Hapag-Lloyd AG

Ladies and gentlemen, welcome to the Hapag-Lloyd Analysts and Investors Full Year Results 2025 Conference Call. Today, Hapag-Lloyd is represented by Rolf Haben Janssen, CEO, and Mark Frese, CFO. I am Valentina, the chorus 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 one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rolf Haber-Janssen. Please go ahead.

Thank you very much and welcome also from our side as usual and we appreciate you taking the time to listen to us. I think from our end I'll give as usual a quick introduction, talk about some highlights, Mark will take us through the numbers and then I'll try to say something about market and outlook and after that happy to take your questions. Maybe if we start with a couple of highlights when we look at 2025. I would say that a number of things to be mentioned. I think on the financial side I would say the results were solid, with as a real highlight that we have grown quite fast, significantly ahead of market, and we were able to keep rates at a reasonable level, also if you compare that to some others. We certainly had a lot of transition costs when moving into Gemini, but in the second half of the year, we also started to see costs coming out. On the fleet side, we've continued to invest in modernizing our fleet. I think that's just normal uh looking at 24 we ordered a fairly large number of ships we ordered some more ships this year um that is a process that will continue to to move ahead on gemini i think we're very pleased with where we are on gemini after 12 months i think if we go back a year and a half a lot of people were sitting on the fence and were in doubt on whether we were going to be able to deliver that 90 schedule reliability i think we've together with Merston, a really good job in doing that pretty much from day one. And we're also confident that going forward, we will be able to hold that up and that we'll start yielding dividends. On the terminals, good throughput growth. We've also been able to grow the portfolio with the terminal in Le Havre. And then we also signed an agreement in Brazil towards the end of the year. So good progress there, even if that unit is still fairly new. And then, of course, we signed the merger agreement with Zim. where we hope to conclude that transaction towards the end of this year. If we look maybe first at the terminal side of things, I think when you look at the terminal portfolio on page three, we've grown in Le Havre, as I mentioned. Operations started in March, being used by Gemini. It certainly improves our position in and out of France, good volume growth. We expect to see some more of that in the course of 26. Damietta, we've been constructing that port for quite some time, and it has now gone live in February. Really good start, good productivity pretty much from day one, but of course, volume will continue to grow. And then we have Aracus, where we signed the agreement in December, yes? and we will finish hopefully construction somewhere in the course of 28, and that will then become another important hub in our network, in this case, of course, mainly focused on the east coast of South America. So all in all, I would say on good track, and when you look at it on the right-hand side where we are these days, I think it's impressive what the team has done, especially keeping in mind that we established it only a few years ago. When we look at volume on page four, we've seen really good volume growth globally, 8% versus market, approximately five. Very strong growth on the Trans-Pacific, although admittedly, we had also lost a fair bit of market share there in the years running up to 23. In 24, we saw good growth and another chunk of good growth in 25. On the Far East, a bit ahead of market. Middle East and Africa also clearly ahead of market. And of course, if you would fast forward and would add in the potential acquisition of Zim, that would certainly strengthen our position in the market and would reinforce our position as number five, as that would mean that we grow to roughly 18 million TEUs. A few words on Gemini. When we look at the schedule reliability, I think we're really proud, as I mentioned in the introduction, about what we actually have achieved. And that is certainly a testimony to all the teams that have worked so hard on that. I know that when we look at the month of February, that we are a little bit down on the back of very bad weather in Europe. But we will get back to this 90% within one or two months. So I think the model that we have designed actually turns out to be quite robust, and I also believe it can still be improved quite a lot. We did a little survey in terms of how do customers look at this, and there I think you see that also when you look at NPS scores that the feedback from the customers is also very clear that when we look at Gemini that clearly outperforms the other alliances and of course that should help us to continue to grow hopefully a little bit ahead of market but it should also allow us to attract the best possible cargo mix and and I believe that in some cases we also see that that customers recognize that not only because we are more reliable but also because the standard deviation of when we deliver so much smaller that they actually can start to reduce their inventories which of course is a clear financial benefit, and that makes it possible to start thinking about how do we share some of that. On the modernization of our ships, we continue to work on that. We today have an order book of in total about 350,000 TUs with 32 vessels. In addition to that, we also have a number of strategic charters. I think our order book today has a decent size We, of course, had the 1217 case. We had the 129 case in there that we