Slide 1: Investor Presentation – Half Year Results 2016
Investor Presentation – Half Year Results 2016 10 August 2016 1
Slide 2: Disclaimer
Disclaimer Forward-looking Statements This presentation contains forward-looking statements that involve a number of risks and uncertainties. Such statements are based on a number of assumptions, estimates, projections or plans that are inherently subject to significant risks, as well as uncertainti
Slide 3: Opening remarks
Opening remarks Introduction We delivered on our strategic objectives but H1 results are disappointing Sector update Rates declined to record lows in Q2 but slight recovery expected in H2 HL financials Our cost savings were not sufficient to compensate the full drop in rates UASC deal In thi
Slide 4: Way Forward Consolidation THE Alliance
Introduction Sector update HL financials Strategic highlights: UASC deal We delivered on our strategic objectives… Next steps Way Forward Consolidation Cuatro synergies from the merger with CSAV Business Combination Agreement signed are being realized on schedule between Hapag-Lloyd and UASC Octave
Slide 5: ...but our half year results are disappointing
Introduction Sector update HL financials Financial highlights: UASC deal ...but our half year results are disappointing Next steps Transport volume Freight rate Transport expenses -0.4%1) -19.6% -15.5% H1 2016: 3.7 TEU m H1 2016: 1,042 USD/TEU H1 2016: 962 USD/TEU EBITDA EBIT Group profit / loss USD
Slide 6: Difficult market – Freight rates declined further in Q2 to record low levels
Introduction Sector update HL financials Difficult market – Freight rates declined further in Q2 UASC deal to record low levels due to intense competition Next steps China Containerized Freight Index Comments CCFI1) Muted global trade growth based on increased economic risks affected demand for gl
Slide 7: Signs supporting a possible recovery over the second half of 2016 remain
Introduction Sector update HL financials However, signs supporting a possible recovery over UASC deal the second half of 2016 remain Next steps Orders for newbuilds normalized… …and ship deliveries in H1 slowed down TEU m Share of world fleet Deliveries per quarter [TTEU] 8 56% -49.0% 7 47% 6 35% 57
Slide 8: We will do whatever we can to get freight rates back to sustainable levels
Introduction Sector update HL financials In the second half, we will do whatever we can to get UASC deal freight rates back to more sustainable levels Next steps Shanghai – Europe (SCFI) Shanghai – USA (SCFI) 2,500 6,000 USWC (USD/FEU) USEC (USD/FEU) HL Transpacific* NEurope (USD/TEU) Mediter. (USD/
Slide 9: Industry is changing – Alliances reshaped and leading players consolidating
Introduction Sector update HL financials Going forward the industry is changing – Alliances are UASC deal being reshaped and leading players are consolidating Next steps The industry is changing Carrier capacity [TEU m] We had communicated the following objectives for 2016: 1. Secure our position in
Slide 10: Disappointing rate development affects Hapag-Lloyd results in first half of 2016
Introduction Sector update HL financials Disappointing rate development affects our UASC deal Hapag-Lloyd results in the first half of 2016 Next steps Operational KPIs Q1 2016 Q2 2016 H1 2016 H1 2015 YoY ∆ / % Transport volume [TTEU] 1,811 1,892 3,703 3,719 -16 / -0.4% Freight rate [USD/TEU] 1,067 1
Slide 11: Volume stable despite weak growth – Freight rates decline to record low levels
Introduction Sector update HL financials Hapag-Lloyd volume stable despite weak growth – UASC deal Freight rates decline further to record low levels Next steps Transport volume [TTEU] Freight rate [USD/TEU] FY 2014 2015 2016 7,401 1,500 H1 -19.6% 5,907 -0.4% 1,400 1,296 +29.4% 1,300 3,703 1,200 2,8
Slide 12: Transport volume stable around 3.7 TEU m in H1 2016
Introduction Sector update HL financials UASC deal Transport volume stable around 3.7 TEU m in H1 2016 Next steps Transport volume [TTEU] 2014 2015 H1 2016 Transport 3,703 5,907 7,401 volume +25.3% -0.4% +7.5% Q2 year-on-year [TTEU] comparison affected by Growth CSAV integration 5.5% 6.0% 5.9% 12.3%
Slide 13: Freight rate fell by 254 USD/TEU – Average bunker price decreased
Introduction Sector update HL financials Freight rate fell by 254 USD/TEU to 1,042 USD/TEU – UASC deal Our average bunker price decreased to 180 USD/t Next steps Freight rate1) [USD/TEU] vs. bunker price2) [USD/t] 2014 2015 H1 2016 Bunker cost / TEU as share 19.3% 10.1% 8.5% of freight rate [%] -254
