Hapag Lloyd : Investor Report Q1 2024

Hapag-Lloyd AG

Q1 2024

Investor Report

1 January to

31 March 2024

SUMMARY OF HAPAG-LLOYD KEY FIGURES

		Q1 2024	Q1 2023	Change
Liner Shipping segment
Total vessels 1		280	250	12%
Aggregate capacity of vessels¹	TTEU	2,066	1,818	14%
Aggregate container capacity¹	TTEU	3,065	2,892	6%
Freight rate	USD / TEU	1,359	1,999	-32%
Transport volume	TTEU	3,037	2,842	7%
Revenue	million USD	4,527	6,023	-25%
EBITDA	million USD	906	2,359	-62%
EBIT	million USD	378	1,855	-80%
Terminal & Infrastructure segment
Revenue	million USD	107	6	n.m.
EBITDA	million USD	35	19	82%
EBIT	million USD	18	19	-7%
Group key financial figures
Revenue	million USD	4,623	6,028	-23%
EBITDA	million USD	942	2,379	-60%
EBIT	million USD	396	1,874	-79%
Group profit/loss	million USD	325	2,031	-84%
Earnings per share	USD	1.82	11.54	-84%
Cash flow from operating activities	million USD	609	2,754	-78%
Group key return figures
EBITDA margin	%	20.4	39.5	-19.1 ppt
EBIT margin	%	8.6	31.1	-22.5 ppt
ROIC²	%	8.3	45.7	-37.4 ppt
Group balance sheet figures 2
Equity	million USD	21,073	20,787	1%
Equity ratio	%	64.4	64.7	-0.3 ppt
Financial debt and lease liabilities	million USD	5,735	5,572	3%
Cash and cash equivalents	million USD	6,289	6,435	-2%
Net liquidity 3	million USD	2,584	2,907	-11%

In individual cases, rounding differences may occur in the tables and charts of this investor report for computational reasons.

1. Reporting date values at the end of the respective quarter.
2. The comparison of key balance sheet figures refers to the reporting date 31 December 2023.
3. Including the financial investments recognised in other financial assets (strategic liquidity reserve)

This report intends to focus on the presentation of the main financial highlights and calculated USD figures of the reporting period. It makes no claim to completeness and does not deal with all aspects and details regarding Hapag-Lloyd. For the full quarterly financial report, please visit our website: https://www.hapag-lloyd.com/en/ir/publications/financial-report.html

This investor report was published on 15 May 2024.

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MAIN DEVELOPMENTS IN Q1 2024

• The first three months of the 2024 financial year were characterised by an upturn in demand and renewed disruptions in global supply chains due to the tense security situation in the Red Sea.
• Group revenue in the first three months of the 2024 financial year fell by 23% to USD 4.6 billion (Q1 2023: USD 6.0 billion), which is mainly due to a significantly lower average freight rate in the Liner Shipping segment.
• Against the backdrop of declining revenues and virtually unchanged operating expenses, Group EBITDA fell to USD 941.5 million (previous year: USD 2,378.7 million) and Group EBIT to USD 395.7 million (previous year: USD 1,874.0 million).
• The Liner Shipping segment recorded a 6.8% year-on-year increase in transport volumes to 3.0 million TEU (previous year: 2.8 million TEU). However, the 32% decline in the average freight rate in particular led to a decrease in EBITDA in the first three months of the 2024 financial year to USD 906.4 million (Q1 2023: USD 2,359.4 million). Segment EBIT fell accordingly from USD 1,855.0 million to USD 378.0 million.
• The Terminal & Infrastructure segment generated EBITDA of USD 35.2 million and EBIT of USD 17.7 million in the first three months of the 2024 financial year.
• Due to the negative operating performance, earnings per share dropped to USD 1.82, from USD 11.54 in the prior year period.
• Free cash flow was once again positive at USD 223.1 million (Q1 2023: USD 3,462.7 million).
• As at 31 March 2024, the Group continued to have high net liquidity of USD 2.6 billion (31 December 2023: USD 2.9 billion).
• Due to the positive business performance, the Executive Board has specified its outlook for the current financial year published on 14 March 2024 and now expects to achieve this in the upper half. Group EBITDA is expected to be in the range of EUR 2.0 to 3.0 billion (previously: EUR 1.0 to 3.0 billion) and Group EBIT in the range of EUR 0.0 to 1.0 billion (previously: EUR -1.0 to 1.0 billion).
• Against the backdrop of very volatile freight rates and major geopolitical challenges, the outlook is subject to a high degree of uncertainty.

