Hapag-Lloyd first-half profit gain lifts shares, optimistic on 2019

FRANKFURT (Reuters) - Rising freight-rate income and transport volumes boosted Hapag-Lloyd's HLAG.DE performance in the first half of 2019, allowing it to remain optimistic about full-year earnings and pushing its share price up more than 10%.

FILE PHOTO: A Hapag-Lloyd container is pictured at a loading terminal in the port of Hamburg Germany July 26, 2018. REUTERS/Fabian Bimmer

“We expect stable or higher growth in transport volumes in the second half. Freight rates may perhaps be a touch higher, and we are keeping our costs under control,” Chief Executive Rolf Habben Jansen told Reuters, adding low order books for ships supported profitability.

Its shares were 10.2% higher at 42.5 euros by 1030 GMT.

Hapag-Lloyd, the world’s fifth-biggest container shipping group, reported a 146 million euro (£134.5 million) net profit in the first half of 2019, versus a year-earlier loss of 101 million euros.

Freight rates in the six-month period increased to $1,071 per 20-foot equivalent unit (TEU) from $1,020 previously, it said.

First-half earnings before interest, tax, depreciation and amortisation (EBITDA) came in at 956 million euros, up from 427 million. Transport volumes increased by 2% to 5,966 TEU.

Hapag-Lloyd maintained guidance for EBITDA to rise to 1.6-2.0 billion euros from 1.138 billion in 2018.

Bankhaus Lampe maintained a buy rating, saying, “With capacity discipline still strong in the sector and in light of robust demand despite the slowdown of the global economy, we believe that Hapag-Lloyd will achieve a sharp rise in earnings in 2019.”

The CEO noted risks to the global shipping industry - which is still on a consolidation course - from escalating trade tensions between the United States and China.

But while some customers appeared reluctant to place orders, he said he believed the market would rebound after a few sluggish months.

“I don’t see it falling off a cliff by any stretch of the imagination when you look at a 12- to 24-month horizon,” he said in a call with analysts.

Ship fuel costs were a concern, increasing by 7% in the first six months to $158 per TEU.

However, Berenberg bank said in a research note that the industry saw bunker costs go up 9% in the same period, showing Hapag-Lloyd managed costs well.

Hapag-Lloyd also saw debt declining, with its net debt to EBITDA ratio reaching 3.5 in the 12 months that ended in June.

Habben Jansen said a good medium-term level would be 2.5 to 3.

Reporting by Vera Eckert; Editing by Michelle Martin and Dale Hudson