Hapag-Lloyd AG — Investor Presentation 2020

Aug 14, 2020

Investor Presentation H1 2020 Results

14 August 2020

Opening Remarks

	Current situation	COVID-19 pandemic led to substantially declining global transport volumes in Q2 2020
1		In response to the decline in demand, we implemented an extensive blank sailings program to adjust our cost base accordingly
		In addition, we have launched our Performance Safeguarding Program (PSP) to mitigate negative effects of the pandemic as much as possible
		In spite of COVID-19 related demand slump, we recorded very solid H1 2020 results
2	Financials	While volumes were down, we benefited from lower bunker prices and active cost management
		To mitigate future risks, we have strengthened our liquidity position and further reduced our leverage
		Container transport volume 2020e is significantly affected by COVID-19
3	Market update	Idle fleet is declining from record high in May as demand picks up slowly
		Volatile markets will also require various measures in H2 2020 to ensure sufficient supply at competitive cost
		Earnings outlook confirmed; however, outlook remains subject to considerable uncertainty
4	Way forward	Focus on execution of the Performance Safeguarding Program and risk adequate liquidity steering
		Continue to roll-out and execute our Strategy 2023 to mitigate delays in implementation

1 Current situation

3

COVID-19 pandemic has weakened global transport volumes in Q2 2020, which required carriers to adjust capacity to save cost…

[% of total capacity]

Current situation

…and the sudden drop of the oil price resulted in significantly lower bunker cost in Q2

Weekly CCFI development

Bunker price development

1 Current situation

We are well positioned and remain focused on the implementation of our Strategy 2023 and the PSP program

OUR TEAM

• Situation worldwide is being closely monitored and we will steadily increase the percentage of employees back in the offices – since June we started gradually returning to offices in Germany
• We continue to actively track business continuity risk levels

OUR BUSINESS OUR FOCUS

• Volumes dropped by a low doubledigit percentage amount in Q2
• However, we benefited from a temporarily favourable ratio between freight rates and bunker prices in the second quarter

• In addition, active cost management has led to a strong H1 result

• Performance Safeguarding Program (PSP) on track, cost saving measures with positive impact across all categories

• We actively keep track on the execution of our Strategy 2023 and have just launched our fourth quality promise

In spite of COVID-19 related volume decline, we recorded a very solid result in the first half year 2020

Operational KPIs P&L effects

Volume TTEU	5,755 (5,966)	Volume declined by -3.5% YoY due to COVID-19 impact on almost all trades, but mainly on main East-West trades
Rate USD/TEU	1,104 (1,071)	Average freight rate increased by 3.1% YoY mainly the MFR recovery mechanism
Bunker USD/mt	448 (429)	Average bunker consumption price increased slightly by +19 USD/mt due to higher share of low-sulphur fuel, but declined in Q2 YoY due to falling oil prices

1,876

(1,060)

H1 revenue was almost stable (-0.6% YoY),

7,005

(7,047)

2.6x

(3.0x)

(867)

7.7%

(5.9%)

1,287 314 EBITDA increased by USD 207 m on the back of a favorable relation of freight rates and bunker prices as well as active cost management mainly in Q2 Net profit nearly doubled YoY, interest result improved due to bond repayments in 2019 (1,080) (165)

as lower volumes were offset by increased freight rates

Balance sheet Financial KPIs

Assets USD m

Fin. Debt USD m

Liquidity USD m

Net debt / EBITDA

FCF USD m

ROIC %

19,152 (18,182)	Total assets increased by USD 970 m vs. 31.12 mainly due to a significant increase in cash
8,058 (7,180)	Total financial debt increased due to debt intake as a precautionary measure to improve liquidity and increased lease liabilities (IFRS 16 related)

Strong increase of liquidity reserve

1,177 Strong Free Cash Flow generation leading to a reduction of net debt

Ratio of net debt to EBITDA improved accordingly (calculated based on LTM)

Return on Invested Capital turned clearly better due to strong result and lower invested capital

7

As a result of our PSP measures and slightly higher freight rates, we were able to significantly improve our earnings YoY

Volumes declined by 3.5% YoY in H1 2020, mainly impacted by a sharp global decline in transport volume in Q2 due to COVID-19

Transport volume development by trade Q1 2019 – Q2 2020 [TTEU]

