Wallenius Wilhelmsen expects 2024 to be another strong year

Oslo-listed RoRo major Wallenius Wilhelmsen reported an Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) of US$438 million and a net profit of US$185 million for the first quarter of 2024, reflecting high activity and profitability across all segments despite geopolitical and operational challenges.

The performance demonstrates a 10% year-on-year EBITDA increase from US$398 million and a 7% uptick in net profit, which stood at US$173 million in Q1 2023.

Among the business segments, shipping contributed US$366 million to the Q1 EBITDA, while logistics and government segments contributed US$46 million and US$34 million, respectively.

“We are very pleased with our results in Q1 2024, in particular in view of the impacts from multiple, external events. Shipping volumes and available capacity were negatively impacted by the rerouting away from the Red Sea. In addition, the bridge collapse in Baltimore impacted operations on the US east coast. Despite this, and thanks to our teams’ extraordinary efforts, we delivered another strong quarter,” says Lasse Kristoffersen, President, and CEO at Wallenius Wilhelmsen.

As explained, the company’s shipping business segment delivered improved results YoY as higher contract rates and reduced costs offset the lower volume and cargo mix.

Specifically, the RoRo industry has been fundamentally strong over the last years due to the very tight global fleet situation and increase in demand particularly from Asia. The security situation in the Red Sea, with vessels being diverted, has put additional pressure on the global tonnage efficiency.

In December 2023, Wallenius Wilhelmsen decided to re-route all of its vessels for Red Sea transit via the Cape of Good Hope. However, the company’s Q1 revenue remained relatively stable from Q4 on continued strong market fundamentals and improving rates.

“Our capacity remains sold out, and we continue to face operational challenges due to port congestion in several regions. Further, the situation worsened somewhat in Q1 on a general congestion increase from most regions, mostly from US West coast,” the company pointed out.

The company said that due to the ongoing capacity constraints many customers are increasingly looking to secure integrated shipping and logistics solutions ahead of scheduled contract renewals.

“In 2024, a substantial portion of our contracts are due for renewal. Scarcity of shipping capacity provides a firm backdrop for negotiations and business activity. We see increased demand for logistics and integrated services, and support for the ambition to reduce emissions,” says Kristoffersen.

Wallenius said that the market remains tight, demand still outstrips tonnage capacity and all vessels are fully utilised. The decrease in volumes came mainly from Europe and US outbound trades with fewer sailings and trading days. Oceania, Atlantic, and EU-AS trades all saw relatively larger decline in shipped volumes compared to the company’s Asia outbound trades.

“Waiting times at key ports continued to create challenges and the situation worsened somewhat in Q1. During the quarter, some 8% of the available trading days were caught up in congestion. We are doing our best to mitigate these challenges by having a continuous dialog with our customers and re-routing to other ports with less congestion whenever and wherever possible. More so, in excess of 5% of our available days were lost as a consequence of the re-routing away from the Red Sea bringing the total to around 13%,” the company said.

Read more: European ports filling up with Chinese autos

Baltimore bridge collapse

The company previously indicated an anticipation of a potential US$5 to 10 million drop in EBITDA due to the suspension of vessel traffic in Baltimore following the collapse of the Francis Scott Key Bridge, which resulted in the vessel M/V Carmen being stranded in the port until it was able to leave port on April 25.

“The Baltimore situation has had limited financial implications for Wallenius Wilhelmsen in Q1, but will have some negative effects in Q2 and possibly longer depending on when the port resumes regular trading and operations,” the company added.

Decarbonization

Wallenius Wilhelmsen met the CO2 intensity target set for 2023, enshrined in the sustainability-linked financing framework established in 2022.

“We have upped our ambitions on decarbonisation with a goal of reducing our emissions by 40% by 2030 (compared to 2022) and becoming net zero by 2040,” says Kristoffersen.

During the quarter Wallenius Wilhelmsen ordered four additional Shaper Class methanol dual fuel vessels, for a total of eight firm orders with planned delivery from H2 2026 onwards. The company was awarded an option for four additional vessels. The newbuilds and energy efficiency initiatives are key elements in the company’s journey towards net zero.

Outlook

Commenting on market fundamentals, Wallenius Wilhelmsen noted that deep-sea auto volumes experienced a 10% year-on-year increase in the first quarter, primarily driven by growing export volumes from China and Europe. Additionally, global high and heavy (H&H) exports have maintained high levels, although softer demand for agricultural equipment, coupled with a normalization in breakbulk volumes, indicates a more modest volume development. Despite these factors, expectations for volume growth and ongoing capacity constraints in shipping support a solid market outlook.

Despite the financial implications of external events, the company expects 2024 to be another strong year, somewhat better than 2023.