Slide 14: Overall transport expenses reduced by USD 673 m thanks to synergies and efficiency programs
Introduction Sector update HL financials Overall transport expenses reduced by 673 USD m UASC deal thanks to synergies and efficiency programs Next steps Transport expenses per TEU [USD/TEU] Transport expenses [USD m] 4,234 -337 -69 -54 -239 26 3,561 5 Compete to Win -177 (-15.5%) 4 1,139 -90 Close
Slide 15: Bunker expenses significantly reduced from lower price and improved consumption
Introduction Sector update HL financials Bunker expenses significantly reduced benefitting UASC deal from lower price and improved consumption Next steps Bunker price [Rotterdam; USD/mt] Bunker consumption [mt/slot; mt/TEU; k mt] 3.812) 1,200 1,029 MFO Bunker cons. 922 per slot1) 3.393) 3.28 1,000 M
Slide 16: Equity at USD 5.3 bn and liquidity at USD 0.9 bn – Capital increase post Closing
Introduction Sector update HL financials Equity at USD 5.3 bn and liquidity at USD 0.9 bn – UASC deal Capital increase of USD 400 m post Closing Next steps Solid equity base [USD m] Stable financial debt [USD m] Net Debt 3,653 3,631 3,737 5,068 5,497 5,283 Cash 865 625 527 4,518 4,256 4,265 Financia
Slide 17: Positive free cash flow of USD 33 m in H1 2016
Introduction Sector update HL financials Positive free cash flow of USD 33 m in H1 2016 – UASC deal Net repayment in financial debt of USD 34 m Next steps Cash flow H1 2016 [USD m] Operating Investing Financing cash flow cash flow cash flow 226 -193 -131 1,048 864 423 7 294 -328 219 -229 337 36 -96
Slide 18: Hapag-Lloyd adjusted its outlook for 2016
Introduction Sector update HL financials Hapag-Lloyd adjusted its outlook for 2016 as freight rate UASC deal development is significantly weaker than expected Next steps Revised Outlook 2016 Comments Hapag-Lloyd adjusts its outlook for the financial Transport year 2016 as the development of the fr
Slide 19: Agreements on merger between Hapag-Lloyd and UASC signed
Introduction Sector update HL financials Agreements on merger between Hapag-Lloyd and UASC deal UASC signed, creating a top tier pure-play carrier Next steps Combined Entity at a glance1) Combination assures top 5 position globally Combined and on key trades against the backdrop of a Entity2) cons
Slide 20: Value creation: Synergies of at least USD 400 m expected
Introduction Sector update HL financials Value creation: Synergies of at least USD 400 m UASC deal expected mainly in network and overhead Next steps Synergy potential, full run-rate [USD m] ~400m Comments 1 Network − Optimized new vessel deployment / network − Efficient use of new fleet 2 Overhea
Slide 21: Modern fleet: No need to further invest in the next years
Introduction Sector update HL financials Modern fleet: No need to further invest in the next UASC deal years due to complimentary ship newbuildings Next steps Vessel delivery schedule 2015-2017 No further investments needed 2015 2016e 2017e VESSEL H1 H2 H1 H2 H1 In order to be competitive mid-term
Slide 22: Closing of the transaction expected by end of 2016
Introduction Sector update HL financials Closing of the transaction expected by end of 2016 UASC deal (subject to necessary approvals) Next steps Indicative timeline Signing Hapag-Lloyd Closing1) of BCA AGM Pre-signing DD Preparation Implementation of Cash Capital of legal legal reorganization Incre
Slide 23: In H2, focus on cost base, rate recovery and UASC integration
Introduction Sector update HL financials In H2, our focus is to further improve our cost base, to UASC deal support rate recovery and to prepare UASC integration Next steps Main focus in the second half (pre Closing) Financial policy going forward (post Closing) Based on improved fleet ownership I
Slide 24: Hapag-Lloyd
€€ Hapag-Lloyd
Slide 25: Industry stays highly correlated with global growth
The industry stays highly correlated with global growth – Short term outlook at lower end of mid term 3-5% range Container shipping volume and global GDP growth 2000 = Indexed to 100 2000 – 2008 2010 – 2014 2015 – 2017e GDP 2x 1x 1x multiplier 300 +3.7% +3.8% +2.2% 250 +1.4% +3.4% +3.1% +8.1% +3.1%
Slide 26: Supply demand gap expected to decrease in 2016
Supply demand gap expected to decrease in 2016 Supply / demand development Net capacity growth TEU m Net capacity growth 18 Demand Supply Postponements 16.2% Scrapping 16 2012 0.80 14 12 2013 0.90 10 9.3% 8.5% 8.0% 8 6.7% 6.1% 5.2% 5.5% 2014 1.00 6 4.8% 4.6% 4 4.3% 2.4% 3.8% 2 2.3% 1.4% 2.2% 2015 1.
