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Hapag-Lloyd Analyst Day
CFO Nicolás Burr & COO Dr. Maximilian Rothkopf
Hamburg, 20 November 2019
2
Today’s Agenda
Recap on Financials & Strategy 2023 incl. Q&A
Market Fundamentals
Financial Performance
Strategy 2023 Recap
THE Alliance & IMO 2020 incl. Q&A
THE Alliance – Setup 2020
IMO 2020 – Implementation at Hapag-Lloyd
2
1
Recap on 9M 2019 Results & HL 2023
CFO Nicolás Burr
Hamburg, 20 November 2019
4
Market Fundamentals
Financial Performance
Strategy 2023 Recap3
2
1
Agenda
5
Consolidation has been shaping the industry –
Hapag-Lloyd has been at the forefront
OOCLHapag-
Lloyd
COSCO HanjinMaersk CMA
CGM
K-LineMSC APL
0.3
Ever-
green
0.4
CSCL MOL UASCNYK HSüd Yang
Ming
0.5
PIL ZIM
2.5
Hyundai
1.5
CSAV
2.3
0.8 0.80.60.7 0.7
0.40.6
0.50.5 0.50.3 0.3 0.3 0.3
1.3
Maersk ONECOSCO CMA CGMMSC Hapag-Lloyd Evergreen Yang Ming Hyundai PIL ZIM
4.0
3.4
2.9 2.7
1.7 1.6
0.40.7
0.4 0.3Rankin
g a
s o
f 2019
Rankin
g e
nd o
f 2013
Carrier capacity [TEU m]
Industry consolidation
39%
16%
17%
19%
44%
65%
2013 2019
Top 5
Top 6-10
Remaining
Global capacity share [%]
6
3.2
2014
61%
2010
3.4
21%
20082007
50%
2009
27%
2015
28%
2011
2.8
11%
2013
21%
2012
38%
19%
6.0
16%
2.5
2016
3.3
13%
4.3
2017
12%
2018 YTD
October
2019
6.5
5.0
3.93.6
3.8
2.5
18%
Orderbook-to-fleet Newly placed orders
Source: MDS Transmodal (October 2019), Drewry Forecaster (various issues), Clarksons (October 2019), Alphaliner weekly (various sources)
[TEU m, %]
Orderbook
Vessels ordered after 30 September 2019
Share of world fleet
Vessels > 13,999 TEU
2011 201820132012 201720152014 2016 YTD
October
2019
1.8
0.4
2.0
1.1
2.2
0.2
0.80.4
1.2
Idle fleet
[TEU m, %]
[TTEU] Share of world fleet 4.9%
417628
228
Q4
2014
Q4
2011
Q4
2012
Q4
2017
Q4
2016
Q4
2013
Q4
2015
Q4
2018
1,359 1,420
595809
779
28 October 2019
(increase driven by
scrubber retrofits)
1,123
The orderbook remains historically low at only 11%…
7
…and scrapping is expected to increase,
which indicates a healthier outlook for the industry
Scheduled vessel deliveries[% of world fleet]
Scrapping
Net capacity growth in 2019e
[TEUm]
Supply / demand balance
Net capacity
growth
ScrappingGross capacity
growth
Slippage
-0.5%-0.9%
-1.2%
Estimated Fleet
’Out of Service’
for scrubber
retrofits
5.1%
3.7%
Source: Drewry (Forecaster 3Q19), Clarksons (October 2019)
20182017
1.7%
2015 2021e2016 2019e 2020e
0.9%1.1%
3.3%
2.0%
0.6%
1.5%
2015 2019e
1.21.2
20172016
1.7
2018 2020e 2021e
0.9
1.3
1.01.1
0
1
2
3
4
5
6
7
8
9
4.7%
2015
2.1%
1.2%
7.6%
8.0%
4.9%
6.1%
2011
3.3%
2.2%
20172012
5.5%
4.3%
2013
6.3%
4.6%
2014
3.2%
8.0%
2016
5.8%
3.9%
3.8%
5.6%
2018
3.7%
2019e 2020e
Demand Supply
8
Alliances have taken measures to actively manage capacity
on the Far East and Transpacific trades in 2019
Transpacific
Extra-loaders have been added during peak season
Far East
Far East Trade (~408,000 TEU weekly capacity)
THE Alliance and Ocean Alliance have removed more than 150,000
TEU capacity during peak season and have announced blank
sailings around Golden Week
Carriers have announced 9 blank sailings to US WC
Carriers have announced 6 blank sailings to US EC / US
GC
Post Peak Season
Peak Season
Temporary suspension of 2M´s AE2/Swan loop
~18,000 TEU/week to North Europe equal to 18% of 2M’s trade capacity;
~4% of total trade capacity & ~7% of North Europe related capacity
2M has announced three blank sailings in the first half of October
31,000 TEU/week equal to ~8% of total trade capacity; ~6% of North
Europe related capacity & ~10% of Med related capacity
HMM withdrew it‘s standalone AEX-service
~4,900 TEU/week to North Europe equal to ~1% of total trade capacity &
