Hapag-Lloyd AG — Investor Presentation 2017

Mar 24, 2017

Investor Presentation Full Year 2016 Results Hamburg, 24 March 2017

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 forwardlooking 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

01	Deliverables	 We continued to progress on our strategic initiatives (Way Forward, THE Alliance, UASC Merger) and delivered a positive operating result for full-year 2016
02	Market Update	 Improving industry fundamentals – 2017 dependent on continuous market discipline  Sector consolidation & alliance re-shaping with Hapag-Lloyd proactively taking part
03	Hapag-Lloyd Financials	 Despite challenging market conditions, Hapag-Lloyd achieved a positive EBIT of USD 140 m in 2016 – we are delivering on our savings with top-tier unit costs
04	UASC Merger	 Final preparations of our merger with UASC on track for closing during next weeks  Significant CAPEX savings and USD 435 m p.a. anticipated cost synergies
05	Way Forward	 Main focus going forward on starting THE Alliance, completing the transaction with UASC and quickly integrating the UASC business to further reduce costs

1 Deliverables

Strategic highlights: We continued to progress on our initiatives …

Financial highlights: … and delivered a positive operating result in 2016

Transport volume	Freight rate	Transport expenses
+2.7%	-15.4%	-15.0%
FY 2016: 7.6 TEU m	FY 2016: 1,036 USD/TEU	FY 2016: 925 USD/TEU
EBITDA	EBIT	Group profit / loss
USD 671 m	USD 140 m	USD -103 m
7.9% EBITDA margin	Positive operating result	1.3% ROIC annualized
Equity	Liquidity reserve	Net debt
USD 5.3 bn	USD 0.8 bn	USD 3.8 bn
44.6% equity ratio	Solid liquidity	71.0% gearing

Demand: Container shipping remains an industry with healthy growth and balanced trade dynamics

Container shipping volume and global GDP growth

Source: Clarksons (February 2017), IMF WEO (October 2016)

6

7

Supply: Capacity growth is slowing (as a result of decreasing benefits of ever larger vessels)

Supply: Scrapping and idling help to further reduce effective supply growth

… keeping net capacity growth low …

Net capacity growth 2017E

… slowly reducing supply / demand gap

Freight rates are slowly improving from Q2 2016 lows – But continuous market discipline needed during 2017

Shanghai – Europe (SCFI)

Shanghai – Latin America (SCFI)

Comments

Further freight rate increases planned for April 2017 by various carriers, e.g.:1)

Hapag-Lloyd: Asia – ISC: USD 250 /TEU – 1 April; Asia (Pacific) – ME: USD / 200 USD – 1 April; Asia – Latin America: USD 1050 / TEU – 15 April

CMA CGM: Asia – Latin America: USD 1050 / TEU – 1 April, ISC – Africa: USD 250 / TEU – 1 April, Asia – Africa: USD 350 / TEU

OOCL: Asia – North America: USD 640 / TEU – 1 April

MOL: Asia – Africa: USD 300 / TEU – 1 April

Market bunker price level increased in Q4 2016 and beginning of 2017 compared to 9M 2016 which is also partially reflected in higher spot market rates

9

We believe that going forward there will be 5-7 significant global liner shipping companies – Gap to the rest is widening rapidly

Consolidation wave leads to higher concentrations

Carrier capacity [TEU m] and global capacity share [%]

Global capacity share [%]

Note: Diagram assuming that all currently announced mergers (Hapag-Lloyd & UASC; NYK & MOL & K-Line, Maersk & Hamburg Süd) will receive regulatory approvals and are executed as announced. Simple sum of stand-alone operating capacity as of December 1, 2016. Source: Drewry (Forecaster 4Q16), MDS Transmodal (January 2017, October 2013)

10

On the back of consolidation, alliances have been re-shaped with start of operations in April 2017

Strong partner in THE Alliance

THE Alliance covers all East-West trades

Comprehensive network of 32 services will connect more than 75 major ports

Combined capacity of ~3.5m TEU or around 17% of world fleet – vessel pool of more than 240 ships

