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The prime strategic objective of the Hapag-Lloyd Group is to achieve long-term profitable growth measured on the basis of developments in the transport volume and the key performance indicators of EBITDA, EBIT and return on invested capital (ROIC). The growing global demand for container transportation is the very foundation of the organic growth which Hapag-Lloyd hopes to achieve. The growing global demand for container transportation is the very foundation of the organic growth which Hapag-Lloyd hopes to achieve. IHS Markit (May 2019) has forecast a rise in global container shipments of 3.8% to around 171 million TEU in 2019. Generally, Hapag-Lloyd intends to increase the transport volume organically in line with market growth.
The key internal performance indicators for the Company’s operating activities are earnings before interest, taxes, depreciation and amortisation (EBITDA) and earnings before interest and taxes (EBIT). The performance of these key financial indicators is outlined in the section “Group earnings, financial and net asset position”. EBITDA is an important indicator of the achievement of sustainable company results and gross cash flows. It has a special significance for capital-intensive companies. Hapag-Lloyd uses EBITDA as an important parameter for investment decisions.
The main factors influencing the development of the operating result indicators are transport volume, freight rate, the US dollar exchange rate against the euro and operating costs including bunker price.
The generation of sustainable cash flows, solid corporate financing, and therefore in particular a sufficient liquidity and equity base, are once again key cornerstones of the Hapag-Lloyd Group’s corporate strategy in the 2019 financial year. As at 30 June 2019, the Hapag-Lloyd Group has a liquidity reserve (consisting of cash, cash equivalents and unused credit facilities) totalling EUR 931.5 million (31 December 2018: EUR 1,133.0 million).
The Executive Board of Hapag-Lloyd AG first reported on the Group’s new strategy (“Strategy 2023”) at a capital market day in November 2018.
The 3 core objectives of Strategy 2023 are:
The focus of Strategy 2023 is on leadership in quality and profitable growth based on continuous, consistent cost and revenue management and the improvement of internal processes through greater agility and by taking advantage of technological opportunities, such as digitalisation and automation. Hapag-Lloyd has already launched a number of projects to ensure that its total cost structure is competitive. Thanks to improved cost structures, it is expected that an earnings contribution of between USD 350 and 400 million per year can be achieved by 2021. In the area of revenue management, Hapag-Lloyd has identified the key places in which optimisations can be made and has launched initial measures.
In addition, initial digitalisation measures such as the web channel with Quick Quotes have already been implemented.
The planning period for Strategy 2023 will run until the end of the year 2023. Although further implementation will take place in 2019, most of the measures and their effects on earnings will be seen in the subsequent years. The most important elements of Strategy 2023 are presented in the following illustration.The focus here is on clearly differentiating the Company from its competitors.
The Hapag-Lloyd Group’s current key financial indicators will continue to be EBITDA and EBIT. Hapag-Lloyd is also aiming to be profitable throughout the entire economic cycle, i.e. to achieve a return on invested capital (ROIC) that is at least equal to the Company’s weighted average cost of capital (WACC). The reduction of debt remains a priority, and the Company’s target is to achieve a ratio of net debt to EBITDA of 3.0x or less by the end of 2023. Furthermore, Hapag-Lloyd is aiming for an equity ratio of over 45% and a liquidity reserve of around USD 1.1 billion.
In addition to the key financial indicators, the following new non-financial goals have been set:
Leadership in quality is to be measured using a Net Promoter Score (NPS). In addition, the Company intends to improve reliability, i.e. punctuality, to clearly define its pledge on punctuality and to put in place the technical requirements for measuring punctuality on a standardised basis and reporting on it.
Hapag-Lloyd aims to increase the percentage of door-to-door business to over 40% by 2023. This cargo type requires additional services which Hapag-Lloyd offers customers and which enable it to generate higher revenue and a higher margin.
Hapag-Lloyd is aiming for a global market share (worldwide, excluding Intra-Asia) of more than 10%. To achieve this goal, Hapag-Lloyd wants to increase its presence in attractive growth markets and in the area of special cargo in particular. This includes the transportation of reefer containers, which Hapag-Lloyd sees today as an area of strength. The Company is aiming for a market share of around 10% here as well.
The success of its digitalisation strategy is to be measured by whether it increases the volume of cargo booked via the web channel to 15% of total volume by 2023.
As a company with a tradition of environmental awareness, it is a matter of course for Hapag-Lloyd that the Company complies with the stricter environmental requirements, such as IMO 2020, and that it implements the necessary technical and organisational changes with the greatest care and attention. In the context of the International Maritime Organization’s (IMO) requirements from 2020 to reduce sulphur dioxide emissions, Hapag-Lloyd will install exhaust gas cleaning systems (EGCS) on 10 larger container ships and test the use of liquid gas (LNG) by converting one of its large vessels. All of this is in addition to its predominant use of low-sulphur fuel.
Strategy 2023, including the aforementioned targets and goals, will become even more concrete as the strategy is implemented and it will be flexibly adapted to the changing operating environment if necessary.
Hapag-Lloyd will report on its progress towards achieving its aims in the course of the 2019 financial year.
In the 2019 financial year the focus will be on:
The key benchmark figures for the 2019 outlook are contained in the following table:
|Key benchmark figures for the 2019 outlook||Outlook|
|Global economic growth (IMF)||+3.3%|
|Increase in global trade (IMF)
|Increase in global container transport volume (IHS)||+4.7%|
|Transport volume, Hapag-Lloyd Group
|Average bunker consumption, Hapag-Lloyd Group||Increasing slightly
|Average freight rate, Hapag-Lloyd Group||Increasing slightly
|EBITDA (earnings before interest, taxes, depreciation and amortisation), Hapag-Lloyd Group||EUR 1.6 - 2.0 billion|
|EBIT (earnings before interest and taxes), Hapag-Lloyd Group||EUR 0.5 - 0.9 billion|