~2% of North Europe related capacity
9
Also, the consolidation is beginning to materialize in less volatile
freight rates on a global level
45
60
75
90
105
120
Jan.-
12
Jan.-
09
Jan.-
15
Jan.-
14
Jan.-
10
Jan.-
16
Jan.-
11
Jan.-
13
Jan.-
17
Jan.-
18
Jan.-
19
CT
S G
lobal R
ate
Index
0
10
20
30
40
Jan.-
13
Jan.-
10
Jan.-
11
Jan.-
16
Jan.-
12
Jan.-
17
Jan.-
14
Jan.-
15
Jan.-
18
Jan.-
19
Absolu
t diffe
rence
betw
een
hig
hest
and
low
est
rate
in
past12 m
onth
30
55
35
40
45
60
50
65
70
75
80
85
The industry has reached an
unprecedented level of global rate
stability
Volatility at a global scale has
diminished sharply over the
decade
Individual trades will always show
higher levels of volatility due to
capacity shifts
Clear correlation between
reduction in rate volatility and
degree of industry consolidation
Development clearly shows that the
industry is changing already
Comments
CTS global rate index and rate volatility vs. carrier consolidation
[Index: 2008 = 100]
To
p 1
0 c
arr
ier
contr
olof
glo
bal capacity
Source: CTS Oct. 2019, Transmodal Oct. 2019
[USD] [% capacity share]
10
Market Fundamentals
Financial Performance
Strategy 2023 Recap3
2
1
Agenda
11
On the back of two mergers, Hapag-Lloyd was able to significantly
increase transport volume and revenues
Volume and Revenue Development Q1 2014 – Q3 2019
2,807
1,399
2,411
2,130
1Q14
2,152
1Q18
1,474
2Q14
3,268
1Q19
2,229
2,929
3Q14
1,560
3,565
4Q14
2,593
1Q15
1,945
2,620
2Q15
1,9341,861
1Q16
2,974
2,376
3Q15 2Q16
1,822
2,225
1Q17
1,811
2,271
2,124
1,892
3Q19
2,088
3Q16
1,950
2,182
2,861
4Q16
2,287
2Q17
2,629
3Q17
2,774
3,119
4Q17
3,4783,221
1,473
3,356
2Q18
3,052
3Q18
3,534
4Q18
3,038
3,569
2,9873,045
3,608
1,947
2,276
4Q15
1,774
2Q19
+69.4%
+117.7%
Revenue [USDm]
Transport Volume [TTEU]
2014 2015 2016 2017 2018
Capacity
year end [TTEU]1,009 966 963 1,573 1,643
2019
1,670
12
While bunker prices increased since 2016, freight rates have
remained stable
Freight Rate vs. Bunker Price Q1 2014 – Q3 2019
595 592 585
525
312 306
245
178 182224
257313 312 308
338372
399446 467
425 434 416
4Q15
1,422
1,010
2Q14
1,426 1,448
1Q18
1,412
4Q14 2Q19
1,027
3Q14
1,331
1,067
362
1Q15
1,264
2Q15
1,189
3Q15
1,116
1Q16
1,019
2Q16 3Q16
1,029
1Q17
1,033 1,030
4Q16
1,056 1,072
2Q17
1,065
1Q14 3Q194Q17 2Q18
1,0551,079
3Q17
1,084
4Q18 1Q19
1,063 1,084
3Q18
Freight Rate [USD]
Combined Bunker Price [USD/mt]
Note: For the financial year 2018, revenues for additional services in Latin America and Turkey were included in the calculat ion of freight rates. The previous year´s figures have not been adjusted
2014 2015 2016 2017 2018 2019
13
108 70 70 74 92
929825 785 766
2018
1,057
20172014 2015
999
2016
1,165
895859 858
-26%
Purchased services ex. Bunker Depreciation
We were able to substantially improve our cost structure
5,907 7,401 7,599 9,803 8,900
Transport-
volume
TTEU
Cost per TEU development 2014 – 2018 (ex bunker)
[USD]
69 108
796 755
9M 2018 9M 2019
865 863
9,011
New PL structure
IFRS 16
11,874
Lim
ite
d c
om
pa
rab
ilit
yd
ue
to
ne
w
P&
L s
tru
ctu
rea
nd
IFR
S 1
6
9M 2019 vs. 9M 2018 (ex bunker)
DepreciationTransport costs ex. Bunker
14
Results have been improving consistently since Q2 2016
despite a challenging industry environment
EBITDA and EBIT Development Q1 2014 – Q3 2019
4
88
150
319
231 219
152 136
83
206247
144
253
415390
266
453
556524
617
443
392
479
-110
-29
103 90
18 5
73111
8
92
202167
62 47
248
164
243197
282
2Q18
196
3Q14 4Q181Q17
-403
1Q14 4Q14
-109
2Q14
34
1Q15 4Q152Q15 3Q15 1Q16 4Q17
-50
3Q182Q16 3Q16 4Q16 2Q17 3Q17 1Q18
251
372
1Q19 2Q19 3Q19
EBITDA USDm ex. IFRS 16