9

Freight rates increased by 3.1% YoY in H1 2020, the sharp drop in bunker prices end Q1 / early Q2 will reduce bunker surcharges in Q3

10

Bunker expenses per unit rose by 6% YoY mainly due to the switch to more expensive low-sulphur fuel in H1 2020…

* Q1 bunker stock valuation was largely offset in Q2, with no meaningful impact in H1

Total bunker consumption [k mt; %]

Bunker price development

…whereas ex-bunker unit cost were in line with previous year

Transport expenses per unit [USD/TEU]

• Costs for "Vessel and voyage" decreased due to network optimization (blank sailings) and higher share of charter vessels considered as Right of Use (RoU) with a respective negative impact on depreciation.
• Besides the Rights of Use related increase, depreciation & amortization increased also due to investments in scrubbers
• All other unit cost were more or less stable

Interest burden clearly reduced – extraordinary valuation effects weigh on financial result

Extraordinary interest result items [USD m] HLAG Bond trading

Comments

• On the back of successful deleveraging and the early repayment of our 6.75% bond initially due 2022, interest result has improved
• Market turbulences led to a devaluation of interest swaps and the early bond repurchase option in total of USD - 26 million in H1 2020

Good earnings development and prudent investment strategy resulting in strong free cash flow generation of USD 1,177 m in H1 2020

Cash flow H1 2020 [USD m]

14

We have further reduced our net debt and substantially improved our leverage ratio to 2.6x

Performance Safeguarding Program (PSP) launched to protect against downside risk of COVID-19 and to safeguard earnings and liquidity

Cost savings

• Substantial capacity measures taken in coordination with our THE Alliance partners to mitigate variable costs
• Reduction of variable transport expenses and fixed costs (e.g. return of chartered ships, SG&A)
• Savings in the range of a mid three-digit million USD figure expected

Investment prioritization

• Investment plan reviewed
• Postponement of growth and unnecessary maintenance investments
• Continuous review going forward

Financial contingency

• Additional liquidity secured
• Different financial measures executed, e.g. draw-down of USD 400 m from RCF & USD 160 m ABS
• Further actions taken (e.g. vessel re-financing) to enhance liquidity and secure necessary investments

3 Market update

Container transport volume 2020e is significantly affected by COVID-19 but not quite as severe as initially expected

GDP vs. global container volume growth [%]

16

3 Market update

17

Idle fleet down from its peak in May to 5.1% as demand picks up slowly – Orderbook activity remains at historical low

Orderbook-to-fleet Newly placed orders

[TEU m]

3 Market update

18

Focus and quick responses continue to be necessary in H2 to ensure adequate supply in a volatile and difficult to predict demand situation

Net capacity growth in 2020e

Supply / Demand balance

4 Way forward

Earnings outlook confirmed –

subject to considerable uncertainties due to COVID-19 pandemic

• EBITDA and EBIT outlook ranges confirmed; however, outlook is subject to significant uncertainties related to the COVID-19 pandemic
• Outlook is based on the premise of a gradual recovery of the global economy in the second half of the year
• For 2020, transport volumes and average bunker consumption prices are expected to be below previous year's level
• In addition, the development of freight rates and a potential further increase of bunker prices should have a decisive influence on Hapag-Lloyd earnings in H2 2020

4 Way forward

Our priorities for the coming months remain unchanged

۰. ٠
∽

Ensure the safety of our employees and fully support our customers to safeguard uninterrupted supply chains

Focus on execution of the Performance Safeguarding Program and tracking of cost cutting measures

Keep track on execution of our Strategy 2023 and gradually pick-up relevant projects again

Continue to follow a conservative financial policy with clear focus on cash

Continuously monitor the global economic impact of the COVID-19 pandemic and adapt to evolving market conditions

Hapag-Lloyd with an equity ratio of 39.2% and a gearing of 84.9%

million USD	30.6.2020	31.12.2019
Assets
Non-current assets	15,540.9	15,501.0
of which fixed assets	15,458.5	15,393.6
Current assets	3,610.8	2,680.7
of which cash and cash equivalents	1,691.2	574.1
Total assets	19,151.7	18,181.7
Equity and liabilities
Equity	7,499.8	7,430.3
Borrowed capital	11,651.9	10,751.4
of which non-current liabilities	6,794.0	6,269.4
of which current liabilities	4,857.9	4,482.0
of which financial debt and lease liabilities	8,058.1	7,179.6
of which non-current financial debt and lease liabilities	6,276.3	5,786.6
of which current financial debt and lease liabilities	1,781.9	1,393.0
Total equity and liabilities	19,151.7	18,181.7

