Investor Presentation

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1 Investor Presentation

2 Disclaimer The facts and information contained herein are as up to date as is reasonably possible and are subject to revision in the future. Neither the Company nor any of its parent or subsidiary undertakings nor any of such person s directors, officers, employees or advisors nor any other person makes any representation or warranty, express or implied as to, and no reliance should be placed on, the accuracy or completeness of the information contained in this presentation. Neither the Company, nor any of its parents or subsidiary undertakings nor any of their directors, employees and advisors nor any other person shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any use of this presentation. The same applies to information contained in other material made available at the presentation. While all reasonable care has been taken to ensure that the facts stated herein are accurate and that the opinions contained herein are fair and reasonable, this document is selective in nature. Where any information and statistics are quoted from any external source, such information or statistics should not be interpreted as having been adopted or endorsed by the Company as being accurate. This presentation contains forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which the Company operates. These statements generally are identified by words such as believes, expects, predicts, intends, projects, plans, estimates, aims, foresees, anticipates, targets and similar expressions. The forward-looking statements, including but not limited to assumptions, opinions and views of the Company for information from third party sources, contained in this presentation are based on current plans, estimates, assumptions and projections and involve uncertainties and risks. Various factors could cause actual future results, performance or events to differ materially from those described in these statements. The Company does not represent or guarantee that the assumptions underlying such forward-looking statements are free from errors and the Company does not accept any responsibility for the future accuracy of the opinions expressed in this presentation. No obligation is assumed to update any forward-looking statements. By accepting this presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the Company s business. This presentation is not a prospectus and does not constitute an offer or an invitation or solicitation to subscribe for, or purchase, any shares of the Company and neither this presentation nor anything contained herein shall form the basis of, or be relied on in connection with, any offer or commitment whatsoever. 2

3 Agenda Company Profile and Strategy Business Development 1H 2016 Outlook

4 A Leading Port and Transport Logistics Group Segments of the listed Port Logistics subgroup Company Profile and Strategy Integrated container handling, Intermodal and logistics services along the transport chain between the overseas port and its hinterland Container segment Container handling Container transfer and storage Value-added container services (e.g. repair, maintenance) Total revenue billion Share of revenue 675 million 61% Intermodal segment Rail- and road-bound transport services into the ports hinterland Loading/Unloading of carriers Operation of inland terminals Share of revenue 364 million 33% Logistics segment Special seaport handling of bulk cargo, fruit, RoRo, ConRo Consulting & training Warehousing & contract logistics Handling of cruise ships Share of revenue 65 million 6% 4

5 Favourable Geographical Location Company Profile and Strategy Hub for the major economies of Asia and Central and Eastern Europe Sea-bound container throughput 2015 of HHLA by region 53% Asia 11% Baltic Sea 11% Scandinavia 8% North America 7% South America 5% Rest of Europe 3% Africa 2% Other countries ASIA / FAR EAST BALTIC SEA / SCANDINAVIA CENTRAL AND EASTERN EUROPE Port of Hamburg Germany s largest logistics hub Cost advantages for shipping lines due to central location deep inland Europe s largest railway port with dense rail network to CEE Europe s densest feeder network to the Baltic Sea via the Kiel Canal Intense and long-standing trade relations with Asia High share of local cargo due to populous and economically strong Hamburg region Well balanced import/export flows 5

6 Advanced Terminal Technology High automation level with mega-ship berth in operation Company Profile and Strategy Market share of 73 % in Hamburg and 18 % in the North Range State-of-the-art handling technology, innovative IT systems and a high level of automation Modern handling facilities for the latest generation of ULCV s already in operation at CTB Further gantry cranes for handling of upcoming 20 TTEU ULCV ordered for facilities at CTB and CTT Further rollout of additional automated block storage capacities at CTB until 2017 Optimised traffic coordination for an improved cargo flow and terminal access 6