EBITDA USDm
EBIT USDm
2014 2015 2016 2017 2018 2019
15
2016 2017 2018
0.2%
Q1Q1
1.8%2.7%
-8.1%
3.4%
-2.4%
Q2
-7.7%
6.1%
Q3
6.9%
-0.9%
Q2
5.1%
Q4
7.8%
Q4
-1.2%
0.4%
3.5%
4.6%
5.0%
-3.0%
Q3
0.6%
5.4%
Q1
1.3%
Q4
1.9%1.3%
Q1
-5.8%
1.4%
Q2 Q3
7.0%
-8.5%
Q2
2.9%
Q3
5.5%
2.1%
Average carrier EBIT margin Hapag-Lloyd EBIT margin
Evergreen
Maersk
COSCO
Wan Hai
Hapag-Lloyd
-4.7%
Yang Ming
HMM
7.8%
7.3%
4.8%
3.6%
2.7%
-1.5%
9M 2019
Q3 2019
Effects of sector consolidation can also be seen in stabilizing results
across the industry over the past quarters
2019
Yang Ming
Hapag-Lloyd
2.6%
Maersk
COSCO
Evergreen
Wan Hai
HMM
6.8%
4.9%
4.7%
3.7%
-0.8%
-7.2%
Average values are based on a varying number of carriers due to differences in data availability in the respective quarters1) Based on Maersk Group as Maersk has stopped to publish a liner EBIT in Q1 2018; 2) HMM incl. bulk business due to unavailability of liner business only
1)
1)
2)
2)
16
Stable equity base of USD 7.3 bn, very strong cash flow
generation of USD 1.7 bn and reduced net debt to EBITDA of 3.2x
Equity base [USD m] Net debt [USD m]
1) Includes Restricted Cash booked as other assets
Invested capital [USD m] & ROIC [%]
Equity ratio
3,653
865
2014 2015
625
3,793
4,415
5,4483,631
622
2016
7,272783
2017
6,812
737
6,535
9M 2018
636
9M 2019
6,084
4,518 4,256
7,595
9M 20182014 2015 2016 2017
5,4975,068
9M 2019
5,342
7,263 7,171 7,332
Net debt /
EBITDAGearing
Net debt
Cash1)
8.722 9.128 9.136
14.134 13.749 14.076
2017
3,1%
2014
-6,0%
4,1%
2015
1,3%
2016
3,1%
9M 2018
6,5%
9M 2019
27.9x 3.9x 5.7x 5.7x 3.2x
LTM
72.1% 66.1% 71.0% 93.8% 85.5%
41.3% 45.5% 44.6% 40.9% 40.9%
4.8x
LTM
92.0%
40.2%
Operating cash flow [USD m]
501635
461
872
201720152014
1,020
9M 20199M 20182016
1,727
Free CF 159 -38 109 1,048 651 1,483
17
Financial Highlights 9M 2019 –
Clearly improved financial results compared to previous year
* IFRS 16 impact
9M 2018
9.0
9M 2019
8.9
+1.2%
9M
2018
1,032
1,075
9M
2019
+4.2%
363
333
9M 2019
15
9M 2018
-30*
+USD 318 m
Transport volume [TEU m] Freight rate [USD/TEU] Revenue [USD m]
9M 2018
10.1
9M 2019
10.7
+5.1%
357696
722
9M 2018
26*
9M 2019
+102.2%
Operating CF [USD m]EBIT [USD m] EAT [USD m]
872
9M 20199M 2018
1,727
399*
1,328
+98.1%
18
Market Fundamentals
Financial Performance
Strategy 2023 Recap3
2
1
Agenda
19
Our Strategy 2023 has 3 overarching goals
Be profitable
throughout the cycle
Deliver unparalleled
quality, be
customer-oriented,
and create value for
customers as well as
capture value for
Hapag-Lloyd
Focus on customer
segments willing to
pay for value
Reinforce strongholds
Expand in key growth markets
Global market share (excluding
Intra Asia) greater than 10%
Global
player
Number 1
for qualityProfitability
20
Mid and long-term differentiating strategy
No. 1 quality carrier
Superior land side
capabilities
Focus on selected
attractive markets
and segments
Best-in-class
Web Channel
Environmental
responsibility
Opportunistic M&A
Continuously earn and keep
the “right to play”
Continuous
Cost Management
Revenue Management
Digitization & Automation
Agile Organization
Overview of core elements to achieve the goals of our Strategy 2023
Sustainable
value
creation
21
We are on-track to deliver on profitability and deleveraging targets
We have made further progressin achieving our quality targets
BE PROFITABLE # 1 FOR QUALITY
Financial result significantly up, EBIT +102% vs. 9M 2018
Financial debt reduced by USD ~800m (excl. IFRS 16) , e.g. due to early Bond repayments
Net leverage improved to 3.2x (excl. IFRS 16), earlier than expected
Strong cash conversion (>90%) and adequate liquidity reserve of USD >1.1 bn available
