Hapag-Lloyd Group in 2003 - Best performance in company's 157-year history

In 2003, the transport and logistics group Hapag-Lloyd achieved a record operating profit of €343m on sales of €3.9 billion. The highlight in 2004 will be its stockmarket listing as a focused shipping company.

"Our liner shipping has an excellent positioning and high productivity with the focus on cost control and reduction. This was the basis for the outstanding performance of Hapag-Lloyd Group compared with previous financial years," commented Michael Behrendt, chairman of the executive board of Hapag-Lloyd AG, when presenting Hapag-Lloyd's performance in 2003 today. He added that the company's other areas had also achieved very sound results in view of the ongoing slowdown and contributed to Hapag-Lloyd's record profit.

In 2003, Hapag-Lloyd achieved sales of €3.9 billion (2002: €3.8 billion) and an operating profit of €343m, 70% up on the previous year. Cash flow came to €514m (€310m), while net profit rose to €306m (€143m) and the equity rate jumped to 45% (40%). Investment expenditure totalled €229m (€353m).

Shipping forging ahead
In 2003, the shipping segment, comprising Hapag-Lloyd Container Line and Hapag-Lloyd Cruises, achieved sales of €2.4 billion, 7.0% up on 2002. Operating profit came to €248m (€104m).

Liner shipping achieves excellent profit
In 2003, Hapag-Lloyd Container Line again achieved double-digit volume growth, thus expanding faster than the market on average (+ 7.4%). It boosted its transport volume by 13.5% to 2.1m TEU, sales by 8.5% to €2.2 billion and operating profit to €253m, an excellent level for the sector and well up on the previous year (€98.2m).

The main reasons for Hapag-Lloyd Container Line’s impressive performance were its volume growth and the rise in freight rates quoted in dollars. A negative factor was the weaker US dollar, which was on average 17 cents lower than in 2002.

Hapag-Lloyd Container Line achieved growth in all the regions it serves. In the Asia/Australia region, it increased its volume by 16% to 865,000 TEU, improving on its good performance the previous year, and achieved a higher profit owing to volume growth and higher rates.

On the routes over the North Atlantic, Hapag-Lloyd transported a total of 550,000 TEU in 2003, 7% more than in 2002. Thanks to cost savings and volume growth, Hapag-Lloyd Container Line again improved its operating profit compared with the previous year.

On the Trans Pacific between Asia and North America, Hapag-Lloyd shipped 540,000 TEU, 14% more than in 2002, and achieved a higher operating profit.

In services with Latin America, Hapag-Lloyd increased its volume by 25% to 150,000 TEU. A large proportion of this growth was accounted for by services between South and North America. Overall sales were up on 2002, although operating profit declined.

Hapag-Lloyd Cruises affected by adverse parameters
Last year the cruises market suffered considerably as a result of the terrorist attacks on Bali and in Mombasa, the impact of SARS and the war in Iraq. The market growth that nevertheless occurred was achieved by aggressive pricing on the part of some suppliers. Hapag-Lloyd Cruises did not follow this policy. As it retained its price level, its bed capacity utilization declined. Its discontinuing of river cruises in 2004 as planned, which already led to reduced bookings in 2003, caused a drop in sales as expected. Hapag-Lloyd Cruises achieved overall sales of €132.9m, 12.6% less than in 2002. Operating profit was negative at – €4.9m (+ €5.4m).

Logistics achieves respectable result
The logistics segment comprising VTG-Lehnkering AG, Pracht Freight Forwarding and Algeco S.A. (Paris/Mâcon) achieved sales of €1.5 billion, not quite matching the previous year's level (– 1.6%). Operating profit also fell slightly to €80.5m (€82.3m).

VTG-Lehnkering improves profit
VTG-Lehnkering registered a decline in sales to €922m (€971m) owing to the slowdown in the chemical industry and the outsourcing of the business line industrial plant logistics on January 1st 2003. Operating profit nevertheless rose to €23.5m (€20.8m).

The business unit rail and tank container logistics achieved sales of €401, not quite matching the high level in 2002 (€413m). Operating profit surged to €15.7m (€13.9m) despite the slowdown.

The business unit bulk and special logistics increased its operating profit to €7.8m (€6.9m), although its sales fell to €521m (€558m) due to the withdrawal of industrial plant logistics last year (without which sales would have risen by 3%). This area was sold, subject to approval from the authorities, to the private equity investment firm Triton retroactively on January 1st 2004.

Pracht Freight Forwarding focusing on consistent cost management
Pracht Freight Forwarding, based in Haiger near Frankfurt, increased its sales significantly to €209m (€190m). Thanks to its consistent cost management and improved productivity, Pracht greatly improved its operating profit, which rose to €4.4m. The company was sold to Kühne & Nagel with effect from January 1st 2004.

Algeco continues to achieve high return on sales
Algeco's performance also suffered from the lack of any sustained economic recovery in Europe. Its sale and hire of container modules for use as temporary premises was negatively affected particularly by declining industrial investment, as well as structural expenditure in palette business. However, Algeco could achieve stable sales at €395m. Operating profit was €52.6m (€58.4m).

Key decision for the future
About a third of Hapag-Lloyd's shares so far held by TUI are to be listed on the stock exchange in the second half of 2004.

Hapag-Lloyd is to be quoted on the stockmarket as a focused shipping company, comprising Hapag-Lloyd Container Line and Hapag-Lloyd Cruises. This means that the group will sell its holdings outside shipping. These include VTG-Lehnkering AG and the stake in the French Algeco S.A.

"Following the sale of bulk and special logistics, the processes for selling rail logistics at VTG-Lehnkering and the holding in Algeco have been initiated," Behrendt explained.

The preparations for the stockmarket listing are running parallel to this. The selection of the consortium banks is thus beginning soon. It is planned to have Hapag-Lloyd quoted on the Frankfurt stock exchange in the second half of 2004. "With our clear focus on shipping, we are confident that we will have a good chance of being included in the M-Dax in the medium term," Behrendt emphasized.

Disclaimer:

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