Hapag-Lloyd's Q1 net Profit Was US$4.68 Billion, Three Times That of The Same Period Last Year! Freight Rates to Fall Sharply in The Third Quarter

On the 12th, after Hapag-Lloyd announced that its first-quarter net profit jumped to $4.68 billion, its chief financial officer Mark Freys said: "I have to admit that demand is currently declining."

On the morning of the 12th, Hapag-Lloyd CEO Rolf Habben Jansen attended the company's first-quarter earnings conference call. The company posted a net profit of $4.68 billion in the first quarter, more than triple the $1.45 billion in the same period last year. The company expects a "strong second quarter," but is less certain about its outlook beyond that.

"Based on market data, business growth is expected to be lower than expected as high inflation and geopolitical risks weigh on consumer confidence," Freis said.

"Even if congestion remains at current levels, or new congestion emerges, demand is softening in the overall picture right now." He said demand in North America "remains relatively strong" but "demand in Europe has declined."

As for spot rates, Freis said he expected a "significant decline" in the third quarter, falling back below contract rates in some cases. “While there are regional differences, the trend is the same; we are seeing global spot freight rates softening,” he said.

"The new long-term and multi-year contracts will provide some protection against falling spot freight rates," Freis said, confirming that "about 50%" of Hapag-Lloyd's business is backed by contracts, of which about 10% is multi-year contract.

Still, the Quick Quotes digital platform, which now accounts for more than a quarter of total bookings, is somewhat reflective of spot market rates, Fres added.

Earlier, chief executive Rolf Habben Jansen had said the year had been "off to an exceptionally strong start" and that he expected a strong second quarter despite "preliminary signs that the market has passed its peak."

Hapag-Lloyd's first-quarter freight volume was flat at 2.987 million TEU, revenue was $9 billion, an increase of 82% year-on-year, and the average freight rate was $2,774/TEU. This compares to an average rate of $2,276/TEU for Maersk and $2,973/TEU for another alliance partner, ONE.

Meanwhile, transportation expenses surged 21% year over year to $3.3 billion, largely due to a 68% increase in fuel costs and double-digit increases in handling, transportation, equipment and vessel costs.

Still, Freis is optimistic that some of these costs may be reduced in due course, but he concedes that others are likely to stick around in the long term.

On April 28, Hapag-Lloyd raised its full-year profit forecast by $2.5 billion, with earnings before interest and taxes in the range of $12.5 billion to $14.5 billion, based on expectations that strong first-half results would "exceed earlier expectations."

Hapag-Lloyd is currently ranked fifth among global shipping companies, operating 247 ships with a capacity of 1.743 million TEU and ships on order with a capacity of 415,000 TEU.