HHLA Suffers Significantly in the First Half of the Year Due to the Coronavirus Crisis

The Hamburg Port and Logistics Group is significantly affected by the coronavirus crisis. Group revenue decreases by 9.4 percent, and operating group earnings (EBIT) drop by 51.5 percent. A continued strong decline in revenue and earnings is expected for the entire year 2020. Liquidity remains sufficient despite the pandemic.

(Hamburg) The drastic decline in global economic activities due to the Coronavirus pandemic in the first half of the year has also noticeably impacted the business development of Hamburger Hafen und Logistik AG (HHLA). Both revenue and earnings have fallen sharply, which has correspondingly affected profitability. Due to weak trade activity, particularly in the second quarter, container handling and container transport decreased significantly in the first half of the year. The real estate segment could not escape this trend despite a high occupancy rate. In total, this led to group revenue of 628.4 million euros (-9.4 percent). Operating earnings (EBIT) fell by 58.8 million euros (-51.5 percent) to 55.5 million euros. The group’s available liquidity at the end of the first half of 2020 was 296.1 million euros (as of June 30, 2019: 260.1 million euros).

Cost Reductions and Investment Cuts

Angela Titzrath, Chairwoman of the HHLA Executive Board: “The measures ordered in the second quarter to contain the Coronavirus pandemic have posed unprecedented challenges to society and the economy. As a system-relevant company in the logistics chain, we have nonetheless fulfilled our responsibility at all times and reliably contributed to the supply of Germany and Europe. Through responsible cost reductions and investment restraint, we have tried to mitigate the strong impacts of the crisis on our business development and to be prepared when the situation eases again. We currently expect a gradual recovery in the second half of the year. Despite the ongoing challenges that demand a lot from us, we continue to work on strengthening the future viability of HHLA. The company has become significantly more digital in recent months. This year, we are also innovatively approaching the distribution of dividends. We offer our shareholders the option to receive their usual cash dividend in the form of A-shares of the company. This is another contribution to securing liquidity, which remains sufficient despite pandemic-induced burdens to meet due payment obligations.”

Subgroup Port Logistics

Business Development January – June 2020
The publicly listed subgroup Port Logistics recorded a significant revenue decline of 9.3 percent to 614.2 million euros (previous year: 677.5 million euros) in the first six months. Operating earnings (EBIT) fell sharply by 53.5 percent to 49.1 million euros (previous year: 105.6 million euros). The EBIT margin decreased by 7.6 percentage points to 8.0 percent.

Segment Container

In the Container segment, the handling volume at HHLA container terminals decreased overall by 11.3 percent to 3,345 thousand standard containers (TEU) (previous year: 3,770 thousand TEU). At the three Hamburg container terminals, the handling volume was 3,058 thousand TEU, which is 12.0 percent below the previous year’s figure (previous year: 3,476 thousand TEU). The main reason for this was the cancellation of ship departures (Blank Sailings) due to the Coronavirus pandemic. The cancellations caused a significant decline in cargo volumes from the Far East. Feeder traffic to the Baltic Sea region has decreased significantly and could not be compensated by increases in the German and British shipping areas. The international container terminals in Odessa and Tallinn recorded a slight decline in handling volume of 2.4 percent to 286 thousand TEU (previous year: 293 thousand TEU). The volume losses primarily associated with the Coronavirus pandemic could not be sufficiently offset by the additional calls in the first quarter.
Revenue decreased in the first half of 2020 compared to the previous year by 9.6 percent to 363.4 million euros (previous year: 401.7 million euros). This was mainly due to the volume decline triggered by the Coronavirus pandemic. Average revenues per waterborne container increased by 1.9 percent compared to the previous year. This was due to a favorable modal split with a high share of hinterland volume and a temporary increase in storage fees due to longer dwell times resulting from weather-related delays and pandemic-related cancellations of ship departures (Blank Sailings). Operating earnings (EBIT) decreased by 35.0 million euros or 48.7 percent to 36.8 million euros (previous year: 71.8 million euros). The EBIT margin fell by 7.8 percentage points to 10.1 percent.

Segment Intermodal

In the Intermodal segment, container transport decreased by 8.2 percent to 718 thousand TEU (previous year: 782 thousand TEU). The decline in road transport was significantly stronger than in rail transport. Rail transport fell by 6.9 percent to 568 thousand TEU (previous year: 610 thousand TEU). While traffic from both northern German and Adriatic seaports recorded significant declines, with some routes experiencing strong decreases, a strong growth in continental traffic compensated for part of the decline in maritime traffic. The downward trend in road transport continued from previous quarters. Particularly due to the weak development in the Hamburg area, the transport volume decreased by 13.0 percent to 149 thousand TEU (previous year: 172 thousand TEU) in a persistently difficult market environment.
Revenue was 223.2 million euros, which is 8.5 percent below the previous year’s figure (previous year: 244.1 million euros) and thus declined slightly more than the transport volume. Despite a slight increase in the rail share of total HHLA intermodal transport from 78.0 percent to 79.2 percent, average revenues per TEU decreased due to a disproportionate decline in cargo flows with longer transport distances. Operating earnings (EBIT) fell by 32.0 percent to 34.5 million euros (previous year: 50.8 million euros) during the reporting period. This strong decline is primarily due to the declining volume and revenue development, as well as increased fluctuations in the volume of import and export cargo, resulting in reduced utilization of train systems.

Subgroup Port Logistics

 The now globally rampant Coronavirus pandemic has prompted government bodies and authorities in most affected countries to impose measures to contain the spread of the virus on an unprecedented scale.
The measures primarily restrict social contacts between people to avoid infection. This leads to a contraction of economic activity at both the national and international levels, the depth and duration of which cannot be reliably estimated. The contraction affects all sectors of the economy, including the international trade that is important for HHLA.
Under the current circumstances, a reliable forecast is not possible, but it can be assumed that revenue and operating earnings (EBIT) in the Port Logistics subgroup will be significantly below the previous year. The primary cause of this is possible, at least temporarily, significant declines in container handling and transport.

Subgroup Real Estate

 HHLA’s real estate in the historic warehouse district and on the fish market area in Hamburg performed better than the overall market. However, revenue at the half-year mark in 2020 was significantly below the previous year at 18.0 million euros (previous year: 19.9 million euros), despite the high occupancy rate. The decline was primarily due to a revenue correction made due to expected rental losses as a result of the Coronavirus pandemic. The cumulative operating earnings (EBIT) therefore fell significantly short of the previous year’s figure by 27.8 percent at 6.1 million euros (previous year: 8.5 million euros) due to the expected rental losses.
A significantly lower result than the previous year is anticipated for the operating earnings (EBIT) of the real estate subgroup.
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