"Strong team – strong performance"
Heiko Hoffmann, Head of Investor Relations, speaks with the Chief Executive Officer of Hapag-Lloyd AG about business developments in 2020.
Heiko Hoffmann: How satisfied are you with how our 2020 financial year went?
Rolf Habben Jansen: Business in 2020 was very much influenced by the coronavirus pandemic. After transport volumes plummeted in the second quarter, we enjoyed unexpectedly strong demand for container transports beginning in the second half of the year, which was especially driven by a sharp increase in consumption in the United States and Europe. However, on the whole, we can look back on a good financial year because, even though there was a slight decline in transport volumes, we benefited from improved freight rates, lower bunker prices and cost savings, which in turn enabled us to increase our result quite significantly compared to the previous year.
What measures did you take to safeguard the company results in response to the coronavirus pandemic?
We launched our Performance Safeguarding Program, reacted flexibly to the fall in demand in the second quarter with capacity adjustments, and implemented countermeasures on the cost side. With around 1,700 individual measures, we saved roughly USD 500 million in the reporting year. At the same time, we very significantly increased our liquidity initially in the first half of the year. But as a result of better than originally expected business developments in the second half of the year and in favour of further reducing our debt, we brought it back down to EUR 1.2 billion at year end. Moreover, we broadened our digitalisation campaign and intensified our efforts to inform customers about our online products – with the idea always being to provide them with the right offering at the right time and to thereby create added value. With the unexpectedly sharp increase in demand for container transports in the third quarter, we put all of our available ship and container capacities into the market. At the same time, we purchased or leased around 300,000 TEU of new container capacity in 2020 to meet the demand of our customers.
Rolf Habben Jansen, CEO
How did the coronavirus pandemic impact your operations and employees?
The coronavirus pandemic has demanded enormous flexibility from our staff. Since their safety and well-being are our top priorities, we encouraged our staff to work from home wherever possible, and we quickly made the technical arrangements needed to make this possible. In addition, many seafarers have unfortunately had to stay on board their ships much longer than originally planned, as crew changes have been severely restricted due to travel restrictions imposed in many countries. This problem has not been satisfactorily resolved yet, and it is clear that we will continue to make all possible efforts to get our colleagues safely back to their families and friends on shore again as soon as possible. The fact is that seafarers should also be classified as key workers, as they work extremely hard day after day to ensure that our customers’ supply chains remain intact, thereby making an indispensable contribution to the functioning of global trade.
How did the market environment affect the implementation of your Strategy 2023, and what progress have you been able to make towards achieving its goals?
In addition to reprioritising some projects and investments, we have deliberately focused on securing the supply chains of our customers. At the same time, we have expanded our market position in strategically important target markets, such as India and Africa, as well as our global presence by opening new offices at the local level. We grew by more than 10 percent in the attractive reefer business, thereby getting much closer to our goal of achieving a total market share of 10 percent in this segment. We have launched several Quality Promises that can be used to transparently measure how we deliver on them while at the same time making our performance transparently comprehensible to our customers in terms of quality – and very conveniently, too, via our new Quality Promise Dashboard. We have also significantly expanded our online business and increased the number of bookings made via our web channel by around 40 percent compared to the prior year, to more than 1.3 million TEU. In addition, we have made new products available to our customers, such as our Shipping Guarantee. What’s more, we have ordered six new ultra-large container ships that will help us boost our competitiveness in the Europe-Far East trade and advance the modernisation of our fleet while reducing our CO2 footprint at the same time.
Heiko Hoffmann, Head of Investor Relations
How is this reflected in the results? And can your shareholders look forward to a dividend again?
We have achieved a very positive Group net result of approximately EUR 935 million and we have signiﬁcantly increased the return on invested capital costs to roughly 11 percent and thereby more than earned our cost of capital in 2020. At the same time, we lowered our ﬁnancial debt by more than EUR 1 billion in the reporting year. With a free cash ﬂow of more than EUR 2 billion and equity of EUR 6.7 billion, we have a very stable ﬁnancial and asset position. Our earnings performance, our rigorous cost management and our deleveraging efforts have also been recognised and rewarded in the reporting year with ratings upgrades from Standard & Poor’s and Moody’s. Our shareholders should also beneﬁt from all the positive results and our good business performance, which is why the Executive Board and the Supervisory Board will jointly propose to the Annual General Meeting that a dividend of EUR 3.50 per share be paid out.
Looking ahead, what do you think the rest of 2021 will be like?
Even if the International Monetary Fund believes that overall economic conditions will become gloomier again at ﬁrst, the forecasts for worldwide economic growth and global trade volumes are signiﬁcantly above the prior-year level. This should also be reﬂected in rising demand for container transports. At the same time, the growth in supply will remain moderate owing to a comparatively low level of orders for new vessels, which means that supply and demand should remain relatively balanced. With this in mind, we expect that the market environment will continue to normalise and gradually improve over the rest of the year. However, it is also clear that the existing forecasts are subject to an extraordinarily high degree of uncertainty due to the coronavirus pandemic. We will continue to implement our Strategy 2023 while keeping a close eye on the market environment and ﬂexibly adapting as required. While doing so, we will continue to focus on the supply chains of our customers and to create added value for our shareholders. I would like to thank everyone very sincerely for their close collaboration in this extraordinary business year and for the conﬁdence they have placed in me.
Many thanks for the interview.