ordered in 24. And then in 25, we ordered some dual-fuel LNG 4.5 case, and we took long-term charters for some of the smaller ships. In the end, I think that underlines that we remain committed to not only modernizing our fleet, but we also do continue to focus on bringing emissions down We see that our AER is meantime down about 20% versus 2022, which I think is a really good achievement. We have about 50 ships with alternative propulsion by the year 2030. We have secured some green fuels based on long-term uptake agreements and also Good to note that despite all the skepticism that we sometimes see in the market, that last year we sold over 380,000 TUs via ShipGreen, which was 90% more than what we saw in 2024. And I think that's the third year in a row that we more or less doubled that. We hope to be able to grow that even more in 2026. We think that the growth will definitely slow down. But 380,000 TUs is not small and at least gets close to about 3% of the total volume that we move. Then a bit on cost savings. On page number 7, I think we see that those cost savings are starting to come. We do expect to get to full run rate by the end of 2026. If you look at where are they, a couple of categories mentioned here. Of course, the network has a lot to do with Gemini, but also has to do with reduction of third-party feeders and some changes that we make to the network in Gemini, but also outside of Gemini. Bunker efficiency because of the reliability, but also because of the money that we have invested in. Fleet upgrades. And then we have a whole bunch of other categories as well that we are working on. I think we've seen some real good traction on cost savings in the second half of 2025. We do expect more than a billion to materialize in 2026. It is also fair to say, though, that the first quarter has been a little bit tough. And we'll come to that later on when we talk about outlook because of extreme bad weather in Europe, especially in the beginning of the year. And, of course, we now also have to face the renewed crisis in the Middle East that causes significant additional costs for us, especially short-term, where, of course, we then need to see how to recover that over the upcoming couple of months. But in parallel, we stay focused on Ventus, and we still think that over time that will bring us a very material contribution to the success of Hapag-Lloyds. Then a few words on ZIM. You will have seen that we signed the merger agreement. Now we have initiated the process to try and get all the needed approvals. Of course, given the situation that we have today in the Middle East, that process may take a little bit longer because things simply move a little bit slower these days. reinforcing our deal rationale, securing our position, access to a very efficient and modern fleet, great people, good customer base in a strategy that's very similar to ours. And of course, in the end, also because we believe that we will be able to realize up to 500 million synergies per year. Timeline. We signed in February. We have the extraordinary meeting of the shareholders scheduled for the end of April. We have initiated the process by now to get the approval from relevant authorities, starting with Israel, but also starting in other jurisdictions and then Hopefully, we will be able to get all those clearances before the end of the year, which would then allow us to close hopefully towards the end of this year or later in the beginning of next year. So, so much maybe as highlights from my end as an introduction. And with that, I would hand it over to Mark, who will take us through the numbers. So, Mark, over to you.

Yes, thank you, Rolf, and also a good morning from my side to our fiscal year 25 result presentation. And let's begin with the overview of our key performance indicators. So for sure, 25 was marked by a very challenging market environment, yet we can say we continue to demonstrate resilience and operational strength across the group. as we delivered strong volume growth in both of our business segments. And although the market's backdrop remained demanding, we achieved an overall very satisfactory financial result, underlying our ability to operate reliably and efficiently even in these volatile circumstances and conditions. Free cash flow remained clearly positive, and our balance sheet continues to be a strong one. With ample liquidity, solid operational cash generation, and a well-balanced funding structure, we are well positioned to navigate the current uncertainty environment and invest in our strategic priorities going forward. And with that, let me walk you through the individual components in a little bit more detail. Revenues increased by 2%. in 25 mainly driven by higher transported volumes. As expected, earnings were lower year on year, and that is primarily due to softer freight rates and continued external cost pressure. For this year, Group EBITDA came in at $3.6 billion, EBIT at $1.1 billion, and Group Profit at $1 billion. Overall, the result landed at the upper end of our earnings guidance. and it was slightly supported by positive operationally cost, one-time non-cash effect in the fourth quarter of around $150 million, which were mainly related to an improvement in our system-supported process for revenue recognition resulting in the release of provisions. When we jump to our liner shipping segment, we saw They achieved strong volume growth. At the same time, revenues were impacted by softer freight rates, driven by rising trade imbalances and growing global tonnage supply. Operationally, new U.S. tariff policies continued security tension in the Red Sea, as we all know, and increasing port congestions, all added pressure on cost. Despite this challenging backdrop, we delivered a solid liner