Cost Management Program (incl. restructuring of unprofitable services) on track with positive effect on unit cost
Overall good results achieved with Revenue Management
Quick Quotes (Web Channel) withongoing strong growth rates in 2019
A new CRM tool for our sales force launched in summer 2019
Further Quality Service Centers (QSCs) to strengthen our delivery consistency and organizational efficiency
Substantial improvement in Net Promoter Score (NPS)
We have reinforced our market share and expanded in niche markets
GLOBAL PLAYER
Global market share stable around 10% (excl. IRT Asia)
Continued growth in reefer and special equipment towards 10% market share target
Strengthened position in attractive markets by launching new services e.g. from Turkey to North America East Coast (Apr 2019), from South East India to Europe (Oct 2019) and from Middle East / India to Africa (Oct 2019)
Tangible steps made on Strategy 2023 in 9M 2019
22
2021
Full savings run rate
2019 2020
350 – 4001)
Cost savings potential
ProcurementNetwork Container
Steering
Collaboration Terminal
Partnering
Total
350 – 4001)
Full run rate [USD m] Cost savings ramp up [USD m]
Savings
implemented
for 2019
Cost management program with substantial savings ramp-up in 2019
1) Compared to a FY 2017 cost base (incl. UASC business for 12 months) Subject to further evaluation and specification in 2019/20
23
We are well on track in implementing our planned
savings initiatives
NETWORK
PROCUREMENT
TERMINAL
PARTNERING
CONTAINER
STEERING
COLLABORATION
Degree of
Implementation
90%
70%
20%
95%
20%
Advanced analytics tool developed
Optimize share of transshipment and direct cargo
Optimization of all shipsystems
Reduce empty moves
Advanced analytics further enhanced
Avoid container type imbalances through substitution
Direct moves between customers to avoid depots
Timely exchange of information
Reduced waiting time
Improved productivity
Early departure
Enhanced and jointly operated Feeder network
Shift volumes from 3rd-party feeder to own services
Review and expand collaboration opportunities
Raise service level and reduce costs
Establish standardized procurement tools/methods across Hapag-Lloyd
Build up partnerships with key suppliers
Measures
24
Example Network: Restructured services CCI, IMX and AGX
contribute mid double digit USD m savings in 9M 2019
CCI IMX
Implemented: June 2018 Implemented: January 2019
JulAprFebJan Mar May Jun Aug Sep
9M cumulated savings [USD m]
AGX
Implemented: December 2018
Combination of 2 services
Reduction by 1 vessel
Optimization of vessel size
Joint operation in new partnerships
Mid
do
ub
le d
igit
Measures
25
We have further built on our foundation of new Revenue Management
with the implementation of advanced revenue optimization drivers
Uptake
Management
Tools
Cargo Mix
Capabilities
Pricing
Techniques
▪ Advanced Booking Acceptance engine
▪ Granular booking uptake analytics
▪ Rule Based Price Setting
▪ Quick Quotes
▪ Shipping Guarantee
▪ Cargo Insurance
▪ Low contributing cargo steering
▪ Improved Transhipment attractiveness
steering
▪ Building of Inland Products
▪ Cargo Mix Optimization tool with constraint
based rule set
Jan-19 Sep-19
7.9%
6.1%
-1.8ppt
Jan-19 Sep-19
9.2%9.5%
-0.3ppt
Far East Trade1) Asia – LatAm Trade1)
1) A lower figure represent a more optimized scenario
Key Concepts
Improvement in cargo mix optimizes profitability of ship systems
and trades
A 100% fully optimized ship system will never occur
Different trades can have very different optimization potentials
Examples
26
Deleveraging
Liquidity
Equity
ROIC (throughout the cycle)
Net Debt / EBITDA
