S&P downgrades Hapag-Lloyd outlook
Standard & Poor’s revised its outlook for Hapag-Lloyd from “stable” to “negative” but confirmed the German ocean carrier’s BB+ credit rating, the Journal of Commerce reports.
“The outlook revision reflects Hapag-Lloyd’s significantly lower profitability in the first half of the year than we previously anticipated,” said S&P credit analyst Izabela Listowska. “Given the persisting difficult industry conditions, we believe the company’s cash flow protection measures may now fall short of the levels we view as rating-commensurate.”
Hapag-Lloyd joins CMA CGM in having its outlook downgraded by the rating agency this month. Moody’s also downgraded the French carrier’s outlook.
Hapag-Lloyd said it does not expect any changes in the terms of its financing as a result of the altered outlook.
“I see the rating confirmation as the result of our swift response to the challenges our industry is currently facing,” said Michael Behrendt, chairman of Hapag-Lloyd’s Executive Board. “Our solid corporate financing was also supporting.”
Hapag-Lloyd said its operating profits in the first two quarters of 2011 put it well above the industry average. The carrier's earnings this year have been hit by higher bunker fuel costs and depressed freight rates resulting from overcapacity, especially on the Asia-Europe trades, which account for around 20 percent of Hapag-Lloyd’s volume, S&P said.
The rating agency expects Hapag-Lloyd’s operating margin to be “somewhat below” 5 percent for the full year, well below its original forecast of about 10 percent. A planned acceleration in capital spending for vessels on order in 2012 and 2013 will put additional pressure on the carrier’s cash flow measures.
“We could consider a downgrade, for example if the company continued to face sustained competitive pressure on freight tariffs and/or bunker fuel cost increases, which would hinder an expected profitability improvement and turnaround in cash flow measures,” Listowska said “We also believe that the ratings on Hapag-Lloyd could also come under pressure if confronted with a substantial weakening in liquidity.”
“The outlook revision reflects Hapag-Lloyd’s significantly lower profitability in the first half of the year than we previously anticipated,” said S&P credit analyst Izabela Listowska. “Given the persisting difficult industry conditions, we believe the company’s cash flow protection measures may now fall short of the levels we view as rating-commensurate.”
Hapag-Lloyd joins CMA CGM in having its outlook downgraded by the rating agency this month. Moody’s also downgraded the French carrier’s outlook.
Hapag-Lloyd said it does not expect any changes in the terms of its financing as a result of the altered outlook.
“I see the rating confirmation as the result of our swift response to the challenges our industry is currently facing,” said Michael Behrendt, chairman of Hapag-Lloyd’s Executive Board. “Our solid corporate financing was also supporting.”
Hapag-Lloyd said its operating profits in the first two quarters of 2011 put it well above the industry average. The carrier's earnings this year have been hit by higher bunker fuel costs and depressed freight rates resulting from overcapacity, especially on the Asia-Europe trades, which account for around 20 percent of Hapag-Lloyd’s volume, S&P said.
The rating agency expects Hapag-Lloyd’s operating margin to be “somewhat below” 5 percent for the full year, well below its original forecast of about 10 percent. A planned acceleration in capital spending for vessels on order in 2012 and 2013 will put additional pressure on the carrier’s cash flow measures.
“We could consider a downgrade, for example if the company continued to face sustained competitive pressure on freight tariffs and/or bunker fuel cost increases, which would hinder an expected profitability improvement and turnaround in cash flow measures,” Listowska said “We also believe that the ratings on Hapag-Lloyd could also come under pressure if confronted with a substantial weakening in liquidity.”