Xinhua Finance Frankfurt, November 20 (Reporter Shao Li) - The latest performance report released by Hamburg Port and Logistics Co., Ltd. HHLA shows that after COSCO officially invested in its terminal, container throughput resumed positive growth in the third quarter, but its profit decline trend has not changed. This may further reduce obstacles for the tender offer of MSC, a Mediterranean shipping company.
According to the third quarter financial report released by HHLA on the 14th, the sharp decline in freight volume in the first half of 2023 due to economic weakness has slowed down due to the strong performance of the container business. The container throughput of Hamburg Port under HHLA operation increased by 5.6% year-on-year in the current quarter.
In the first quarter of this year, due to the sharp decline in container traffic in China, the container throughput of HHLA Hamburg Port decreased by 15.9% year-on-year. At that time, the acquisition of 24.9% equity in the Tollerort container terminal at Hamburg Port by COSCO Shipping Port Co., Ltd. (hereinafter referred to as "COSCO Shipping") saw new changes.
It was not until May 10th that the German federal government confirmed the validity of this acquisition for the second time. In late June, relevant parties from China and Germany completed the equity delivery. In the second quarter, the year-on-year decrease in container throughput at HHLA Hamburg Port narrowed to 9.4%.
Although container throughput has resumed positive growth, the operating profit (EBIT) of HHLA listed logistics companies in the third quarter decreased by 60% year-on-year, with container business operating profit still declining by as much as 80%. During the same period, sales revenue decreased by 7.9% and 15% respectively.
HHLA stated that the significantly shorter container stay time compared to last year, resulting in a decrease in storage fees, is an important reason for its profit decline.
Industry insiders point out that while market demand is still severely weak, the long-standing problem of high container business costs at Hamburg Port is fully emerging.
The data since 2019 shows that despite the special period of the COVID-19, HHLA's container business accounted for a relatively stable proportion of total revenue, which has been in the range of 50% to 60%. The proportion in the first nine months of this year was only 9 percentage points lower than that in 2019, when it was the highest. However, the proportion of operating profit in the container business has significantly declined, not only much lower than the high profit years of 2021 and 2022, but also decreased by 25 and 15 percentage points compared to 2019 and 2020, respectively.
Experts from Hamburg University of Economics pointed out that the high labor costs and lack of automation at Hamburg Port have pushed up port costs, with container handling costs 20% and 25% higher than those at Antwerp and Rotterdam ports. In the context of high inflation, further increases in labor costs are expected.
Although HHLA only achieved an operating profit of 61.8 million euros in the first three quarters, the company still believes that it is possible to achieve the previously set performance target of 100 million euros for the entire year. On Tuesday, HHLA's stock price fell nearly 1% to 16.40 euros.
HHLA's stock price has continued to decline since the beginning of 2022 and has fallen by over 50% by late August of this year (10 euros per share). In mid September, after MSC, a Swiss based Mediterranean shipping company, issued a takeover offer of 16.75 euros per share through its subsidiary, HHLA's stock price rebounded significantly.
Analysts point out that the significant decline in profits has dealt a blow to Hamburg Port and Logistics Corporation (HHLA), which may further reduce the barriers to entry for MSC, a Mediterranean shipping company.
As the largest port operator in Hamburg, HHLA holds approximately 69% of its equity in the hands of local governments. Hamburg City has previously signed a contract to retain only 50.1% of its equity, with MSC holding up to 49.9% of the shares. Last week, after MSC made concessions, HHLA management also supported this acquisition offer. MSC's offer to the remaining shareholders is valid until November 20th, while the legal "further acceptance period" is expected to last until December 7th.
This acquisition offer has sparked strong opposition from shipping companies and unions. The shipping company is concerned that MSC may have special rights at Hamburg Port. Hapag Lloyd, the largest shipping company in Germany, and its partners have container throughput exceeding half in Hamburg. They considered participating in a bidding bid, but ultimately chose to give up. The union is concerned about large-scale layoffs.
HHLA CEO Angela Titzrath recently stated that she has reached a preliminary agreement with MSC, which stipulates the exclusion of operational related layoffs for at least five years.
She also stated that she has received commitments from Hamburg City and MSC not to change HHLA's consistent principle of treating all customers equally, and does not guarantee that any shipping company will receive investment first. MSC will not influence the board of directors to change the strategies and investment plans that have already been formulated.
It is understood that HHLA plans to invest 775 million euros between 2025 and 2028 to expand the multimodal railway network and strengthen digitization. Automate the Burchardkai terminal at Hamburg Port, transforming it into an innovative and sustainable transfer point in Europe. In addition, HHLA will continue to invest in expanding its business track and support multiple startups.
Industry insiders have pointed out that existing commitments are difficult to prevent competitive container shipping companies from leaving Hamburg Port. For example, so far Hamburg Port's largest customer, German company Hebrot, may not be willing to pay port fees to its direct competitor Mediterranean Shipping Company in the future. Herbert's boss had previously stated that a large number of containers could be sent to Wilhelm Port or Bremen Port.
Tizras also confirmed that there are still some unresolved issues that require binding solutions with the city of Hamburg and MSC in the coming weeks. The minimum term of the agreement with MSC is 40 years.
Tizras has been serving as the CEO of HHLA since 2017. Her contract will expire at the end of 2024, and there is currently no news of any extension.