Strategy & Outlook

In November 2018, the Executive Board of Hapag-Lloyd AG first presented on the Group’s new strategy (“Strategy 2023”).

The Executive Board of Hapag-Lloyd AG assumes that the future of the container shipping industry business will no longer be solely determined by unit costs and economies of scale. Instead, it firmly believes that service quality and reliability will be decisive competitive factors and that customers are willing to pay for quality, service and greater reliability. With regard to reliability in particular, there is a need for action by the industry, and therefore by Hapag-Lloyd.

Hapag-Lloyd has developed its new strategy based on these premises. Successful implementation of the strategy will safeguard the future and provide the foundations for further organic growth.

The three core objectives of Strategy 2023 are:

  • Becoming number one for quality
  • Remain a global player
  • Profitability throughout the entire economic cycle

The aim is to ensure that the company remains a global player, to make Hapag-Lloyd a leader in quality and to set standards in the industry for quality, reliability and service. Hapag-Lloyd considers leadership in quality as a basic requirement for maintaining or even improving margins and the future success in the market. Continuous process optimisation will contribute to this, brought about by a more agile organisation, digitalisation and automation.

The following unique selling points will differentiate us clearly from our competitors and form the core of our strategy:

  • Leadership in quality

Surveys commissioned by Hapag-Lloyd show that proven quality and reliability, such as punctual delivery, play a significant role for more than half of market participants. As part of its aim to set industry standards with regard to quality, Hapag-Lloyd has specified pledges on quality that are being implemented on a gradual basis. As a result, customer satisfaction will be one of our targets in future. A corresponding methodology for recording and measuring this indicator is currently under discussion and will be implemented and communicated during the coming quarters. In addition to a base product that includes clearly specified pledges on service and quality, we will offer customised premium products that meet specific customer requirements and cover additional services.

  • Agile organisation

A key factor for the success of Strategy 2023 is the development of Hapag-Lloyd’s organisation towards increased agility. The aim is to make quicker and better commercial decisions with the help of data-based analysis tools. This will enable, amongst other things, a faster and more flexible response to market changes in supply and demand. Agility also requires the willingness to continuously learn. At the same time, agility means that Hapag-Lloyd must be more flexible in project development and be open to partnerships.

  • Digitalisation and automation

New technologies and automation are enabling a continuous improvement in internal processes and systems, thus reducing time-consuming manual administrative tasks. The resources freed up by this can be used to increase efficiency and make optimisations in other areas, such as improving cost control and enhancing revenue management.

Hapag-Lloyd believes that it is well equipped for the digitalisation and automation. Our “single operating system” is recognised within the industry and forms the backbone of our efficient operating process. This also means that Hapag-Lloyd is in a comparatively good starting position when it comes to implementing and taking advantage of new technologies, as was shown with the introduction of the Web Channel, for example.

  • Continuous cost and revenue management

The basis for the successful implementation of Strategy 2023 remains a consistent cost and revenue management. Hapag-Lloyd has already launched a number of projects to ensure that the company cost structure is competitive. In the area of revenue management, Hapag-Lloyd has identified the key areas in which optimisations can be made and initial measures have been started. Thanks to improved cost structures, Hapag-Lloyd expects to achieve an earnings contribution of USD 350 to 400 million annually by 2021.The cost structures will be continuously reviewed and adjusted. In terms of economies of scale, Hapag-Lloyd is already on par with substantially bigger competitors. At the same time, rigorous and consistent digitisation is a prerequisite for increasing service quality.

Summary of objectives and measurement of results:

Hapag-Lloyd believes that the most recent major wave of consolidation within the industry is largely complete. The focus of Strategy 2023 is on becoming number one for quality and achieving profitable growth. The basis is continuous and consistent cost and revenue management as well as improving internal processes through greater agility and taking advantage of technological opportunities, such as digitisation and automation. Initial measures such as the Web Channel with Quick Quotes have already been implemented. The planning period for Strategy 2023 will run until the end of the year 2023. Although further implementation will take place in 2019, most of the measures and their effects on earnings will be visible in the subsequent years.

The current financial key performance indicators of the Hapag-Lloyd Group will remain the EBITDA and the EBIT. Hapag-Lloyd furthermore aims to be profitable throughout the entire economic cycle, i. e. to achieve a return on invested capital (ROIC) that is at least equal to the Company’s weighted average cost of capital (WACC). The reduction of debt remains a priority, and the Company’s target is to achieve a ratio of net debt to EBITDA of 3.0x or less by the end of 2023. Its target for the end of 2019 continues to be a ratio of net debt to EBITDA of 3.5x or less. Furthermore, Hapag-Lloyd is aiming for an equity ratio of over 45% and a liquidity reserve of around USD 1.1 billion.

In addition to the key financial indicators, the following new non-financial goals have been set: Leadership in quality is to be measured using the Net Promoter Score (NPS). In addition, the Company intends to improve reliability, i. e. punctuality, by clearly defining its pledge on punctuality and to put in place the technical requirements for measuring and reporting punctuality on a standardised basis.

Hapag-Lloyd aims to increase the percentage of door-to-door business to over 40% by 2023. This cargo type requires additional services which Hapag-Lloyd offers customers and which enable it to generate higher revenue and a higher margin.

Hapag-Lloyd targets a global market share (worldwide excl. Intra-Asia) of more than 10%. To achieve this aim, Hapag-Lloyd wants to continue expanding in attractive growth markets and in the area of special container transports such as reefer. The company believes it already has a strength in this business and it wants to increase its market share in special transports also to around 10%.

The success of the digitisation strategy is to be measured by whether the volume of cargo booked via the Web Channel will reach 15% of total volume by 2023.

As a company with a tradition of environmental awareness, it is a matter of course that Hapag-Lloyd will comply with the stricter environmental requirements, such as IMO 2020, and that the company will implement the necessary technical and organisational changes with the greatest care and attention. With regard to the new regulations by the International Maritime Organization (IMO) coming into effect 2020 to reduce sulphur emissions, Hapag-Lloyd will predominantly use the low sulphur fuel. On 10 vessels, the company will install Exhaust Gas Cleaning Systems (EGCS) to filter the sulphur from the exhaust gases. In addition, an LNG- pilot will be conducted with one LNG ready ultra large container vessel (ULCV) being retrofitted to run on LNG.

The Strategy 2023, including the aforementioned targets and goals, will become more granular as the strategy implementation progresses. When necessary, the strategy will be adapted to a changing operating environment.

In the 2019 financial year our focus will be on:

  • Strategy 2023
  • Achieving further cost savings, which are expected to reach USD 350 – 400 million p. a. by 2021
  • Continue implementing measures to improve revenue quality
  • Further developing Hapag-Lloyd’s partnership within THE Alliance
  • Technical and organisational preparations for the IMO’s new exhaust gas standards

In the course of the financial year 2019, Hapag-Lloyd will report about the progress in target achievement.

The key benchmark figures for the 2019 outlook are contained in the following table:

Key benchmark figures for the 2019 outlook Outlook
Global economic growth (IMF) +3.5%
Increase in global trade (IMF)
+4.0%
Increase in global container transport volume (IHS) +4.7%
Transport volume, Hapag-Lloyd Group
Increasing slightly
Average bunker consumption, Hapag-Lloyd Group Increasing moderately
Average freight rate, Hapag-Lloyd Group Increasing slightly
EBITDA (earnings before interest, taxes, depreciation and amortisation), Hapag-Lloyd Group EUR 1.6 -  2.0 billion
EBIT (earnings before interest and taxes), Hapag-Lloyd Group EUR  0.5 - 0.9 billion
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