Hapag-Lloyd CEO: reduction in operational costs needed

Hapag-Lloyd CEO says net losses for shipping line in 2014 will be reversed by 2016
Hapag-Lloyd failed to reduce operational costs quick enough in 2014 amid falling freight rates
Hapag-Lloyd failed to reduce operational costs quick enough in 2014 amid falling freight rates

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Hapag-Lloyd CEO Rolf Habben Jansen has said that the German shipping line needs to bring down its operational costs after its 2014 annual report showed a net deficit of US $656-million and an operating deficit of US $123-million.

Even though, the net loss can primarily be explained by the takeover of container activities in South American CSAV, and an impairment on older vessels in the fleet, Jansen says the line failed to reduce operating costs fast enough when freight rates fell.

“One of our challenges in 2014 was that we were unable to reduce our unit costs quickly enough. We will take a big step in this regard this year, and unit costs this year will decline faster than the freight rates,” he told ShippingWatch.com. “I think it's fair to say that we should have done better in this area.”

Transport costs per teu fell by 2.3% for Hapag-Lloyd while their freight rate dropped by 3.2%. In addition to making its internal operations more efficient, Hapag-Lloyd’s CEO also said that synergies in relation to the takeover of CSAV are estimated to produce US $300-million in savings when the integration is complete.

Jansen expressed hope for a significantly better result in 2015, and while he declined to speculate on whether the ocean carrier would break even this year, he said the losses would be arrested by 2016.

Hapag-Lloyd is the largest shipping line in Germany and was formed in 1970 as a merger of two 19th century companies, Hapag, which dated from 1847, and Norddeutscher Lloyd (NDL) or North German Lloyd (NGL), which was formed in 1856.

Hapag-Lloyd was acquired in 1998 by TUI AG (Hanover) and became its fully owned subsidiary in 2002. In 2009, TUI sold a majority stake to a group of private investors and the City of Hamburg, the so-called Albert Ballin Consortium.

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