Hapag-Lloyd Group in 2001 - Another successful financial year

Declining growth rates in liner shipping
The downturn emanating from the USA also affected other economies, particularly in Asia, but also in Europe. According to the OECD, world trade grew by only 0.3% last year. Volume in international container liner services rose by close on 2% in the last financial year, well down on the 6% average growth in recent years.

Hapag-Lloyd Container Line (HLCL) increased its volume by about 8% to 1.7m standard containers (TEU). Liner shipping thus again grew faster than the market on average. The volume growth was achieved with almost no increase in staff. HLCL achieved sales of €2.2 billion and increased its operating profit by 17% to €186m, despite weaker demand and the resulting significant declines in rates.

Günther Casjens, CEO of Hapag-Lloyd Container Line and board member of Hapag-Lloyd AG, identified various reasons for HLCL's impressive performance: "We achieved another productivity increase thanks to our constant refinement of our IT systems. And we also benefited from the joint management and use of ship capacities within the Grand Alliance." Casjens added that the strong US dollar was also a positive factor. The dollar exchange rate rose by about 7.8% on average compared with the previous year.

The area liner shipping comprises the three profit centres Region Europe, America and Asia/Australia.

Transport volume for Region Europe rose by 3.7% to 560,000 TEU. Because of the continued high volume and rate growth at the beginning of 2001, Region Europe achieved a profit that was well up on the previous year.

Export volume shipped by Hapag-Lloyd (America) increased by 2.9% to 420,000 TEU, mainly as a result of new services to the Mediterranean as well as between South America and Europe. Despite the good volume growth, it failed to match the previous year's result, chiefly because of significant rate declines in services to Asia and Europe.
Hapag-Lloyd (Asia) succeeded in improving its position in all relevant services, despite the increasingly weak market. The export volume it handled last year rose by 12% to 696,000 TEU. Trans Pacific and intra-Asian services in particular grew at an above-average rate.

Demand for cruises was high during the first nine months of 2001. Bookings then declined after the events of September 11th. In the last financial year, Hapag-Lloyd Cruises achieved sales of €154m (€175m) and a slight operating loss of €1.7m. The "Europa" put in a gratifying performance, again making a significant positive contribution to profit.

Higher profit in logistics
Our logistics area achieved revenues of €1.5 billion (€1.4 billion) in 2001. Operating profit surged to €95m (€84m). Investment totalled €172m, of which VTG-Lehnkering accounted for €57m. Investment focused on modernizing and expanding rail tank and freight car fleets, the tank farm area and purchasing road tankers. Algeco Group invested €107m in expanding its park of container modules for leasing as well as in purchasing palettes. Staff in the logistics area totals 5,300, including 3,500 in Germany.

In 2001, VTG-Lehnkering achieved revenues of €932m (€940m), slightly down on the previous year. The reason for this was the sale of its maritime services division in the context of portfolio restructuring. Disregarding disinvestment, sales would have risen by about 5% compared with the previous year.

Despite the slowdown, VTG-Lehnkering raised its operating profit by 14% to €30m. The increase in profit was due mainly to its core business, rail logistics, which was more profitable despite a planned rise in cyclical wagon maintenance costs. The strong demand for the freight cars of Transwaggon and the higher contribution to profit from Transpetrol, which provides rail tank car forwarding services, were particularly favourable factors. Capacity utilization of rail tank and freight cars was at a high level.

Profit in bulk and special logistics was slightly lower than the previous year, the main reason being declines at tank farms. Investment in environmental protection – for which there was no corresponding revenues – also depressed profit despite good capacity utilization. Negative factors for inland shipping included unfavourable water levels. On the other hand, hazardous goods distribution achieved a higher profit.

In chemical services, the inclusion of Schirm USA (still not completely included the previous year) and the withdrawal from the unsuccessful Hago had a beneficial effect.

The forwarding sector is still suffering from massive overcapacities particularly for domestic general cargo services, which are exerting pressure on profits. In this market setting, Pracht Freight Forwarding achieved an operating profit of €3m on sales of €169m, slightly down on the previous year. The main reason was declining profit contributions from land services because of the slowdown, as well as start-up costs for a new customer in the logistics area and expenditure on e-commerce activities.

Algeco, based in Paris/Mâcon, again reported gratifying results, increasing its profit in 2001 to €62m, 16% up on the already high level the previous year. This was due mainly to its core business, the leasing and sale of container modules for use as temporary premises, accounting for 85% of Algeco's sales of €401m.

Thanks to its leading market position, Algeco achieved continuous growth in leading European countries. It increased its stock of container modules by 15% to over 100,000 units and clearly expanded its capacities in France and Spain/Portugal with slightly lower capacity utilization. Performing above the market average, Algeco slightly increased its capacity utilization in Germany. Its production and distribution activities established in Eastern Europe in 2000 also developed to a gratifying extent.

Investments and finances
With its sound balance-sheet structures, Hapag-Lloyd Group reported a balance-sheet total of €3.4 billion (€3.3 billion) for 2001. Equity increased by €167m to over €1.3 billion, resulting in an excellent equity rate of 39%. Investments in 2001 could be financed fully from cash flow at €422m (€401m). Cash flow was 5% up on the previous year, making it possible to reduce net indebtedness from €588m to €508m.

Hapag-Lloyd achieved a return on equity of 23% relative to operating profit of €299m. Return on total capital employed came to 18% with an operating profit before tax (EBITA) of €325m and a total capital (equity, pension reserves and net financial liabilities bearing interest) of €1.8 billion.

Joachim Eilert, board member of Hapag-Lloyd AG, commented: "Hapag-Lloyd will continue to be conservative in its accounting policy and make the most of all possible tax depreciation opportunities. In the group accounts, however, we write down assets from the business management point of view on a linear basis in accordance with IAS."

Looking optimistically into the future
Behrendt was confident about the prospects for the current financial year, stating that the container line will continue to grow faster than the market on average, although in view of the rate situation it will have to expect a drop in earnings. A slightly improved profit is expected for cruises. VTG-Lehnkering plans this year to continue to expand its market position in rail logistics as one of the leading suppliers in Europe. In cooperation with an independent private bank, Hapag-Lloyd and VTG-Lehnkering are taking over the European rail logistics activities of the Australian Brambles Group. VTG-Lehnkering will assume responsibility for operative management for all participants. Algeco could suffer slight losses in earnings owing to a more adverse overall economic environment.

"We are active exclusively in markets with long-term growth prospects and hold leading positions in these areas. Our results in 2002 will be well down on 2001 owing to the weak economy, which is recovering only slowly. However, we are confident that we will put in a satisfactory performance in the circumstances," concluded Behrendt.