Global economic development weighs on HHLA’s result
Hamburger Hafen und Logistik AG (HHLA) recorded a drop in revenue and earnings in the first half of 2023. The ongoing war in Ukraine, geopolitical tension, inflation and rising interest rates put pressure on consumer and industrial demand and are continuing to hinder the global economic recovery in the aftermath of the pandemic.
HHLA’s business performance in the first half of 2023 reflected the sentiment in the market. The significant drop in volumes due to the economic situation that was evident in the first quarter of 2023 has continued in the second quarter of the current year. In addition, shorter dwell times for containers handled at the Hamburg container terminals compared to the previous year resulted in reduced storage fees. Revenue in the HHLA Group fell by 6.7 percent to € 727.1 million in the first six months of 2023 (previous year: € 779.5 million). The Group operating result (EBIT) decreased by 50.3 percent to € 50.4 million (previous year: € 101.3 million). The EBIT margin amounted to 6.9 percent (previous year: 13.0 percent). Profit after tax and non-controlling interests came to € 8.2 million (previous year: € 43.9 million).
– The global economic slowdown is also impacting the business of HHLA as a European logistics company. This means that 2023 will remain challenging, as was to be expected. In a quest to bolster the company’s future viability and competitiveness, HHLA is stepping up its cost discipline once again and focusing all the more on developing sustainable, innovative and profitable logistics solutions. In the first six months, we continued to invest in state-of-the-art technology, expanded our European rail network and forged ahead with a pilot project on autonomous driving in Tallinn – said Angela Titzrath, HHLA’s Chief Executive Officer.
Port Logistics subgroup: performance January to June 2023
The listed Port Logistics subgroup recorded a decrease of 7.1 percent in revenue to € 707.7 million in the first six months (previous year: € 761.9 million). The operating result (EBIT) dropped by 55.8 percent to € 40.5 million (previous year: € 91.7 million). The EBIT margin came in at 5.7 percent, down by 6.3 percentage points in a year-on-year comparison. Profit after tax and non-controlling interests decreased by 93.0 percent to € 2.7 million (previous year: € 38.4 million). Earnings per share thus amounted to € 0.04 (previous year: € 0.53).
In the Container segment, container throughput at HHLA’s container terminals decreased year-on-year by 14.6 percent to 2,876 thousand standard containers (TEU) (previous year: 3,368 thousand TEU). At 2,763 thousand TEU, throughput volume at the Hamburg container terminals was down 12.7 percent (previous year: 3,167 thousand TEU). The main driver of this development was the strong decline in volumes of the Far East shipping region. The positive momentum from North American freight volumes was unable to compensate for this. Feeder traffic volumes were also strongly down on the previous year. In addition to the strong reduction in Swedish and Polish traffic, volumes from Russia were also absent due to the sanctions. The proportion of seaborne handling by feeders was down to 18.4 percent (previous year: 20.9 percent).
Throughput volume at the international container terminals fell by 43.9 percent year-on-year to 113 thousand TEU (previous year: 202 thousand TEU). The strong decline in cargo volumes was largely attributable to the Odessa terminal (CTO) after seaborne handling there was suspended by the authorities following the Russian invasion. There has also been an absence of extra calls at the TK Estonia container terminal as an alternative to Russian ports in 2023. The strong increase in throughput volumes at the multi-function terminal PLT Italy was unable to fully offset this shortfall.
Revenue in the Container segment fell by 19.7 percent in the reporting period to € 352.2 million (previous year: € 438.8 million). In addition to the strong decrease in volumes, this was mainly due to shorter dwell times for containers handled at the Hamburg container terminals compared to the previous year and the resulting drop in storage fees. Against this background, the operating result (EBIT) fell by 76.2 percent to € 19.1 million (previous year: € 80.2 million). The EBIT margin dropped by 12.9 percentage points to 5.4 percent (previous year: 18.3 percent).
