Hapag-Lloyd Up Beat on Future

German container shipping group Hapag-Lloyd said it expected a clear increase in operating profit (EBIT) this year thanks to a market recovery, ongoing synergies from its merger with Chilean sector peer CSAV and cost-cutting programs.

"We believe that the ongoing consolidation and the upcoming new alliance set-up should add stability to the market, and that there will be some recovery of the market," Chief Executive Rolf Habben Jansen told a news conference on Wednesday.

Hapag-Lloyd posted a 2015 net profit of 114 million euros ($127.5 million), which was up from a 2014 loss of 604 million and the first positive result since 2010.

The company's earnings before interest and tax (EBIT) had swung to a 366 million euro profit in 2015, from a year-earlier loss of 383 million.

The company forecast 2016 earnings before interest, tax, depreciation and amortization (EBITDA) to be up moderately compared with 2015's 831 million euros.

Having merged with Compania Sud Americana de Vapores (CSAV) in December 2014, it reaps $400 million a year in synergy savings, and in addition launched a series of cost savings programs.

Hapag Lloyd derived some 70 percent of the $200 million of total targeted result improvements from its Octave cost cutting program in 2015. At the end of 2015, it started program Octave 2, meant to bring less in savings than Octave, with an exact figure to be published in May, Habben Jansen said.

Turning to market conditions, the chief executive said some freight rate recovery was likely in 2016.

“It does not make sense to achieve freights below variable costs... it will have to go in a different direction,” he said, adding his company, like others, would not sacrifice earnings for market share.

“The result for the year is in line with our expectations. Hapag-Lloyd has delivered what we promised. Also in comparison with our main competitors, Hapag-Lloyd has made up tremendous ground and is back among the top performers in the industry,” said Habben Jansen.

“In 2016 we will continue to work on our competitiveness, to maintain and further strengthen our performance in the industry. We are well positioned thanks to our balanced portfolio across all trades and our strong presence in attractive niche markets such as reefer, special cargo, dangerous goods or cabotage.”

The shipping industry has been battling over capacity, linked to a glut of new vessels ordered during a boom period before the global financial crisis of 2007-2009, forcing operators to strike alliances.

Hapag Lloyd will move from its number four position in world shipping to fifth later this year when two mergers are expected to go through officially.

French CMA CGM has bought Singaporean NOL, cementing its position as number three after Danish Maersk and privately-owned Swiss MSC, and state-controlled Chinese shipping companies Cosco and CS are also to merge.

Hapag-Lloyd shares, which have been included in Germany's SDAX index since Monday, were up three percent at 17.26 euros by 1542 GMT.

Habben Jansen confirmed Hapag-Lloyd would pay a dividend for 2016 next year, should 2016 results turn out as planned.