Equity ratio
Adequate liquidity reserve of
> WACC
≤ 3.0x
> 45%
~ USD 1.1 bn
Profitability
Attractive
Markets
Superior
landside
Quality
Web Channel
Environmental
Grow volume in selected attractive markets and
achieve a market share of ~10%
(excl. Intra Asia) in reefer market by 2023
Increase share of door-to-door business
to over 40% of total by 2023
Comply with or exceed all environmental
regulations (incl. IMO)
Grow volume booked via Web Channel
to 15% by 2023
Achieve best in class Net Promoter Score (NPS)
Measure and improve On Time Delivery
We remain ambitious and are confident to achieve the goals we have
set our self
Financial Targets to be achieved until 2023 Non-Financial Targets to be achieved until 2023
27
Major targets for 2019 and beyond continue to remain unchanged
Continuously proactively adjust to changing market conditions
Continue to increase profitability and further deleverage our company
Successfully implement IMO 2020
Continue to implement our “Strategy 2023” and create more value for our
customers and shareholders as we strive to become number one for quality
Further develop and offer more digitalized solutions to our customers
Continue Revenue Management professionalization and
make further progress on our Cost Management program
THE Alliance setup and
Status on IMO 2020 preparations
COO Dr. Maximilian Rothkopf
Hamburg, 20 November 2019
29
2020: A key year for operations
Manage
IMO 2020
Transition
Strengthen
THE Alliance
Operational focus topics for the year 2020:
Improve
Schedule
Reliability
Further
enhance
IT Systems
&
Organization
30
THE Alliance – Setup 2020
IMO 2020 – Implementation at Hapag-Lloyd
Q&A session3
2
1
Agenda
31
THE Alliance: Multilateral framework based on core principles
defining our unique selling proposition
Multi-Trade agreement: Atlantic, Far East-Europe, Asia-Middle East and Transpacific
Best ship for the loop principle: Deployment of operationally most appropriate vessel in each loop, regardless of providing line – mixed loops are the norm
Loop allocation share:Based on core principle: “What you put in, is what you get out” – irrespective of where own vessels are deployed
Organizational setup: Joint coordination center in Singapore, with agreed Joint Working Procedure for daily operation
THE Alliance members as from 1 April 2020
Core principles of THE Alliance
~280 vessels
32 services
32
THE Alliance partnership allows Hapag-Lloyd to offer a superior
product on core east-west-trades
Setup of joint service network covering a defined scope of trades
Ensure multiple weekly departures from/to main east/west destinations
Enhanced product for customers
Multiple departures per week which would be impossible in stand-alone situation
Reduced investment needs due to vessel sharing between alliance partners
Improved utilization over all services
Reduced unit costs
Same underlying mechanisms as a classical “vessel sharing agreement”, but larger scope
Frequent joint review of product offering and clearly defined processes for changes
Use of large vessels to leverage economies of scale
Joint deployment decisions of fleet based on each line’s demand
Alliance concept
Advantages for Hapag-Lloyd
33
HMM joining THE Alliance on 1 April 2020 brings additional
ULCV capacity…
Current capacity HMM New orders
Vessels: 12
Vessel capacity: 23,000 TEU
Delivery as of Q2 2020
% of future total fleet1): 33% HMM will participate in
THE Alliance on major East-West trades (such as Far East and Transpacific) from1 April 2020
Vessels: 57
Capacity: 274,806 TEU
Avg. capacity: 4,821 TEU
% of total fleet: 64%
Chartered fleet
Vessels: 19