Slide 27: Well-balanced exposure to global trade with strong position in attractive markets
Well-balanced exposure to global trade with strong position in attractive markets and niche businesses Well-balanced global exposure Attractive market presence Strong niche businesses Transpacific Atlantic Far East Atlantic Reefer 5 Services Other 24% 26% Globally Historical stronghold Consolidate
Slide 28: Imbalances: Hapag-Lloyd outperforms the market
Imbalances: Hapag-Lloyd outperforms the market Number of full non-dominant leg containers Container Steering per 10 full dominant leg containers1) Dominant 10 Special Know-How/ IT leg Trans- 7 Advantageous customer pacific 5 portfolio Cost-efficient management of Trans- 7 equipment flows atlantic 6
Slide 29: Long-standing and diversified customer base of blue chip customers
Long-standing and diversified customer base of blue chip customers and a diversified base of goods transported Highly diversified customer base1) Strong relationship with blue chip customers 100% 30% Top 50 Customers (∑ = 36%) 23% 11% 9% 8% 18% TOP 10 TOP TOP TOP TOP > 500 Total Hapag-Lloyd has a hi
Slide 30: As of 30 June our fleet remains competitive
As of 30 June our fleet remains competitive – We will not invest further at this time Vessel fleet as of 30 June 2016 Owned1) Chartered3) Current Current fleet orderbook Fleet age [% of total capacity] Capacity [TEU] 131,674 131,674 52,945 Average age 7.9 years4) >10,000 TEU Vessels 10 10 5 MODERN 4
Slide 31: Our Way Forward – Further improvements expected from existing initiatives
Our Way Forward – Further improvements expected from our existing initiatives Tangible results in 2015 and further upside Strategic projects to enhance profitable growth Compete to Win Improvement of Qualitatively Close the revenue quality enhanced Successful Cost Gap growth implementation Value-enh
Slide 32: OCTAVE project gained further traction in Q1 2016
OCTAVE 2 project gained further traction in Q1 2016 OCTAVE project Existing OCTAVE initiatives G6 Enhancement – create integrated alliance Procure- Procurement – reduction of expenses ment New OCTAVE initiatives Further cost Transshipment – optimize shipment flows savings and efficiency improvements
Slide 33: Improved sales organization and better sales processes
Improved sales organization and better sales processes with significant potential to improve revenues COMPETE TO WIN Project Sales organization Sales process Employee training Global rollout Clearer roles in areas Better opportunities 600 Sales Executives finished 670 Sales Support 2016 Better coord
Slide 34: Hapag-Lloyd with positive EBITDA of USD 219 m
Hapag-Lloyd with positive EBITDA of USD 219 m Income statement [USD m] Transport expenses [USD m] % H1 2016 H1 2015 % change H1 2016 H1 2015 change Revenue 4,212.2 5,213.4 -19% Expenses for raw materials 319.0 656.1 -51% and supplies Other operating 65.2 115.8 -44% Cost of purchased services 3,242.3
Slide 35: Hapag-Lloyd with equity ratio of 44.4%
Hapag-Lloyd with equity ratio of 44.4% Balance sheet [USD m] Financial position [USD m] 30.06.2016 31.12.2015 30.06.2015 30.06.2016 31.12.2015 30.06.2015 Assets Cash and cash equivalents 527.2. 625.0. 665.1. Non-current assets 10,320.0 10,363.7 10,285.3 Financial debt 4,264.6 4,256.3 4,420.2 Of whic
Slide 36: Hapag-Lloyd stock in SDAX since March 2016
Hapag-Lloyd stock in SDAX since March 2016 – Next change of redemption prices in October 2016 Share trading Bonds trading 120 110 100 103.6 102.5 80 100 100.4 60 6-Nov 6-Dec 6-Jan 6-Feb 6-Mar 6-Apr 6-May 6-Jun 6-Jul 90 Jan/14 May/14 Sep/14 Jan/15 May/15 Sep/15 Jan/16 May/16 Hapag-Lloyd Maersk Evergr
Slide 37: Henrik Schilling, Senior Director Investor Relations
Henrik Schilling Senior Director Investor Relations Tel +49 40 3001-2896 Fax +49 40 3001-72896 Henrik.Schilling@hlag.com https://www.hapag-lloyd.com/en/ir.html 37