Germany’s Hapag-Lloyd expects strong earnings to roll into the second quarter but warns that the freight market may have peaked.

The world’s fifth-largest liner company had an extraordinarily strong start to the year with profits surging 220% on the back of higher freight rates.

Group profit rose to $4.7bn in the first three months of 2022, up from $1.45bn in the same period last year.

The surge resulted from ongoing disruption in supply chains sucked capacity out of the market.

Revenues were 80% higher at close to $9bn, up from $4.9bn in the previous period.

That was due to higher average freight rates of $2,774 per teu — up from $1,509 in the previous year — as well as a stronger US dollar.

“The year has got off to an exceptionally strong start on the whole,” said chief executive Rolf Habben Jansen.

“And whilst there have been first signs that the market has passed its peak we also expect a strong second quarter.”

Improving picture

Based on the better than anticipated earnings, the company expects the second quarter will exceed earlier expectations.

Transport volumes for the company’s 248 ships were roughly on a par with the prior-year level, at 3m teu.

However, ongoing port congestion resulted in longer round voyage times for ships and containers, which had a negative impact on transport capacity, the company noted.

Hinterland infrastructures are also under strain, resulting in longer turnaround times for ships and containers.

Hapag Lloyd's neopanamax containership the 13,000-teu Antwerpen Express (built 2013). Photo: Hapag Lloyd

“Global supply chains continue to be under significant pressure — not least because of the recent measures taken in China in response to COVID-19 outbreaks, Habben Jansen said.

“This situation is expected to improve in the second half of the year.

“For our customers worldwide, we will do everything in our power to help normalise this difficult market environment as quickly as possible,”

Upgrade for 2022

The result was impacted by higher costs.

These included significantly increasing expenses for container handling and a roughly 60% higher average bunker consumption price.

But the better-than-expected results mean the company is able to stick with its massively upgraded profit forecast for 2022.

Ebitda in the first quarter rose to $5.3bn for the three months, up from $1.9bn. Ebit climbed to $4.7bn up from $1.5bn.

On 28 April, Hapag-Lloyd said it expects to deliver Ebitda in the region of $14.5bn to $16.5bn this year, some $2.5bn higher than earlier forecast.

Ebit for the year is forecast at between $12.5 to $14.5bn on the back of soaring freight rates.

“However, this forecast remains subject to considerable uncertainty given the ongoing COVID-19 pandemic and the war in Ukraine,” the company said.

Hapag-Lloyd’s decision to project an earnings forecast is in contrast to its THE Alliance partner Ocean Network Express (ONE).

The Japanese line deemed it “extremely difficult” to announce a reasonable business forecast for the coming financial year.