March 26 (Bloomberg) -- Hapag-Lloyd AG narrowed its full-year loss as the freight-shipping company cut costs and benefited from lower fuel prices before a planned takeover that will make it the world’s fourth-largest container carrier.
The net loss in 2013 was 97.4 million euros ($134.7 million) compared with 128.3 million euros a year earlier as spending on transport costs were reduced by 409 million euros, the Hamburg-based company said in a statement. Operating profit more than doubled to 67.2 million euros.
“Although Hapag-Lloyd continued to perform well compared to other industry players thanks to the positive operating result, this result nevertheless falls well short of our expectations for 2013 and is ultimately disappointing,” Chief Executive Officer Michael Behrendt said in the statement. “Irrationality” in freight pricing made it impossible “to push through sustainable rate increases in the market from the second quarter, despite good ship utilization at times.”
Hapag-Lloyd, Germany’s industry leader with a fleet of 151 vessels, plans to take over the container-shipping operations of Valparaiso, Chile-based Cia. Sud Americana de Vapores SA. The acquisition may help the company counter a prolonged shipping slump and close the gap on the world’s three largest carriers, including A.P. Moeller-Maersk A/S. CSAV, which expects a binding deal by the end of April, will get a 30 percent stake in Hapag-Lloyd in return.
Cargo volume rose 4.6 percent to about 5.5 million standard 20-foot containers, or TEU, Hapag-Lloyd said. Sales fell almost 4 percent to 6.57 billion euros, because of a decline in the dollar, the industry’s main currency, the company said. Earnings before interest, taxes, depreciation and amortization rose 16 percent to 389.1 million euros. That compares with Maersk Line’s Ebitda of the equivalent of 2.5 billion euros last year.
Behrendt said the industry’s outlook looks much “brighter,” with container traffic expected to grow 4.4 percent this year and 5.2 percent in 2015.
“The addition of new shipping capacities will decline and an increasing number of older ships will disappear from the market and be scrapped,” the CEO said. Hapag-Lloyd will add two large vessels with a capacity of 13,200 TEU on the Asia-Europe route next month, he said.
Behrendt seeks to seal a final deal with CSAV, which will help the company boost its Latin America business, before he retires at the end of June. Behrendt’s successor will be Rolf Habben-Jansen, the former head of Copenhagen-based Maersk’s freight-forwarding arm Damco NV, who will join the German company’s management board in April before becoming CEO in July.
The majority of CSAV shareholders approved the Hapag-Lloyd deal on March 21. Stakeholders who voted against the transaction or didn’t attend the meeting have until April 20 to sell their shares at a fixed price. If more than 5 percent of shareholders ask to be bought out, CSAV may call off the deal, CEO Oscar Hasbun said at the time.
The new Hapag-Lloyd would operate about 200 vessels, while annual savings will total about $300 million, according to Hasbun. Within 12 to 18 months after the transaction is completed, Hapag-Lloyd plans an initial public offering to raise $500 million, Hasbun said.
Behrendt has said an IPO may take pace in 2015 when general conditions in the shipping industry “normalize again.” German tour operator TUI AG, which holds a 22 percent stake in Hapag-Lloyd, may use the stock sale as an exit, as the Hanover-based company has repeatedly said it wants to divest the holding. TUI rose as much as 1.1 percent and was trading up 0.7 percent at 12.21 euros as of 11:13 a.m. in Frankfurt.
Hapag-Lloyd turned to CSAV after talks to merge with local competitor Hamburg Sued failed a year ago because shareholders of both companies couldn’t agree on terms.
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