By Dominic Chopping

Hapag-Lloyd expects earnings to fall sharply this year as the current situation in the Red Sea complicates an already challenging economic and political environment.

The container-shipping industry is suffering from a glut of vessels and not enough cargo to move, which has sent freight rates tumbling from their pandemic-fueled highs.

Hapag-Lloyd has been responding to the rate pressure by intensifying cost-cutting, seeking savings from its procurement activities while adjusting its network.

Hostilities in the Middle East have provided temporary support to rates though, as attacks on merchant vessels in the Red Sea has forced shippers to divert their vessels by thousands of miles to avoid the area, constraining capacity and lifting rates.

Although the timing of any resolution to the hostilities is unclear, A.P. Moeller-Maersk recently cautioned that eventually the oversupply in shipping capacity will return and lead to price pressure.

Hapag-Lloyd said Thursday that the average freight rate fell by about 48% in 2023, while transport volumes edged 0.5% higher.

The German shipping company expects to report earnings before interest, tax, depreciation and amortization of between 1 billion euros and 3 billion euros ($1.1 billion to $3.3 billion) in 2024 with earnings before interest and tax of between a EUR1 billion loss and EUR1 billion profit.

It reported Ebitda of EUR4.46 billion and EBIT of EUR2.53 billion in 2023.

However, it cautioned that the volatile development of freight rates and geopolitical challenges mean the guidance is subject to considerable uncertainty.

"We will be focusing even more intensively on quality and sustainability," said Chief Executive Rolf Habben Jansen.

"We will continue to grow in our new Terminal & Infrastructure business...and realize improvements in terms of cost efficiency and productivity."

The company posted a net profit of EUR2.95 billion in 2023 from EUR17.04 billion in the previous year, as revenue dropped 48%. It said 2023 was characterized by initially weak demand and significantly lower freight rates for container transport, resulting in negative effects on the revenue and earnings trend.

It proposed a full-year dividend of EUR9.25, down from EUR63 in the previous year.

In a separate announcement Thursday, the company said its supervisory board has approved an early renewal of Jansen's contract as CEO, extending it to March 31, 2029. It had been due to expire in 2027.

In addition, Donya-Florence Amer's contract as chief information officer and chief human resources officer has been extended for another five years, to Jan. 31, 2030.

"Rolf Habben Jansen has been doing an excellent job for Hapag-Lloyd for almost a decade," said Michael Behrendt, chairman of the supervisory board. "By renewing the appointment of Rolf Habben Jansen, the supervisory board is focusing on continuity."

Write to Dominic Chopping at

(END) Dow Jones Newswires

03-14-24 0352ET