German container shipper Hapag-Lloyd recently posted a net profit of €3.2 billion for the first nine months of 2023, down by 77% from a year earlier, and cut its forecasts for full-year earnings.
Net profit was down from €13.8 billion in comparable 2022 when the shipping industry, a proxy for global trade, boomed amid post-pandemic recovery and because logistics disruptions drove up prices for consumers.
Economic Slowdown Impact
This year, the global economic slowdown and the clearing of port log-jams sent freight rates down sharply, which has also harmed Hapag-Lloyd competitor Maersk.
"At the moment, everything is under pressure. Freight rates in some segment are at a level where you cannot operate ships profitably," chief executive Rolf Habben Jansen said in an interview with Reuters.
Earnings before interest and taxes (EBIT) were now seen to be ranging between 2.2-3.1 billion euros, down from a €2-4 billion range quoted before.
EBITDA was expected to be in a range of €4.1-5 billion vis-a-vis a previous range of €4-6 billion.
The forecasts remained exposed to uncertainty amid geopolitical conflicts, inflationary pressure and high inventory levels of customers, the company said.
Transport volumes, however, remained almost at par with those in the prior year at 8.9 million twenty-foot equivalent units (TEU), up nearly 5% year-on-year in the third quarter.
Relief also came from lower shipping fuel prices, which dropped by 19% to an average $611 per tonne in the nine months.
Freight rates were off 45% in the nine months at $1,604 per TEU, taking revenue down 46% to €14.1 billion.
Habben Jansen said the company expects no short-term recovery of the rates and has responded by cutting several services on key routes.
But the cancellations so far do not exceed 20% of previous voyages schedules.
Cuts to staff, totalling 13,500 worldwide, were currently not on the agenda.
Maersk is seeking up to 10,000 reductions.