Capacity: 154,160 TEU
Avg. capacity: 8,114 TEU
% of total fleet: 36%
Owned fleet
Yearly transport volume: ~ 4,500 TTEU
Vessels: 76
Capacity: 428,966 TEU
Avg. capacity: 5,644 TEU
Total fleet
Vessels: 8
Vessel capacity: 15,000 TEU
Delivery as of Q2 2021
% of future total fleet1): 15%
1) Assumption that entire current fleet will be continued; likely some return of charter vessels
34
…and will further strengthen THE Alliance’s competitive position
Transpacific Far EastAtlantic
2M
45%
14%
Ocean
Others
5%
36%1) ( - pp)
THE Alliance
2M
21%
42%
Ocean
Others
8%
29% (+3 pp)
THE Alliance
2M
39%
36%
Ocean
Others
0%
25% (+1 pp)
THE Alliance
Source: Alphaliner Monthly Monitor (October 2019) Note: (%) = Market share excl. HMM 1) HMM with no participation on Atlantic trade
Alliance capacity shares on major trades (incl. HMM)
35
THE Alliance – Setup 2020
IMO 2020 – Implementation at Hapag-Lloyd
Q&A session3
2
1
Agenda
36
1.0
2.0
0.0
0.5
3.5
3.0
1.5
2.5
4.0
4.5
1716122010 11 1413 15 1918 20 2321 22 24 2025
Fuel type
0.1% Emission control areas (ECAs)
Targeted 0.1% ECAs China
0.5% worldwide
0.1% at berth
VLSFO 0.5%
HSFO 3.5%
MDO 0.1%
Only with
scrubbers2
Worldwide(excl. ECAs)
ECAs3 +
EU Ports + New
ECAs China
Worldwide(excl. ECAs)
ECAs3 +
EU Ports
No large scale
use
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 Carribbean
IMO 2020 Sulphur Regulation
Today 2020
As of 2020, all ships will be required to use fuel with 0.5% Sulphur
content or less worldwide
Bunker fuel Sulphur limit
% Sulphur (by weight)
Emission control
areas (ECAs3:
Europe and North
America) with move
to 0.1% Sulphur
levels in 2015
All international
bunkers outside
ECAs3 scheduled
to move to 0.5%
Sulphur on Jan 1
2020
Global
ECA
37
There are three options to comply with IMO2020
C u r r e n t H L f u e l p o r t f o l i o i n l i g h t o f I M O 2 0 2 0
Majority of fleet will use compliant fuel
10 Hamburg Class
9 charter ships
Study further scrubber opportunities
Pilot conversion of "Sajir“
Potential to convert 16 additional LNG-ready ships
Liquefied natural
gas (LNG)Scrubber (EGCS)Compliant
fuels
1 32
Options for ensuring compliance
38
Hapag-Lloyd is on its way to ensure compliance with IMO 2020
First VLSFO is
bunkered
Mid October
First consumption of
VLSFO
From December 1st
Consumption of
HSFO is now
forbidden
Jan 1st
Latest date for change-over
December 31st
Carriage ban
for HSFO
(except scrubber)
March 1st
No vessel burns HSFO
Last stocks to be debunkered
Jan 1st – February 29th
Regulatory deadline to ensure compliant
fuel is provided to every vessel
39
The objective of the IMO 2020 project group is to ensure a smooth transition of Hapag-Lloyd’s fleet while avoiding any HSFO
debunkerings in 2020
Business
IntelligenceLegal &
Insurance
Chartering
Fuel Purchase
Network &
Cooperations
= Project Lead
There are certain operational requirements to ensure
compliance
– Tanks need to be cleaned prior to bunkering of VLSFO
– Ship implementation plan has to be developed
– Debunkering to be avoided due to financial and
operational risks
– Contractual agreements for charter vessels have to
be fulfilled
Working group established
Fleet
Management
Transition of Hapag-Lloyd’s fleet towards IMO 2020 compliance is
a complex task but well underway
IMO 2020
Group
40
Fuel change-over monitoring
Port 1 Port 2 Port 3 Port 4 Port 5
Bunker VLSFO
ROB HSFO
Bunker HSFO Change-over
date
HSFO tank capacity
VLSFO tank capacity
Latest by
31st Dec 2019
Fue
l in
me
tric
to
ns
Consumption
Tank cleaning
The industry faces a 3-dimensional dilemma between
change over date vs. risk of debunkering vs. additional costs