7 Investments for Higher Value Added Company Profile and Strategy 13 hinterland terminals, 52 locomotives and more than 2,000 wagons Hub and inland terminals in the hinterland Multi-system locomotives and shunting engines Light-weighted wagons with modern braking system Investments in million Approx. 190 million investment in own terminals and rolling stock since More than 53 % of subgroup investments in was spent on Intermodal segment Total 7

8 Intermodal Network Company Profile and Strategy High degree of own traction in the hinterland raises level of value added High-frequency shuttle train connections to all major economic centres in the ports hinterland Own assets (terminals, repair and maintenance facilities as well as own rolling stock) 13 well located inland hub terminals with innovative design and technology More than 2,000 own lightweighted wagons with modern braking system and more than 50 own locomotives to further enhance product quality and improve cost efficiency More than 450 regular connections per week, thereof the majority to CEE 8

9 Company Profile and Strategy Successfully Implemented Diversification Strategy Intermodal contributes significantly to earnings and stability of the subgroup Transport volume in TTEU 1,172 CAGR % 1,283 1,318 Revenue in million CAGR % EBIT and EBIT margin in million, % CAGR % 55.2 Segment assets and ROCE in million, % % 7.8 % 15.2% 7.8 % 8.7 % 15.7%

10 Challenges and Measures Taking opportunities in a changing market environment Company Profile and Strategy Current challenges Worldwide slowdown of growth in the economy, trade and container handling Structural changes in the Chinese economy Ongoing economic crises in Russia and Ukraine Intensified competition between ports in the North, Baltic and Mediterranean Sea New alliances between shipping liners Continued peak load conditions due to further delay of dredging the river Elbe and ship size growth Further continuing infrastructure deficits Measures Focusing on activities with high value added and profitability Ship size-related expansion of our container terminals Productivity gains by further automation and further optimisation of processes as well as improvement of transport coordination Continued growth in our Intermodal activities Increasing customer satisfaction by outstanding product quality and reliability Exploiting horizontal growth opportunities in dynamic markets and business areas 10

11 Strategic Focus of HHLA Company Profile and Strategy Further diversification to reduce one-sided dependencies and risks Maintenance and expansion of our market leadership in Hamburg Further network and terminal expansion of our Intermodal companies Accelerated horizontal growth by expanded regional and product strategy A leading port logistics operator in Europe turns into a leading European port and transport logistics Group 11

12 Agenda Company Profile and Strategy Business Development H Outlook

13 Business Environment Subdued global growth continuing Business Development H Macroeconomic development Global economy: Slight recovery of momentum in 2Q16 1 China: GDP growth stabilises in 2Q16 at 6.7 % y-o-y 2 Russia: Despite weakening trend still shrinking GDP (4Q15: % y-o-y; 1Q16: % y-o-y) 3 Ukraine: First sign of recovery (1Q16: % y-o-y) 4 Sector development 5 Global container growth: After a notable dip in 1Q16 a pickup in 2Q16 of 2.3 % y-o-y is expected China: After a flat 1Q16 economy gains dynamics slowly with an expected increase of 3.2 % y-o-y in 2Q16 North-West Europe: Despite a weak 1Q16 growth of 2.0 % y-o-y is expected for 2Q16 Scandinavia/Baltic region: After a slight recovery in 1Q16 volumes are shrinking again (1Q16: % y-o-y; 2Q16: % y-o-y) Source: 1 IfW World Economic Development in Spring, June Reuters, Press Release Weltbank Brief Russia Monthly Economic Developments July Interfax Press Release Drewry Maritime Research Container Forecaster Q2/

