Hapag-Lloyd Aktiengesellschaft (ETR:HLAG) reported a weaker first quarter of 2026, with management describing the start to the year as “unsatisfactory” as severe weather, weak Atlantic trade and higher costs tied to Middle East tensions weighed on results.
Chief Executive Officer Rolf Habben Jansen said the company “would have hoped for a better quarter,” citing adverse weather in Northern and Southern Europe during January and February, along with similar disruptions on the U.S. East Coast. He said Hapag-Lloyd’s exposure to those markets meant it was “hit harder than most.”
The company kept its earnings outlook unchanged, while emphasizing that uncertainty remains elevated compared with prior years.
Revenue Falls as Liner Shipping Weakens
Chief Financial Officer Mark Frese said group revenue declined to $4.9 billion from $5.3 billion in the prior-year quarter, driven “exclusively” by weaker performance in the Liner shipping segment. Group EBITDA fell to $494 million, and the company reported an EBIT loss of $157 million.
In Liner shipping, revenue declined to $4.8 billion. Frese said average freight rates fell 9.5% year over year to $1,330 per TU, with the strongest erosion on the Asia-to-America trade due to U.S. tariff-related demand fluctuations. Transport volumes were only slightly below the prior-year period, which had benefited from strong growth tied to the start of Gemini.
Frese said unit costs rose 8% to about $1,420 per TU, mainly because of operational disruptions affecting volumes and costs. Handling, haulage and equipment costs increased as weather-related port congestion and Middle East disruptions drove higher terminal storage costs. He also pointed to higher energy surcharges from vendors and weaker fixed-cost absorption from lower volumes.
The company generated operating cash flow of $500 million and free cash flow of $405 million in the quarter. Cash declined by roughly $200 million to $3.8 billion, while total liquidity reserves stood at $6.9 billion at quarter end. Frese said the balance sheet remains resilient and provides flexibility to fund strategic investments and manage market uncertainty.
Hapag-Lloyd’s executive board and supervisory board proposed a dividend of EUR 3 per share, or EUR 527 million in total, for the prior financial year. The proposal is scheduled for consideration at the annual general meeting on May 20.
Middle East Conflict Drives Higher Costs
Habben Jansen said the conflict in the Middle East caused “significant extra costs” beginning in March, and the company is seeking to recover those costs through surcharges. He estimated the impact at EUR 50 million to EUR 60 million in extra costs per week.
He said the conflict is geographically limited but has a global cost impact because of higher energy prices. Several Hapag-Lloyd ships remain stuck in the region, and the company cannot currently move in and out of the Strait of Hormuz. The company is serving the Upper Gulf through a land bridge via Oman and, to some extent, through Jeddah, though Habben Jansen said those options are more expensive for customers and limited in capacity.
In response to analyst questions, Habben Jansen said more than 90% of the bunker cost increase was price-related rather than availability-related. He added that about 50% of Hapag-Lloyd’s business runs under contracts with fuel clauses, which should allow the company to recover additional fuel costs in full on that portion of business. Recovery in the short-term market will depend on market conditions, though he said the company’s chances over the next two quarters were “pretty good” as demand holds up and peak season approaches.
Gemini Reliability Dips, Terminal Business Grows
Habben Jansen said schedule reliability in Gemini declined during the quarter but added that the recovery has been quick given the severity of the disruption. He identified the closure of the port of Tangier for effectively nine days as a major factor and said reliability should return toward prior levels in the second quarter, with statistics likely reflecting improvement by May or June.
The Terminal and Infrastructure segment showed growth. Frese said revenue in the segment increased to $168 million, while EBITDA improved to $47 million. Terminal throughput rose more than 11% to 3.4 million TU, supported by higher volumes in Latin America and India. Revenue also benefited from the full consolidation of J M Baxi after Hapag-Lloyd increased its stake to 51%, as well as higher storage revenue at European ports due to longer dwell times.
The Damietta terminal in Egypt began operations in February after construction was completed and is now serving as Hapag-Lloyd’s new East Mediterranean hub.
ZIM Transaction Moves Through Regulatory Process
Habben Jansen said ZIM shareholders approved the merger agreement with Hapag-Lloyd by a “very clear majority.” The company is now filing for regulatory approvals, including in Israel related to the golden share, as well as in other jurisdictions.
Management continues to expect the transaction to close in the fourth quarter of 2026. Asked about opposition reported in local media, Habben Jansen said Hapag-Lloyd is in dialogue with regulators and is focused on convincing them that the transaction is “a very good deal” for all parties. He acknowledged that political and emotional factors can be difficult to predict.
Frese said the company has no plan to come to the market to refinance the EUR 2.5 billion bridge funding tied to the ZIM transaction, saying it is “not needed.”
Market Outlook Remains Mixed but Peak Season Expected
Habben Jansen said container market growth remains “reasonably” strong despite uncertainty, with first-quarter market growth around 4% and full-year growth of about 3% not appearing unusual. He emphasized that dominant trade legs have grown faster than overall market volumes in recent years, increasing the capacity needed to serve those routes.
He said forward bookings, futures markets and customer conversations point to a “fairly normal peak season,” though he said the key period will be late June and July. Spot rates have risen somewhat, and he said demand on the Asia-Europe trade is currently very strong, with significant overbooking and upward pressure on pricing.
On capacity, Habben Jansen said Hapag-Lloyd’s capacity should remain “fairly flat” through 2026. Looking ahead to industry supply, he said scrapping will increase and slow steaming could play a role if fuel prices remain elevated. However, he noted that the key mitigating factor will be growth on dominant trade legs rather than overall market growth.
Regarding a possible return to the Red Sea, Habben Jansen said it remains difficult to judge timing while the Iran conflict is ongoing. He said escort capacity is not currently sufficient to guide all ships through, and any return would likely be gradual over multiple months to avoid overwhelming terminals in the Mediterranean, Northern Europe and the U.S.
About Hapag-Lloyd Aktiengesellschaft (ETR:HLAG)
Hapag-Lloyd Aktiengesellschaft, together with its subsidiaries, operates as a liner shipping company worldwide. It operates through Liner Shipping; and Terminal & Infrastructure segments. The company's vessel and container fleets are used for dry and special cargo, dangerous goods, and coffee, as well as reefer cargo. It also offers bilateral EDI, a directly connected electronic data interchange; application programming interface (API) developer portal to connect software systems and exchange data; operates portals comprising INTTRA, Infor Nexus, and CargoSmart that manage customer's supply chain data and connect to their carriers through one interface, as well as WAVE BL service for the digital release of original bills of lading; and provides email and security information services.
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