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

8,058.1 7,179.6 1,691.2 574.1 – – 6,366.9 6,605.4 185.0 585.0 1,876.2 1,159.1 7,499.8 7,430.3 84.9 88.9 39.2 40.9	million USD	30.6.2020	31.12.2019
	Financial debt
	Cash and cash equivalents
	Restricted Cash
	Net debt
	Unused credit lines
	Liquidity reserve
	Equity
	Gearing (net debt / equity) (%)
	Equity ratio (%)

Hapag-Lloyd with positive EBIT of USD 563.2 m in H1 2020

Income statement [USD m]

million USD	Q2 2020	Q2 2019	YoY change	H1 2020	H1 2019	YoY change
Revenue	3,321.2	3,569.0	–7%	7,005.2	7,046.6	–1%
Transport expenses	–2,295.4	–2,790.5	–18%	–5,209.9	–5,450.7	–4%
Personnel expenses	–184.3	–185.5	–1%	–374.8	–374.8	0%
Depreciation, amortisa tion and impairment	–382.9	–327.3	17%	–724.0	–640.2	13%
Other operating result	–78.5	–78.7	0%	–150.3	–161.0	7%
Operating result	380.1	187.0	103%	546.2	419.8	30%
Share of profit of equity accounted investees	7.1	10.1	–29%	17.3	19.8	–12%
Result from investments	–0.1	0.0	n.m.	–0.3	0.2	n.m.
Earnings before interest and tax (EBIT)	387.1	197.1	96%	563.2	439.8	28%
Interest result	–87.8	–133.5	–34%	–224.7	–254.1	–12%
Other financial items	–1.9	–1.2	52%	2.9	–1.0	n.m.
Income taxes	–10.4	–6.6	58%	–27.0	–19.5	38%
Group profit / loss	287.1	55.9	414%	314.4	165.2	90%

A Appendix

Well balanced maturity structure of financial liabilities

Financial Debt Profile as per 30 June 20201) , [USD m]

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 30.06.2020 consists of transaction costs and accrued interest 2) ABS program prolonged until 2022 3) Liabilities from lease and charter contracts consist of USD 59 million liabilities from former finance lease contracts and USD

1,491 USD million from lease contracts presented as on-balance financial liability due to first-time application of IFRS 16 4) Repayment amounts based on contractual debt as per 30.06.2020 Note: Rounding differences may occur

A Appendix

Hapag-Lloyd`s shareholder structure

Kühne Maritime GmbH / Kühne Holding AG

CSAV Germany Container Holding GmbH

HGV Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement mbH Qatar Holding Germany GmbH

The Public Investment Fund on behalf of the Kingdom of Saudi Arabia

Free Float

A Appendix

Share price development

Bond trading

HL EUR 6.75 % 2022 HL EUR 5.125% 2024

	EUR Bond 2024	EUR Bond 2022
Listing	Open market of the Luxembourg Stock Exchange (Euro MTF)
Volume	EUR 450 m	EUR 450 m
ISIN / WKN	XS1645113322	XS1555576641 / A2E4V1
Maturity Date	Jul 15, 2024	Feb 1, 2022
Redemption Price	as of July 15, 2020:102.563%; as of July 15, 2021:101.281%; as of July 15, 2022:100%	as of Feb 1, 2019: 103.375%; as of Feb 1, 2020: 101.688%; as of Feb 1, 2021: 100%
Coupon	5.125%	6.75%

Financial Calendar 2020

19 February 2020	Preliminary Financials 2019
20 March 2020	Annual Report 2019
15 May 2020	Quarterly Financial Report Q1 2020
05 June 2020	Virtual Annual General Meeting 2020
14 August 2020	Half-year Financial Report 2020
13 November 2020	Quarterly Financial Report 9M 2020

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.

Hapag-Lloyd Investor Relations Ballindamm 25 20095 Hamburg Tel: +49 (40) 3001-2896 ir@hlag.com All publication documents can be found here: https://www.hapag-lloyd.com/en/ir.html