Individual fuel change-over monitoring for each vessel
▪ Required tank
cleaning reduces
tank capacity for
HSFO
▪ Port omissions could
disrupt bunkering
and cleaning plans
▪ Speed ups might
result in earlier
consumption of
VLSFO
▪ Additional cost
could occur due to
earlier change-over
Key takeaways
41 Source: Internal assessment
We are confident that Very Low Sulphur Fuel Oil will be sufficiently
available at major ports
Current coverage of secured VLSFO [0.5%]
Top 8 HLAG
Bunker Ports
Share of total
yearly volume
[%]
~ 20
Total 100
Other
To
p 8
~ 8
0%
A
B
D
C
E
F
G
H
~ 55
~ 20
~ 5
42 Source: Platts data as per 30.10.2019, futures data & own calculation
216
464
150
200
250
300
350
400
450
500
550
600
Apr
19
Jul
19
Jan
19
Feb
19
Mar
19
Oct
19
May
19
Jun
19
Aug
19
Sep
19
Nov
19
May
20
+248
+150
+57
HSFO [3.5%]
HSFO [3.5%] Forward
VLSFO [0.5%]
VLSFO [0.5%] Forward
Price spread between VLSFO and HSFO was estimated to be around
250 USD/mt – Current prices support our estimation
Rotterdam bunker prices [USD/mt]
43
The Marine Fuel Recovery Mechanism (MFR) replaces all
existing fuel charges
MFR has been gradually implemented from 1 February 2019
It is causal, transparent and easy-to-understand
It helps our customers predict and plan the price increases for
their trade routes
The calculation is based on average market data
As of today, MFR has been implemented in the majority of our
contracts
We have introduced a Marine Fuel Recovery mechanism (MFR)
to pass on higher bunker prices
44
As of 1 December 2019, Hapag-Lloyd will implement an additional
bunker surcharge to cover the IMO 2020 transition period (ITC)
Expected higher fuel price based on a certain spread:
Tank cleaning (Riding Gangs, Additives, Flushing Parcels)
Tank modifications
Stripping pumps
HSFO debunkering
Replacing emergency fuels
Due to unavailability of LSFO 0.5% in specific bunker ports it is possible that we cannot optimize our bunker purchasing and…
– use ULSFO 0.1% instead of VLSFO 0.5%
– bunker several times taking in smaller quantities
– bunker in more expensive portsExamplary graph
Spread
Competitors, such as Maersk/ Hamburg Süd, CMA CGM, ZIM and others have also announced to introduce surcharges to cover the
IMO 2020 transition period, effective December 1st, 2019.
Fuel price development Transitional operational expenses Inefficient fuelling expenses
The ITC will apply to FAK and short term business
45
Fleet modernization programs
2010s 2015s 2020
Theme"Engine power reduction to match demand"
"Optimizing water resistance of Hull"
"IMO 2020 compliance & Future GHG regulations"
ResultIncreased fuel efficiency due to operating on optimized design point for engine
Optimized floating characteristics can lead to fuel savings of up to 10%
Compliance to IMO emission regulations by reducing CO2 emissions
Action
Turbo charger cut out and power reduction. Improved power management for auxiliary engines
Replacement of traditional bulbous by float-optimized bulbous bow, trim optimization and hull roughness
Installation of scrubbers and conversion to LNG dual fuel propulsion
We have continually modernized our fleet and now
need to address evolving emission regulations
In view of IMO 2020, we started modernizing our fleet (own and chartered) by installing 19 scrubbers and a LNG pilot by end of year 2020,
and continue to look at further opportunities
46
GVU for HIMSEN G/E Open loop scrubber (hybrid ready)
At sea ~3,000 tons / hr wash water
3 wash water pumps (+1 in standby) with ~1,000 kW power consumption
Switch over to compliant fuel in none discharge areas (Elbe River, Singapore, China Coast, Belgium Coast…etc.)
