Hapag Lloyd profit falls 83 per cent as Red Sea turmoil makes global shipping downturn worse

Hapag-Lloyd profit fell 83 per cent last year amid a global shipping crisis caused by disruption in the Red Sea and a major downturn in the industry.

The container shipping giant reported profits of €3bn (£2.6bn) in 2023, an 83 per cent fall from the €17bn gain posted in 2022.

Shareholder dividends have been cut to €9.25 per share.

Since November, Houthi rebel attacks in the Red Sea have forced carrier’s to divert around the Cape of Good Hope, adding weeks to journey times and bumping up shipping costs significantly.

“We have got the current financial year off to a satisfactory start, but the economic and political environment continues to be volatile and challenging – especially in view of the current situation around the Red Sea,” Rolf Habben Jansen, Hapag Lloyd’s chief executive, said.

Earnings before interest, taxation, depreciation and amortisation (EBITDA) are expected to come in at between €1bn and €3bn. In 2023, the company’s earnings reached €4.4bn.

The shipping industry had already been impacted by a huge downturn in freight rates, which have tapered off from the heights of a post-pandemic boom, when a collision supply chain and resurgent consumer demand sent profits into the stratosphere.

And firms such as Maersk, MSC and Hapag-Lloyd are also bearing the costs of an oversupply of vessels ordered during the profit bonanza and stringent environmental regulation imposed by the International Maritime Organisation (IMO).

Revenues at Hapag Lloyd near halved to €17.9bn, primarily owing to a 48 per cent fall in freight rates, to around $1,500 per TEU.

Shares fell 1.56 per cent by 9.50am GMT.