EUROKAI GmbH : Annual Report 2020, pdf, 7.44 MB

EUROKAI

ANNUAL REPORT

2020

Short Version

EUROKAI Group

Kurt F. W. A.

EUROKAI GmbH &

Eckelmann GmbH

Co. KGaA

Extract from the

Hamburg

Hamburg

Organisational Chart

50%

66.6%

EUROGATE GmbH &

33.4%

Contship Italia S. p. A.

Co. KGaA, KG

Bremen

Milan (Melzo)

66.6%

33.4%

100%

100%

70%

100%

100%

40%

40%

100%

100%

60%

Medgate

EUROGATE

REMAIN GmbH

EUROGATE Container

EUROGATE

EUROGATE

TangerMedGate

Sogemar S. p. A.

CICT Porto Industriale

La Spezia Container

FeederXpress Ltd.

Intermodal GmbH

Container-Depot

Terminal Wilhelms-

Container Terminal

Container Terminal

Management S. a. r. l.

Cagliari S. p. A. i. L.

Terminal S. p. A.

and Repair

haven GmbH & Co. KG

Bremerhaven GmbH

Hamburg GmbH

Monrovia

Hamburg

Hamburg

Wilhelmshaven

Bremerhaven

Hamburg

Tangier

Milan (Melzo)

Cagliari

La Spezia

25.01%

38%

100%

100%

50%

100%

50%

100%

30%

J. F. Müller & Sohn AG

boxXpress.de GmbH

EUROGATE

EUROGATE Technical

Rail Terminal

SWOP Seaworthy

EUROGATE

Hannibal S. p. A.

Terminal Container

City Terminal GmbH

Services GmbH

Bremerhaven GmbH

Packing GmbH

Tanger S. A.

Ravenna S. p. A.

Hamburg

Hamburg

Hamburg

Bremerhaven

Bremerhaven

Hamburg

Tangier

Milan (Melzo)

Ravenna

64%

100%

50%

50%

20%

20%

100%

15%

FLOYD Zrt.

EUROGATE Terminal

MSC Gate

EUROKOMBI

Tanger Alliance S. A.

OCEANOGATE

Salerno Container

Services GmbH

Bremerhaven

Terminal GmbH

Italia S. p. A.

Terminal S. p. A.

GmbH & Co. KG

Budapest

Bremen

Bremerhaven

Hamburg

Tangier

Milan (Melzo)

Salerno

50%

50%

34%

100%

IPN Inland Port

North Sea Terminal

HVCC Hamburg

Rail Hub Milano

Network GmbH &

Bremerhaven

Vessel Coordination

S. p. A.

Co. KG

GmbH & Co.

Center GmbH

Milan (Melzo)

Hamburg

Bremerhaven

Hamburg

60%

EUROGATE

Container Terminal

Limassol Ltd.

Limassol

20%

JSC Ust-Luga

Container Terminal

Ust-Luga

16.7%

CONTRAIL Logística

S. A.

São Paulo

16.34%

LISCONT Operadores

de Contentores S. A.

Lisbon

As at April 2021

Balance Sheet Figures

and Corporate Data

Figures in accordance with IFRSs

		2020	2019
			EUR '000	EUR '000
REVENUE	197,209	260,848
NET LOSS FOR THE YEAR (2019: NET PROFIT)		-30,578	70,228
TOTAL ASSETS	727,765	841,713
EQUITY	403,014	474,556
EQUITY RATIO	55 %	56 %
CAPITAL EXPENDITURE ON INTANGIBLE ASSETS AND PPE	7,783	6,302
(EXCLUDING EFFECTS OF APPLYING IFRS 16)
DEPRECIATION AND AMORTISATION EXPENSE	19,054	20,504
CASH FLOW FROM CONTINUING OPERATIONS	45,301	54,213
PERSONNEL EXPENSES	58,420	89,540
EMPLOYEES	980	1,323
EARNINGS PER SHARE IN EUR (UNDER IAS 33)		-2.83	3.11
		SHARE PRICE DEVELOPMENT EUROKAI
DEVELOPMENT OF EUROKAI CONTAINER HANDLING	PREFERENCE SHARE ISIN DE0005706535

