Shipping giant Hapag Lloyd saw half year profits tumble over 65 per cent as declining demand and “significantly weaker” freight rates hit the firm’s bottom line.
Revenues slumped from €16.9bn (£14.59bn) down to €10bn (£8.63bn) at the world’s fifth-biggest container line, a 40 per cent year-on-year drop, with the firm noting particularly low demand on Far East and European trade routes to North America.
“Weaker demand and lower freight rates are having a very noticeable impact on our earnings. In a challenging market environment, we can look back on a successful first half year overall, in which we were able to expand our terminal portfolio while also significantly boosting our customers’ satisfaction thanks to our focus on quality.” Rolf Habben Jansen, CEO of Hapag-Lloyd AG, said.
It marks a significant drop off in performance from the highs of previous years, which saw the container shipping industry enjoy a historic boom on the back of pent-up demand unleashed after coronavirus.
Huge import demand for manufactured consumer goods sent freight rates to record levels, resulting in the sector raking in more profit in three years than in the previous 60.
Hapag-Lloyd said today that freight rates in the six months to June had fallen sharply by 38 per cent.
This, coupled with an oversupply of vessels ordered during the boom, has seen Hapag Lloyd, Maersk and Mediterranean Shipping Company struggle.
Maersks’ revenues and earnings fell 40 per cent and 72 per cent year-on-year in its second quarter results last week.
Disrupted trade flows as a result of the war in Ukraine and inflation have also dented margins, and although Hapag Lloyd maintained its earnings forecast of $4.3 to $6.5 billion – it said this could be negatively impacted by the “geopolitical uncertainties,” and “persistent inflationary pressures.”