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CONTENTS

3	1.	MAIN VALUE DRIVERS OF THE CONTAINER SHIPPING SECTOR
3	1.1.	General economic conditions
3	1.2.	Sector-specific conditions

1. 2. STRUCTURE OF HAPAG-LLOYD'S VESSEL AND CONTAINER FLEET
2. 3. GROUP EARNINGS POSITION

6	3.1.	Group earnings
9	3.2.	Liner Shipping earnings
13	3.3.	Terminal & Infrastructure earnings

1. 4. GROUP NET ASSET POSITION
2. 5. GROUP FINANCIAL POSITION

1. 5.1. Developments in cash and cash equivalents
2. 5.2. Financial solidity

1. 6. SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE

1. 7. OUTLOOK

1. IMPORTANT NOTICE
2. DISCLAIMER
3. IMPRINT

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1. MAIN VALUE DRIVERS OF THE CONTAINER SHIPPING SECTOR

1.1. GENERAL ECONOMIC CONDITIONS

The pace at which the global economy grows and, by extension, at which global trade develops is a significant factor that influences demand for container shipping services and terminal services.

According to the International Monetary Fund (IMF), the global economy recorded robust growth and a further decline in inflation at the start of the year despite the numerous geopolitical crises (IMF World Economic Outlook, April 2024).

The economy of the People's Republic of China grew by 5.3% year-on-year in the first three months of 2024, despite the negative impact of the real estate crisis. Exports of goods rose by 4.9%, while imports increased by 5% compared to the first quarter of 2023 (National Bureau of Statistics of China, April 2024). The main recipients of Chinese goods are the USA and Europe. The US economy grew by 3.0% in the first quarter of 2024 compared to the first quarter of 2023. Growth was driven by investments and rising government spending. In the first quarter of 2024, imports of goods rose by 1.0% compared to the same period of the previous year, while exports fell by 1.2% (U.S. Department of Commerce, May 2024). The EU economy grew by 0.5% in the first quarter of 2024 compared to Q1 2023. Exports of goods from the EU increased slightly

by 0.5% in the first two months of 2024 compared to the prior year period. In contrast, imports of goods fell significantly by 14.2% (Eurostat, April 2024).

Due to the tensions in the Middle East, crude oil prices rose by 13.6% in the first quarter of 2024 to USD 87.48 per barrel of Brent crude oil as at 31 March 2024 compared to USD 77.04 per barrel at the end of December 2023 (S&P Global Commodity Insights, Bloomberg).

1.2. SECTOR-SPECIFIC CONDITIONS

The Liner Shipping and Terminal & Infrastructure segments are both fundamentally affected by the same sector-specific developments, in particular international trade.

Global container transport volumes recovered significantly by 12.0% year-on-year in the period from January to February 2024 (CTS, April 2024). This development is due in particular to a weak prior year basis, which was due to the reduction of excessively high inventories world-wide. Almost all major trades recorded significant growth. The transport volume in the Far East to North America trade rose by 25.4% and from the Far East to Europe by 11.5%.

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Monthly global container transport volumes (in million TEU)

16

15

14

13

2024

2023

12

11

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Source: CTS, April 2024

The Shanghai Containerized Freight Index (SCFI), which tracks spot freight rate trends on Shanghai's most important trade routes, was significantly higher in the first quarter of 2024 than in the same quarter of the previous year. Against the backdrop of a growing number of attacks on ships in the Red Sea by the Houthi rebels, many container shipping companies began re-routing their ships around the Cape of Good Hope from mid-December 2023. The longer journey times lead to a shortage of shipping capacity and rising transportation costs. As a result, there has been a sharp rise in spot freight rates since the end of 2023. The SCFI was quoted at USD 1.994/TEU at the end of March 2024 (previous year: USD 863/TEU).

Development of the Shanghai Containerized Freight Index (in USD/TEU)

3,500

3,000

2,500				2024
			2023
2,000

1,500

1,000

500

0

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Source: Shanghai Shipping Exchange, April 2024

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At the end of March 2024, the proportion of laid-up, i.e. idle, ships was 0.25 million TEU or 0.9% of the global fleet, down on the previous year's level (31 March 2023: 0.60 million TEU; 2.3%, Alphaliner Weekly, March 2023). The reason for this is the increased demand for ship capacity due to the longer routes around the Cape of Good Hope.

According to MDS Transmodal, a total of 108 container ships with a transport capacity of around

0.8 million TEU were put into service in the first three months of 2024 (prior year period: 60 ships, transport capacity: around 0.4 million TEU). According to Clarksons, only 14 small container ships with a total of 23 TTEU were scrapped in the same period (previous year: 19 ships, 31 TTEU).

In the first three months of 2024, orders were placed for the construction of 26 container ships with a total transport capacity of 0.2 million TEU, less than the 0.4 million TEU in the prior year period (Clarksons Research, April 2024).

According to MDS Transmodal, the tonnage of container ships on order fell to around 6.1 million TEU at the end of March 2024, compared to around 7.1 million TEU at the end of March 2023. Accordingly, the ratio of order backlog to current global container fleet capacity remained at a high level of 21.4% (as at 31 March 2023: 27.6%), albeit well below the peak of around 61% reached in 2007.

