UASC posts biggest operating loss of any major container line

UASC posts biggest operating loss of any major container line

United Arab Shipping Company (UASC) has posted its financial figures publically for the first time, revealing a -9% operating loss – the greatest of any major container carrier, according to analysis by Alphaliner.

The consultancy said the loss could have big implications for UASC’s merger with publically listed German carrier Hapag-Lloyd, which was agreed in July.

The Kuwait-based container line posted an operating loss of -$299m and a net loss of -$384m in 2015. Revenue for the year was $3.32bn.

UASC’s operating losses have continued this year, and have been surpassed only by the container divisions of struggling Korean lines Hanjin Shipping and Hyundai Merchant Marine, Alphaliner said in its newsletter on Tuesday.

The Korean lines reported operating losses of -9.8% and -18.5% respectively during the first six months of 2016, while UASC posted a loss of -8.6%.

Alphaliner attributed UASC’s persistent losses to its rapid fleet expansion and newbuilding programme for ultra-large container vessels, which since 2013 has comprised six 19,870-teu and eleven 14,993-teu boxships. Two of the latter newbuildings are awaiting delivery.

“The expansion has come at a heavy price for UASC. While the total value of ships owned by the company has increased by $1.72bn since the end of 2014, the carrier’s net debt has increased by some $1.81bn. Over the same period, UASC’s total equity has shrunk from $2.46bn to only $1.89bn due to the heavy losses incurred despite the addition of these new ‘eco’ ships,” Alphaliner said.

The losses also cast a shadow over UASC’s merger with Hapag-Lloyd, which the consultancy called “lop-sided”.

UASC’s contribution to the merged company was valued between 28% and 49% of the combined entity, based on the two companies’ relative net book values at the end of 2015. The broad range is dependent on whether goodwill and other intangible assets were taken into account, Alphaliner noted.

“The final relative valuation agreed by UASC leads its shareholders to obtain only 28% of the shares of the combined entity, at the very low end of the valuation range. They would also not enjoy any benefits from the potential synergy savings from the merger,” the consultancy said.

“Based on Hapag-Lloyd’s current market capitalisation of €1.92bn [$2.16bn], the total value of UASC’s shares would be worth only €745m ($845m), or a massive 55% discount to its current book value.”

Holly Birkett

Holly is Splash's Online Editor and correspondent for the UK and Mediterranean. She has been a maritime journalist since 2010, and has written for and edited several trade publications. She is currently studying for membership of the Institute of Chartered Shipbrokers. In 2013, Holly won the Seahorse Club's Social Media Journalist of the Year award. She is currently based in London.

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2 Comments

  1. Avatar
    Brian R. McCaughrin
    August 24, 2016 at 3:38 pm

    Hello Everyone:

    My Company, McCaughrin Maritime Marine Systems., Inc., (MMMSI-MMMU), http://www.mccaughrinmaritime.com/ Have been in the Container Market off and On for 19 years on Global front, Now using Third, (3rd) Party Logistics Operators, in South Anerica with their owns ships, and containers, that are about same size of McCaughrin’s, in trying to Save us money, and do it better then before. But Seeing Hapag-Lloyd, & this Merge with UASC, Is not only Top Heavy, But we are still in this Global Economical Depression, That has not over by Land slide I, am looking at 2021 at best. Hapag Lloyd would be wise to back off and sit this one out at least till then. For McCaughrin’s, We Slashed 75% of our market base to Stay in Business, Globally back in 2009, Where We lost Five, ($5) Million per month, x $15M per Quarter, For Us that death..We came close to bankruptcy five, (5) times. Now we are in bulk cargoes..Safe and steady as she goes..Too many players right now and Their needs to be few big players to go by the way side. Now weather that be Hanjin, or Hyundai, or someone else bigger, Its nothing personal, and No Building for Five, (5) Years. Let the Market, catch up with itself, because right now, You are destroying What out their, With too many big ships, that are half empty sailing to no where finding half cargoes, and Mergers are too little, too late to happen now. Hapag-Lloyd, walk away from this one.

  2. Sam Chambers
    Sam Chambers
    August 25, 2016 at 4:27 am

    5 years more pain is essentially what OOCL’s veteran chairman CC Tung also said a couple of weeks back