August 29, 2017 / 11:18 AM / a month ago

UPDATE 1-Hapag-Lloyd sees dividend on the horizon as shipping markets improve

* CEO tells Reuters could consider 2017 dividend

* Demand improved, costs under control

* Integration of rival UASC to soon be complete

* More consolidation underway in world market (Adds details from analysts call and interview)

FRANKFURT, Aug 29 (Reuters) - German container shipping group Hapag-Lloyd said its merger with Arab peer UASC and an improved market could allow it to consider paying its first dividend since a stock market listing in November 2015.

The company swung to a first-half operating profit as it raised transport volumes and as freight rates stabilised, it said on Tuesday.

Shipping has struggled with overcapacity, price wars and freight rates far below break-even levels. Industry analysts say the worst may be over, thanks to an improving global economy and reduced competition following a series of mergers.

Conditions had changed for the better in the second quarter, Hapag-Lloyd Chief Executive Rolf Habben Jansen said.

“The market environment has improved somewhat, costs are under control and demand is developing well,” he told Reuters.

“If we were to write a positive (net) result by the end of the year, we would seriously think about a dividend payment for 2017,” he added.

Habben Jansen told analysts that world container trade may grow by between three and four percent this year, and also looks strong for 2018. His comments echo those from industry leader A.P. Moller Maersk Chief Executive Soren Skou who said this month that “container shipping fundamentals are at their best since 2010”.

MERGER COSTS

Profit before interest and tax (EBIT) came to 87.3 million euros ($104.6 million) in the first half of the year, up from a year-earlier loss of 39.7 million, the company reported.

Hapag-Lloyd posted a first-half net loss of 46.1 million euros after a 142.1 million loss in the same period a year earlier, partly owing to one-off costs for consolidating UASC, but said it turned positive in the second quarter.

Annual earnings measured as EBIT and EBITDA were set to clearly exceed previous year levels, as were transport volumes.

The company cited trade growth, slow new vessel ordering and quick integration of UASC operations to create the world’s fifth largest shipping group.

The migration of UASC operations to the Hapag-Lloyd platforms would be complete by the end of the third quarter.

Hapag-Lloyd shares slipped 0.9 percent to 36.9 euros by 1105 GMT but have risen from a flotation price of 20 euros in 2015.

Once the latest merger activities were completed, the number of big global competitors would shrink to between five and seven, Habben Jansen said.

Maersk is to close a takeover of German player Hamburg Sued by year-end and China’s COSCO Shipping Holdings has bid $6.3 billion for Hong Kong peer Orient Overseas International ($1 = 0.8350 euros) (Reporting by Vera Eckert; Editing by Maria Sheahan and Keith Weir)

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