Hapag-Lloyd AG — Investor Presentation 2016

Aug 10, 2016

Investor Presentation – Half Year Results 2016

LIASCE	UABCE	LIABOT
以為頭口目 The Company's Company's Company's Company's	した画に書	いみ時に言
私兵事日目	山外田口道	LEASERT
しい時に言	山八田口豊	LIAMED
UASCE	UASCE	いみ回口目
UASCE	しんちじ 月	山内田口目

1 10 August 2016

Disclaimer

Forward-looking Statements

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.

Opening remarks

Strategic highlights: We delivered on our strategic objectives…

Way Forward

Cuatro synergies from the merger with CSAV are being realized on schedule

Octave on track, delivering cost savings and efficiency improvements

Compete to Win roll out completed and new sales organization set up

THE Alliance

THE Alliance created, securing our position in a strong and integrated alliance

Consolidation

Business Combination Agreement signed between Hapag-Lloyd and UASC

Combination forms a top tier liner company with one of the most modern and efficient fleets

Significant value creation via expected synergies of at least USD 400 m p.a.

Clearly reduced investments in the upcoming years maximizing free cashflow

USD 400 m capital increase (backstopped) within six months from Closing

Completion of the merger expected by end of 2016 (subject to regulatory approvals)

Introduction
Sector update
HL financials
UASC deal
Next steps

Financial highlights: ...but our half year results are disappointing

Transport volume	Freight rate	Transport expenses
-0.4%1)	-19.6%	-15.5%
H1 2016: 3.7 TEU m	H1 2016: 1,042 USD/TEU	H1 2016: 962 USD/TEU
EBITDA	EBIT	Group profit / loss
USD 219 m	USD -44 m	USD -158 m
5.2% EBITDA margin	Negative operating result	-1.3% ROIC annualized
Equity	Liquidity reserve	Net debt
USD 5.3 bn	USD 0.9 bn	USD 3.7 bn
44.4% equity ratio	Adequate liquidity	Debt repayment

1) Q2 year-on-year comparison affected by CSAV integration

Difficult market – Freight rates declined further in Q2 to record low levels due to intense competition

• Muted global trade growth based on increased economic risks affected demand for global container shipping services
• Intense competition increased pressure on freight rates in Q2 leading to higher than expected rate declines to unsustainable levels
• Even though freight rates have finally gone back up towards the peak season in various trades this rebound is coming later than anticipated and more is needed going forward
• Supply / demand gap to decrease over next months as growth in global container vessel capacity is expected to be lower than initially forecasted due to scrapping of old and inefficient vessels and postponements of deliveries
• Capacity level of idle ships has risen sharply in recent quarters
• 1) The CCFI reflects China's nationwide export container transport and comprises the reported freight rates of 22 shipping companies

	Introduction
	Sector update
	HL financials
	UASC deal
	Next steps

However, signs supporting a possible recovery over the second half of 2016 remain

…and ship deliveries in H1 slowed down

…and scrapping at multi-years high

Idle capacity remains high…

7 Source: Alphaliner weekly newsletter, MDS Transmodal, Clarksons, Drewry

In the second half, we will do whatever we can to get freight rates back to more sustainable levels

Shanghai – Latin America (SCFI)

Comments

Further freight rate increases planned for August and September 2016 by various carriers, e.g.:1)

• Hapag-Lloyd incl. FE-LA (USD 1,050/TEU), LA (USD 200/TEU), FE-ME (USD 100/TEU), FE-Aus (USD 300/TEU)
• Maersk incl. FE-LA (USD 750/TEU), ISC-Africa (USD 150/TEU), ISC-LA (USD 150/TEU)
• CMA CGM incl. FE-Africa (USD 400/TEU), FE-Europe (USD 1,850/TEU), ISC-Africa (USD 300/TEU), Europe-ME (USD 200/TEU), Europe-ISC (USD 300/TEU)
• OOCL: incl. FE-LA (USD 750/TEU)
• Hamburg Süd: incl. FE-LA (USD 750/TEU)