In the Intermodal segment, container transport decreased by a total of 3.7 percent to 819 thousand TEU (previous year: 851 thousand TEU). Rail transport fell year-on-year by 2.5 percent to 691 thousand TEU (previous year: 709 thousand TEU). All the main routes were affected by the decrease, with the northern German seaports and Polish traffic hit particularly hard. There was a decrease in road transport of 9.9 percent to 128 thousand TEU (previous year: 142 thousand TEU).
With a marked year-on-year increase of 11.1 percent to € 313.0 million (previous year: € 281.6 million), the development of revenue contrasted sharply with that of transport volumes. This was due to the rise in transport revenue in the previous year, which was adjusted to the increased costs for the purchase of services, in particular energy costs, at a later point in time. Mainly as a result of the decrease in transport volumes, the operating result (EBIT) fell to € 41.1 million (previous year: € 42.8 million), a drop of 3.9 percent. The EBIT margin fell by 2.1 percentage points to 13.1 percent (previous year: 15.2 percent).
Real Estate subgroup: performance January to June 2023
HHLA’s properties in the Speicherstadt historical warehouse district and the fish market area reported a positive trend in the first half of the current financial year with almost full occupancy in both areas.
Revenue rose significantly by 8.6 percent in the reporting period to € 23.4 million (previous year: € 21.5 million). In addition to increased income from revenue-based rent agreements, this growth was largely due to rising rental income from newly developed properties in the Speicherstadt historical warehouse district. A planned temporary vacancy for facade renovation to increase the energy efficiency of a property, as well as increased maintenance expenses and depreciation following completed project development, were more than offset by the growth in revenue. As a result, the cumulative operating result (EBIT) increased slightly by 2.2 percent to € 9.7 million in the reporting period (previous year: € 9.4 million).
Outlook for 2023
Within the Port Logistics and Real Estate subgroups, the key economic indicators for the first half of 2023 and HHLA’s actual economic performance were largely in line with the performance forecast in the combined management report for 2022, which, at the time of preparing the annual report, was subject to great uncertainty due to the geopolitical tensions and their effects on inflation as well as economic sanction measures. In the course of the current financial year, the post-pandemic economic recovery in the main markets of the Port Logistics subgroup has been weaker than forecast by leading economic institutes at the beginning of the year. Consequently, HHLA issued an ad hoc disclosure on 27 July 2023 announcing the downgrading of its guidance for the financial year 2023 compared with the expectations communicated in the quarterly statement January to March 2023.
Against the background of this development, a significant year-on-year decrease in container throughput is now expected for the Port Logistics subgroup (previously: slight increase) as well as container transport on a par with 2022 (previously: moderate year-on-year increase). A significant decrease in revenue is now expected (previously: slight increase). This development is the result of a strong volume-related decrease (previously: moderate decrease) in revenue of the Container segment, which cannot be offset by a significant increase (previously: strong increase) in revenue of the Intermodal segment. Expectations for the operating result (EBIT) have been adjusted accordingly and now range from € 100 to 120 million (previously: € 145 to 175 million). Within this range, a strong year-on-year decrease is expected for the Container segment and a slight year-on-year decrease (previously: moderate increase) for the Intermodal segment in their respective segment EBIT results.
For the Real Estate subgroup, revenue is still expected to remain at the prior-year level with a significant decline in the operating result (EBIT).
Overall, a significant decrease in revenue is forecast at Group level (previously: moderate increase). Against this background of changed expectations, the operating result (EBIT) will be between € 115 and 135 million (previously: between € 160 million and € 190 million).
Capital expenditure at Group level is still expected to be in the range of € 250 million to € 300 million. With investments of € 220 million to € 270 million, the Port Logistics subgroup will account for the majority of this expenditure. In the Container segment, investments will focus on efficiency gains for the Port of Hamburg and the expansion of foreign terminals, and in the Intermodal segment on the expansion of the Group’s own transport and handling capacities.
Given the aforementioned volatile conditions, the outlook remains fraught with significant uncertainties.