14 Adjusted EBIT on Prior-Year s Level Intermodal growth can largely compensate downturn in Container Key Figures 1H16 of the Port Logistics Subgroup Business Development H Revenue in million -2.1% EBIT / adjusted EBIT in million -0.7% * 58.8 Adjusted EBIT EBIT Slight decrease in revenue mainly due to lower container throughput volumes EBIT impacted by one-off expenses, but adjusted EBIT sustained on prior-year s level Adjusted EBIT-margin of 13.2 % slightly above prior-year s figure (1H15: 13.0 %) 1H15 1H16 1H15 1H16 * Adjusted by one-off expenses of 14.9 m Free Cash Flow * in million % ROCE / adjusted ROCE in % pp * Adjusted ROCE Positive Free Cash Flow development mainly due to lower tax payments Adjusted ROCE still on above-average level 10.2 ROCE 1H15 1H16 * Without proceeds from short-term deposits 1H15 1H16 * Adjusted by one-off expenses of 14.9 m 14

15 Throughput and Transport Volumes Business Development H Container throughput still modest while transport growth impressive Container throughput in TTEU 3, % 3,157 3, % % 1H15 1 2H15 2 1H16 3 Container throughput still declining y-o-y, but stabilizing based on a semi-annual comparison (1H16 vs. 2H15) Volume decrease at Hamburg terminals (- 6.2 % y-o-y) mainly due to lower Asia (- 9.0 % y-o-y) and feeder volumes (- 8.5 % y-o-y) Container Terminal Odessa continued to make good progress (+ 5.9 % y-o-y) Container transport in TTEU % % % Remarkable growth in container transport continues Mainly driven by growth in rail transportation of 8.6 % y-o-y to 537 thousand TEU (1H15: 494 thousand TEU) Road transport volumes almost on prior-year s level 1H15 1 2H15 2 1H

16 Container Segment EBIT down as a result of lower volumes and lower utilization Business Development H Revenue % H H16 Volume-related revenue decline Average revenue per TEU up due to individual price adjustments and lower feeder ratio of 22.9 % (1H15: 23.4 %) m /TEU /TEU m OpEx (incl. D&A) % H H16 Disproportionate decline of OpEx compared to volumes due to fixed costs and uneven volume flows over the course of a week, but still offset by approx. 70 % in the short term m /TEU /TEU m EBIT % H H16 EBIT impacted by lower volumes and lower utilization, but EBIT per TEU and EBIT margin (1H16: 16.1 % vs. 1H5: 16.3 %) on previous year s level m /TEU /TEU m 16

17 Intermodal Segment Dynamic growth in volumes, revenue and EBIT Business Development H Revenue 1H % H16 Revenue increase slightly below volume growth dynamics due to a change in route mix resulting into a lower average transportation distance m m OpEx (incl. D&A) 1H % H16 Cost development well below volume trend Improved cost structure and productivity gains due to use of own traction m m EBIT % % % m m 1H15 1H16 EBIT margin EBIT again significantly outperformed volume and revenue growth Productivity gains and cost improvements haven t been fully effective in 1H15 due to ramp-up Impressive EBIT margin: 17.6 % (+ 2.8 pp) 17

18 Logistics Segment EBIT heavily burdened by one-off restructuring expenses Business Development H Revenue % H15 1H16 Revenue decline due to gradual reduction of project and contract logistic activities as well as project-related lower revenue of consulting activities m m EBIT m m -1.1 neg H15 1H16 One-off restructuring expenses of 14.9 million EBIT of all consolidated companies was heavily burdened by one-off expenses of 14.9 million in the course of the planned restructuring of project and contract logistics Earnings from associates (using the equity method) -1.3% H15 1H16 At-equity companies showed an inconsistent performance However, earnings from associates all in all largely on previous year s level m m 18

19 Earnings Bridge Business Development H Net profit down due to one-off, but continued activities remained almost stable in million; figures of the Port Logistics subgroup (change vs. 1H15) (+/- 0.0) EPS % (+ 0.3) (+ 4.1) 14.9 (+ 1.2) (- 2.2) -20.7% At-equity earnings almost on prior year's level Net interest expense down by 3.2 % Considerably lower negative F/X effect ( % y-o-y) Effective tax rate up by 2.9 pp to 27.4 % Minorities up by 17.7 % -36.0% 21.3 EBIT Earnings from associates Net interest income F/X translation Tax Minorities Net profit 19

