Hapag-Lloyd unveils "Strategy 2023"
As the liner industry has come to a turning point following a period of consolidation, Hapag-Lloyd unveiled its five-year strategy, prioritizing profitability, service, and cost savings in a container shipping
Large-scale acquisitions is not one of the objectives in German carrier's new strategy will characterize everything the shipping company does in the next five years, said its CEO Rolf Habben Jansen.
Hapag-Lloyd is more than two times larger than it was in 2014 in terms of transport capacity. At the same time, 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. Hapag-Lloyd will therefore focus on significantly improving quality for its customers, selective global growth and becoming profitable throughout the cycle.
Jansen said: “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.”
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 approximately 12 percent.
A cost management programme with a savings run-rate target of USD 350 to 400 million has been launched to ensure a competitive cost position is maintained also 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 more than 45 percent. An adequate liquidity reserve of around 1.1 billion US dollar will be maintained.