8 Source: Shanghai Shipping Exchange (5 August 2016), Company information 1) Based on peer and industry publications

Going forward the industry is changing – Alliances are being reshaped and leading players are consolidating

The industry is changing

9 Source: MDS Transmodal July 2016, Hapag-Lloyd data, only vessels >399TEU 1) Subject to a successful closure of the transaction between Hapag-Lloyd and UASC, as well as regulatory approvals, the UASC tonnage is anticipated to become part of THE Alliance

Operational KPIs
Q1 2016 Q2 2016 H1 2016 H1 2015 YoY ∆ / %
Transport volume [TTEU]	1,811	1,892	3,703	3,719	-16 / -0.4%
Freight rate [USD/TEU]	1,067	1,019	1,042	1,296	-254 / -19.6%
Bunker price MFO [USD/t]	178	182	180	346	-166/ -48.0%
Exchange rate [EUR/USD]	1.10	1.12	1.11	1.12	-0.01 / -0.3%
Revenue [USD m]	2,124	2,088	4,212	5,213	-1,001 / -19.2%
EBITDA [USD m]	136	83	219	551	-332 / -60.3%
EBIT [USD m]	5	-50	-44	299	-343 / n.m.
EAT [USD m]	-47	-111	-158	176	-334 / n.m.
Investments [USD m]1)	105	115	220	502	-283 / -56.3%

1) Balance sheet investments in PPE

Introduction
Sector update
HL financials
UASC deal
Next steps

Hapag-Lloyd volume stable despite weak growth – Freight rates decline further to record low levels

Transport volume [TTEU]

Freight rate [USD/TEU]

FX-rate (USD/EUR)

Bunker price [USD/mt]

Introduction
Sector update
HL financials
UASC deal	Transport volume stable around 3.7 TEU m in H1 2016
Next steps

Transport volume [TTEU]

1) HLAG + CCS as of 2 December 2014

Freight rate fell by 254 USD/TEU to 1,042 USD/TEU – Our average bunker price decreased to 180 USD/t

Freight rate1) [USD/TEU] vs. bunker price2) [USD/t]

1) Hapag-Lloyd average freight rate per period 2) Hapag-Lloyd average consumption price per period, 2014 excl. CCS (1M) 3) HLAG + CCS as of 2 Dec 2014

Introduction
Sector update
HL financials
UASC deal

Overall transport expenses reduced by 673 USD m thanks to synergies and efficiency programs

Transport expenses per TEU [USD/TEU]

7 -177 (-15.5%) H1 2016 962 Maintenance /repair /other Container transport costs -63 Chartering, leases and container rentals -14 Port, canal and terminal costs -17 Expenses for raw materials and supplies -90 H1 2015 1,139 -87 (-9.0%)1) Compete to Win 5 Close the Cost Gap 4 Structural Improvements 3 OCTAVE 2 CUATRO 1 4,234 -337 -69 -54 -239 26 3,561 Price Consumption Transport expenses [USD m]

1) Cost of purchased services H1 2016: 962 USD/TEU

Introduction
Sector update
HL financials
UASC deal
Next steps

Bunker expenses significantly reduced benefitting from lower price and improved consumption

Bunker price [Rotterdam; USD/mt]

Bunker consumption [mt/slot; mt/TEU; k mt]

Bunker mix [MFO; MDO]

Bunker expenses6) [USD/TEU; USD m]

1) Average nominal deployed capacity in TEU 2) HLAG excluding CCS 3) Including technical effect due to initial addition of CSAV fleet at the beginning of 2015 4) HLAG + CCS as of 2nd December 2014 5) Due to CCS integration slight categorization differences may occur 6) Expenses for raw materials and supplies

15 Source: Bloomberg (4 August 2016)

Equity at USD 5.3 bn and liquidity at USD 0.9 bn – Capital increase of USD 400 m post Closing

Adequate liquidity reserve [USD m] UASC deal implications

• Cash capital increase of USD 400 m (equivalent) planned within six months after the closing of the transaction with UASC
• Strengthening of shareholder base with the new key shareholders Qatar Holding LLC and the Public Investment Fund of the Kingdom of Saudi Arabia
• Value protection via guaranteed equity, cash and debt covenants (as of certain Relevant Dates)