20 Agenda Company Profile and Strategy Business Development and Financial Performance Q1/2016 Outlook

21 Outlook Outlook 2016 Reaffirmation for the current financial year Market Environment Performance of Port Logistics GDP trend 2016 in % 3.2 Global Source: IMF / July Container throughput trend 2016 in % 1.8 Global China 2.4 China Source: Drewry Maritime Research / July Germany 1.2 North West Europe Russia -1.2 Scandinavia and Black Sea -1.4 Volumes Container throughput: on previous year s level (2015: 6.6 million TEU) Container transport: slight increase on previous year (2015: 1.3 million TEU) Revenue On previous year s level (2015: 1.1 billion) EBIT In a range between 100 million and 130 million incl. one-off consolidation expenses of about 15 million Investments In the region of 180 million Almost all of which is allocated for the Port Logistics subgroup 21

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23 Appendix Key Takeaways Vertical integration Location Business model of vertical integration with a high level of value added services enables optimisation of all processes along the logistics chain between the seaport and the European hinterland Strong natural catchment area due to favourable geographic location of Hamburg as most easterly North Sea port which makes it the ideal hub for the entire Baltic region and for hinterland traffic to and from CEE Technology High level of automation, advanced handling technology and innovative IT systems ensure operational excellence and data exchange with customers Intermodal strategy Cost leadership in Intermodal rail services due to own assets and dominant market positions Financial stability Solid financial fundament with capacity and productivity reserves to maintain our position as a leading port and transport logistics group and to achieve a sustainable growth in our enterprise value 23

24 Appendix Business Model Value creation based on vertical integration 24

25 Key Figures Financial statement of the Port Logistics subgroup Appendix in million 2012* Revenues 1, , , ,111.0 EBIT 172.8* Profit after tax and minority interests 66.4* Earnings per share in 0.95* ROCE in % Free Cash Flow Capex** Restated figures: 2012 from application of IAS 19 (revised 2011) / 2013 from application of IFRS 11 * incl. one-off gain of 17.6 million due to realignment of Intermodal segment ** without Group internal transaction 25

26 Key Figures Container segment Appendix in million Container throughput in TTEU 7,183 7,500 7,480 6,561 Revenues EBITDA EBITDA margin in % EBIT EBIT margin in % Segment assets Restated figures: 2012 from application of IAS 19 (revised 2011) / 2013 from application of IFRS 11 26

27 Key Figures Intermodal segment Appendix in million 2012* Container transport in TTEU 993** 1,172 1,283 1,318 Revenues EBITDA 59.5* EBITDA margin in % 19.8* EBIT 41.3* EBIT margin in % 13.8* Segment assets Restated figures: 2012 from application of IAS 19 (revised 2011) / 2013 from application of IFRS 11 * incl. one-off gain of 17.6 million due to realignment of Intermodal segment ** container transport from continued activities 27

28 Key Figures Logistics segment Appendix in million Revenues EBITDA EBITDA margin in % EBIT EBIT margin in % Earnings from associated companies (using the equity method) Segment assets Restated figures: 2012 from application of IAS 19 (revised 2011) / 2013 from application of IFRS 11 28

29 Earnings Bridge 2015 Appendix Net profit and EPS of the Subgroup Port Logistics increased substantially in million EPS % % At-equity earnings down by 29.1 % Net financial result up by 30.9 % Declining F/X-effect (UAH devaluation) y-o-y Effective tax rate of 24.5% down by 6.1 pp Minorities down by 7.8 % % EBIT At-equity earnings Net interest income F/X effect Tax Minorities Net profit 29

30 Key Performance Indicators 2015 Solid financial fundament Appendix Profit after tax and minorities & EPS in million Ø Capital employed & ROCE in million Profit after tax and minorities EPS 13.6 % 12.4 % Ø capital employed ROCE Operating cash flow & operating cash flow per share in million Net financial debt & net financial debt / EBITDA in million Operating cash flow Operating cash flow per share 0.4x 0.6x Net financial debt Net financial debt / EBITDA

