Standard & Poor's (S&P) has bumped up the corporate credit rating of German container line Hapag-Lloyd to the highest point since it began coverage in 2010.
The ratings agency now ranks the shipowner at 'BB-', up from 'B+', with a positive outlook.
This was based on what S&P sees as improved credit quality and "resilient" Ebitda, as well as tight cost control and continuous debt reduction.
The positive outlook means the rating could rise again over the next year if the current profile is maintained.
The rating for Hapag-Lloyd's senior unsecured bond debt was raised to 'B' from 'B-'.
Solid Ebitda
S&P said it expected the shipowner to continue its solid 2019 Ebitda performance in 2020.
The agency added that Hapag-Lloyd’s strengthened cash flow generation, coupled with gradually reducing debt, will result in stronger than previously expected credit metrics in 2020.
S&P also recognised that Hapag-Lloyd has outperformed its cost-reduction targets, enhanced its operating efficiency, decreased cost per container shipped and improved its profitability.
The ratings agency said Ebitda has been above the industry average over the last few years.
Hapag-Lloyd said in August that it was on track to hit its full-year guidance after reporting Ebitda of €700m ($825m) in the second quarter.
The company expects the full-year Ebitda figure to rise to between €1.7bn and €2.2bn.
The shipowner has the capacity to further reduce leverage and to increase credit quality, S&P believes.
"We are very pleased that our earnings performance and our consistent cost management as well as our deleveraging efforts are positively recognised with this S&P rating action," said Hapag-Lloyd's chief financial officer Mark Frese.
'Prudent' financial approach
"Going forward, our prudent financial policy remains unchanged with a clear focus on profitability, cost control, debt reduction and balance sheet stability."
Hapag-Lloyd saw a sharp fall in volumes due to the coronavirus pandemic in the second quarter.
But group profit rose to €261m in the second quarter of the year thanks to higher freight rates and reduced bunker costs.
That lifted profits to €285m in the first half of the year, nearly double the €146m in the previous period.
Newbuildings on the cards
TradeWinds reported at the end of last month that Hapag-Lloyd had returned to shipyards for a slew of up to 12 ultra-large containership newbuildings worth more than $1bn and is weighing up LNG-fuelling for the vessels.
Newbuilding sources said the shipowner has asked for quotes on six firm vessels of 23,000 teu each for delivery dates in 2023, along with slots for a similar number of optional newbuildings.
They said the company has asked yards to submit pricing for both dual-fuel and vessels fitted with conventional propulsion systems.
