Capital Markets Day Hamburg, 21 November 2018 - Hapag-Lloyd

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Capital Markets Day Hamburg, 21 November 2018 - Hapag-Lloyd
Capital Markets Day
Hamburg, 21 November 2018
Capital Markets Day Hamburg, 21 November 2018 - Hapag-Lloyd
Corporate Development
CEO Rolf Habben Jansen
Capital Markets Day Hamburg, 21 November 2018 - Hapag-Lloyd
Hapag-Lloyd – 171 years young…

    Founding                         Merger                                Takeover
    of Hapag in                      of Hapag and NDL to                   by Albert Ballin
    Hamburg                          Hapag-Lloyd                           Consortium

    1847                             1970                                  2009

                  1857                                     2005            Profit slump
                                                                           in the course of the
                  Founding                                 Merger          global economic crisis
                  of Norddeutscher                         with CP Ships
                  Lloyd (NDL)

3
Capital Markets Day Hamburg, 21 November 2018 - Hapag-Lloyd
… and we continue to further build the company and help shape the
future of the Industry…

       CSAV Merger                                                                                      Successful cash
       Hapag-Lloyd kicked off
                                                        BCA
       the latest wave of                               with UASC                                       capital increase
                                                        signed                                          of USD 413m
       sector consolidation     CSAV Synergies                                  Closing of the
                                exceeded expectations                           UASC Merger
2014                                                                                                                  Today

                        Successful IPO       Compete-to-Win Successful bond                                       First time
                        in challenging stock successfully changed the refinancing of                              dividend
                        market environment way how we sell            EUR 450m at 6.75%      Successful bond      since the IPO
                                                                                             refinancing of
                                                                                             EUR 450m at 5.125%

4
Capital Markets Day Hamburg, 21 November 2018 - Hapag-Lloyd
…as illustrated by some key figures
when looking back only a few years
People                                                                                   Volume
                                                                              12,660                             11,700 TTEU
                        7,000                                                                      5,900 TTEU

                          2014                                                9M 2018                 2014      LTM 9M 2018

Ø Vessel Size & Age                                                                      Revenue
                                                                             7,190 TEU                          USD 13,200 m

                     5,300 TEU                                                                USD 9,050 m

                     8.7 years                                               7.5 years
                          2014                                                9M 2018                 2014       LTM 9M 2018

 5   Note: Rounded figures, 2014 figures before CSAV integration in December 2014
Capital Markets Day Hamburg, 21 November 2018 - Hapag-Lloyd
The past years, the industry has gone through a needed and
unprecedented wave of consolidation…
Industry consolidation                                                                                                                                                  Global capacity share [%]
Carrier capacity [TEU m]
                         2.5
                                 2.3
 Ranking end of 2013

                                                                                                                                                                                               Top 5

                                       1.5                                                                                                                                                     Top 6-10
                                                                                                                                                                                               Remaining
                                              0.8     0.8      0.7    0.7   0.6
                                                                                                                                                                            44%
                                                                                    0.6   0.5     0.5    0.5    0.5     0.4   0.4    0.3     0.3    0.3   0.3     0.3
                                                                                                                                                                                        64%
                       Maersk MSC      CMA Ever- COSCOHapag- Hanjin         APL    CSCL MOL       NYK   HSüd OOCL Yang        PIL   K-Line   ZIM Hyundai UASC CSAV
                                       CGM green       Lloyd                                                      Ming

                                                                                                                                                                            17%

                           3.9
 Ranking as of 2018

                                        3.2
                                                      2.8
                                                                     2.6
                                                                                                                                                                                        19%
                                                                                                                                                                            39%
                                                                                  1.6       1.6
                                                                                                          1.2
                                                                                                                        0.6         0.4            0.4          0.4
                                                                                                                                                                                        17%

                        Maersk /       MSC          COSCO       CMA CGM Hapag-Lloyd        ONE          Evergreen     Yang Ming     PIL        Hyundai          ZIM
                         Hsüd                       / CSCL /      / APL   / UASC                                                                                            2013       2018
                                                      OOCL

   6                   Source: MDS Transmodal (October 2013, Oct 2018), Alphaliner monthly (September 2018)
Capital Markets Day Hamburg, 21 November 2018 - Hapag-Lloyd
…and we leveraged our ability to integrate efficiently, which allowed
us to create significant value and achieve sustainable scale
Timeline of major integration activities                          Synergies gained (in USDm)
                                                                                                 Initially estimated synergies
                                                                                     180

                         12 months                                 CP Ships                218
                         integration
     2005
              Closing                     Integration completed                                  300

                          8 months
                         integration                                 CSAV                                           400
     2014
              Closing            Integration completed

                    4 months
                   integration                                       UASC                                                 435
     2017
               Closing     Integration completed

 7
Capital Markets Day Hamburg, 21 November 2018 - Hapag-Lloyd
In that process we have also renewed a major part of our fleet…

Vessels & Total Capacity [#, TEUm]
                                                                                1.6 TEUm

                                              1.0 TEUm
                             0.8 TEUm
                                                                              222
                            144              172

                            Pre-CSAV          Pre-UASC                              Today

31 newbuilds were delivered from 2015 to 2017 while 26 vessels have been recycled since 2015
 6 x 19,870 TEU
 11 x 15,000 TEU
 5 x 10,500 TEU
 7 x 9,300 TEU
                                                   26 smaller and inefficient vessels have been
 2 x 3,500 TEU                                     environmentally friendly recycled since 2015.

Total newbuild capacity of ~400 TTEU               Total recycled capacity of ~100 TTEU

8   Note: Rounded figures
Capital Markets Day Hamburg, 21 November 2018 - Hapag-Lloyd
…resulting in one of the youngest and most fuel efficient fleets
in the industry…
                  Average fleet age [years]1)                                                      Average vessel size [TEU]                                                                  Fleet ownership [%]
                                                                  9.5                                                                                                                   current chartered fleet            Current own fleet3)
                                                      8.8                          7,190
                                          8.3
                               8.0
                    7.7                                                                             6,327         6,316
    7.5
                                                                                                                              5,905
                                                                                                                                              5,585                       34%               35%
                                                                                                                                                           5,369                                       41%
                                                                                                                                                                                                                  51%            55%
                                                                                                                                                                                                                                            66%

                                                                                                                                                                          66%               65%
                                                                                                                                                                                                       59%
                                                                                                                                                                                                                  49%            45%
                                                                                                                                                                                                                                            34%
                     COSCO2)

                                                                   MSC

                                                                                                      MSC

                                                                                                                    COSCO2)

                                                                                                                                                                                             COSCO2)

                                                                                                                                                                                                                                  CMA CGM

                                                                                                                                                                                                                                             MSC
    Hapag-Lloyd

                                                                                     Hapag-Lloyd

                                                                                                                                                                          Hapag-Lloyd
                                           Top 10

                                                                                                                                  Top 10

                                                                                                                                                                                                                  Top 10
                               CMA CGM

                                                       Maersk

                                                                                                                                                Maersk

                                                                                                                                                              CMA CGM

                                                                                                                                                                                                        Maersk
9       Source: MDS Transmodal (October 2018), Drewry (3Q 2018)   1) Weighted by carrier capacities         2) COSCO incl. OOCL      3) Includes finance leased vessels
Capital Markets Day Hamburg, 21 November 2018 - Hapag-Lloyd
…we have a well balanced network…

Transport volume by trade 9M 2018

                     16%                                                  16%                                             18%