Positive free cash flow of USD 33 m in H1 2016 – Net repayment in financial debt of USD 34 m

Cash flow H1 2016 [USD m]

Hapag-Lloyd adjusted its outlook for 2016 as freight rate development is significantly weaker than expected

Revised Outlook 2016		Comments
Transport volume	Increasing slightly	 Hapag-Lloyd adjusts its outlook for the financial year 2016 as the development of the freight rates is significantly weaker than expected
Bunker consumption price	Clearly decreasing	 The revised expectation of the Executive Board is a clearly decreasing EBITDA and a clearly decreasing EBIT compared with previous year
Freight rate	Clearly decreasing	 In the second quarter of 2016 the average freight rate of Hapag-Lloyd decreased to 1,019 USD/TEU, i.e. 245 USD/TEU below prior year period (1,264 USD/TEU in Q2 2015) – the recovery at the beginning of July does not seem sufficient and sustainable enough
EBITDA	Clearly decreasing	 Additionally bunker prices have increased throughout the second quarter of 2016
EBIT	Clearly decreasing	 After the Business Combination with United Arab Shipping Company S.A.G. (UASC) transaction related one-off costs will also impact the results in 2016

Revised guidance versus Interim Report Q1 2016

Combined Entity at a glance1)

			Combined Entity2)
Corporate HQ	Hamburg	Dubai	Hamburg
Alliance membership	G6	Ocean 3	THE Alliance
Ships [#]	170	61	231
Container [TTEU]	1,513	682	2,195
Capacity [TEU m]	1.0	0.6	1.6

• Combination assures top 5 position globally and on key trades against the backdrop of a consolidating market
• Further balancing of trade portfolio with leadership on Middle East Trades
• Increased competitiveness through complementary young and fuel-efficient fleet with large share of ULCVs
• Sustainable market position without further short-term fleet investments
• Significant value creation through expected run-rate synergies of at least USD 400 m per annum
• Strong partner in the light of the ongoing alliance reshuffling
• Supportive core shareholders and capital market investors

1) 30 June 2016 2) Sum of stand-alone figures

Introduction
Sector update
HL financials
UASC deal
Next steps

Value creation: Synergies of at least USD 400 m expected mainly in network and overhead

Synergy potential, full run-rate [USD m]

Synergies of at least USD 400 m per year from 2019 onwards – approx. 1/3 to be achieved in 2017 already One-off costs of approx. USD 150 m largely payable in 2016/2017

Modern fleet: No need to further invest in the next years due to complimentary ship newbuildings

Vessel delivery schedule 2015-2017

21 1) Delivery of last two 15,000 TEU vessels to be delayed from H2 2016 into 2017

No further investments needed

• In order to be competitive mid-term, Hapag-Lloyd would have needed significant investments in ultralarge container vessels in upcoming years (as envisaged in IPO process)
• UASC had recently ordered 17 fuel-efficient big ships (6x 18,000 TEU and 11x 15,000 TEU) most of them were delivered in 2015/2016
• The Combined Entity will thereby operate one of the youngest and most efficient fleets in the industry
• Hence, no need for new vessel investment in next years – the fleet expenditures have been basically "pulled forward"
• The Combined Entity will focus on maximizing free cash flow to deleverage quickly

Closing of the transaction expected by end of 2016 (subject to necessary approvals)

1) Subject to necessary approvals 2) Long stop date for closing conditions

• In the second half of the year, we continue to focus our cost savings and improvement programs (Cuatro synergies, Octave measures, Compete to Win)
• Furthermore, we will do whatever we can to get freight rates back to more sustainable levels
• In this difficult competitive environment, it is very important
• − to complete the transaction with UASC as quickly as possible and
• − to start the integration of UASC immediately after the completion of all preclosing conditions
• The integration will bring us annual net synergies of at least USD 400 million, some of which should already take effect next year

Main focus in the second half (pre Closing) Financial policy going forward (post Closing)

