Copyright 2007, Traffic World, Inc.
Hapag-Lloyd Container Line, the world''s fifth-largest ocean container carrier, saw earnings plunge to a loss of $150 million in 2006 from a profit of $428 million the previous year on lower freight rates and higher fuel and inland transportation costs.
But the German carrier confidently forecast it would rebound in the second half of this year and could deliver a profit as high as $665 million in 2008.
The results, however, were overshadowed by renewed speculation over a stock market flotation of Hapag-Lloyd after its parent company, TUI, Europe''s biggest tour operator, announced it is acquiring a British rival, First Choice, and setting up a new merged U.K.-based tourism company.
Chairman Michael Frenzel of TUI so far has resisted pressure from investors and some stockholders to split the tourism and shipping divisions and make an initial public offering for Hapag-Lloyd.
Hapag-Lloyd blamed the $151.6-million loss on lower ocean freight rates and "markedly" increased costs for fuel and landside logistics and higher container ship charter rates.
A profit of $10.6 million in the cruise business narrowed TUI''s overall loss to $141 million against a profit of $428 million in 2005.
The results were also impacted by a charge of $151.6 million for integrating CP Ships, a Canadian rival acquired for $2 billion.
Revenues soared 63 percent to $8.4 billion from $5 billion the previous year, most of which resulted from the first-time inclusion of CP Ships.
Traffic rose on a comparable basis to 5 million TEUs from 4.8 million TEUs in 2005 while average freight rates slid 2.7 percent to $1,430 per TEU from $1,469 per TEU.
The company said trading conditions will remain tough through the first half of 2007 but it expects synergies from the integration of CP Ships will produce a "significantly positive" contribution to full year results "even in the event of freight rates remaining low." It forecasts traffic to grow by between 8 percent and 9 percent in the current year, lifting revenues to $9.3 billion.
Hapag-Lloyd said it will achieve targeted annual savings of $293 million from integrating CP Ships in 2008 when another 8 to 9 percent increase in traffic and firmer freight rates will deliver an operating profit of between $532 million and $665 million.
Overall, TUI reported a 2006 loss of $1.13 billion against a profit of $660 million in 2005 on a one-time charge of $1 billion.