Investors have dealt savagely with Hapag-Lloyd shares after the German line announced a profit downgrade on Friday with analysts warning of imminent further profit warnings from other lines.
Hapag-Lloyd shares closed trading at EUR29.68 yesterday, a drop of 17.8% from the price early Friday when the downgrade was released. Shares today are currently trading down further at EUR29.48, which represents a decrease in market capitalisation for the line of around EUR1.18bn ($1.38bn).
Hapag-Lloyd said the adjustment to its full year outlook was due to “unexpectedly significant and continuing increase in the operational costs since the beginning of the year, especially with regard to fuel related costs and charter rates combined with a slower than expected recovery of freight rates.”
The company is now forecasting an EBIT from EUR200m to EUR450m and an EBITDA between EUR900m and EUR1,150m.
With all boxlines struggling, further profit downgrades have been forecast for many of Hapag-Lloyd’s rivals.
On LinkedIn, regular Splash contributor Lars Jensen, a partner at SeaIntelligence Consulting, wrote: “Hapag-Lloyd was simply the first to do it, but I would be highly surprised if this more negative view on 2018 profitability is not fairly symptomatic for most other main carriers as well. Hapag was merely the first to put it into writing.”
Andy Lane, a partner at CTI Consulting, concurred, telling Splash other liners will likely follow suit. “Hapag faces the same headwinds as all of its peers, revenues under pressure and higher than expected – budgeted – costs, mainly due to fuel,” Lane said, adding: “There will be variation in terms of how big corrections are, but it will be a general trend. Anyone bucking the trend will have clearly differentiated their business model recently, but the industry is not that dynamic.”
And what will happen when all these recently ordered ULCV start hit the water?
The oil price is the elephant in the room, here. Assuming that everyone is more or less slow steaming now, there is not much room to cut the fuel bill further, and there is every likelihood that the oil price is going to continue to rise.