[PPT] - Hapag-Lloyd at the Gemini Shippers Association Annual Meeting June PowerPoint Presentation

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Hapag-Lloyd at the Gemini Shippers Association Annual Meeting

June 6th 2017

Hardy Pearson – SVP Area Midwest/Northeast P.J. McGrath – SVP Transpacific Trade

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2

Industry Update Hapag-Lloyd in a Nutshell Trade Update

Agenda

A. C. B.

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3 A.

Industry Update

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4

Present and future trends (and challenges) in liner shipping

Alliances

Prevailing Losses

Consolidation Ship Size

What trend will change our business most on the long run?

Digitalization

Cost Cutting

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5

100 150 200 250 300 2018E 2017E 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000

Demand: Container shipping remains an industry with healthy growth and balanced trade dynamics

Container shipping volume and global GDP growth

Global GDP Transport volume

+4.7% +3.5%

6

2000-2008 2010-2015 2016-2018E

2.1x 1.3x 1.2x GDP multiplier

Source: Clarksons (April 2017), IMF WEO (April 2017)

+4.2% +4.6% +3.1% +3.5% +3.6% +3.5% +4.3% +9.1%

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6

Supply: Capacity growth is slowing – very few deliveries post 2017 expected

Orderbook-to-fleet [TEU m, %] Orders placed by year [TEU m] Vessel deliveries by year [TEU m] 5 3 2 1 6 4 8 7 28% 27% 4.3 2011

38% 3.9

2010 50% 5.0 2009 61% 6.0 2008 6.5 2007 19% 3.8 2015 2016 16%

3.2 3.4 21%

2014 18% 3.3 2013 2017E 21%

3.6

2012 3.1 15% Apr17 YTD

0.0

2016 0.2 2015

2.2

2013 1.1 2014 3.2 1.2 2007 0.1 2008 0.6 2009 1.8 2010 0.4 2011 2.0 2012 2011 1.2 2010 1.4 2009 1.2 2008 1.4 2007 1.4 2017E 2016 2015 1.2 2014

0.9

2013 1.7 2012 1.5 1.3 1.3

+33%

Source: Clarksons (April 2017), Drewry

15,300 TEU

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7

Global Supply and Demand Growth

Reducing Gap between Supply and Demand

05/06/2017 Shipping, Trade & Economy Master Slides GI Feb17

Source: Clarksons 1Q17, Drewry 1Q17

10
8
6
4
2

2 4 6 8 10 12 14 16 18

2018e 4.5% 4.6% 2017e 2.7% 4.2% 2016 1.2% 3.4% 2015 8.4% 2.2% 2014 6.3% 5.3% 2013 5.5% 5.1% 2012 6.1% 3.1% 2011 8.0% 7.8% 2010 9.7% 13.7% 2009 6.8%

9.2%

Demand Supply

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8

Why are mergers and larger alliances needed …

05/06/2017

… because carriers have no choice.

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9

CSCL

0.6

APL

0.6

Hanjin

0.7

Hapag- Lloyd

0.7

COSCO

0.8

Ever- green

0.8

CMA CGM

1.5

MSC

2.3

Maersk Hyundai

0.3

ZIM

0.3

K-Line

0.3

PIL

0.4

Yang Ming

0.4

OOCL

0.5

Hamburg Süd

0.5

NYK

0.5

MOL CSAV

0.3

UASC

0.3 0.5 2.5 Carrier capacity [TEU m] and global capacity share [%] 1.0

MOL / NYK / K-Line

1.4

COSCO / CSCL

1.7

CMA CGM / APL

2.2

MSC

2.9

Maersk / Hamburg Süd

3.7

Hapag-Lloyd / UASC

1.6

ZIM

0.3

PIL

0.4

Hyundai

0.5

Yang Ming

0.6

OOCL

0.6

Evergreen 18% 15% 11% 8% 8% 5% 3% 3% 2% 7% 14% 13% 8% 4% 4% 4% 4% 3% 3% 3% 3% 3% 2% 2% 2% 2% 2% 2% 2% 1% 2% 1%

We believe that going forward there will be 5-7 significant global liner shipping companies – Gap to the rest is widening rapidly

Consolidation wave leads to higher concentrations

Ranking as of 2017 Ranking end of 2013

Note: Diagram assuming that all currently announced mergers (Hapag-Lloyd & UASC; NYK & MOL & K-Line, Maersk & Hamburg Süd) will receive regulatory approvals and are executed as announced. Simple sum of stand-alone operating capacity as of December 1, 2016.

39% 19% 17% 21% 44% 60%

2017E 2013

Remaining Top 6-10 Top 5 Global capacity share [%]

Source: Drewry (Forecaster 1Q17), MDS Transmodal (April 2017, October 2013)

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Liner Shipping is a capital intensive industry

Vessel investment Container investment

 Total number of containers needed: 150,000 TEU  Price2 per container (40HC): 3,825 USD  Total container investment: 287 mio USD  10 vessels are needed for one Asia-US EC Loop  Price1 per vessel: 93 mio USD  Total vessel investment: 930 mio USD

1Source: Clarksons Mar 17, 2source: Harrison Consulting 1Q17

Capital cost for one Asia-US East Coast loop with 10,000TEU vessels = USD 1.2 billion

without considering all operating costs such as port & terminal costs, bunker, channel passage, crew etc.