Contents

Balance Sheet Figures and Corporate Data
Extract from the Organisational Chart
Foreword by the Chairman of the Management Board	4
Group Management Report for the 2020 financial year	10
Report of the Supervisory Board	34
Corporate Governance Statement	42
Consolidated Financial Statements in accordance with IFRSs	52
Consolidated Income Statement	53
Consolidated Statement of Comprehensive Income	54
Consolidated Balance Sheet	56
Consolidated Cash Flow Statement	58
Segment Reporting	60
Consolidated Statement of Changes in Equity	62
Consolidated Statement of Changes in Non-current Assets	66
Financial Statements EUROKAI GmbH & Co. KGaA, Hamburg (shortened) in accordance with the German Commercial Code (HGB)	70
Other Disclosures	74
Responsibility Statement (Group)	78
Contact

TEUs
14,000,000	13,286,054	13,268,444	14,235,796	14,839,344	14,549,644	14,610,609	14,413,182	14,092,770
12,000,000	11,651,981	10,949,900
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020

EUR
				29.0
				28.0
				27.0
				26.0
				25.0
				24.0
				23.0
				22.0
1.5.2020	1.7.2020	1.9.2020	1.11.2020 1.1.2021	1.3.2021

Since 2019 excluding Medcenter Container Terminal (MCT), Gioia Tauro. The handling volumes of CICT Porto Industriale Cagliari S. p. A. i. L., which is	3
in liquidation, are no longer included in the handling statistics for reasons of comparability.

Foreword by the Chairman

of the Management Board

THOMAS H. ECKELMANN

Chairman of the Management Board

To all our shareholders,

Six new container gantries at EUROGATE Container Terminal Hamburg.

The financial year 2020, which is the subject of this report, was an exceptional year. It will long be remembered as the year of the COVID-19 pandemic, and is likely to have ramifications for the future that we cannot yet foresee. However, the virus wasn't the only thing to keep us on our toes during this past year; we have also had to make many difficult and landmark decisions in the EUROKAI Group.

The net profit for the financial year shown in the separate financial statements for EUROKAI amounts to EUR 15.8 million (2019: EUR 27.9 million), while consolidated net loss was EUR -30.6 million (2019: consolidated net profit of EUR 70.2 million). Thus the earnings shown in the separate financial statements were in line with the original forecast, albeit significantly below the previous year's result. This can be attributed in particular to the substantial decline in earnings of EUROGATE GmbH & Co. KGaA, KG, which - as was also the case for the EUROGATE Group - posted a substantial loss for the 2020 financial year. Thus, in line with the projection that was revised during the year, consolidated earnings of the EUROKAI Group were also negative.

As a consequence, earnings per share in accordance with IAS 33 decreased to EUR -2.83 (2019: EUR 3.11) and thus also entered negative territory.

Although we managed to keep the operating business of the Group companies afloat in 2020 despite the challenging conditions caused by the coronavirus pandemic, the economic and social repercussions can already be keenly felt. Restrictions in our daily lives as well as at the workplace have significantly changed our way of life, consumption habits, means of communicating and interacting with one another. From today's standpoint, it is almost impossible to assess what the long-term consequences for society and the markets will be, all the more so given that the pandemic is still raging. In light of virus mutations and the different paces at which the vaccines are being rolled out around the world, it is to be feared that we will still not see an end to the pandemic in 2021. However, from today's vantage point, the good liquidity situation of our Group companies provides sufficient financial reserves to at least weather the short- to medium- term fallout and after-effects.

4	ANNUAL REPORT 2020		FOREWORD BY THE CHAIRMAN OF THE MANAGEMENT BOARD	5

The trading price of the EUROKAI preference shares remained relatively stable during the 2020 calendar year. While at the end of 2019 EUROKAI shares stood at EUR 33.00, the price at the end of 2020 was EUR 26.00. The preference shares are currently trading at EUR 26.00 (as at 26 March 2021).

On the basis of EUROKAI's sound liquidity situation, we propose full distribution of the net profit for 2020 to the shareholders and a dividend payment of EUR 1.00 per ordinary and preference share.