31 Appendix Significantly Higher Dividend y-o-y Dividend proposal: 59 -Cent per A class share Development of dividend per share and payout ratio % 70 % % Payout ratio proposal of 70 % of the relevant net income for A class shares in 2015 within the communicated corridor, in place since % 65 % 70 % 70 % Renewed double digit increase of the dividend per A class share Payout ratio Dividend per share 31

32 Growth of Global Container Throughput and GDP Growth multiplier on GDP slowed down Company Profile and Strategy Upswing Dip Recovery New Normal Expectation 20% Ø multiple 2.8x 7.3x 2.5x 1.2x ~ 1.0x 15% 10% 5% 0% [F'cast] 2017 [F'cast] 2018 [F'cast] 2019 [F'cast] -5% -10% Global container throughput Global GDP Source: Drewry, IMF 32

33 Ports remain an attractive growth industry Company Profile and Strategy After above average growth dynamics a new momentum has established in TEU million 800 Global thereof Asia thereof Northwest Europe Source: Drewry, HHLA Upswing Dip Recovery New Normal Expectation [F'cast] 2017 [F'cast] 2018 [F'cast] CAGR Global Asia NW Europe 12.3% -9.3% 11.8% 4.0% 3 4 % 14.1% -7.9% 13.4% 4.4% 4 5 % 9.7% -17.1% 6.4% 1.5% 2 3 % 33

34 Deviations in ship calls per week Peak loads due to bigger ship sizes in a new normal environment 2007/ Carrying capacity of container ships roughly doubled since 2007/08 Company Profile and Strategy max. ~ 9,000 TEU max. ~ 18,000 TEU Weekly Path of HHLA Throughput Volumes Index (100 = Ø weekly) 120% 110% 100% 90% 80% 70% standard deviation: 2007/08: 8.1% 2015 : 13.3% (+ 64.1% vs. 2007/08) 37 % 26 % Mo Tu Wed Thu Fr Sa Su High High weekly average Low Low In 2007/08 load conditions with homogeneous distribution of weekly throughput volumes Nowadays weekly peak load conditions as well as underutilisation has almost doubled Spread between highest and lowest utilization is roughly 50 % higher compared to 2007/ /08 34

35 Growth in Ship Sizes Handling of ultra large container vessels (ULCV) require extra effort Appendix Ship size development at HHLA container terminals % 39% 34% Fourfold increase of ULCV calls within five years 21% 7% 40% ULCV ULCV fleet fleet worldwide worldwide and and order order book book until until in service in service on on order order Unrestricted fleet growth continues < 6,000 TEU 6,000 to 10,000 TEU > 10,000 TEU Source: AXL Alphaliner, July 2016 Implications Nautical restrictions tightened by increasing number of ULCV because of more width and draught Peak load conditions due to narrower time windows require more staff and equipment Capex requirements (suitable quay walls, gantry cranes etc.) Counteraction Enhancing service quality by continuous investment in technology and efficiency Launching Feeder Logistics Centre (FLZ) and Nautical Terminal Coordination (NTK) to optimise ULCV and feeder vessel calls Raising attractiveness of HHLA terminals by expanding hinterland network 35

36 Development of Alliances in Container Shipping Concentration in the shipping industry substantially increased Appendix 2015 Shipping Lines M O3 G6 C K Y H E Consolidation processes Maersk MSC CSCL CMA CGM UASC APL OOCL Hapag Lloyd NYK / MOL Hyundai M. M. Cosco Evergreen K Line Yang Ming Hanjin 2M Network Ocean Alliance subject to approval by the regulations authorities The Alliance Companies are in merger talks Share FE Europe 35% 36% 29% Implications Consolidation process in the shipping industry is supposed to be continued Re-shaping of alliances and cooperation to improve load factor and slot costs Perspectives Deployment of largest vessel sizes and focus on calls at gateway ports (hubs) Source: AXS Alphaliner, May