                                                                           22%          9%
                                                                                                             13%
                                                                                                                                                       9%
 9M 2014                                                                         5%   9M 2018
 TTEU                                                       23%                       TTEU
                                                                                         2,072
                                                                                                                                           1,601
                                                                                                              1,382        1,459
                      959                       1,033                                                                                                                1,115
     921                         945
                                                                                                                                                        783
                                                            489                                                                                                                     488

                                                                                                                                                                                    EMAO
                                 Transpacific

                                                            Australasia
     Latin America

                                                 Far East

                                                                                                                                            Far East

                                                                                                                                                                      Middle East
                      Atlantic

                                                                                                               Atlantic

                                                                                                                            Transpacific

                                                                                                                                                        Intra Asia
                                                                                             Latin America
10
…a relevant global market share and a solid presence
in all major trades…
Hapag-Lloyd’s Global Market Share on selected trades by transport volume [%]

                                                                Atlantic                                              Far East
     Transpacific
                                                                                                 Middle East
                                                                                                                          10%
             7%                                                  22%
                                                                                                       18%
                                                                      146,235

                                           Latin America
                                                                                                        11,674
                                                                                                                      Intra-Asia
                                                                      116,344             >9%
                                                      14%                           Market share
                                                                                                                      Other Trades

                                                                                  [excl. Intra-Asia]    10,632

                                                                Global Container Volume    Hapag-Lloyd Transport Volume
                                                                         2018e                    LTM 9M 2018

11   Source: IHS Global Insight (October 2018), Internal data
…and are a core member of THE Alliance

Alliance members
                       THE Alliance                                                                  2M                            Ocean Alliance

Capacity consolidation on key trades has improved substantially due to alliances
                             Atlantic                                                            Transpacific                          Far East
 Others                                                          2M            Others                             2M    Others                        2M
 9%                                                             41%            12%                               20%    0%                           40%

 34%                                                          16%              27%                                42%   24%                           36%
 THE Alliance                                               Ocean              THE Alliance                     Ocean   THE Alliance                Ocean

12   Source: Alphaliner Monthly Monitor (October 2018)   Note: Rounding differences may occur.
Despite increasing geopolitical risks, container shipping volume
growth expectation remains on a healthy level…
Global Container Volume Growth & Real GDP Growth [%]
2000 = Indexed to 100
   GDP
 multiplier                                         1.9x                                                                          1.0x                               1.3x

           300

           250

                                      Container Volume
           200
                                      Growth

           150

                                                                                                                               Real GDP
           100
              2000       2001       2002      2003       2004      2005       2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   2016   2017   2018e 2019e 2020e

13   Source: IHS (October 2018), IMF WEO (October 2018) 1) Average for the period.
…which, combined with the historically low orderbook, will lead to a
further improving supply/demand balance in the years to come
Orderbook-to-fleet                                                                                        Newly placed orders
[TEU m, %]                                                                                                 [TEU m, %]                                                                     YTD
                                                                                                                                                                                          2018
                                                                                                               3.2
                                                                                  Orderbook
     61%                                                                          Vessels > 14,000 TEU
                                                                                                                                                           2.0           2.2
                                                                                  Share of World Fleet                                     1.8
     6.5    50%
                                                                                                                      1.2                                         1.1                            1.0
             6.0                                                                                                                                                                        0.8
                     38%                                                                                                            0.6            0.4
                                                                                                                             0.1                                                0.2
                      5.0     27%      28%
                                                                                                           2007      2008    2009   2010   2011   2012     2013   2014   2015   2016    2017     2018
                                                21%      21%               19%
                                        4.3                       18%
                                                                                    16%
                                                                                          13%                                                                                     Drewry’s supply
                               3.9
                                                          3.6
                                                                            3.8                 11%       Supply / Demand Balance                                               estimate for 2020e
                                                 3.4               3.3                                                                                                           is highly unlikely
                                                                                    3.2
                                                                                                         15          13.7%
                                                                                          2.8
                                                                                                 2.4                 9.7%
                                                                                                         10                  8.0%                          8.0%
                                                                                                                 6.8%               6.1%           6.3%                          5.7%
                                                                                                                                           5.5%                          5.5%            4.9%     5.3%
                                                                                                          5                  7.8%                                 3.1%
                                                                                                                                                   4.0%                  3.8%    4.0%     3.5% 5.1%
                                                                                                          0                         3.1%   2.2%
                                                                            2.0     1.7                                                                    1.2%   1.2%
                                                                   1.4                    1.7
                                                                                                 1.4      -5
                                                          1.0
                      0.4               0.5      0.5                                                             -9.2%
             0.3               0.2
                                                                                                         -10
     2007   2008     2009     2010     2011     2012     2013     2014     2015    2016   2017 October     2009      2010    2011   2012   2013    2014    2015   2016   2017   2018e 2019e 2020e
                                                                                                2018
                                                                                                                                                  Demand            Supply

14   Source: MDS Transmodal (October 2018), Drewry (3Q), Alphaliner Weekly (Issue 41)
Financial Development
CFO Nicolás Burr
Opening Remarks

 01       Scale              Substantial volume and revenue growth

     02   Cost               Continuous reduction of unit costs

 03       Profitability      Consistently above industry average

 04       Balance Sheet      Strengthening through capital market measures

16
On the back of two mergers, Hapag-Lloyd was able to significantly
 increase transport volume and revenues
 Volume and Revenue Development Q1 2014 – Q3 2018

Capacity
                    1,009                            966                            963                          1,573                            1,596
year end [TTEU]
                                                                                                                                                               3,542
                                                                                                                                                3,352
                                                                                                                      3,268
                                                                                                                                        3,217
          Transport Volume [TTEU]                                                                                               3,119
                                                                                                                                                           3,052
          Revenue [USDm]                                                                                                                        2,987
                                                                                                                                        2,861
                                                                                                                      2,807     2,774
+66.3%                                      2,620                                                            2,629
                                    2,593
                            2,411                   2,376
         2,276                                                                                       2,271   2,287
                  2,229                                     2,225
                                                                                     2,152   2,182
                                                                    2,124   2,088                                                                         +118.2%
                                            1,945                                                    1,934
2,130                                               1,861   1,822
                                    1,774                           1,811
                                                                                     1,947   1,950
                                                                            1,892
                            1,560
         1,474    1,473
1,399

 1Q14     2Q14    3Q14      4Q14    1Q15    2Q15     3Q15   4Q15    1Q16    2Q16     3Q16    4Q16    1Q17    2Q17        3Q17   4Q17    1Q18    2Q18       3Q18

                  2014                              2015                            2016                             2017                         2018

  17
We continuously reduced transport expenses …

Unit cost development Q1 2014 – Q3 2018
         Hapag-Lloyd                            HL + CSAV as of         HL + UASC as of
          standalone                           2nd December 2014         24th May 2017

                                             Synergies CSAV          Synergies UASC

            1,363

                                     1,089
            1,057

                                                              925        921                926

         Unit cost [USD]             929

         Unit cost ex bunker [USD]                                                                  -7.3%
                                                              825
                                                                         785                765

            2014                     2015                     2016      2017              9M 2018
18
…and realised substantial improvements in every single
cost category
Total cost per TEU development 2014 – 2018
                                                                                                        2014 -2018
Transport-
volume
TTEU            5,907               7,401                 7,599             9,803           8,900

[USD]           1,562                                                                                      -47%

                 306
                                    1,232
                                     160                  1,067             1,074           1,059          -28%
                                                           100               136             161

                1,057
                                     929                                                                   -30%
                                                           825               785             765

                 91                                                              78
                                          73                   72                                64        -36%
                 108               70                   70                  74             69
                 2014               2015                  2016               2017         9M 2018
             Raw Materials and Supplies        Cost of purchased services    Personnel   Depreciation

