No further consolidation, liner shipping industry has changed
The assumption comes from Hapag Lloyd, which has unveiled its Strategy 2023
Following a period of consolidation, the liner shipping industry has changed significantly, and further consolidation amongst the largest players in the industry is less attractive due to decreasing incremental scale benefits; as a result, the industry has come to a turning point.
The assumption comes from Hapag Lloyd, which has disclosed details of its new mid-term Strategy 2023. The German company is mover twice larger than in 2014 in terms of transport capacity, and will therefore focus on significantly improving quality for its customers, selective global growth and becoming profitable throughout the cycle.
“Size is not the name of the game anymore, but customer orientation. It is obvious that customers expect more reliable supply chains, so our industry needs to change and invest more. At the same time, we know that people are prepared to pay for value. Going forward, delivering value to get the most attractive cargo on board is at the heart of our new Strategy 2023. To be number one for quality is the ultimate promise to our customers and a strong differentiator from our competitors”, said Rolf Habben Jansen, CEO of Hapag-Lloyd.
Hapag-Lloyd’s Strategy 2023 is based on various elements: Key cost initiatives focus on network optimisation, terminal partnering and further improvements in procurement and container steering. Furthermore, an optimised revenue management will ensure that the most attractive cargo gets on board. At the core of the new Strategy is an enhanced differentiation by offering unrivalled levels of reliability and service quality. Hapag-Lloyd is making changes to its structures, systems, processes and operations and focusing single-mindedly on delivering customers a better and more efficient experience in their supply chains.
At the same time, additional improvements aim to turn Hapag-Lloyd into a more agile, dynamic and analytically driven organisation. More investments in digitalisation and automation will be made to further exploit digital excellence. One example is to increase the share of the online business via the web channel to 15 percent of Hapag-Lloyd’s overall volume by 2023.
Financial targets by 2023 will focus on generating economic value by delivering a Return on Invested Capital (ROIC) which is higher than the Weighted Average Cost of Capital (WACC). This implies an EBITDA margin of 12%.
A cost management program with a savings run-rate target of USD 350 to 400 million has been launched to ensure a competitive cost position is maintained after launching the strategy initiatives. On leverage the net debt-to-EBITDA ratio is targeted to be less than 3.0x with an equity ratio of 45%. An adequate liquidity reserve of around 1.1 billion US dollar will be maintained.