EBIT of $1 billion. Jumping over to rates and volumes, in 25, we transported 13.5 million TU's, and that represents a volume growth of 8%, which is well above the market. And this strong development reflects the successful implementation of Gemini Corporation, and the supporting expansion of our fleet capacity. Significant reduction in network delays was one of the key success factors that enabled this remarkable volume performance, as you might imagine. The growth is particularly noteworthy given the terrorist-driven demand volatility we had to manage in this year. While market volumes on the Trans-Pacific declined, Due to the sharp increase in U.S. import tariffs, we were still able to grow our volumes by double digits and gained overall market share. We also delivered above-market growth on other Gemini trades, such as Far and Middle East. On the Atlantic, volumes increased only modestly due to the softer demand between Europe and North America, and we all know why. while operational disruption in several ports limited growth on the Latin America-Europe trade. After that prolonged decline, the average trade rate increased by 5% quarter over quarter in Q3, supported by front-loading effects especially, but eased again in Q4 to US$1,310 per TU. And that is the lowest level since the fourth quarter of 23. For the full year, average rate rate stood at US$1,376 per TU, and that's representing an 8% decrease compared to the year before. Jumping over to our unit cost, they increased by 4% in 25 to US$1,328 to you, respectively. And several factors caused this. For sure, higher trade imbalances, fluctuating US tariff rates, and rising regulatory compliance requirements of which structurally increased our cost base. And a weaker US dollar further for sure amplified these effects just named. Operational efficiency also remained under pressure due to Red Sea rerouting and the persistent port congestions across key hubs. And as Rolf already mentioned, with our comprehensive cost savings program Ventus, we began effectively counterbalancing these elevated cost pressures in the second half of 2025 and more to come. Following the successful phase-in of Gemini, the structural benefits of the new network have started to materialize, supporting efficiency and service reliability as key quality factors. Jumping over to the T&I, so to our terminal infrastructure segment, That business delivered strong throughput growth and they benefited from the synergies between both business segments and they also benefited for sure from the acquisition and ramp up of new terminals. Revenues in the terminal segment increased by 18% to 514 million US dollars in 25. European and Mediterranean hubs in particular saw strong uplift from stable Gemini connectivity, as mentioned already before. Growth was further supported by our acquisition of the Le Havre terminal in France last March and the ramp-up of our terminal in Tuticorin in India. At the same time, the cost base was impacted by operational challenges, particularly U.S. tariff-related demand volatility in our Latin America terminals, as well as the unfavorable mixed effects, one-off items, and ramp-up costs associated with the new business segment. As a result, EBITDA remained broadly stable at $152 million, while EBITDA slightly declined to $66 million in 2025. Jumping over to the cash flow, Operating cash flow for 25 for the group amounted to $2.9 billion. We invested around $1.8 billion, especially in new vessels and containers, and also in the modernization of our existing fleet under our fleet upgrade program. These investments are, as you know, key for us to further improve our cost efficiency on the one side and reducing our CO2 emissions across the whole fleet. The net cash outflow from investment totaled to $1.4 billion, and that was supported by $390 million of proceeds from interest dividends and divestments we did. All in all, we generated another robust free cash flow of 1.45 billion US dollars. The financing cash outflows amounted to 3.1 billion US, results for sure of the dividend payment of 1.65 billion US dollars, but also from debt and lease redemptions and interest payments. Our year-end cash balance remained at a very healthy level of 4.1 billion US dollars. Looking at our balance sheet, and here you can see that we continue to operate from a very strong financial position which is really characterized by the liquidity we are having and our low leverage, including our highly liquid fixed income investments and our undrawn evolving credit facilities, our total liquidity reserve amounts to $7 billion. And this for sure provides us with substantial flexibility both to fund strategic investments such as the planned ZIM acquisitions and to navigate periods of heightened market volatility. Jumping over to the next slide, and let me, maybe before I conclude, take a moment to reflect on our recently celebrated 10th anniversary as a public-listed company. With our clear focus on quality, we are not only delivering an outstanding service offering to our customers, but have also generated tremendous long-term returns for our shareholders. Since IPO in 2015, Hapag-Lloyd has distributed more than 21 billion euros in dividends, and that's while consistently creating value and maintaining a strong balance sheet with a prudent financial policy. And to continue that and to continue sharing the success with our shareholders, the executive board and supervisory board will propose a dividend of 3 euros per share at the AGM in May. This represents a payout ratio of 57% of our group's annual net profit and a total payout of 0.5 billion US, and that is fully in line with our dividends policy. Having said that, I hand it back to Rolf for a market update and our financial outlook. Thank you.