19
While bunker prices increased since 2016, freight rates have
 remained stable
 Freight Rate vs. Bunker Price Q1 2014 – Q3 2018

             Freight Rate [USD]
             Bunker Price [USD/mt]

1,422     1,426         1,448        1,412
                                                   1,331                                                                                                                      -1.1%
                                                                 1,264
                                                                              1,189
                                                                                            1,116        1,067                                                               1,072
                                                                                                                       1,019         1,027        1,033         1,056                      1,065         1,030    1,029           1,055
                                                                                                                                                                                                                          1,010

                                                                                                                                                                            +150.4%
            592          585
                                       525
                                                                                                                                                                                                                                  446
595                                                  362                                                                                                                                                          372     399
                                                                   312          306                                                                              313           312           308          338
                                                                                             245                                      224           257
                                                                                                           178           182

1Q14        2Q14         3Q14          4Q14          1Q15          2Q15         3Q15          4Q15         1Q16          2Q16         3Q16          4Q16          1Q17         2Q17          3Q17          4Q17   1Q18    2Q18    3Q18
                    2014                                                  2015                                                  2016                                                2017                                  2018

  20    Note: For the financial year 2018, revenues for additional services in Latin America and Turkey were included in the calculation of freight rates. The previous year´s figures have not been adjusted
Results improve consistently since Q2 2016 despite a
challenging industry environment
EBITDA and EBIT Development Q1 2014 – Q3 2018
 EBITDA margin      1.4%                       9.4%                            7.9%                            10.6%                    9.6%
 EBIT margin       -5.5%                       4.1%                            1.6%                             4.2%                    3.6%

       EBITDA USDm
       EBIT USDm                                                                                                                                457
                                                                                                                  415     390
                                  319
                                                                                           247           253                     270     245
                                         231      219                             206
                                  196                                                                             202                              252
+453             150                                       152                                    144                     167
                                                                  136                      111
         88                              103          90                 83                              92
                                                                                      73                                         66
                 34                                        18                                                                             41
                                                                  5                                8
        -29                                                              -50
 4                         -109

-110                                                                                                                                            +362

                           -403
1Q14    2Q14     3Q14      4Q14   1Q15   2Q15     3Q15     4Q15   1Q16   2Q16     3Q16     4Q16   1Q17   2Q17      3Q17   4Q17   1Q18    2Q18   3Q18

               2014                            2015                            2016                            2017                      2018

 21
Hapag-Lloyd’s profitability has been consistently above
      industry average for the past 4 years
      EBIT Margin Development Q1 2014 – Q3 2018
               Hapag-Lloyd EBIT margin
               Average industry EBIT margin

                                                      7.6%                                                                                                                                   7.1%
 8                                                                                                                                                            6.1%
                                                      4.9%                                                                           5.1%                             5.4%
 6                                                                 3.9%         3.8%                                         3.4%                    3.5%
 4                                                                                                                                                            5.0%           2.1%            2.4%
               0.9%        1.4%         1.4%                                                                                                                                         1.2%
 2                                                                                           0.8%           0.2%                             0.4%                     0.6%
       -1.0%                                                       2.7%                                                              -0.9%           2.7%
 0                         1.2%                                                 -1.8%                              -2.4%
 -2                                                                                                                                                                          -3.0%
               -1.3%                                                                                                                         -1.2%
 -4                                                                                          -5.9%           -6
 -6                                                                                                                -8.1%     -7.7%
       -5.2%                                                                                                                                                                         -8.5%
 -8
-10
-12
-14
                                       -16.7%
-16
-18
   1Q14        2Q14         3Q14         4Q14         1Q15         2Q15          3Q15         4Q15          1Q16   2Q16      3Q16    4Q16    1Q17    2Q17      3Q17   4Q17   1Q18    2Q18    3Q18
                       2014                                                2015                                            2016                             2017                     2018

      22   Note: Industry average only includes figures where available and does not claim to be complete
Our efforts to reduce costs become obvious when applying the
2009 freight rate and bunker price to our 2018 cost structure
2009 freight and bunker price impact on 2018 results (indicative)                                                                                                                   Key takeaways

                                                                                                                                                                                    ▪   Results in 2009 show
                                                                                                                                                                                        disappointing cost
        Market                                                           2009                               9M 2018                         Indicative 20181)
                                                                                                                                                                                        management

        Freight rate (USD/TEU)                                          1,257                                  1,032                                 1,257
                                                                                                                                                                                    ▪   The industry was aware
                                                                                                                                                                                        of the need to reduce
        Bunker price (USD/mt)                                             331                                   406                                    331                              costs and has done so

                                                                                                                                                                                    ▪   Hapag-Lloyd has put in
        Results                                                          2009                               9M 2018                          Indicative 2018                            a great effort and
                                                                                                                                                                                        significantly reduced
        EBITDA (USDm)                                                    -407                                   972                                 ~ 4,000                             unit costs

                                                                                                                                                                                    ▪ When applying the 2009
        EAT (USDm)                                                       -958                                    15                                 ~ 2,700
                                                                                                                                                                                        freight rate to our 2018
                                                                                                                                                                                        cost base, results would
                                                                                                                                                                                        be substantially higher

23   1) Figures based on LTM 9M 2018; simplified application: bunker price 2009 used to calculate raw materials and supplies only; other cost categories LTM 9M 2018 not adjusted
We have also strengthened our equity base while at the same time
optimizing our debt capital structure …
Capital Market Projects

                                         Capital Increases                                                                                                      Bond Issuances

                                                                                                                            Issuance of two new bonds with a total value of EUR 900 m
                                        Takeover container activities ~ USD 1.5 bn                                         The proceeds were used to proactively refinance outstanding
     2014        CSAV
                                        Subsequent capital increase USD ~ 0.5 bn                                            bonds due 2017, 2018 & 2019

     2015        IPO                    ~ USD 300 m
                                                                                                                                 9.75%          7.75%   7.50%                    6.50%2)            5.125%

                                                                                                                                                                                EUR 450 m          EUR 450 m
                                                                                                                                            EUR 400 m

                                        Contribution in kind ~ USD 1.4 bn                                                                                                      EUR 200 m
     2017        UASC                                                                                                                       EUR 200 m EUR 250 m
                                        Cash capital increase ~ USD 0.4 bn
                                                                                                                              USD 125 m
                                                                                                                                      EUR 200 m                                 EUR 250 m

                                                                                                                                   2017         2018    2019      2020   2021     2022      2023     2024

24   1) Annual Result and FX effects   2) Yield to maturity at issuance: 6.50% (weighted average: (6.75% x 250 + 6.186% x 200) / 450 = 6.50%)
…and reduced      financing
       Capital increase II  costs as well as improved the
maturity structure of financial liabilities
Financial Debt Profile as at 30 September 2018

Contractual Repayment Profile as per 30 September 20181), [USDm]

                                                                                                                            2,801

        Liabilities to banks             Liabilities from finance lease contracts
        Bonds                            Other financial liabilities
                                                                                                                                                               Lease liabilities to be recognised under IFRS 163)

                                                                                                                            1,970
                                                                                                                                                                                                              USD 0.5-1 bn
                                                                                                    1,496

                                                     1,162

                                                            2)                                        908                                                                                                     USD 4-5 bn
                              847                     459
                                                                              722

                                                                                                                              521
                              725
                                                      605                     619
       265                                                                                            521                     16                                                                              USD 6-8 bn
    237                           44                                              16                                          295
                            78                      78    20               87                             17
    20       9                                                                                     50
        Q4                   2019                    2020                    2021                    2022                  ≥ 2023