The CONTSHIP Italia Group posted earnings after taxes of EUR 27.6 million for 2020, which was significantly lower than the previous year's level (EUR 65.8 million), mainly due to the one-time gains of EUR 33.9 million from the disposal of the indirectly held equity interest in Medcenter Container Terminal S. p.A, Gioia Tauro in April 2019 included in the previous year's result for the Group. In con- trast, the consolidated net profit was burdened in the previous year by the expected expenses in connection with the permanent cessation of the business operations and liquidation of CICT Porto Indus- triale Cagliari S. p. A. i. L. in the amount of EUR 10 million. Without these one-time effects, the earnings of the CONTSHIP Italia Group remained stable even under COVID-19 conditions. At EUR -121.1 million, the EUROGATE Group posted a substantial net loss year- over-year in 2020 (2019: consolidated net profit of EUR 45.5 million), due to operational losses at the principal companies combined with additional burdens on earnings in the form of restructuring expenses and impairment losses on non-current financial assets.

A YEAR SHAPED BY THE PANDEMIC

At the start of 2020, here in Europe we still had the hope that the outbreak of the COVID-19 virus in China would not turn into a pan- demic. We now know that at that time it was already too late, and that the virus had already spread to Europe and other parts of the world. What followed were high infection rates and large numbers of victims in Northern Italy, followed by Spain, France, the UK and also in Germany, although here the first lockdown managed to bring the number of cases and fatalities under control. At the end of the day, however, the virus took hold across the whole of Europe and social and cultural life, the education sector and the economy ground more or less to a halt. With a slight time delay, North and South America suffered the same fate.

During this time, the market reacted accordingly. Global container volumes on the principal trades to and from Asia fell right from the early days of the pandemic, at times by as much as 17.5%. The assumptions that we had to make at the time with respect to our handling volumes for the 2020 financial year were correspondingly -15 to -20% compared with the previous year.

The shipping companies were very quick to adapt their networks to the new cargo volumes and by early March 2020 had removed up to 10.6% of their ship capacities, i. e. 402 ships with a capacity of

2.46 million TEUs, from the market. This scarcity of shipping capac- ity initially led to numerous cancellations of planned ship calls at our terminals. After the Chinese economy started to gather momentum again from the middle of the second quarter, this additionally led to significantly increasing freight rates on the Far East routes. Today, around 98% of the worldwide shipping capacities are back in ser- vice, but shipowners are currently focusing on the trades between Asia and North America in an effort to reduce the backlog of goods between these two continents. As a consequence, ship capacities on the routes between Asia and Europe are still below pre-pandemic levels, posing an enduring challenge for freight forwarding and han- dling companies.

During the second half of the year the market and cargo volumes started to pick up, and the fourth quarter in particular was characterised by encouraging volume increases at our terminals. We were able to benefit from this in Germany especially, because in addition to the revival of the global economy, additional volumes were shipped here that were actually destined for the UK. The combined effect of Brexit and the pandemic had led to capacity bottlenecks and clearance problems at the English ports, especially in Felixstowe. It was to our advantage that the volumes could not be transhipped in Rot- terdam either, so they were transported onwards to Bremerhaven and Hamburg. As a result, EUROGATE Container Terminal Hamburg was even able to increase its handling volumes by 3.3% year-over-year.Germany-wide, the reduction in handling volumes compared to the previous year was ultimately just -3.3%. Across the EUROKAI Group as a whole, the decline in handling volumes totalled -5.6%. Our intermodal transport operations also experienced pandemic-related volume decreases of 6.6% on a year-for-year comparison.

All in all, we have come through the pandemic relatively unscathed so far. During this time, we have taken all possible measures not only to keep our core business going, but also to protect our employees as best we can. In all Group companies, we took steps to ensure that the respective applicable regulations such as social distancing or hygiene rules could be complied with. We set up crisis teams and reporting chains and like this have so far been able to successfully avoid large incidences of infection at our terminals or in our service organisa- tions. My special thanks are due to all those who have worked and continue to work tirelessly to keep our workforces healthy.

CONSOLIDATION AND STRATEGIC EXPANSION OF THE CONTSHIP ITALIA PORTFOLIO

But even if 2020 is set to go down in history as the year of the COVID-­19 pandemic, it was mainly entrepreneurial decisions that kept us intensely busy throughout the year.