Leading product characterized by

• Fast transit times
• Broad port coverage
• Latest vessels

Unique contingency plan

Independent trust fund to safeguard customers' cargo on board

After Japanese JV2) we are three partners in THE Alliance:3)

1) 2M including Hamburg Süd; 2) Subject to regulatory approvals and closing; 3) Total operating capacity of THE alliance partners, not all to be deployed in alliance (Hapag-Lloyd including UASC)

Source: Alphaliner monthly (February 2017), Drewry (Forecaster 4Q16), MDS Transmodal (January 2017)

We delivered on our defined initiatives

Tangible results and further upside

Overall we achieved an operating profit in 2016

Hapag-Lloyd Results FY 2016

	Q1 2016	Q2 2016	Q3 2016	Q4 2016	FY 2016	FY 2015	∆%
Transport volume [TTEU]	1,811	1,892	1,947	1,949	7,599	7,401	+3%
Freight rate [USD/TEU]	1,067	1,019	1,027	1,033	1,036	1,225	-15%
Bunker price [USD/t]	178	182	224	257	210	312	-33%
Exchange rate [EUR/USD]	1.10	1.12	1.13	1.10	1.10	1.11	n/a
Revenue [USD m]	2,124	2,088	2,152	2,182	8,546	9,814	-13%
EBITDA [USD m]	136	83	206	246	671	922	-27%
EBITDA margin	6.4%	4.0%	9.6%	11.3%	7.9%	9.4%	-1.5ppt
EBIT [USD m]	5	-50	73	111	140	407	-66%
EBIT margin	0.2%	-2.4%	3.4%	5.1%	1.6%	4.1%	-2.5ppt
Group profit / loss [USD m]	-47	-111	9	46	-103	126	-181%

Transport volume up 3% to 7.6 TEU m in 2016 – Q4 volume up strongly by 7% year-on-year

2016 average freight rate decreased by 15.4% – However, rates slowly improve from Q2 lows

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

16

Transport expenses reduced by USD 1 bn mainly driven by bunker, synergies and efficiency programs

Transport expenses per TEU [USD/TEU]

• Transport expenses per unit decreased year-onyear by 163 USD/TEU to 925 USD/TEU in 2016
• The decline results both from a saving in cost of purchased services (103 USD/TEU) and from a decrease in expenses for raw materials and supplies (60 USD/TEU)
• The decrease in costs of purchased services is mainly explained by the realization of CUATRO synergies, the OCTAVE efficiency programs as well as market driven factors such as
• decreasing charter rates in the second half of 2016,
• higher than expected volume discounts due to overachieved volume targets in Q4 and
• valuation and closing effects

The effects of our further cost savings are clearly visible when looking at the relative performance

Note: For selected peers including terminals and other business if no liner figure available. Translation into USD based on average FX rates for individual periods.

3 Financials

Equity at USD 5.3 bn and liquidity reserve at USD 0.8 bn – Capital increase of USD 400 m post Closing

Strong equity base [USD m]

Solid liquidity position [USD m]

¹⁾ incl. Restricted Cash (USD 19.7 million booked as other assets)

Stable net debt [USD m]

UASC merger implications

• Cash capital increase of USD 400 m (equivalent) to be executed within six months after closing (backstopped by certain core shareholders)
• 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 109 m in 2016

Cash flow 2016 [USD m]

Unused credit lines Cash and cash equivalents

Hapag-Lloyd optimized its maturity profile via debt capital markets at more attractive pricing levels

Bond coupon and maturity profile

• On 18 Jan 2017 Hapag-Lloyd successfully priced a new bond of EUR 250 m due 2022 – on 7 Feb 2017 the company tapped the new bond by additional EUR 200 m at emission price of 102.375%
• The proceeds were used to proactively refinance by redeeming the outstanding 9.75% USD bond due 2017, partially redeem the 7.75% EUR bond due 2018 and for general corporate purposes (including further repayment of existing indebtedness)
• The yield to maturity at issuance was 6.50%1) and thereby clearly below the existing bond pricings
• Hapag-Lloyd was able to engage a high quality and diversified investor base in this new bond issuance

