Hapag-Lloyd downgrades earnings outlook for 2018

The containership carrier blames growing operational costs and underperforming freight rates, jeopardsiing earlier predictions that foresaw a clear increase in earnings. Earnings could now decrease this year compared with 2017

News ID: 80099

Date: 30 June 2018 - 09:43

Company warns that cost-cutting measures are not enough to offset growth-impeding factors

HAPAG-Lloyd has revised its 2018 outlook downwards on mounting operational costs and lagging freight rates.

The German carrier, which this week announced some staff redundancies, dropped its anticipated earnings before interest tax and amortisation ranges from €200m ($233m) and €450m. The estimate stood at €410.9m at the end of 2017.

What is more, earnings before interest, taxes, depreciation and amortisation are expected to be between €900m and €1.15bn, compared with €1.06bn at the end of last year.

In its first quarter report this year, the company said that as long as its 2017 merger with the United Arab Shipping Co yielded the expected synergies and freight rates hit their anticipated heights there would be a “clear year-on-year increase” in 2018.

The adjustment is the result of “an unexpectedly significant and continuing increase in the operational costs since the beginning of the year, especially with regard to fuel-related costs and charter rates combined with a slower than expected recovery of freight rates,” the company said.

The news comes after the company announced it would remove or outsource dozens of jobs as a result of its mergers with CSAV and UASC.

Hapag noted that cost-cutting measures are not enough to offset the weight of the aforementioned factors.