    1) As of January 2018 financial debt profile has been changed to the statement of repayment amounts. Deviation from the total financial debt as shown in the balance sheet as per 30.09.2018 consist of
25 transaction costs and accrued interest 2) ABS programme prolonged until 2020 3) Estimates for operating lease liabilities to be recognized under IFRS 16 as from 1 January 2019 onwards;
    Based on annual and quarterly reports
Reduced CAPEX and substantial positive operating cash flow
generation help to increase FCF and to deleverage the company
CAPEX 2014-2018 [USD m]                                Cash flow 2014-2018 [USD m]
                                                                                Operating Cash Flow
     Other   Containers   Vessels
                                                        Free Cash Flow
                                                            159          -38           109       1,048     651
                  925                                                                            1,020

                  105
                                                                                                           872

                  279
                                                                         635
                                      521
      449                              11
                               433                          501
       11                                                                              461
                                 14   209
                              65
      181
                                              263
                  542                          12
                               354
                                      301     196
      257

                                               55
     2014         2015         2016   2017   9M 2018        2014         2015          2016       2017   9M 2018

26
Stable equity base of USD 7.2 bn, solid liquidity reserve of USD
1.2 bn and reduced net debt of USD 6.5 bn
Equity base [USDm]                                                                    Net debt [USDm]
Equity ratio       41.3%                45.5%               44.6%   40.9%   41.0%                                                        LTM
                                                                                      Net debt /
Gearing            72.1%                66.1%               71.0%   93.8%   91.1%                      27.9x   3.9x    5.7x    5.7x      4.8x
                                                                                      EBITDA
                                                                                                                               7,595     7,272
                                                                    7,263    7,171
                                                                                                                                783       737
                   5,068                5,497               5,342
                                                                                                       4,518   4,256   4,415
                                                                                       Cash 1)          865     625     622
                                                                                                                               6,812     6,535
                                                                                       Net debt        3,653   3,631   3,793

                    2014                2015                2016    2017    9M 2018                    2014    2015    2016    2017     9M 2018

Liquidity reserve [USDm]                                                              Invested capital [USDm] & ROIC [%]
                                                                    1,328                                                      14.134   13.749
                   1,121                                                     1,164
                                        1,048                                                                  9.128   9.136
Unused                                                               545                               8.722
                     256                                     822              470
credit lines                                                                                                                   3,1%      3,2%
                                          423                                                                          1,3%
                                                             200
                                                                                                               4,1%
       1)            865                                             783
Cash                                      625                622              694
                                                                                                   -6,0%

                    2014                 2015               2016    2017    9M 2018                    2014    2015    2016    2017     9M 2018

27     1) Includes Restricted Cash booked as other assets
Our continuous efforts have been recognized by the capital markets

Share performance since 6 November 2015
Indexed Price
     225
     200
     175
     150
     125
     100
      75
      50

                                              HLAG   Maersk         Evergreen        OOIL            SDAX   DAX Global Shipping

Bonds trading

 110

 105
                                                                                                                                  103.4
                                                                                                                                  100.9
 100

     95
                                                     HL EUR 6.75 % 2022         HL EUR 5.125% 2024

28     Source: Bloomberg (19 November 2018)
Wrap-up

Key takeaways

                   ▪   Hapag-Lloyd financials show clear positive development
Scale              ▪   Since 2014, Hapag-Lloyd has substantially grown transport volume and revenue
                   ▪   At the same time, we were able to significantly reduce our unit costs

                   ▪   In a challenging market environment, we were able to steadily increase our
                       operational result
Profitability
                   ▪   Hapag-Lloyds profitability has been consistently above industry average
                   ▪   Profitability supported by improved ownership structure and synergies

                   ▪   We have strengthened our capital structure and optimized our maturity profile
                   ▪   At the same time we have reduced our investments to maximize free cash flow
Financial policy
                   ▪   Therefore we were able to clearly deleverage over time
                   ▪   And we managed to maintain an adequate liquidity reserve
29
Strategy 2023
CEO Rolf Habben Jansen & CFO Nicolás Burr

30
Going forward, what do we assume?

                                                    §
                                                                               Technology
         Market structure              External restrictions
                                                                              opportunities
     ▪ Reasonable growth              ▪ Increasing legislative          ▪ Carriers build online channels
                                         and societal pressure on          to target smaller customers
     ▪ Reasonably rational capacity      environmental sustainability
        addition                                                        ▪ Automation opportunities for
     ▪ No further consolidation       ▪ 3 alliances going forward          back-end processes
        within Top 7 carriers                                           ▪ Start-up companies
                                                                           remaining/entering logistics
     ▪ Opportunities to
        de-commoditize

31
In our industry marginal returns from further scale have
diminished significantly
         Hapag-Lloyd                 HL + CSAV as of               HL + UASC as of                    Twice-the-scale
          standalone                2nd December 2014               24th May 2017                        scenario

                           -12%

                                          -11%

                                                           -5%
                                                                          -3%
                                                                                               -2% to -4%

     Unit cost ex bunker

             2014                 2015              2016         2017                9M 2018

32
Hapag-Lloyd has a number of clear strengths to build on

       Process quality         In-house IT                      Strong brand
       Global blueprint        data management                  Quality reputation

       Strong global
                               Balanced trade
       shareholder base                                         Pure play carrier
                               portfolio
       Solid Balance Sheet

       Global player
                               The best team from
       with a relevant                                          Young and large
                               4 lines
       market share in                                          vessels
                               Truly global culture
       all major trades

                             Operational execution excellence

33
Our Strategy 2023 has 3 overarching goals

                                                    Number 1
Be profitable              Profitability                          Deliver unparalleled
                                                    for quality
throughout the cycle                                              quality, be
                                                                  customer-oriented,
                                                                  and create value for
                                                                  customers as well as
                                                                  capture value for
                                                                  Hapag-Lloyd
                                           Global
Reinforce strongholds
                                           player                 Focus on customer
Expand in key growth markets
                                                                  segments willing to
Global market share (excluding                                    pay for value
Intra Asia) greater than 10%

34
Overview of core elements to achieve the goals of our Strategy 2023

     Continuously earn and keep            Mid and long-term differentiating strategy
          the “right to play”
                                                                       Environmental
                                              No. 1 quality carrier
                                                                       responsibility
             Continuous
          Cost Management
                                              Superior land side        Best-in-class
                                                 capabilities           Web Channel       Sustainable
                                                                                             value
                                                                                            creation
                                                                                           creation
         Revenue Management                   Focus on selected
                                              attractive markets      Opportunistic M&A
                                                and segments

                                  Digitization & Automation

                                     Agile Organization

35
Continuously earn and keep the “right to play”
36
To enable our differentiation strategy,
remaining cost competitive is a pre-requisite…
From vendor to partner
                                               Continuous
                                                  Cost
                                               Management

                              Container                                      Terminal
                              Steering                                      Partnering
                             Improve cargo
                                                                           Increase quality
                              steering
     Network                                    Collaboration              Optimize port-stay
                             Container                                                             Procurement
  Fix unprofitable           substitution     Partnerships with key      Win-wins in tighter
   services / feeders                           players along the value     partnerships           Further build
                                                chain                                               global procurement
  Improve vessel &
   fleet composition                                                                               Vendor management

  Optimize transshipment
   flows
37
…and we launched a cost management program, structured in
5 modules with a savings run-rate of USD 350-400 million1) by 2021

                                                                                                                                                            350 – 4001)

                                                                                                                                                                          Cost savings, USDm
Modules:                   Network                          Container                      Collaboration                          Terminal    Procurement      Total
                                                            Steering                                                             Partnering