We expect a clearly increasing EBITDA for 2017 with the majority of revenue and operating profits in H2 2017

	FY 2016	Guidance for 2017	Transport volume	+/- 100 TTEU		+/- USD <0.1 bn
		Increasing	Freight rate	+/- 50 USD/TEU		+/- USD ~0.4 bn
Transport volume	7.6 TEU m	moderately	Bunker price	+/- 100 USD/mt		+/- USD ~0.3 bn
Bunker consumption	210	Increasing	EUR / USD	+/- 0.1 EUR/USD		+/- USD <0.1 bn
price (MFO)	USD/mt	clearly	UASC financials 9M 2016
Freight rate	1,036 USD/TEU	Increasing moderately		9M 2016		Hapag-Lloyd released
			Transport volume	2.3 TEU m		indicative pro-forma 9M 2016 figures for UASC
EBITDA	USD 671 m	Increasing	Freight rate	610 USD/TEU		at the start of 2017
		clearly	Revenue	USD 1.8 bn		Figures from the income statement
	USD 140 m	Increasing	EBITDA	USD 105 m		were adjusted to Hapag-Lloyd's financial
EBIT		clearly	EBIT	USD -115 m		reporting methods

Hapag-Lloyd guidance for 2017 Hapag-Lloyd sensitivities for 2017

Hapag-Lloyd / UASC merger creates a top tier pure-play carrier – Final preparations on track for closing during next weeks

1.5 million TEU

container ships are operated by Hapag-Lloyd and UASC together – a modern, efficient fleet

is the total transport capacity of the container ships. This means that Hapag-Lloyd operates one of the world's largest container ship fleets

2,300,000 TEU

of container transport capacity is available to customers for the transportation of cargo

THE Alliance

The ships of Hapag-Lloyd and UASC operate together in this strong new alliance

At a glance Deal rationale

Strengthened market position

The merger between Hapag-Lloyd and UASC strengthens the Group's market position as one of the world's leading container shipping companies in an industry which is continuing to consolidate.

UASC and Hapag-Lloyd are an excellent fit. The combined company has a globally diversified network across all the main trades. Its presence on the most important East-West trade in container shipping is stronger. In addition, Hapag-Lloyd will in future be one of the market leaders in the attractive Middle East sub-trade.

Together, Hapag-Lloyd and UASC operate a young and very efficient fleet with an average age of just 6.3 years. As a result, no investments in new ships will be needed over the coming years.

Hapag-Lloyd has a long-standing tradition with alliances and, together with UASC, has a strong position in the new THE Alliance. It is also backed by strong core shareholders and capital market investors.

The merging of service networks, optimal use ships and amalgamation of sales and administrative areas creates significant synergies. Around a third of the expected USD 435 million in synergies should be achieved in 2017.

Scale: On important trades TOP 5 players now make up more than 70 % capacity share

TOP 5 concentration on individual trades (2013 versus 2017)

2013 2017 (incl. announced mergers)

Note: Diagram assuming that all currently announced mergers (Hapag-Lloyd & UASC; NYK & MOL & K-Line; Maersk & Hamburg Süd) will receive regulatory approvals and are executed as announced. Simple sum of stand-alone operating capacity as of February 2017.

