Hapag-Lloyd orders 5,750 refrigerated containers

Delivery beginning in October 2016 / New order strengthens market position in the transport of temperature-sensitive goods / Tests with new refrigeration equipment and natural refrigerants hapag-lloyd Hapag-Lloyd will also be investing in its container fleet this year: The liner shipping company has ordered a total of 5,750 refrigerated containers (reefers) of the latest generation – including 5,000 x 40-foot and 750 x 20-foot units. In addition, 1,000 of the new containers are equipped with “controlled atmosphere” technology, which allows various types of fruits and vegetables to be transported for longer periods of time while maintaining a consistent quality. In addition to temperature-sensitive goods – such as fruits, vegetables, meat and fish – Hapag-Lloyd also transports other high-value products in reefer containers, such as pharmaceuticals. Plans call for the new refrigerated containers to be delivered beginning already in October and to be gradually integrated into the existing container fleet. The new order accompanies the delivery of five new 10,500 TEU vessels, which Hapag-Lloyd ordered last April. The new containerships of the “Valparaíso Express” class are currently being built in South Korea and are scheduled to incrementally go to sea between South America and Europe beginning in late 2016. Each of these ships boasts an especially high reefer capacity of more than 2,100 units. “Hapag-Lloyd is one of the world’s biggest suppliers in the reefer segment and numbers among the market leaders in South America,” says Anthony J. Firmin, Chief Operating Officer at Hapag-Lloyd. "With the newly ordered reefers, we will be able to continue offering state-of-the-art equipment to our customers while at the same time optimizing the efficiency of our container fleet. In this way, we are especially optimally equipped for the South America traffic, which is important in the reefer business.” Hapag-Lloyd already has one of the largest and most modern reefer fleets in the world. Together with the cooling-technology specialist Carrier Transicold, the liner shipping company is currently testing a new generation of refrigeration equipment. These use the eco-friendly natural refrigerant carbon dioxide and, in the long run, could replace the chemical refrigerants now standard in the sector. Results in first half of 2016 Subdued economic growth in many parts of the world, persistently tough competition in the liner shipping industry and further declines in freight rates have marked the first half of the 2016 business year. While transport volume remained stable in the first six months at 3.7 million TEU (-0.4 % compared to the prior year period), the average freight rate fell by USD 254 year on year to 1,042 USD/TEU, or almost 20 percent. Revenue reached EUR 3.8 billion in the first half of the year (prior year period: EUR 4.7 billion). It was possible to reduce year on year transport expenses by approximately EUR 600 million, or almost 16 percent. Aside from lower bunker prices and consumption than in the previous year, this development was also attributable to synergies realized as a result of the integration of the container business of CSAV and ongoing cost savings and efficiency programs. Bunker prices started to go up in the second quarter of 2016 while freight rates remained at a low level. This led to an additional negative impact on earnings. In the first half of the current business year, Hapag-Lloyd achieved an EBITDA of EUR 196.7 million (prior year period: EUR 493.3 million) and an operating result (EBIT) of EUR -39.7 million (prior year period: EUR 267.7 million). The Group net result stood at EUR -142.1 million (prior year period EUR 157.2 million). “The first-half result is disappointing,” said Rolf Habben Jansen, CEO of Hapag-Lloyd. “Our cost saving measures and efficiency programs are on track and the synergies from the merger with CSAV are being realized on schedule. But this isn’t enough to completely compensate for the significant drop in the average freight rate. Even though freight rates have finally gone back up towards the peak season in various trades this rebound is coming later than anticipated and more is needed going forward.” “In the second half of the year, our main focus will be to further improve our cost base and to do whatever we can to get freight rates back to a more sustainable level,” Habben Jansen added. “In this difficult competitive environment, it is very important to complete the transaction with UASC as quickly as possible and to start the integration of UASC immediately after the completion of all pre-closing conditions. The integration will bring us annual net synergies of at least USD 400 million, some of which should already take effect next year.” During the period under review, Hapag-Lloyd invested EUR 178.8 million in vessels. With an equity ratio of 44.4 percent and liquidity reserves of EUR 774.9 million (both as of 30.6.2016), the company is well positioned compared to its international competitors. Summary of Hapag-Lloyd Key Figures
H1 2016 H1 2015
Transport volume (TTEU) 3,703 3,719
Freight rate (USD/TEU) 1,042 1,296
Revenue (million EUR) 3,786 4,669
EBITDA (million EUR) 196.7 493.3
EBIT (million EUR) -39.7 267.7
EBITDA margin 5.2% 10.6%
EBIT margin -1.0% 5.7%
  Source: Hapag-Lloyd
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