German container shipper Hapag-Lloyd on Thursday said global vessel oversupply and a crisis in the Red Sea will force it to cut expenses in 2024 and could reduce sailings, after it posted a 83% fall in net profit in 2023.
"We expect the market environment to continue to be difficult given the large number of ship deliveries this year," said chief executive Rolf Habben Jansen, dding that attacks on ships in the Suez Canal were disrupting its service network.
"We need to further reduce our per-unit costs in order to remain profitable and competitive, going forward," he said.
The company, the world's fifth-biggest container liner, will save on the procurement side and adjust services, he said.
The company posted a net profit of 3.0 billion euros ($3.28 billion) for 2023, down from 17.0 billion a year earlier, and cut its dividend by to 9.25 euros per share.
Hapag-Lloyd is among a number of commercial shippers that have been skipping the Suez Canal after Yemen-based Houthi militants began attacking ships, rerouting via the Cape of Good Hope, which adds two to three weeks to voyages.
German shipowners' group VDR on Tuesday said the diversions cost operators $1 million per tour.
A profit bonanza in 2022, when global shipping benefited from soaring prices as trading faced hiccups during the recovery from the pandemic, is long-forgotten, and tighter environmental laws require further outlays.
Global fleet growth by perhaps between 7 and 10% this year would also add supply pressure, company data showed.
Hapag-Lloyd forecasts 2024 earnings before interest, taxation, depreciation and amortisation (EBITDA) in a range of 1.0 billion to 3.0 billion euros, compared with 4.4 billion euros achieved in 2023.
Earnings before interest and taxes (EBIT) this year will likely be between minus 1.0 billion to 1.0 billion euros, after 2.5 billion euros in 2023.
Freight rates fell 48% last year to $1,500 per TEU, contributing to a near halving of Hapag-Lloyd's revenue to 17.9 billion euros, with the only upside a fall in fuel costs.
Hapag-Lloyd shares were down 1.1% at 132.8 euros at 0804 GMT.