Profitability	Based on improved fleet ownership structure and synergy realization the EBITDA margin will increase significantly
Investments	No new vessel investments in next years – Maximize free cashflow
Deleveraging	Clear deleveraging target: Reduce net leverage to ~3.5x by 2018
Liquidity	Committed to an adequate liquidity 1) reserve (USD 1.1-1.2 bn)
Capital Increase	Cash capital increase backstopped by certain key shareholders2)

Well-balanced exposure to global trade with strong position in attractive markets and niche businesses

Imbalances: Hapag-Lloyd outperforms the market

1) This ratio reflects the imbalance in the market (industry average) vs. Hapag-Lloyd imbalance of transport volumes (the higher the ratio, the more balanced in both directions). Ratio has been rounded

Source: IHS Global Insight July 2016; Hapag-Lloyd FY 2015; market data adapted to Hapag-Lloyd trade lane definition

28

Long-standing and diversified customer base of blue chip customers and a diversified base of goods transported

Hapag-Lloyd has a highly diversified customer base: No customer has a share greater than 5% of HL's revenue

Balanced portfolio of goods transported2)… … in a diversified customer portfolio3)

Vessel fleet as of 30 June 2016
		Owned1)	Chartered3)	Current fleet	Current orderbook			Fleet age [% of total capacity]
	Capacity [TEU]	131,674		131,674	52,945		Average age 7.9 years4)
>10,000 TEU	Vessels	10		10	5	MODERN
	Capacity [TEU]	243,614	94,444	338,058		42%	58% 45%
8,000 – 10,000 TEU	Vessels	28	11	39			55%	1%
	Capacity [TEU]	49,743	37,791	87,534		≤10 years	10-20 years	>20 years
		7	6	13			Fleet ownership [%]
6,000 – 8,000 TEU	Vessels
	Capacity [TEU]	68,154	193,705	261,859		Owned 56%		Chartered 44%
4,000 – 6,000 TEU	Vessels	15	41	56			Average vessel size [TEU]
	Capacity [TEU]	33,800	70,742	104,542			+377	+2,162
2,300 – 4,000 TEU	Vessels	11	23	34		5,599	5,046
	Capacity [TEU]							3,362
	Vessels	3,918	24,319	28,237		HL	Top 20	World Fleet
<2,300 TEU		2	16	18
Total	Capacity [TEU]	530,9032)	421,001	951,904	52,945		Total container fleet
	Vessels	73	97	170	5	1.5m TEU	Owned 43%	Leased 57%

1) Incl. 3 long-term finance leases 2) Incl. 3 chartered-out 3) Includes long-term (>3 years), mid-term (1-3 years) and short-term (<1 year) charters

4) Weighted average age by capacity

As at 30 June 2016, Hapag-Lloyd used a chartered ship primarily for the repositioning of empty containers. The ship has a transport capacity of around 6,900 TEU. As the ship is not employed in a liner service it is not included in the fleet data described above.

30 Source: MDS Transmodal July 2016

Our Way Forward – Further improvements expected from our existing initiatives

OCTAVE project

Existing OCTAVE initiatives

		G6 Enhancement – create integrated alliance
s e v ati ti ni i E V A T C O w e N	Procure ment	– reduction of expenses Procurement
		Transshipment – optimize shipment flows	Further cost savings and efficiency
	Fleet & Network	– increase operational intake Ship Size	improvements:
		Stowage – optimize stowage process	High double-digit USD million figure by 2017
		Service Portfolio – reduce complexity
	Sales & Product	– optimize space usage Weight Utilization
		– increase collection Demurrage / Detention

Improved sales organization and better sales processes with significant potential to improve revenues