Network: Balanced trade portfolio – More than any TOP 5 liner

Transport volume by trade, FY 2016 (indicative)

1) UASC transport volume by trade as of 30.09.2016; 2) Allocation of UASC volume according to Hapag-Lloyd trade definition; 3) As of December 2016. Breakdown based on capacity deployed by individual carriers on direct services only. Excl. wayport capacity, transshipment services, slot exchange arrangements and cross-trade intra-alliance arrangements; numbers for Hapag-Lloyd based on exposure to global trades; 4) Includes Middle East / ISC trades and idle fleet

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Fleet: Access to young and fuel-efficient fleet with large share of ULCVs with no planned need to invest in next years

Young and fuel-efficient fleet

e1) g a et	Combined CMA CGM		6.3	7.2 -1.6
e e fl	COSCO 2) Top 15			7.4 yrs 7.8
g a	Hapag-Lloyd			7.9
er v	Maersk			8.4
A	MSC			8.8
%]1)	Combined	66%	34%
p [	COSCO	63%	37%
hi	Hapag-Lloyd	57%	43%
s er n	Maersk	53%	47%
w o	2) Top 15	50%	50%
et	CMA CGM	44%	56%
e Fl	MSC	36%	64%
e
z si	Combined			6,857
el	CMA CGM			6,044	+1,057
s U]1) s e	Hapag-Lloyd	5,800
v E e T	COSCO			5,656
[ g a	Top 15		5,164
er v	Maersk		5,083
A	CMA CGM		4,862

Ship deliveries 2015-2017

Vessel			2015		2016
			H2	H1	H2	H1
19,000 TEU Vessels
	Capacity [TEU] Vessels	19,000 1	57,000 3	38,000 2	- -	- -
15,000 TEU Vessels
	Capacity [TEU] Vessels	45,000 3	15,000 1	60,000 4	- -	30,000 2
10,500 TEU Vessels
	Capacity [TEU] Vessels	- -	- -	- -	21,000 2	31,500 3
9,300 TEU Vessels
	Capacity [TEU] Vessels	37,200 4	9,300 1	- -	- -	- -
3,500 TEU Vessels
	Capacity [TEU] Vessels	- -	- -	7,000 2	- -	- -
TOTAL	Capacity [TEU] Vessels	101,200 8	81,300 5	105,000 8	21,000 2	61,500 5

1) Diagram assuming that all currently announced mergers (Hapag-Lloyd & UASC; NYK & MOL & K-Line; Maersk & Hamburg Süd) will receive regulatory approvals and are executed as announced. Simple sum of stand-alone operating capacity 2) Weighted by carrier capacities

Source: MDS Transmodal (January 2017) plus HL internal data (HL Fleet as of 31.12.2016, Combined as of 31.12.2016), only vessels >399 TEU

Synergies: Synergies of USD 435 m expected from 2019 onwards – Mainly in network and overhead

Synergy potential, full run-rate [USD m] Synergies of USD 435 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 2017 Other USD 435 million Network Overhead Expected synergies

Comments

• Optimized new vessel deployment/network
• Slot cost advantages

• Efficient use of new fleet

• Consolidation of Corp. and Regional HQs

• Consolidation of country organizations
• Other overhead reductions (e.g. marketing, consultancy, audit)

Network Overhead Other (terminals, equipment and intermodal)

• Lower container handling rates per vendor/location
• Imbalance reduction and leasing costs optimization
• Optimization of inland haulage network
• Best practice sharing

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Partner: New core shareholders with strategic interest in the Combined Entity

Transaction overview

• UASC shares contributed to Hapag-Lloyd in exchange for newly issued Hapag-Lloyd shares
• Continued investment of sovereign wealth funds QIA and PIF highlight continued strategic importance of HL for the region
• C. 39% of shareholders representing governmental bodies and interests
• C. 37% of shareholders backed by wealthy entrepreneurs with focus on and long experience in logistics
• Planned cash capital increase of USD 400 m 50/50 backstopped by incumbent and new key shareholders within six months post closing