Low sulphur bunker was quoted at USD 588/t on 31 March 2024, 12.4% higher than the 2023 year-end price of USD 523/t (MFO 0.5%, FOB Rotterdam).

2. STRUCTURE OF HAPAG-LLOYD'S VESSEL AND CONTAINER FLEET

Fleet and capacity development

As at 31 March 2024, Hapag-Lloyd's fleet consisted of a total of 280 ships (31 March 2023:

250 ships). All of the vessels are certified in accordance with the ISM (International Safety Management) Code and have a valid ISSC (ISPS) certificate. The majority of the vessels are also certified as per ISO 9001 (quality management) and ISO 14001 (environmental management).

The TEU capacity of the Hapag-Lloyd fleet as at 31 March 2024 amounted to 2,066 TTEU, an increase of 13.7% compared with 31 March 2023 (1,818 TTEU). Based on TEU capacity, 60% of the fleet was owned as at 31 March 2024 (31 March 2023: 62%). In the first quarter of 2024, three newbuilds (two vessels owned and one as a long-term charter) with a total capacity of 50 TTEU were put into service.

As at 31 March 2024, Hapag-Lloyd's order book comprised eight newbuilds of 23,664 TEU and one newbuild of 13,288 TEU. The total capacity of the newbuilds is 202.6 TTEU. The delivery of the vessels is planned for the years 2024 to 2025.

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The average age of Hapag-Lloyd's entire fleet as at 31 March 2024 (capacity-weighted) was

1. years (31 March 2023: 11.2 years) and was therefore slightly above the average level of the ten largest container liner shipping companies worldwide of 10.8 years (31 March 2023:

1. years). At 7.4 TTEU (31 March 2023: 7.3 TTEU), the average ship size of the Hapag-Lloyd Group's fleet was around 8% above the comparable average of 6.8 TTEU for the world's ten largest container liner shipping companies (31 March 2023: 6.5 TTEU; source: MDS Transmodal) and around 64% above the average ship size of the global fleet of 4.5 TTEU (31 March 2023:

1. TTEU; source: MDS Transmodal).

As at 31 March 2024, Hapag-Lloyd has 1.8 million (31 March 2023: 1.7 million) owned and leased containers at its disposal to transport cargo with a capacity of 3.1 million TEU (31 March 2023:

2.9 million TEU). The capacity-weighted share of containers owned as at 31 March 2024 was approximately 60% (31 March 2023: approximately 58%). In the first three months of 2024, new construction orders were placed for 1,600 special purpose containers with a capacity of 3,200 TEU and 53,750 general purpose containers with a capacity of 95,000 TEU.

Hapag-Lloyd's service network comprised 114 services as at 31 March 2024 (31 March 2023: 119 services).

Structure of Hapag-Lloyd's vessel and container fleets

	31.3.2024	31.12.2023	31.3.2023
Number of vessels	280	266	250
thereof
Own vessels ¹	124	123	122
Chartered vessels	156	143	128
Aggregate capacity of vessels (TTEU)	2,066	1,972	1,818
Aggregate container capacity (TTEU)	3,065	2,975	2,892
Number of services	114	113	119

1 Including lease agreements with purchase option/obligation at maturity

3. GROUP EARNINGS POSITION

3.1. GROUP EARNINGS

The first quarter of the 2024 financial year continued to be characterised by a significantly lower average freight rate compared to the same period of the previous year, which results in particular from the normalisation of supply chains. In contrast, the transport volume increased, driven primarily by an upturn in demand. As a result of these developments, the Hapag-Lloyd Group generated a lower Group result in the first quarter of 2024 compared to the same period of the previous year.

With an amount of USD 941.5 million, consolidated earnings before interest, taxes, depreciation, and amortisation (EBITDA) were significantly lower in the first quarter of the 2024 financial year than the previous year's figure of USD 2,378.7 million. The Hapag-Lloyd Group's earnings before interest and taxes (EBIT) also fell significantly to USD 395.7 million (prior year period: USD 1,874.0 mil- lion). The Group result totalled USD 324.6 million (prior year period: USD 2.031,0 million).