Our 13,200 TEU Hamburg Express class vessels are currently being
fitted with Scrubbers
Technical data
Meets all current regulations
Uncertain longer term outlook due to possible further restrictions
Limited capex and relatively short payback time
Slightly higher consumption than w/o scrubber
General Information
47
GVU for HIMSEN G/E
Work in progress and in plan…
… all Hamburg Express class vessels refitted by end of 2020!
48
LNG appears to be an attractive alternative fuel, until future
emission free technologies reach commercially viable scale
Emissions Lowest emissions among currently available fuels
Reduces SOx up to 100%, Particles up to 100%, NOx up to 95%, and CO2 between 20–25%
Technological
maturity Medium-to-long term option to bridge gap from fossil fuels to future emission free technologies
Proven technology already in use with large LNG tankers and some cruise ships and smaller vessels
Still in pilot mode for ULCVs
Capex Higher Capex than scrubber but lasts for vessel lifetime (~25 years)
Fuel availability Long-term availability of LNG appears secured (e. g. increase of US production)
Infrastructure/bunkering capacity building up rapidly
Gas price dropping towards expected long term floor ( e. g. new/cheaper methods such as fracking)
Regulation Widely accepted technology
Lower costs from carbon tax / levy, once applied
LNG
49
Compared to Heavy Fuel Oil (3.5%), Liquefied Natural Gas (LNG)
reduces emissions significantly
CO2
NOx
SOx
Particles
Liquefied Natural Gas (LNG)
~20-25%
~90-95%
~99-100%
~98-100%
Source: IMO GHG study (adjusted)
Reduction of emissions through LNG versus HSFO (3.5%)
Reduction by:
LNG successfully attacks all issues with one solution
The best solution to reduce CO2
emissions in the mid-term
50
LNG Commercial operation - growing order book
Bio fuels
(DME, RME, Ethanol)
Demonstration - first fuel trials of up to 20%
mixtures
e-Methanol Concept stage
Synfuels
(GTL, BTL, MTBE)Concept stage
Ammonia Concept stage
Electricity
(thorium energy conversion)Concept stage
Hydrogen
(+ fuel cells)
Demonstration - considered for regional ferry
operation
For container shipping, LNG appears to be a viable mid-term
option – Other fuels / technologies are all still at the concept stage
High-level comparison per fuel type
Fuel type Shipping readiness Timing1)
Note: battery-electric propulsion excluded due to weight and space constraints 1) Indication based on market expert feedback
Source: Market research, expert interviews
2020 2050
2020 2050
2020 2050
2020 2050
2020 2050
2020 2050
(small) (large)2020 2050
51
Hapag-Lloyd is the first in the world to convert a large container
ship to LNG – What we expect from the conversion of the „Sajir“
What to expect from the “Sajir” conversion?
We want to drive environmental friendly shipping
We do expect reasonable pay back times based on our
business case
The conversion is a pilot project for the entire industry
Conversion planned to be completed by Q3 2020
Planning phase started in Q4 2018
We will gain valuable operational experience
Hapag-Lloyd has further 16 LNG-ready vessels which
could potentially be refitted Our A15 (11x) and A19 (6x)
class vessels were built “LNG-Ready” in line with DNVGL
regulations
Flag Germany Breadth 368.52 m
Class 15,000 TEU Draught 51.00 m
Length 14.50 m
52
Disclaimer
This presentation contains forward-looking statements that involve a
number of risks and uncertainties. Such statements are based on a
number of assumptions, estimates, projections or plans that are
inherently subject to significant risks, as well as uncertainties and
contingencies that are subject to change. Actual results can differ
materially from those anticipated in the Company’s forward-looking
statements as a result of a variety of factors, many of which are beyond
the control of the Company, including those set forth from time to time in
the Company’s press releases and reports and those set forth from time
to time in the Company’s analyst calls and discussions. We do not
assume any obligation to update the forward-looking statements
contained in this presentation.
This presentation does not constitute an offer to sell or a solicitation or
offer to buy any securities of the Company, and no part of this
presentation shall form the basis of or may be relied upon in connection
with any offer or commitment whatsoever. This presentation is being
presented solely for your information and is subject to change without
notice.
Forward-looking statements