COMPETE TO WIN Project

Income statement [USD m]				Transport expenses [USD m]
	H1 2016	H1 2015	% change
Revenue	4,212.2	5,213.4	-19%	Expenses for raw materials
Other operating income	65.2	115.8	-44%	and supplies Cost of purchased services	3,242.3	3,578.0
Transport expenses	-3,561.3	-4,234.1	-16%	Thereof
Personnel expenses	-283.0	-283.3	-0%	Port, canal and terminal costs Chartering, leases and	1,525.1	1,593.6
Depreciation, amorti zation and impairment	-263.0	-251.9	4%	container rentals Container transport costs	1,036.3	1,275.2
Other operating	-227.8	-271.9	n.m.	Maintenance/repair/other	119.7	93.6
expenses				Transport expenses	3,561.3	4,234.1
Operating result	-57.7	288.0	n.m.
Share of profit of	13.4	15.4	-13%		Transport expenses per TEU [USD/TEU]
equity-acc. investees Other financial result	0.1	-4.4	n.m.	Expenses for raw materials and supplies
Earnings before	-44.2	299.0	n.m.	Cost of purchased services	875.6	962.1
interest and tax				Thereof
(EBIT)				Port, canal and terminal costs	411.8	428.5
EBITDA	218.8	550.9	-60%	Chartering, leases and container rentals
Interest result	-100.0	-110.8	-10%	Container transport costs	279.8	342.9
Income taxes	-13.9	-12.6	n.m.	Maintenance/repair/other	32.3	25.2
Group profit/loss	-158.1	175.6	n.m.	Transport expenses	961.7	1,138.5

	H1 2016	H1 2015	% change
Expenses for raw materials and supplies	319.0	656.1	-51%
Cost of purchased services	3,242.3	3,578.0	-9%
Thereof
Port, canal and terminal costs	1,525.1	1,593.6	-4%
Chartering, leases and container rentals	561.2	615.6	-9%
Container transport costs	1,036.3	1,275.2	-19%
Maintenance/repair/other	119.7	93.6	28%
Transport expenses	3,561.3	4,234.1	-16%

Transport expenses per TEU [USD/TEU]

Transport expenses	961.7	1,138.5	-16%
Maintenance/repair/other	32.3	25.2	28%
Container transport costs	279.8	342.9	-18%
Chartering, leases and container rentals	151.5	165.5	-8%
Port, canal and terminal costs	411.8	428.5	-4%
Thereof
Cost of purchased services	875.6	962.1	-9%
Expenses for raw materials and supplies	86.1	176.4	-51%

	30.06.2016	31.12.2015	30.06.2015
Assets
Non-current assets	10,320.0	10,363.7	10,285.3
Of which fixed assets	10,249.0	10,301.7	10,211.4
Current assets	1,577.4	1,704.8	1,816.4
Of which cash and cash equivalents	527.2	625.0	665.1
Total assets	11,897.4	12,068.5	12,101.7
Equity and liabilities
Equity	5,283.3	5,496.8	5,234.3
Borrowed capital	6,614.1	6,571.7	6,867.4
Of which non-current liabilities	3,914.9	3,958.4	4,331.1
Of which current liabilities	2,699.2	2,613.3	2,536.3
Of which financial debt	4,264.6	4,256.3	4,420.2
thereof
Non-current financial debt	3,489.7	3,591.7	3,888.8
Current financial debt	774.9	664.6	531.4
Total equity and liabilities	11,897.4	12,068.5	12,101.7

Balance sheet [USD m] Financial position [USD m]

	30.06.2016	31.12.2015	30.06.2015
Cash and cash equivalents	527.2.	625.0.	665.1.
Financial debt	4,264.6	4,256.3	4,420.2
Net debt	3,737.4	3,631.3	3,755.1
Unused credit lines	336.6	423.4	263.1
Liquidity reserve	863.8	1,048.4	928.2
Equity	5,283.3	5,496.8	5,234.3
Gearing (net debt/equity) (%)	70.7%	66.1%	71.7%
Equity ratio (%)	44.4%	45.5%	43.3%

Hapag-Lloyd stock in SDAX since March 2016 – Next change of redemption prices in October 2016

1) Partially redeemed by nominal USD 125 m on 30 Dec 2015

36 Source: Bloomberg (5 August 2016); Citi (5 August 2016)

37

Senior Director Investor Relations Tel +49 40 3001-2896 Fax +49 40 3001-72896 Henrik.Schilling@hlag.com https://www.hapag-lloyd.com/en/ir.html