Hapag-Lloyd expects significant revenue decline this year, as the current situation in the Red Sea complicates the already challenging economic and political climate. The container shipping industry is suffering from an oversupply of vessels and not enough cargo, causing freight rates to plummet from their pandemic-fueled highs. Hapag-Lloyd is responding to rate pressure by intensifying its cost-cutting efforts, seeking savings in its procurement activities, and adjusting its network. Hostilities in the Middle East have temporarily supported rates, as attacks on commercial ships in the Red Sea have forced shipping companies to reroute their vessels by thousands of kilometers to avoid the area. This has led to a capacity constraint and an increase in rates.

"Regardless of the Outcome of the Conflict, High Number of Ship Deliveries This Year to Lead to a Gradual Increase in Transport Capacities, Expected to Negatively Impact Freight Rate Development, Company Says. Additionally, Higher Transport Costs Due to Longer Voyage Times Around the Cape of Good Hope and the Inclusion of the Shipping Sector in the European Emissions Trading System, Aimed at Limiting the Industry's Emissions, Are Likely to Exceed Planned Cost Reduction Measures, It Added."

The Citi analyst, Sathish Sivakumar, explained in a note that these cost projections are disappointing and therefore the earnings outlook could deviate from the experts' expectations. The company's shares fell by 1.5% in early trading.

Hapag-Lloyd announced on Thursday that the average freight rate has dropped by about 48% in 2023, while transport volumes increased by 0.5%. The German shipping company expects to record an EBITDA (earnings before interest, taxes, depreciation, and amortization) of 1 to 3 billion euros ($1.1 to $3.3 billion) in 2024, with earnings before interest and taxes ranging from a loss of 1 billion euros to a profit of 1 billion euros.

"In 2023, an EBITDA of 4.46 billion Euros and an EBIT of 2.53 billion Euros were reported. The company currently expects that transport volumes can be slightly increased this year, while the average freight rate is expected to decrease significantly. However, it warned that the volatile development of rates and geopolitical challenges mean that forecasts are subject to considerable uncertainty."

"We are satisfied with the satisfactory start of the current fiscal year, however the economic and political environment remains volatile and challenging - particularly in light of the current situation in the Red Sea," said CEO Rolf Habben Jansen.

The company reported a net profit of 2.95 billion euros in 2023, compared to 17.04 billion euros the previous year, as revenues fell by 48%. It stated that the year 2023 was characterized by initially weak demand and significantly lower freight rates for container transportation, which negatively impacted the revenue and profit trend. It proposed an annual dividend of 9.25 euros, compared to 63 euros in the previous year.

In a separate announcement on Thursday, the company said that the supervisory board had agreed to an early extension of Jansen's contract as CEO until March 31, 2029. It was originally set to expire in 2027. Additionally, the contract of Donya-Florence Amer as Chief Information Officer and Chief Human Resources Officer was extended for another five years until January 31, 2030.

"Rolf Habben Jansen has been doing outstanding work for Hapag-Lloyd for almost a decade," said Michael Behrendt, Chairman of the Supervisory Board. "By renewing the appointment of Rolf Habben Jansen, the Supervisory Board is opting for continuity."