Despite the most serious economic crisis for decades, in the financial year 2009 Hamburger Hafen und Logistik AG (HHLA) earned a return well into double digits and met its forecast for the year. Revenue fell by 25.3 percent to 990.7 million euros and operating result from continuing activi-ties was 50.3 percent lower at 177.7 million euros. A profit margin of 18.0 percent from continuing activities and an equity ratio of 40.0 percent stand for profitability and stability even under tough operating conditions. Despite first signs of a gradual recovery in volumes, for the current financial year HHLA expects a still tense market environment with growing pressure from competition and on earnings.
“Despite a steep downturn in volumes handled and transported, in the financial year 2009 Hamburger Hafen und Logistik AG succeeded in keeping the fall in revenues within limits, in achieving a respectable result and in preserving its sound balance sheet structure. This is all the more remarkable as HHLA is especially heavily hit by the repercussions of the current world economic crisis,” stated HHLA Klaus-Dieter Peters, Chairman of HHLA’s Executive Board, on publication of the annual financial statement for 2009. Measures taken in a timely manner as part of the “Securing the future” project made a crucial contribution here. “We shall continue to systematically pursue this course in the difficult financial year 2010. Then we shall be in a position to successfully overcome the consequences of the recession and at the same time be ready to actively exploit the opportunities from an economic recovery.”
Dividend of 0.40 euros proposed
For the year 2009, HHLA’s Executive and Supervisory Boards propose to the Annual General Meeting payment out of the net profit qualifying for distribution of a dividend of 0.40 euros per share on the Port Logistics subgroup shares traded on the stock exchange. This subgroup accounts for 97 percent of HHLA’s revenues.
Considerable deterioration in market environment
The economic crisis hit global transport chains disproportionately. Whereas for many years the rule-of-thumb applied that intercontinental container traffic grows at between twice and three times the rate of worldwide economic output, in the crisis this rule also proved to be applicable in the reverse direction. It was especially the growth markets that have been so crucial for HHLA in recent years, such as container traffic with Asia, as well as the emerging economies of Central and Eastern Europe, which experienced particularly serious downturns in the course of the crisis.
Systematic cost management
HHLA had already reacted to the challenge of the crisis back in the fourth quarter of 2008 with an extensive programme of measures. The “Securing the future” project includes a strict cost reduction programme and adaptation of the investment programme to the changed underlying circumstances, as well as a package of measures to secure employment with a combination of in-service training and short-time working:
- In 2009, for instance, costs of material were 28.6 percent down on the previous year, falling more steeply than sales revenues, to 346.1 million euros (previous year: 484.7 million euros).
- The modernization and expansion programme for the period 2009 - 2012 has been staggered, with 600 of the original 1,200 million euros deferred to the period after 2012. The volume of investments in the financial year 2009 totalled 159.7 million euros instead of the 355 million euros planned at the time of the IPO in 2007.
- The fall in employment of temporary workers and the reduction in overtime, as well as the programme of short-time working and in-service training introduced from July 2009, reduced the volume of work at the Hamburg base by over 20 percent (on a comparison of the second half-year in 2009 with 2008).
- The “Securing the future” project is being continued in 2010. Negotiations are currently in progress with staff representatives on a reorganization of working conditions and processes at Container Terminal Burchardkai, as well as an optimized capacity management at Container Terminals Tollerort and Burchardkai.
Investments in future prospects
In the financial year 2009, HHLA maintained its important investments in gaining efficiency and performance as well as for grasping future opportunities for development. Among the measures implemented were:
- Expansion of the Feeder Logistics Center in the Port of Hamburg to optimize feeder-ship circulation. For all concerned, this will lead to cost and time savings as well to gains in quality, strengthening Hamburg’s competitive position as a feeder hub.
- Expansion of the hinterland network through investments in railcars and inland terminals. A build-up of inland terminals customized to meet the requirements of maritime logistics (with depots and service facilities, among other aspects) in Germany is aimed at substantial improvements to the hinterland connections of German seaports. The intermodal subsidiaries of HHLA’s and Eurogate launched their Inland Port Network joint venture for this purpose in March 2010.