38   1) Compared to a FY 2017 cost base (incl. UASC business for 12 months) Subject to further evaluation and specification in 2019/20
Many of the initiatives are currently already in the
implementation phase, with more to come
                             Example: Transshipment       Advanced analytics tool developed
                                                          Optimize share of transshipment and direct cargo
          Network                                         Optimization of all shipsystems

                            Managing surplus / demand     Reduce empty moves
                                                          Advanced analytics further enhanced
                                                          Avoid container type imbalances through substitution
     Container Steering                                   Direct moves between customers to avoid depots

                           Example: Feeder network ONE    Enhanced and jointly operated Feeder network
                                                          Shift volumes from 3rd-party feeder to own services

       Collaboration                                      Review and expand collaboration opportunities

                               Partnering approach        Timely exchange of information
                                                          Reduced waiting time
                                                          Improved productivity
     Terminal Partnering                                  Early departure

39
Revenue Management Excellence is based on Product, Pricing
and Uptake Management

         Decision on                                                  Decision on Booking
                                      Decision on Pricing
       Product/Contract                                                      Uptake
     ▪ Clearly defined products      ▪ Analytics-based decision       ▪ Better forecasting
     ▪ Improved contract adherence      support for dynamic pricing      capabilities

     ▪ Reduced revenue leakage       ▪ Data-driven tender pricing     ▪ Automated acceptance
                                                                         decisions

40
To achieve our vision, we will transform Hapag-Lloyd’s
Pricing & Revenue Management in three phases…

     Strengthen the basics           Foundations of new            Advanced Revenue
                                    Revenue Management            Management excellence

          2018-2019                       2019-2020                Long-term aspiration (2020+)

                       Dedicated change management along the journey

41
…which we started in 2018 with the “Contribution Boost”

                            ▪   Focus on 10 short-term initiatives with          Examples: Reduction of low
                                no major system changes                            contributing business

Strengthening the basics:   ▪   Improve cargo mix steering and reduce
   Contribution Boost           revenue leakages                              AT WB                      -63%

                            ▪   Replacing least contributing cargo           LA-E NB                            -34%

                            ▪   Ensure collection of Demurrage & Detention
                                & local revenue                               FE WB               -46%

                            ▪   Develop new Marine Fuel Recovery
                                mechanism and implement same by the                    Baseline     Sep-18
                                beginning of 2019

42
Mid- & long-term differentiating strategy
43
Our strategy is based on our unique strengths and
true differentiation through six strategic pillars
     I        No. 1 quality carrier          II Superior land side capabilities           III Focus on selected attractive
                                                                                               markets and segments

         Rationale: Proven willingness        Rationale: Inland is a differentiator and    Rationale: Shifting market growth
         to pay for quality in the market     can offer contribution beyond port-port      to emerging and niche markets

 IV Environmental responsibility             V Best-in-class Web Channel                  VI     Opportunistic M&A

         Rationale: Changing environmental    Rationale: Serve smaller customers by        Rationale: Seize opportunities that
         regulation and a good asset base     building the best customer front-end         support HL's strategic goals
                                              using our strong IT backbone
44
Market research reveals that PROVEN and CONSISTENT quality
matters to more than half the market…

              "Price
 A            seekers"
                                                                                       01   Capture willingness to pay
              Mainly                                                                        from existing customers by
              cost-driven                                                                   delivering the required quality
              selection                                                                     levels
                                                                                            Optimize customer mix by
              "Value
                                                                                       02   leveraging willingness to
 B            seekers"
                                                                                            award more business from
                                                                                            existing quality customers
              Quality driven                                         Quality matters
              selection                                         >50% to more than
                                                                     half the market        Further optimize customer
              "Service                                                                 03   mix by gaining new
 C            seekers"                                                                      customers in target segments
                                                                                            to reach market customer mix
                                              Market research
                                               participants

45   Source: Market research, December 2017
…and we will deliver a clearly articulated core product to
all customers and more for value and quality seekers

Premium
Product      Diversified       to target specific     Improved       service levels for
                               customer needs                        customers who value
                               not addressed by                      premium service level,
                               base product                          as clearly differen-
                                                                     tiated products with
                                                                     price premium

Base           Consistent across              Transparent with
Product         customers of all size,          measured and
                contract type, and industry     communicated
               Clearly articulated             performance levels
                through quality promises       Calibrated "slightly
                                                above market average"

46
We have defined our future Quality Commitments – which will be
an essential part of the “handshake” with our customers…

         Responsive service
                                                  Commitment to volume and
                                                  bookings
         Timely and accurate
         documentation

         Booked and loaded                        Provision of accurate
         as agreed                                information on time

         Reliable transport

                                                  Payment as agreed
         Quick issue resolution

47
…and we have already taken the first steps on what we know is
a multi-year journey to differentiate on quality…
This will require us to reach deep down into our organizational structure and operational “engine room”,

building on our proven track record of executing large scale projects.

We have already started mobilizing the organization to truly deliver on our initiatives,
                                                                                                                        More to come…
and have the ability to systematically monitor progress and development and adjust course as necessary.

                                                                                           Procurement and supplier
                                                                                                 management
                                                                   Partnering
                                     Web Channel                                                    First pilot in Benelux
                                                                                                     successfully completed

     Premium product                                                 Enhance product and new
                                                                      partnerships
       development
                                      More product additions

         Continuously launch
          premium products

48
…and some of it is already in place today

Some examples of segments where customers are willing to pay for value

           Web Channel              Cherry Express                Dangerous
                                                                    Goods
             Instant quotes            Fast transit times       Safety

             Immediate booking         Direct port calls        High quality
                                                                   documentation
             Direct confirmation       Special care
                                                                  Highly skilled and
                                                                   experienced staff

49
Hapag-Lloyd intends to offer more end-to-end business,
as we believe this can be beneficial for all parties

Higher profitability by   Increased differentiation   Improved control over    Improved cost through
capturing some value      through better E2E          equipment flows and      integrated procurement
pools and feed more       service                     better steering of the   and reduction of 1-way
contributing cargo onto                               imbalances               trips
our ships

50
We will expand our position in attractive niche segments,
reinforce our strongholds and further build growth markets

                Attractive markets                           Niche segments

                                                                  ▪   High market growth
                                                        Reefer    ▪   Customers are prepared to
                                                                      pay for high quality & value

                                                                  ▪   The market offers
                                                        Special       untapped opportunities
                                                        Cargo     ▪   Ambition is to "scale beyond
                                                                      Europe”

                                                                  ▪   One of the historical
▪    Growth in container shipping increasingly shifts   Dangerous     strength of Hapag-Lloyd
     towards emerging markets                           Goods     ▪   High quality service is already
▪    We are well positioned regarding our strongholds                 valued by customers

51
Sustainable value creation
52
Creating Shareholder Value through Strategy 2023

     To recap, we have described                …and in financial terms our
     the 3 goals of our Strategy 2023…              objectives are to:

                                  Number 1
         Profitability                               Return more than
                                  for quality   01   our cost of capital

                                                     Deliver on our Financial
                                                02
                                                     and Non-Financial
                         Global                      Targets
                         player

53
Financial Targets to be achieved until 2023

Profitability                                                             ROIC (throughout the cycle)                > WACC

                                                                          [This implies an EBITDA-margin of ~ 12%]

Deleveraging                                                              Net Debt / EBITDA                          ≤ 3.0x

Equity                                                                    Equity ratio                               > 45%

Liquidity                                                                 Adequate liquidity reserve of              ~ USD 1.1 bn

