German container shipping major Hapag-Lloyd revealed details of its new mid-term ‘Strategy 2023’, which will focus on increased reliability and service quality to drive efficiency in the supply chain and to respond to the new conditions brought by the consolidation trend in recent years. Additional improvements aim to turn the company into a more analytically-driven organisation.
At the same time, the company adds, the industry has reached a turning point, where further consolidation amongst the largest players in the industry is less attractive due to decreasing incremental scale benefits. Hapag-Lloyd will therefore focus on significantly improving quality, 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 key cost initiatives for network optimisation, terminal partnering and further improvements in procurement and container steering, as well as an optimised revenue management to ensure that the most attractive cargo gets onboard.
Additionally, at the core of the new Strategy are changes to the company’s structures, systems, processes and operations and focusing on delivering customers a better and more efficient supply chain system.
Meanwhile, additional improvements aim to turn Hapag-Lloyd into a more 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% 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%.
A cost management programme with a savings run-rate target of USD 350 to 400 million has been also 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%. An adequate liquidity reserve of around 1.1 billion USD will be maintained.