- Investments in improving performance at port terminals, including preparation for the entry into service of the new mega-containership berth at HHLA Container Terminal Burchardkai, the taking into service of a new modern temperature-controlled shed for fruit logistics at O’Swaldkai, and automation of additional unloading piers at Hansaport.
- The major training initiative, involving more than 400 of the 3,500 staff at the Hamburg base so far.
An overview of Group figures
HHLA Group has to report substantial falls in revenue and profits in the financial year 2009, but achieved a respectable margin on results and kept its equity ratio at a high level:
- Revenue, for instance, was down 25.3 percent at 990.7 million euros.
- Operating result (EBIT) from continuing activities was 50.3 percent lower at 177.7 million euros. The corresponding EBIT margin was 18.0 percent (previous year: 27.3 percent).
- Equity ratio was 40.0 percent (previous year: 42.3 percent).
- At the same time, the stock exchange listed core business vested in the Port Logistics subgroup achieved revenue of 962.9 million euros (- 25.9 percent) and EBIT from continuing activities of 165.1 million euros (- 52.0 percent).
- Group net profit for the year fell by 59.0 percent to 89.1 million euros.
An overview of segment development
Container segment. Owing especially to the recession in Central and Eastern Europe, in the financial year 2009 HHLA’s container terminals in Hamburg and Odessa posted a 32.9 percent downturn in container handling to 4.9 million standard containers. The magnitude of this decrease is foremost a result of the massive decline in feeder throughput in the Baltic region. Without feeder related handling, HHLA’s container throughput decreased merely by approx. 15%.
Revenues fell by 29.1 percent to 561.6 million euros, operating result was down by 50.8 % to 149.6 million euros. At 26.6 percent, EBIT margin once again reached a high level (previous year: 38.4 percent).
Intermodal segment. In a market environment determined by volume losses and further intensifying competition as well as an 18.5 percent drop in volume transported to 1.5 million standard containers, companies in the segment were able to consolidate, and in some cases to expand, their market shares. Despite substantial price concessions, the fall in revenues at 25.0 percent to 277.3 million euros, was kept within bounds. EBIT from continuing activities sank by 48.0 percent to 21.9 million euros.
Logistics segment. In a market environment partly marked by sometimes considerable downturns in volumes (ore, vehicles, contract logistics), companies in this wide-ranging segment asserted themselves on the whole. On revenues down 9.4 percent to 114.9 million euros, EBIT of 8.2 million euros (- 21.0 percent) were achieved. EBIT margin of 7.2 percent was only just below the previous year’s 8.2 percent.
Real Estate segment. In a gloomy commercial environment, the Real Estate segment managed to maintain the previous year’s level of revenues, which were 0.4 percent higher at 32.7 million euros. As a result of increased maintenance, EBIT declined by 9.9 percent to 12.3 million euros.
Looking ahead to 2010
Against the background of what remains a broad range of possible scenarios for the economy, indicators and forecasts are currently pointing to a moderate recovery in the world economy, although there will be marked differences regionally. In particular, the further development of the Central and Eastern European markets (e.g., the Baltic states and Russia), so vital for Hamburg as a logistics hub, is from today’s angle still beset with great uncertainties. Other adverse factors are the shipping crisis, not yet overcome, as well as overcapacities in North Range ports. During the first two months of 2010, the trend in volumes for both handling and transport confirmed the trend in the second half of 2009. This indicates stabilization at a low level, but no sustained recovery yet. In view of the persistent difficulty in estimating the trend for the remainder of the year 2010, on the basis of a recovery in volume in the low single-figure percentage bracket, HHLA is reckoning with Group revenues slightly below the previous year and an EBIT margin in double digits. The continuation of strict cost management as well as the investment programme to boost its competitiveness will put HHLA in a position to successfully overcome the difficult economic situation, and at the same time to grasp future opportunities for growth.