54   Note: All KPI’s subject to IFRS 16 adjustments – adjusted KPI’s will be communicated accordingly
Non-Financial Targets to be achieved until 2023

Quality              Achieve best in class Net Promoter Score (NPS)

                     Measure and improve On Time Delivery

Superior landside    Increase share of door-to-door business to over 40% of total by 2023

                     Grow volume in selected attractive markets and achieve a market share
Attractive Markets
                     of ~10% (excl. Intra Asia) in reefer market by 2023

Environmental        Comply with or exceed all IMO environmental regulations

Web Channel          Grow volume booked via Web Channel to 15% by 2023

55
Wrap-up

Key takeaways

                 ▪   Marginal returns from further scale have diminished significantly
Industry         ▪   We believe that the industry is at an inflection point and the future is about
                     differentiation

                 ▪   Hapag-Lloyd has a strong starting position to take the next step to become the
                     number one for quality
Strategy 2023
                 ▪   Customers are willing to pay for quality and value
                 ▪   We have set up a robust strategy that differs from what others do

                 ▪   We are convinced to succeed as we have proven repeatedly that we are able to
Strategy             implement the measures necessary to reach our self-imposed targets
implementation   ▪   We looked at multiple scenarios and have a clear approach for all kind of defaults
                 ▪   To ensure a successful implementation we will follow a set of clear principles
56
Agile Organization –
Ongoing organizational improvements to implement Strategy 2023
CPO Joachim Schlotfeldt

57
Hapag-Lloyd became a truly global company over
the last couple of years…
The "new Hapag-Lloyd"...

                                                … is younger in age…                         … and is more international
                                          [Average age]                                      [Nationalities employed]

                                                          39.2                                76             78           90
                                              39.1
                                                                   38.4

                                       Pre-CSAV       Pre-UASC   Post-UASC               Pre-CSAV         Pre-UASC      Post-UASC

                                                                 Hapag-Lloyd in numbers:

                                    ~12,600 employees                        127 countries                              394 locations*

58 * Thereof 191 own offices and 203 agents
…and it’s organization is in a strong starting position to master
future challenges

     Capabilities       ▪    Strong and recognized IT & process quality

     Execution
     excellence
                        ▪    Ability to successfully manage large-scale projects, e.g. CSAV and UASC integration

     Sales and      ▪       Global Sales and Customer Service network
     customer
     service        ▪       Good brand perception with accessible and knowledgeable sales/CS staff

     Global
     player         ▪       Global footprint and strong home turfs (Germany, Italy, Canada, South America, Middle East)

     People &       ▪       Loyal, committed, and qualified workforce that is open to change
     culture        ▪       Value-driven and principled organization
59
But to be able to execute Strategy 2023 successfully we need to
modernize our organization and improve agility…
Introduction to Agile Organization

Our goal:                                  Steps of the organizational transformation
Increase the agility of the organization
                                                          Core Processes
                                            Improve core processes,
                                            optimize / simplify organization
    Faster decision making
    Continually learn and improve                   Quality Service Centers
    Develop projects flexibly              Improve consistency and quality of service
    Deal with risks earlier
    Partner easily with other players                       Automation
                                            Drive automation of standardized processes

60
…which requires streamlined processes, better tools
and a focus on core business functions
Core Processes

         Business Admin Excellence:    Voyage Control:                        Cargo Control:
         Streamline planning and       Increase schedule                      Improve quality of
         steering processes            reliability                            allocation management
                                                                              and ship planning

                                      Approach

                                           Optimize and simplify processes

                                           Introduce additional and better tools

61
Establishing Quality Service Centers will increase consistency
and quality…

                    1. Improve the consistency and quality of the service provided by Hapag-Lloyd in
                       Areas
                    2. Make continuous improvement of processes easier
                    3. Make process and system roll-outs / updates much faster and more reliable

                      Regional centralization of certain functions of:
                            Customer Service
                            Operations
                            Business Administration
                      Build on extensive experience with bundling of non-customer facing processes in
                        Global Service Centers in Mumbai, Chennai and Shanghai
                      Quality Service Centers (QSC) already established in Atlanta and Suzhou
                      Set up QSC in further Regions, e.g. Region Middle East (Mumbai)
62
…while automation will allow staff to focus on tasks
with higher value-added

           Robotics                        Focus staff on value-adding functions

                      Natural language     Increase quality and speed of work,
                      generation           reduce errors

           Cognitive agents                Support further volume growth of HL

                                           Build on automation already in place
                      Machine learning     due to strong operating backbone
                                           and process structure

63
Our organization will look substantially different in 2023 with more
analytically driven roles and reduced data entry & processing roles
Resource shifts                                                                                          Illustrative

                  Additional staff   Regular                              Additional staff to support
                  to cover           productivity   Long-term             strategy, e.g. niche specialists,
                  volume growth      gains          automation ambition   revenue analytics specialists, etc.

     Starting point                                                                                Steady-state

64
Continuously earn and keep the “right to play” –
Procurement Focus
CPO Joachim Schlotfeldt

65
We will significantly strengthen our procurement and
supplier management capabilities and competence

                                                                             Transport+ initiative to
                                                                             reduce transport spend

                                                                             Bunker procurement

                                                                             Corporate procurement

                                                                             Terminal procurement

 ▪   Objective is to raise service levels and reduce cost – i.e., improve value for money, not just
     drive down cost
 ▪   Impact on all levels of the organization: central, regional, and local
 ▪   Build up partnerships with our key suppliers
66
Procurement excellence program in transport aims at capturing
the full potential by reducing costs and increasing service levels

    Standard procurement                   Individual levers                     Focused enablement to
    methods                                                                      ensure savings capture

▪    Apply standard procurement            ▪    Develop market specific levers   ▪   Ensure successful
     tools                                      on Area level                        implementation
▪    Establish standards across
     Hapag-Lloyd

                                  Significant
                                  cost reduction
  Efficient processes

  Continuous communication                                                             „From Vendor to
                                                                                            Partner“
  Increased transparency
                                                        Better   quality

67
The procurement program will initially focus on transport spend
and additional locally sourced spend categories…
                                                                          Key takeaways

                                                                          ▪   Transport spend
                                                                              fully in scope

                   2,882                                                  ▪   Further increase
                                                                              due to general cost
                                                                              inflation cannot be
                                                                              ruled out
                                      Rail
                                                                          ▪   Additional locally
                                                                              sourced cost
Container
transport                                            Barge / Feeder           categories to be
costs                                                                         addressed
[USDm]

                                             Truck
                                                                          ▪   13 lighthouse
                                                                              projects across all
                                                                              regions already in
                                                                  Other       implementation1)
               LTM 9M 2018

 68 1) Also covering terminal spend
…and the first results illustrate that this ambition is feasible and
realistic

First pilot in Area Benelux completed with positive results                                            Next steps

                Cost savings of mid single digit USD million as well as process and quality   ▪   Europe-wide rail
                 improvements                                                                      tender

                                                                                               ▪ Currently
                                                                                                   addressing
                Partnership discussions held with trucking and barge vendors                      Germany,
                                                                                                   Central Europe
                                                                                                   and Indo-China

                Optimised modal mix                                                           ▪   Thereafter broad-
                                                                                                   scale rollout in all
                                                                                                   Areas in 2019

69
Wrap-up

Key takeaways

Strong
                ▪   Hapag-Lloyd became a truly global company over the last couple of years…
backbone        ▪   …and can build on acknowledged core competencies

                ▪   To adapt faster than competition to changing business environment and to adapt
Become              successfully Strategy 2023 we need to further modernize our organization and
an agile            increase agility
organization
                ▪   Several initiatives have already been implemented

