into 2026. We will continue to invest into the future. We will commit to a number of smaller ships that will come into our fleet to renew some aging fleet. We also have some things, we also continue to work on our terminal division, but nothing specifically announced there at the moment. I think we have narrowed our outlook a little bit going forward, and when you look at the midpoint on EBIT, then you see that we have slightly raised that compared to what we had a couple of months ago. Switching to market, let's still say it's a fairly robust market. When you recall all the forecasts that there were for the container trade in the beginning of this year, but also in fairness in the beginning of last year, then certainly over the last seven quarters, we have seen a stronger market than many people had expected. In 2024, the market grew over 6%. The first nine months now, we are again looking at close to 5%. That's a lot more than people had anticipated, and I think that's pretty encouraging and shows also that global trade is quite resilient. We still expected the last quarter to be somewhat weaker, but of course, that remains to be seen. Sport rates under pressure after the relatively early peak season. Seen a bit of an uptake in the last couple of weeks, but last week again a bit weaker. But I think we also see that demand still remains fairly strong and utilizations remain high. So hopefully we'll see some further recovery of those sport rates as we move forward. Switching briefly to Gemini. Gemini. I think it is fair to say that we have set a new benchmark for reliability in the industry, I think with very consistent performance, even in very volatile markets and under difficult market positions. I think the network has delivered on its promise pretty much consistently. every month i also believe that drives our above market growth we also see customer feedback very positive with with our net promoter score that we measure twice a year at the moment at a an all-time high and we also still see as i mentioned before quite a lot of things that we can still do better and we will continue to implement those smaller improvements month after month after month, and that will allow us to get to our anticipated cost-saving run rate in the course of 2026. Next steps, make sure that we continue to grow volume on the back of an excellent product, and also make sure we get... adequately paid for that because if we are able to help our customers to run their supply chains a lot better then that must be more efficient for them as it allows them for example to take out inventory and of course we would like also to be adequately paid for that. We will also come with the introduction of a new quality promise for on-time delivery on box level because that's in the end the ultimate promise to customers that we make that we deliver their box on time. A little bit on investments before I hand it over to Mark. We have announced also this morning a decision to invest in up to 22 new ships in smaller vessel classes as we have a significant amount of tonnage in those vessel classes that is going out of service in the second half of this decade. That means we need to replace them. We also have to reduce our exposure to the highly elevated time chart at the moment, market at the moment, and of course, that also helps us to reduce our operational cost base, and it helps us also on our decarbonization journey. The shifts that we will order will probably be in a couple of different classes, one around 1,800 TUs, one class around 3,500, and one class around 4,500 TUs. With that, let me for now first hand it over to Mark.

Thank you, Rolf. Good morning also from my side, and thank you for joining us today for our nine-month result presentation, which will show that in a complex and volatile market environment, we have delivered a solid operational performance. Our strong volume growth, which is well above the market average, demonstrates the benefits of our strategic positioning, particularly the successful implementation of our Gemini East-West network. In the coming quarters, we aim to sustain this growth momentum. and still keeping the flat capacity stable. As anticipated, earnings are lower than last year's exceptional performance, and that is primarily due to softer freight rates and continued cost pressure. And to address this, we are intensifying our cost discipline and further optimizing our network to enhance efficiency and competitiveness. At the same time, we maintain a robust balance sheet with ample liquidity and a moderate leverage, providing the flexibility to pursue whatever strategic priorities we focus on or opportunities come up and we navigate market volatility effectively with that. Let's now take a closer look at our financial performance. Revenue and earnings in the third quarter improved sequentially, driven by a temporarily higher cost spot rate, resulting from front-loading effects in the U.S. EBIT increased from $189 million in Q2 to $228 million in Q3. However, compared to last year's exceptional result, earnings were lower due to the significantly weaker overall trade rate environment. Looking at the first nine months, revenue grew by 5%, supported by strong volume growth across both operating segments, which had offset partially the lower freight rate environment. At the same time, persistent cost pressure