37 Competing Ports of the North Range Container throughput and market share development Appendix Container throughput million TEU (- 0.5 % y-o-y) NORTH SEA DENMARK 2015: Throughput and market share of HHLA in million TEU 36.7 BREMEN PORTS 5.6 million TEU (- 4.3 % y-o-y) KIEL CANAL 17.4 % % % 6.3 BELGIUM THE NETHERLANDS WILHELMSHAVEN 0.4 million TEU (pos. y-o-y) ROTTERDAM 12.2 million TEU (- 0.5 % y-o-y) ANTWERP 9.7 million TEU (+ 7.5 % y-o-y) GERMANY HAMBURG 8.8 million TEU (- 9.3 % y-o-y) HHLA in Hamburg 6.3 million TEU ( % y-o-y) Current terminal capacity of North Range ports** of ~ 55 million TEU p.a.*** utilisation stands at ~ 67 % *** CAGR: *** North Range Ports (Rotterdam, Hamburg, Bremen ports, Antwerp) incl. Wilhelmshaven *** Source: AXS Alphaliner, own estimates North Range German Bay Hamburg HHLA CAGR* 0.8% % CAGR* -0.4% % CAGR* -1.4% 2008: Throughput and market share of HHLA in million TEU % CAGR* -1.0% 6.9 North Range German Bay Hamburg HHLA 37

38 Short Ways Less Costs Appendix Hamburgs location offers cost benefits compared to other Nord Range ports Shanghai <> Hamburg (one-way: ~ 20,375 km) + 70 % of costs for about 97 % of total distance No differentiation in freight rates between North Range ports Hamburg <> Prague (one-way: ~ 690 km) + 30 % of costs for about 3 % of total distance Clear differentiation between North Range ports 38

39 State-of-the-Art Container Handling at CTA Maximum efficiency by high degree of automation and compact layout Appendix 39

40 Strengthening Hinterland Network With Own Assets Well located inland hub terminals offer high level of value added services Appendix 40

41 HHLA in the Port of Hamburg Appendix HHLA CONTAINER TERMINAL BURCHARDKAI HHLA REAL ESTATE FISCHMARKT HHLA CONTAINER TERMINAL TOLLERORT HHLA REAL ESTATE SPEICHERSTADT HHLA LOGISTICS CRUISE CENTER HHLA LOGISTICS ÜBERSEE-ZENTRUM HHLA LOGISTICS O SWALDKAI HHLA LOGISTICS HANSAPORT HHLA CONTAINER TERMINAL ALTENWERDER 41

42 Elbe Waterway Adjustment Administrative steps by the public authorities in charge Appendix Initiation of plan approval process Final plan approval Main hearings on legal objections Proceedings stayed pending a decision by the ECJ ECJ judgment on the EU Water Framework Directive Submission of planning supplement decision Final ruling on the plan approval Sep 2006 Apr 2012 July Oct July March to 21 Dec 2016 Federal Water and Shipping Authority & City State of Hamburg Federal Water and Shipping Authority Federal Administrative Court (FAC) European Court of Justice (ECJ) Federal Water and Shipping Authority Federal Administrative Court (FAC) Adjustment of navigation channel m tidal dependent / m tidal independent, widening boxes Enabling a higher load factor, extended time slots and more flexibility for mega carriers 42

43 Appendix Elbe Waterway Adjustment Passing Box 43

44 Financial Calendar IR Contact 30 March 2016 Annual Report 2015 Press Conference, Analyst Conference Phone: Fax: May 2016 Interim Statement January - March 2016 Analyst Conference 16 June 2016 Annual General Meeting (AGM) 11 August 2016 Interim Report January - June 2016 Analyst Conference 10 November 2016 Interim Statement January - September 2016 Analyst Conference Web: investor-relations@hhla.de 44

45 HAMBURGER HAFEN UND LOGISTIK AG Investor Presentation Annual Report Half-Year Financial Report January to June