Develop         ▪   With the enlarged organization and changing market environment also
enhanced            Procurement needs to change
procurement     ▪   We will significantly strengthen our procurement and supplier management
capabilities        capabilities and competence

70
Environmental Responsibility –
IMO 2020: Tackling regulatory challenges
COO Anthony Firmin

71
Regulatory challenges have always played a role in shipping

Hapag-Lloyd has successfully adopted new regulations throughout its history

                                                        Tier 3          IMO2020

                       24-hour rule      SOX max 3.5%
                                                                 ISPS

                               Shiprecycling     Ballast water
                                                                          …

72
As of 2020, all ships will be required to use fuel with 0.5% sulphur
content or less on all the world‘s oceans
IMO 2020 Sulphur Regulation                                                                                             Bunker fuel Sulphur limit
                                                                                                                        % Sulphur (by weight)
                                                                                                                          4.5
                                                                                                                                                                                                                             Global
                                                                                                                          4.0                                                                                                ECA
                                                                                                                          3.5

                                                                                                                          3.0                                 Emission control                                All international
 0.5% worldwide                                                                                                                                               areas (ECAs3:                                   bunkers outside
                                                                                                                          2.5                                 Europe and North                                ECAs3 scheduled
 0.1% at berth
                                                                                                                          2.0                                 America) with move                              to move to 0.5%
 0.1% Emission control areas (ECAs)                                                                                                                           to 0.1% Sulphur                                 Sulphur on Jan 1
 Targeted 0.1% ECAs China
                                                                                                                          1.5                                 levels in 2015                                  2020
                                                                                                                          1.0
Fuel type                                   Today                                       2020
                                                                                                                          0.5
                                           Worldwide                                  Only with
 HSFO 3.5%                                   (excl. ECAs)                             scrubbers2                          0.0
                                                                                                                            2010 11          12     13      14      15     16      17     18        19   20   21   22   23   24 2025

                                     No large scale use                               Worldwide
 LSFO 0.5%                                                                               (excl. ECAs)

                                    ECAs3 +                                     ECAs3 +
 MDO 0.1%
                                    EU Ports                                    EU Ports + New
                                                                                ECAs China
73   1) Marine Diesel Oil (0.1% sulphur)   2) Possible use of scrubber for Sox post-treatment   3) Emission Control Area (ECAs) = The Channel, North Sea, Baltic Sea, North America, US Carribean
There are three options to comply with IMO2020 but Low Sulphur
Fuel Oil will be the key solution in the short term
Options for ensuring compliance

1                                           2                                                              3

                        Liquefied natural              Exhaust gas                                             Compliant
                        gas (LNG)                      cleaning systems                                        fuels

Estimated containership fleet as at 2020E
                                                                                                                       LNG powered newbuildings
                                                                                                                       LNG powered conversions
     2
          33                         160                                 5,200                                 5,406   Scrubber newbuildings
11                                                                                                                     Scrubber retrofits
                                                                                                                       Compliant fuels

                                                                   More than 90%
                                                of the container world fleet will run on compliant fuels

74       Source: Alphaliner weekly
Liquefied Natural Gas (LNG)

Hapag-Lloyd believes LNG could be the mid-term fuel solution for the shipping industry

                                                                                           Hapag-Lloyd’s position

                                                     Regulatory certainty
                                              +      Lower emissions                              17
                                                                                                vessels LNG
                                                     Future availability                         ready1)

                                                                                                               Refitting
                                                     High capex                                              one 15k
                                              –
                                                                                                              class vessel
                                                     Bunkering network not yet in place
                                                     Availability in ports not yet
                                                                                                  Further
                                                                                                                             Lower
                                                      sufficient                                                              sulphur
                                                                                                refittings                    content
                                                                                                 possible
                                                                                                                             and CO2

                                                                                                                Mid-
                                                   Estimated cost for conversion and                           term
                                                    additional cost for new builds:                            solution

                                                     USD 25 – 30 million per ship
                                                   Attractive payback
75 1) approx. 18% of current total capacity
Exhaust Gas Cleaning Systems (EGCS)

The use of EGCS is economically attractive as a short- to mid-term solution

                                                                              Hapag-Lloyd’s position

                                   Lower capex than LNG
                           +       No issues with fuel (HSFO 3.5%)
                                                                                      10
                                                                                   retrofits
                                   Economically attractive                        planned for
                                                                                    2019/2020
                                   Proven base technology
                                                                                                 Retrofits for
                                                                                                 13k TEU
                                
                           –        Increased fuel consumption and                               vessel class

                                    higher CO2 emissions
                                                                                     Further                     Higher
                                   Direct discharge of scrubber water into
                                                                                   refittings                    CO2 and
                                    the ocean                                       subject to                    water
                                                                                      pilot
                                   No long-term solution                                                        pollution

                                                                                                  Short-/
                                 Estimated cost for conversion:                                   mid-
                                                                                                   term
                                   USD 7 – 10 million per ship                                     solution
                                 Attractive payback

76
Compliant Fuels

Compliant fuels are the key solution for ensuring compliance from 2020 onwards

                                                                                         Hapag-Lloyd’s position

                                                 No capex
                                          +      Currently most environmentally
                                                                                               Key
                                                                                               solution
                                                  friendly solution                           going into
                                                                                                2020
                                                 Confirmed availability1)
                                                                                                            ~90%
                                                                                                            of ships in

                                          –      High price
                                                                                                             industry

                                                 Higher opex                                    Major

                                                 Possible compatibility problems
                                                                                               refittings                 Low
                                                                                                not                        sulphur
                                                                                                                          emissions
                                                                                              before 2020

                                                 No downtime or cost for conversion
                                                 Additional cost of USD ~1bn annually
                                                  due to higher price

77   1) Confirmation by major suppliers
The IMO2020 regulation will make the industry greener but it
will come with a price
Costs will go up as both compliant fuels and investments into new technologies will be expensive

                                      Estimated impact      Estimated impact      Estimated impact
                                          on entire           on container        on Hapag-Lloyd
                                      shipping industry     shipping industry

     On the assumption that the spread between high-sulphur fuel oil (HSFO) and low-sulphur fuel oil (LSFO 0.5%) will be
     ~250 US dollars per tonne by 2020, Hapag-Lloyd faces additional costs of around 1 billion US dollars annually

78
To recover fuel related costs caused by the IMO2020, Hapag-Lloyd
has developed a Marine Fuel Recovery (MFR) mechanism

 Marine Fuel Recovery Mechanism will be gradually implemented from beginning of 2019
  – all customers will take part in this change
 Hapag-Lloyd will replace all existing fuel charges with a new MFR mechanism

79
The new MFR mechanism is logical, transparent
and easy to understand
MFR creates transparency and is based on market data and averages for market class vessels

               Helps our customers predict and plan price development
               Customer feedback on the MFR has been largely positive

                         The MFR is based on market data (fuel consumption, fuel price and
                          carried TEU) and derived from averages for Market Class Vessels

                                 Unique approach also considering price difference between 0.1% and
                                  0.5% Low Sulphur Fuel
                                 Dominant and non-dominant legs are treated in the same way

80
Governance is crucial – Hapag-Lloyd welcomes the Carriage Ban

A robust enforcement regime is necessary for ensuring a level playing field

          The IMO itself has no authority for          Each Flag and port state responsible
                     governance                       for enforcing the regulation with sanctions
                                                                       and fines

                                                         Carriage Ban as of March 1, 2020

         Strict control in ports is extremely
                      important
                                                       IMO bans vessels that carry HSFO when
                                                            not equipped with scrubbers

