Hapag-Lloyd reported a strong quarterly result as it reaps the rewards of the booming container market, leading to optimism despite signs that the six-month box rate rally is starting to falter.
The Hamburg-based liner operator doubled earnings in the fourth quarter of 2020 due to a surge in volumes and freight rates.
Ebitda rise to $1bn in the three months to the end of December, up from $500m the previous year.
Preliminary results show revenues up by nearly one-fifth to $4.1bn over the period, up from $3.5bn in the previous year.
Ebit increased by 150% to $500m, after one-off expenses of around $140m, mainly related to fleet optimisation.
Contract rates rise
The strong performance is leading some analysts to upgrade their expectations for Hapag’s earnings in the coming year.
Analysts project it will earn Ebitda of €2.9bn ($3.51bn) in 2021.
But that consensus figure appears low in the light of an estimated 50% rise in higher contracted freight rates, according to analysts at Jefferies.
The investment bank noted that container stocks have come under pressure in recent days, triggered by the first decrease in the Shanghai Containerised Freight Index since July.
The index, which measures spot freight rates, fell 1% to $2,869 per teu in the week ending 22 January.
But long-term freight rates remain strong, even though spot rates on the Asia-Europe trade where Hapag-Lloyd is a strong operator appear to have peaked.
The China Containerized Freight Index, which measures long-term contract rates, has risen 6% in recent days to $1,967 per teu.
“Contract rates are now up more than 100% year on year, which are boding well for contract renewals,” added Fearnley Securities.
Improved spot rates and volumes
The easing spot market did not affect Hapag’s full-year figure, which was significantly higher despite the coronavirus pandemic.
The company reported Ebitda of more than $3bn for the 2020 financial year.
Revenue increased by roughly 3% to $14.6bn and it made cost savings of $500m.
“The main drivers of these positive business developments have been improved freight rates and lower bunker prices,” it said.
The most dramatic improvements in the market dynamics came in the fourth quarter, when freight rates were up more than $100 per teu to $1,163 per teu. Volumes rose by 100,000 teu over the quarter to 3.1m teu.