In Italy, we laid the foundation for restructuring the business activities of the CONTSHIP Italia Group back in 2019. Following the successful disposal of our 50% equity interest in Medcenter Container Terminal (MCT), Gioia Tauro, and the cessation of operations and start of the liquidation procedure at CICT Cagliari International Container Terminal, my wife Cecilia and I continued with the realignment process of the management structures at the other investment holdings in Italy. Since mid-2019, Alfredo Scalisi has been in charge at La Spezia Container Terminal S. p. A., including its equity interests in Ravenna and Salerno. Matthieu Gasselin took over the reins as Managing Director of the SOGEMAR Group in September 2020 and thus succeeded Sebastiano Grasso, who retired on age grounds after 20 years of service.

With both managers, CONTSHIP Italia is well positioned for the fu- ture. In addition to the reorganisation of both business segments, this also envisages the eastward expansion of La Spezia Container Terminal and the expansion of intermodal as well as international activities. In total, we will invest a one-off sum of around EUR 2.3 million in the restructuring of the CONTSHIP Italia Group, which in turn will lead to annual savings in the amount of EUR 2.5 to 3 million from 2021.

A real highlight for EUROKAI is the successful commissioning of our new Tanger Alliance Terminal (TC 3) in Tangier, Morocco. Despite some pandemic-related difficulties with the manufacture and delivery of handling equipment, we were able to start operating the terminal at the turn of the year 20/21. Since then, Hapag-Lloyd ships have been calling at the terminal on a regular basis. The full transfer of the Hapag Lloyd services from the adjacent EUROGATE Tanger Terminal will be completed in the coming days. With two terminals at the Tangier location, the EUROKAI Group is now ideally positioned at this strategically important handling hub. Tangier is in the meantime (2020) the largest container port in the Mediterranean region.

CORE BUSINESS IN GERMANY FACES IMPORTANT CHANGES

The current situation with our core business in Germany is anything but ideal. Since the end of 2019, the Group Management Board of EUROGATE has been facing major challenges, together with the Managing Directors of the terminal companies and the Transformation Office that we set up in 2020 to get EUROGATE back on an even keel. The high operating costs coupled with insufficient productivity have led to a lack of profitability as well as a loss of market share in favour of the western ports of Antwerp and Rotterdam. Of particular concern in this context is Container Terminal Wilhelms­haven,­ which has made persistent losses since it started operations in 2012. This led to substantial impairment losses on non-current financial assets in the 2020 financial year, which is one of the main reasons for EUROGATE's poor year-end result in 2020.

Despite everything, in light of the increasing size of ships to 24,000- TEU vessels and completion of the electrified rail link by the end of 2022, we remain convinced that from 2023 we can achieve a turnaround at the deep-water port in Wilhelms­haven,­ which is key for successful competition among the German seaports in the North Range, from the western ports to the Baltic Sea ports.

We are currently in negotiations with the works councils at all affected EUROGATE undertakings concerning implementation of the necessary measures relating to the "Future EUROGATE" transformation process; these have been ongoing for a year in constructive agreement concerning their necessity. The target is an annual cost reduction of EUR 84 million across the entire EUROGATE Group. The transformation has an implementation period of a maximum of three years.

AUTOMATION

With respect to the automation of our terminals, I can report that our "STRADegy" research project with driverless straddle carriers was completed at the end of 2020. With the results of this project we are now moving into the implementation phase of the system with preparations for the "go live", as things currently stand starting in Wilhelmshaven.

Another example on the path to digitalisation is the young start-up "driveMybox" from Hamburg, which EUROGATE is funding as a strategic investor. The company has been active with an online platform since 2020 that will initially be used in Germany to broker transport orders for containers on their last mile to the end customer. The goal is to digitise the transport chain within EUROGATE's sphere of influ- ence, i. e. from handling at the container terminal to intermodal road and rail transport to the final consignee or consignor.

OUTLOOK FOR 2021

EUROKAI will continue its stable development. This is due in particular to its foreign investments, which especially in Italy and Morocco have produced consistently positive results even during the pandem- ic, leading to a dividend proposal for 2020 alone of EUR 1.00/share. EUROGATE's earnings are expected to level out due to the rigorous risk provisioning undertaken in 2020. For "Future EUROGATE", much depends on a constructive course of the transformation negotiations. After almost 46 years now at EUROGATE, I am very confident they will prove fruitful. Dockworkers, with whom I identify not just based on my own background, are undoubtedly not uncomplicated in struc- ture, but at the end of the day their common sense prevails.

6	ANNUAL REPORT 2020		FOREWORD BY THE CHAIRMAN OF THE MANAGEMENT BOARD	7