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Hapag-Lloyd: Size is Not the Name of the Game Anymore

Hapag-Lloyd

By MarEx 2018-11-21 17:39:50

Hapag-Lloyd has disclosed details of its new mid-term Strategy 2023, saying the liner industry has come to a turning point following a period of consolidation.

Hapag-Lloyd is more than two times larger than it was in 2014 in terms of transport capacity. Further consolidation among the largest players in the industry is now less attractive due to decreasing incremental scale benefits. Instead, the company will focus on significantly improving quality for its customers, selective global growth and becoming profitable throughout the cycle. 

“Size is not the name of the game anymore, but customer orientation,” said Rolf Habben Jansen, CEO of Hapag-Lloyd. “It is obvious that customers expect more reliable supply chains, so our industry needs to change and invest more. At the same time, we know that people are prepared to pay for value. Going forward, delivering value to get the most attractive cargo on board is at the heart of our new Strategy 2023. To be number one for quality is the ultimate promise to our customers and a strong differentiator from our competitors.” 

He says Hapag-Lloyd’s Strategy 2023 is based on network optimization, terminal partnering and further improvements in procurement and container steering. 

At the same time, additional improvements aim to turn Hapag-Lloyd into a more agile, dynamic and analytically driven organization. More investments in digitalization and automation will be made and the company aims to increase the share of the online business to 15 percent of its overall volume by 2023.

Financial targets by 2023 will focus on generating economic value by delivering a Return on Invested Capital which is higher than the Weighted Average Cost of Capital. This implies an EBITDA margin of approximately 12 percent. A cost management program with a savings run-rate target of $350 to $400 million has been launched. The net debt-to-EBITDA ratio is targeted to be less than 3.0x with an equity ratio of more than 45 percent. A liquidity reserve of around $1.1 billion will be maintained.

Cooperation

Last month, Hapag-Lloyd and Ocean Network Express (ONE) entered into a strategic feeder network agreement. The cooperation covers specific Intra-Europe (BAX, NBS, NPX, REX, SDX, ADX, LEX) and Intra-Asia (BHX, HAS, PID) feeder trade lanes and will be further expanded in the future.

Hapag-Lloyd and ONE also operate together within THE Alliance and cooperate on their Latin America, Africa and Indian Subcontinent trades.

In September, Hapag-Lloyd, ONE and Yang Ming announced a new cooperation with CMA-CGM, COSCO and OOCL to enhance their Mediterranean – U.S. East Coast service AL6 (Atlantic 6). 

Reorganization

Hapag-Lloyd reorganized its Executive Board in March, and in May extended Jansen's contract for a further five years until March 31, 2024. Jansen was appointed member of the Hapag-Lloyd Executive Board in April 2014 and has been CEO since July 2014.

The reorganization came about following the mergers with CSAV (2014) and UASC (2017). As a result, the company's transport capacity and number of containers transported more than doubled. Revenue rose by the around 50 percent in the same period, and the number of employees increased by around 70 percent. 

Hapag-Lloyd has a fleet of 222 modern container ships and a total transport capacity of 1.6 million TEU. It has a container capacity of approximately 2.6 million TEU, and around 12,000 employees and 394 offices in 127 countries. 120 liner services connect to over 600 ports around the world.