Hapag-Lloyd with clearly defined financial policy

1) 50% backstopped by QH and PIF, 50% backstopped by CSAV and Kühne

Hapag-Lloyd shares with supportive tradings in recent months

Share trading

Hapag-Lloyd bonds continuously trade above par

Bonds trading

HL EUR 7.75% 2018 HL EUR 7.50% 2019 HL EUR 6.75% 2022

	EUR Bond 2022	EUR Bond 2019	EUR Bond 2018
Listing	Open market of the Luxembourg Stock Exchange (Euro MTF)
Volume	EUR 450 m	EUR 250 m	EUR 200 m1)
ISIN / WKN	XS1555576641 / A2E4V1	XS1144214993 / A13SNX	XS0974356262 / A1X3QY
Maturity Date	Feb 1, 2022	Oct 15, 2019	Oct 1, 2018
Redemption Price	as of Feb 1, 2019:103.375%; as of Feb 1, 2020:101.688%; as of Feb 1, 2021:100%	as of Oct 15, 2016:103.750%; as of Oct 15, 2017:101.875%; as of Oct 15, 2018:100%	as of Oct 1, 2015:103.875%; as of Oct 1, 2016:101.938%; as of Oct 1, 2017:100%
Coupon	6.75%	7.50%	7.75%

1) Partial redemption by nominal EUR 200 m on 9 March 2017

Hapag-Lloyd with positive EBITDA of USD 671 m

	FY 2016	FY 2015	% change
Revenue	8,545.5	9,814.4	-13%
Other operating income	107.3	215.0	-50%
Transport expenses	-7,031.6	-8,056.9	-13%
Personnel expenses	-548.1	-537.8	2%
Depreciation, amortization & impairment	-531.4	-515.7	3%
Other operating expenses	-426.7	-574.6	-26%
Operating result	114.9	344.4	-67%
Share of profit of equity-acc. investees	30.0	31.6	-5%
Other financial result	-5.2	30.7	-117%
Earnings before interest & tax (EBIT)	139.7	406.7	-66%
EBITDA	671.1	922.4	-27%
Interest result	-220.8	-252.3	-12%
Income taxes	-21.8	-28.0	-22%
Group profit / loss	-102.9	126.4	-181%

Income statement [USD m] Transport expenses [USD m]

	FY 2016	FY 2015	% change
Expenses for raw materials & supplies	760.0	1,185.3	-36%
Cost of purchased services	6,271.6	6,871.6	-9%
Thereof Port, canal & terminal costs	2,929.8	3,016.0	-3%
Chartering leases and container rentals	1,033.0	1,297.1	-20%
Container transport costs	2,098.3	2,384.8	-12%
Maintenance/ repair/ other	210.5	173.7	21%
Transport expenses	7,031.6	8,056.9	-13%
	Transport expenses per TEU [USD m]
	FY 2016	FY 2015	% change
Expenses for raw materials & supplies	100.0	160.2	-38%
Cost of purchased services	825.3	928.5	-11%
Thereof Port, canal & terminal costs	385.5	407.5	-5%
Chartering leases and container rentals	135.9	175.3	-22%
Container transport costs	276.1	322.2	-14%
Maintenance/ repair/ other	27.7	23.5	18%
Transport expenses	925.3	1,088.6	-15%

Hapag-Lloyd with equity ratio of 44.6%

	31.12.2016	31.12.2015
Assets
Non-current assets	10,267.4	10,363.7
of which fixed assets	10,183.3	10,301.7
Current assets	1,698.0	1,704.8
of which cash and cash equivalents	602.1	625.0
Total assets	11,965.4	12,068.5
Equity and liabilities
Equity	5,341.7	5,496.8
Borrowed capital	6,623.7	6,571.7
of which non-current liabilities	3,836.7	3,958.4
of which current liabilities	2,787.0	2,613.3
of whih financial debt	4,414.9	4,256.3
thereof Non-current financial debt	3,448.4	3,5911.7
Current financial debt	966.5	664.6
Total equity and liabilities	11,965.4	12,068.5

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

	31.12.2016	31.12.2015
Cash and cash equivalents	602.1	625.0
Financial debt	4,414.9	4,256.3
Net debt	3,793.1	3,631.3
Unused credit lines	200.0	423.4
Liquidity reserve	802.1	1,048.4
Equity	5,341.7	5,496.8
Gearing (net debt / equity) (%)	71.0%	66.1%
Equity ratio (%)	44.6%	45.5%

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