Hapag-Lloyd on Thursday wrapped up its integration with United Arab Shipping Company (UASC) six months after starting the merger process, with the benefits of the now combined carrier already being felt in a recent set of vastly improved financial results.
At a gathering of the shipping company’s global management in Hamburg, Hapag-Lloyd CEO Rolf Habben Jansen said the relatively rapid completion of the integration was helped by the carrier’s experience in mergers — CP Ships was brought onboard in 2005 and CSAV in 2014.
Hapag-Lloyd now offers 125 liner services in a global network, and beginning in 2019, the company expects annual synergies of $435 million as a result of the UASC merger. “Already in 2018, we will benefit from the merger of the two shipping companies due to significant cost reductions,” he said.
The volume and financial merits of the merger are already being felt. Container volume, combined with an improving market, saw its liftings surge almost 25 percent in the first nine months of the year. Higher year-over-year freight rates led the carrier to a group net profit of $63.92 million. Hapag-Lloyd handled 7 million TEU in the first nine months, which generated revenue of $8.6 billion and an earnings before interest and taxes of $315 million.
“The quick and smooth integration of UASC into the Hapag-Lloyd Group has also played a crucial role. We have already been able to realize the first synergies resulting from the merger, which will help us to further solidify our position in the sector,” Habben Jansen said.
The addition of UASC’s 58 vessels has created the fifth-largest container line, and its fleet of 215 vessels is one of the industry’s youngest with an average ship age of just 7.2 years. Average vessel size in the new fleet will be about 6,840 TEU, approximately 30 percent higher than the 5,280 TEU average of the top 15 carriers. UASC operates 15 mega-ships above 15,000 TEU that total 247,146 TEU, and Hapag-Lloyd operates 17 mega-ships that total 204,819 TEU, according to IHS Markit data.
Hapag-Lloyd merged with UASC on May 24, 2017. Within the subsequent six months, the operating businesses, the information technology systems, the different fleets, and the corresponding departments and country organizations were brought together.
However, the solid financial performance of most carriers in the first three quarters is not likely to be repeated in the last three months of the year. Alphaliner said average China Containerized Freight Index (CCFI) rates edged upwards by 1.9 percent in the third quarter compared with the second quarter, and by 21 percent compared with the third quarter of last year. Individual carriers’ performance was mixed, with marginal rate gains for CMA CGM, OOCL, “K” Line, and Zim while Maersk, Yang Ming, and Hyundai Merchant Marine recorded lower average revenue in the third quarter, and Hapag-Lloyd reported flat rate developments, compared with the second quarter.
But the analyst said carrier inability to drive rates upwards during the seasonally stronger third quarter despite robust demand growth and continued rate weakness in October and November was expected to weigh down the earnings performance in the fourth quarter. The analyst said the average CCFI index has already fallen by 7.4 percent in the fourth quarter against the third quarter, with further falls expected in the coming weeks.