weighed on operating performance. For the period, group EBIT reached $905 million, and group profit totaled to $946 million. Looking now at the performance of the Liner segment, we can see that revenue in the business segment increased to $15.7 billion in the first nine months. This development was driven by above-market volume growth, particularly in the Gemini trades. EBIT amounted to $858 million in the first nine months, and that is compared to $1.9 billion during the same period of previous year. In Q3, EBIT improved sequentially to 219 million U.S. dollars as temporarily higher spot rates out of Asia lifted our average rate by around about 5 percent compared to the quarter before. After the nine months of 25, we transported, or in the months 25, we transported 10.2 million boxes, representing a volume growth of 9%. That's well above market rate. This strong performance reflects our sustained investment in efficient fleet capacity and the successful transition to the new Gemini East-West network. particularly noteworthy given the tariff-related demand fluctuations we have navigated through. So growth was especially strong on the Pacific and Asia-Europe trade routes. In contrast, Atlantic volumes improved only modestly due to the soft demand between Europe and North America, while transport volumes between Latin and Europe, Latin America and Europe, were constrained by operational disruptions in ports. Following a persistent decline in the average rate rate, which improved 5% in Q3 2025, quarter over quarter, driven by front-loading effects. However, the first nine months of 25, the average rate rate stood at $1,397 per TU, almost 5% lower compared to the prior year. Having a look on the unit costs in the first nine months of 25, they increased by 5% to $1,338 per year, and this increase was driven by higher storage costs due to port congestion and operational delays, increased hinterland transportation costs from the growing share of door-to-door business, and planned startup investment associated with the Gemini network. In addition, external factors such as rising trade imbalances, higher regulatory compliance costs, and for sure, as we all know, the FX effects which we have experienced generally elevated the cost base. To mitigate these external factors, you can assume we structured and we are executing already a comprehensive cost program. I would also like to provide more context on the Gemini startup cost, as these are likely more pronounced for Hapag-Lloyd than for our Gemini partner, as well as on the initial cost savings that are already becoming visible. For us, the new network represents a more significant transformation, which is temporarily associated with higher unit costs, We have not only redesigned the network, but also changed the terminals we call at the capacity we operate. While we already see clear cost benefits per available slot right now, such as reduced ship system cost and lower bunker consumption, the unit cost per transport box are still elevated for now. But when we look ahead, growing volumes at stable capacity and further network optimizations will drive unit costs down, resulting in tangible positive impacts on our P&L in the coming quarters. Let's now have a closer look on the T&I segment. Revenue in the terminal business increased, as you can see here, by 15% to $375 million in the first nine months. This growth was supported by encouraging throughput developments we have seen and the acquisition of our terminal in Le Havre in France this year in March. EBIT amounted to 46 million U.S. dollars, which is below the prior year level, primarily due to weaker performance at Latin America terminals. This was driven by U.S. tariff-related market volatilities And we have seen strong unfavorable weather conditions there. Additionally, we continue to ramp up this relatively new business segment, which is quite normal that is associated with temporarily higher cost base. Turning to our cash flow development on the next chart, operating cash flow for the first nine months. As you can see here, 25 amounted to $2.6 billion. We invested around about $1.5 billion, mostly investment in containers, as well as in the modernization of our fleet under our fleet upgrade program. These investments are designed to enhance the cost efficiency and reduce CO2 emissions across our operations, including income from interest, Dividends and divestments of $309 million in net cash outflow from investments totaled to $1.2 billion, resulting in a robust free cash flow of $1.4 billion. Financing cash outflows amounted to $2.5 billion, primarily reflecting the dividend payment of more than $1.6 billion to our shareholders, along with debt redemptions and interest payments. Overall, the cash position decreased by $1.1 billion, resulting in a still robust cash balance of $4.6 billion at the end of Q3. For sure, we continue to maintain a very resilient balance sheet with ample liquidity and moderate leverage. Strong liquidity reserves still there, which includes cash fixed income investments, undrawn revolving credit facilities, which totals to $7.5 billion. This provides us with significant flexibility to fund strategic initiatives and for sure navigate effectively through difficult market periods and volatility. And with that, I will hand it back to Rolf now for the market update and our outlook. Thank you.