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TUI Quarterly Loss Narrows as Hapag-Lloyd Container Line Reports Profit
TUI AG, the biggest single shareholder in the Hapag-Lloyd shipping company, reported a smaller third-quarter loss as the container line posted a profit and interest payments fell.
The net loss narrowed to 9.4 million euros ($12.1 million), or 6 cents a share, in the three months through June from 470 million euros, or 1.89 euros, a year earlier. Sales fell 4.2 percent to 4 billion euros, Hanover, Germany-based TUI, which also owns Europe’s largest travel company TUI Travel Plc, said today in a statement.
Earnings from Hapag were 74.5 million euros as the shipping line posted a record profit on a recovery of freight rates and volumes. The recession and a glut of new vessels led to a slump in freight rates last year. TUI owns about 43 percent of Hapag, Germany’s biggest ocean-container line. TUI Travel, the source of most of TUI’s revenue, yesterday posted a loss.
“Hapag-Lloyd was a positive surprise as the reported results beat most expectations,” said Robert Greil, an analyst at Merck Finck & Co in Munich. The shares are down today as TUI Travel’s stock is extending yesterday’s decline, said the analyst, whose rating on TUI is under review.
TUI fell 25 cents, or 3.2 percent, to 7.68 euros at the 5:30 p.m. close of trading in Frankfurt trading, adding to yesterday’s 4.3 percent decline, while TUI Travel dropped 6.5 percent in London after losing 10 percent yesterday.
Travel Loss
TUI Travel, in which TUI holds a majority stake, had a net loss of 81 million pounds ($127 million) for the quarter compared with year-earlier profit of 32 million pounds because of air-traffic shutdowns caused by the volcanic ash clouds over Europe in April and May and consumers’ holiday-spending cuts in both Germany and the U.K.
TUI reiterated today that operating earnings from continued businesses will rise “slightly” in the current fiscal year after adjustments. TUI also said it expects to achieve a “positive group result.”
The year-earlier earnings were reduced by 54.4 million euros because of a loss at Hapag. TUI had interest costs of 371 million euros in the year-earlier period related to financing provided to the shipper.
TUI raised its forecast for container shipping last month, saying it expected Hapag-Lloyd to “post significantly positive operating earnings” because of a “notable recovery” in the industry. Hapag received state loan guarantees worth 1.2 billion euros last year, which it hasn’t used.
No Rush to Sell
TUI isn’t “in a rush” to sell its remaining stake in Hapag, Chief Financial Officer Horst Baier said today in a conference call, adding that the container line’s management is considering handing back state loan guarantees it received last year.
Freight rates in the business rose 30 percent while volumes increased 8 percent in the quarter, TUI said in the statement. The company expects further volume growth in global container shipping, Baier said.
“Hapag is benefiting from the ongoing recovery of the container business as German export booms and intra-Asian cargo traffic increases,” Martina Noss, an analyst at Norddeutsche Landesbank in Hanover, said before the earnings report. She has a “buy” recommendation on the stock.
Total revenue from tourism, which includes TUI AG’s cruise ship and hotel businesses, fell 4.1 percent to 3.99 billion euros. Adjusted earnings before interest, taxes and amortization from tourism rose 6.9 percent to 113.8 million euros. The figure excludes one-times expenses of 128 million euros related to the volcanic ash clouds.
To contact the reporter on this story: Holger Elfes in Dusseldorf at helfes@bloomberg.net
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