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Will the new regulation affect the supply / demand balance
in liner shipping?
Disadvantage of inefficient vessels will become more apparent as older vessels need to
use more expensive fuels                                                                          Illustrative

     Fuel costs per day for an old                          +62,5%
     4,000 TEU vessel
                                                                         32.850
     [USD/day]
                                                                                        +$6,407

                                             20.216
                                                +$3,943

                                         Cost per sea day            Cost per sea day
                                          @ 400 USD/mt                @ 650 USD/mt

          Might lead to increased scrapping of older, less efficient vessels…
          …which would further improve supply / demand balance

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Wrap-up

Key takeaways
                     IMO 2020 will effect the industry as a whole

Regulation 2020      Three options are available to achive compliance (LNG, EGCS, Compliant Fuels)
                     Majority of containerships will run on compliant fuel as of 2020

                     Hapag-Lloyd embraces new regulation as industry is becoming greener
Hapag-Lloyd          We will test LNG and install EGCS in 2019 / 2020
approach
                     Compliant fuel most relevant solution in the short-term

                     MFR mechanism in place to tackle higher bunker costs
                     Positive results of refitting and pilots will lead to further installation of EGCS and LNG
Going forward
                     IMO envisions significant emission reduction by 2050

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Digital Transformation
CEO Rolf Habben Jansen

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Hapag-Lloyd’s journey to digitization started in the early 90’s

                                       „Electrification“                                                 Digitization
1990                                                                                                                     Today
                                                                                     Integration
     93                                        00                              10      CSAV &                            18
                                                                                        UASC

                                             Advanced functions and process            Advanced
  System standardization &
                                               coverage, EDI-connectivity,           forecasting &
integration for core processes
                                             automation, system architecture          optimization

                           Enhanced biz
                                                                                Process              Ease of doing biz with, new
                          steering through
                                                                               Excellence                   architecture
                                 BI

85
Hapag-Lloyd’s existing IT is the basis for our digitization efforts…

                                                                                   Compass

             Integration  Single Version of Truth                                    FIS

                                                                                  Biz Analytics
             High Degree of Automation,
             i.e. Quality and Efficiency

                                                       Customer

                                                                                                               Supplier
                                                                                      SAP
             Connectivity EDI/API/Web/Mobile
                                                                  Communication      CRM          Marine Ops

             Analytics to manage global networks                              Base Systems

                                                                  Standardized Processes & Organization

     Excellent starting point to continuously enhance Hapag-Lloyd’s service products and quality
     by leveraging digital technologies

86
…which can only be successful if there is close alignment
between Business and IT

                           HL IT             Biz-IT Alignment                   Digital Excellence

                                   Integrated management of digital
     Tech Watch Unit               development programme                              Digital Channel & e-Biz Unit
      Track >200 start-ups         Commercial, Operations, BA, IT, Board             Hapag-Lloyd online channel
      Discussions with >50         Agile project pipeline management                 Portal partnerships
      Partnerships with ~10        Disciplined project execution – on time,          Agile product development
                                      on budget

                                        ~ 100 IT projects p.a.
                                         Process excellence
                                         Automation
                                         Collaboration

87
Hapag-Lloyd is actively monitoring digital developments
and partnering with leading-edge companies…
                                            We are closely monitoring developments. Where sufficiently
                                            interesting we start discussions, leading to pilots, and eventually to
                                            partnerships
                              TechWatch

Objective                                    Artificial
                                                             Forecasting of empty container demand, network
▪ To build on our strong                   Intelligence,
                                                             analysis and yield management
  operating backbone and IT                  Machine
  competence to                              Learning
  differentiate from the
  competition
▪ Become an increasingly                                     Participating in three consortia to evaluate
                                                             different opportunities to exploit blockchain
  agile and customer-                      Blockchain        technology.
  responsive organization                                    In parallel preparation of technical setup

                              Automation
                                            Already very active with Web Channel, FIS Macros, Container
                                            Steering, Auto Booking Confirmation, Auto Shipping Instruction
                                            and a steadily increasing number of simple process robots
88
…as we know that technological innovations help to create new
and better customer solutions…
                                                    There are plenty of
                                                    opportunities for carriers to
                                                    differentiate, also with
                                                    regard to digitization
While the basic customer                             Customer service
needs have not changed                               Physical services
much, customers today                                Contractual commitments
expect to conduct their                              Digital services
business with the comfort     Customer
of modern technology:
 Mobile applications
                              Centricity
 Transparency
 Fast response                                     Digitization enables us to
                                                    interact more directly
                                                    with customers (and
                                                    suppliers)

89
…and to accelerate this we set up the
Digital Channel Incubation Unit (DCIU)…

      Hapag-Lloyd’s new Digital Channel Incubation Unit   Customer
      (DCIU) drives digitization within the company       Insights &
                                                             Data

          Working with continuous real-time
           market & customer research,
               product development,
                 marketing and IT
               together as one team
                                                            DCIU
                                                                        Agile
       By empowering digital                                            Digital
                                               Digital
       transformation, we provide                                      Product
                                              Marketing
       customer solutions to unleash                                   Develop-
       the potential of the future of                                   ment
       logistics

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…who in a joint effort with IT & Business launched
Quick Quotes in 2018…

     24/7 access to the Quick     Reception of rate in immediate       Quotation with just a
     Quotes tool whenever and               response                       few clicks
             wherever

   Access for all customers       Start of booking process follows   Flexible access to Hapag-
 regardless of size or location                directly               Lloyds extensive global
                                                                              network

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…which in 10 months has grown to around 6% of global Hapag-
Lloyd volume – a business of over USD 0.5 bn annualized revenue!
Quick Quotes volume development

      Volume1                                                                                                                                                         Quotations2
      ‘000 TEUs                                                                                                                                                              ‘000
                                                                                                                                                              New product
      15                                                                                                                       Public launch of                (Open Top)     100
               Project                                                                                                           Web Channel
               start                                                                                                                  (week 33)
      12                                                                                                                                                                          80

                                                                                                                  New products
        9                                                                                                         (e.g., Reefer)                                                  60
                                      Full Minimum-Viable-
                                             Product rollout
        6                                                                                                                                                                         40

        3                                                                                                                                                                         20

        0                                                                                                                                                                         0
                  2        4          6        8        10        12       14        16        18       20        22    24    26   28     30   32   34   36   38   40   42   44

                                                                                                      Volume                 Quotations                   Calendar week (2018)

92   1 Start of Shipment based   2 Quotations: Successful customer requests based on creation date (excl. 2nd quotes)
     Data as of: November 5th, 2018
Wrap-up

Key takeaways
                ▪   Hapag-Lloyd has always been at the forefront of IT developments
Single          ▪   Our global single operating system is an industry acclaimed competitive
operating           advantage…
system
                ▪   …and a strong basis for further digital development

Digitization    ▪   Providing customer solutions by driving digital transformation
focus &         ▪   New focus on collaboration and customer centricity
customer        ▪   Digital Channel Incubation Unit (DCIU) drives digitization within the company…
solutions       ▪   …and develops new digital products in an agile way

New products,
                ▪   We kicked off a number of potentially interesting collaboration efforts
features and    ▪   Web Channel has so far been a huge success
enhancements    ▪   Further digitization products and features are in the pipeline

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Number One for Quality!
     Actively drive change by building on our capabilities

     Continually earn and keep our right to play

     Deliver unparalleled quality

     Become a more agile organization

     Deal with regulatory changes in an environmentally friendly manner

     Create new and better customer solutions through digitization

     Systematically monitor progress and development

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