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Consolidated income statement

	Q1 2024			QoQ	YoY
million USD	Q4 2023	Q1 2023	Change	change
Revenue	4,623.4	4,079.2	6,028.1	13.3%	-23.3%
Transport and terminal expenses	-3,299.6	-3,268.4	-3,259.4	1.0%	1.2%
Personnel expenses	-260.3	-306.6	-259.0	-15.1%	0.5%
Depreciation, amortisation
and impairment	-545.8	-556.8	-504.7	-2.0%	8.1%
Other operating result	-115.7	-192.4	-147.6	-39.9%	-21.7%
Operating result	402.0	-245.0	1,857.3	n.m.	-78.4%
Share of profit of
equity-accounted investees	-6.3	-6.1	16.7	2.8%	n.m.
Earnings before interest and tax
(EBIT)	395.7	-251.1	1,874.0	n.m.	-78.9%
Interest result and other
financial result	40.4	53.9	162.8	-25.1%	-75.2%
Other financial items	-11.5	-2.9	62.5	291.8%	n.m.
Income taxes	-100.0	-34.1	-68.3	193.0%	46.5%
Group profit/loss	324.6	-234.3	2,031.0	n.m.	-84.0%
Basic/diluted earnings
per share (in USD)	1.82	-1.36	11.54	n.m.	-84.2%
EBITDA	941.5	305.7	2,378.7	208.0%	-60.4%
EBITDA margin (%)	20.4	7.5	39.5	12.9 ppt	-19.1 ppt
EBIT	395.7	-251.1	1,874.0	n.m.	-78.9%
EBIT margin (%)	8.6	-6.2	31.1	14.7 ppt	-22.5 ppt

Revenue in the Group

In the first quarter of the 2024 financial year, the Hapag-Lloyd Group's revenue fell by USD 1,404.8 million to USD 4,623.4 million (prior year period: USD 6,028.1 million), which corresponds to a decrease of 23.3%. This development was mainly due to the lower average freight rates. This was offset by a 6.8% increase in transport volume compared with the prior year period.

Operating expenses in the Group

Transport and terminal expenses increased by USD 40.2 million to USD 3,299.6 million in the first quarter of the 2024 financial year (prior year period: USD 3.259,4 million). This corresponds to an increase of 1.2%.

Personnel expenses increased by USD 1.3 million to USD 260.3 million in the first quarter of the 2024 financial year (prior year period: USD 259.0 million). Lower provisions for bonus payments were more than offset by increased costs for employees taken over as a result of the acquisition of SAAM Terminals in the third quarter of last year.

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In the first quarter of the 2024 financial year, depreciation and amortisation increased by USD 41.1 million to USD 545.8 million (prior year period: USD 504.7 million). The increase was mainly due to higher depreciation and amortisation for new ships and containers as well as the addition of depreciation and amortisation from the acquisition of SAAM Terminals. The scheduled amortisation of right-of-use assets (primarily ships and containers) led to depreciation and amortisation of USD 280.1 million (prior year period: USD 285.3 million).

Other operating result

The other operating result of USD -115.7 million (prior year period: USD -147.6 million) comprised the net balance of other operating income and expenses. Other operating expenses totalled USD 139.0 million for the first quarter of the 2024 financial year (prior year period: expenses

of USD 170.2 million). This mainly included IT and communication expenses (USD 69.0 million; prior year period: USD 71.2 million), office and administrative expenses (USD 16.7 million; prior year period: USD 11.5 million), expenses for training and other personnel expenses (USD 13.9 million; prior year period: USD 9.4 million) and fees for consultancy and other professional services (USD 13.5 million; prior year period: USD 24.6 million).

Interest result and other financial result

In the first quarter of the 2024 financial year, the interest result and other financial result amounted to USD 28.9 million (prior year period: USD 225.3 million). The decrease in interest income and other financial income to USD 113.6 million (prior year period: USD 226.5 million) was mainly due to the lower volume of money market transactions. Money market transactions yielded income totalling USD 84.6 million (prior year period: USD 225.5 million). Interest income from the securities of the special fund "HLAG Performance Express" totalled USD 17.7 million (prior year period: USD 0.0 million).

Other financial items

In the first quarter of the 2024 financial year, the result for other financial items amounted to USD -11.5 million (prior year period: USD 62.5 million). The main reason for this development was the valuation effect from the derivatives in connection with the dividend distributions

in euros for the financial years 2022 and 2023.

Income taxes

The increase in income taxes in the first quarter of the 2024 financial year by USD 31.8 million to USD 100.0 million (prior year period: USD 68.3 million) is mainly due to the development of deferred taxes in the Hapag-Lloyd Group. While current income taxes fell by USD 53.9 million to USD 14.0 million (prior year period: USD 67.8 million), there was a significant increase in expenses for deferred taxes to USD 86.1 million (prior year period: USD 0.4 million). The increase is mainly the result of the decrease in deferred tax assets due to the reduction in temporary prior- year differences in the area of exchange rate effects on investments totalling USD 34.3 million (prior year period: USD 0.0 million) and from the recognition of deferred tax liabilities on unrealised exchange rate effects of the first quarter of 2024 on investments in the amount of USD 32.4 million (period year period: USD 0.0 million) as well as on valuation differences of the special fund in the amount of USD 25.1 million (prior year period: USD 0.0 million).

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