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11

Increased reliability for key slings by specializing port

coverage

Carriers exiting chassis provision business
Carriers more selective in targeting inland locations
Reduction in demurrage / detention exceptions – the

real cost is missed opportunities on strong leg

Need to recover bunker cost fluctuations

Trends in the Market

05/06/2017 Insert Presentation Title here "Insert > Header and Footer > Apply to All"

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12 B.

Hapag-Lloyd in a Nutshell

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13

Hapag-Lloyd / UASC merger creates a top tier pure-play carrier

Strengthened market position Well-balanced trades Large, young fleet Strong partnerships Significant synergy effects

Deal rationale At a glance

Combined Entity1)

Corporate HQ Hamburg Dubai Hamburg Alliance membership G6

(until 31 March 2017)

Ocean 3

(until 31 March 2017)

THE Alliance

(since 1 April 2017)

Ships [#] 172 58 230 Capacity [TEU m] 1.0 0.6 1.6 Container [TEU m] 1.6 0.7 2.3

1) Sum of stand-alone figures as of 31 March 2017 (rounding differences may occur)

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14

The combined company is steered from Hamburg – Dubai becomes HQ for the new Region Middle East

Regions Central functions Executive Board Executive Committee

CCO Thorsten Haeser CEO Rolf Habben Jansen CFO Nicolás Burr COO Anthony J. Firmin Trade Management Martin Rolf Global Sales Hans Schäfer Operations Glenn Hards Network Ulf Schawohl Global Markets Thorsten Haeser

(interim)

Michael Pradel Europe

HQ: Hamburg

Wolfgang Freese North America

HQ: Piscataway

Lars Christiansen Middle East

HQ: Dubai

Andrés Kulka Latin America

HQ: Valparaíso

Joachim Schlotfeldt Asia

HQ: Singapore

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15

Fleet – The combined company will operate a younger and more efficient fleet

Average fleet age Fleet ownership Average vessel size [TEU]

7.4 7.6 8.3 8.5 8.7 7.2 8.5

1.3 yrs

Combined COSCO CMA CGM Top 15 Maersk Hapag-Lloyd MSC Combined 65% 35% COSCO 60% 40% Hapag-Lloyd 57% 43% Maersk 53% 47% Top 15 49% 51% CMA CGM 46% 54% MSC 36% 64% 6,839 6,181 5,970 5,281 5,163 5,858 5,038 +982 CMA CGM Maersk Top 15 Hapag-Lloyd COSCO MSC Combined

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16

Keep it simple and efficient – from door to door ▪ One-stop service covering the complete transport chain – even across borders ▪ Extensive intermodal network in the USA and Canada for service to and from all key locations ▪ Experienced, trained at motivated staff at local

ffices

▪ Save time and costs by avoiding delays in your supply chain ▪ Handling of all customs and clearance formalities ▪ Tailor-made inland solutions by our experts

Easy. Fast. Ecofriendly.

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17

Hapag-Lloyd shares with supportive tradings in recent months

60 80 100 120 140 160

Hapag-Lloyd Maersk Evergreen OOCL DAX Global Shipping

Stock Exchange

Frankfurt Stock Exchange / Hamburg Stock Exchange

Market segment / Index

Regulated market (Prime Standard) / SDAX

ISIN / WKN / Ticker Symbol

DE000HLAG475 / HLAG47

Ticker Symbol

HLAG

Primary listing

6 November 2015

Number of shares

118,110,917

Share trading

Source: Bloomberg (10 May 2017)

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18

e-Business Focus

E-Business Channels and Products Automation of Processes Efficiency Digitization Supply Chain Cost Cutting

Process Transparency

Standardization

Customer Hapag-Lloyd

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Technology Impact at Hapag-Lloyd

New Channels

▪ Presently working on a number of potential new channels ▪ Pilot projects ongoing ▪ Once we are confident that the new channels create value for our customers we will announce them

05/06/2017

Hapag-Lloyd App

▪ Mobile retrieval of schedules, company news, and contacts ▪ Real-time container tracing ▪ Potential new channels will also be available for mobile usage ▪ Ongoing development of additional features and usability improvements

New Services

▪ Piloting for remote container monitoring for Reefer and Dry ▪ Evaluation ongoing whether new services generate value for our customers and create economical advantages for Hapag- Lloyd ▪ Ongoing process of evaluating digitally enabled products – announcements will follow once decisions are taken

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Technology Impact at Hapag-Lloyd

05/06/2017

Existing IT - Services

▪ So far not all steps along the value chain are fully linked and automated ▪ Target is to provide an increasingly seamless and digital interface to customers who value this approach ▪ Examples:

– Equipment forecasting – Digital rate delivery – Online invoicing/payment – Automated ETA update

Depot Shipper Container terminal Container terminal Shipper Depot Empty Container

(Delivery)

Empty Container

(Redelivery)

Consolidation Center/ Factory Inland transport to port Export port Ocean leg Import port Inland transport to consignee Distribution Center/ Factory Depot Shipper Container terminal Container terminal Shipper Depot Empty Container

(Delivery)

Empty Container

(Redelivery)

Consolidation Center/ Factory Inland transport to port Export port Ocean leg Import port Inland transport to consignee Distribution Center/ Factory

Consignee

Only One Shipment File

Export Region Import Region

Simultaneous Access

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21 C.

Trade Update

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22

05/06/2017 Shipping, Trade & Economy Master Slides GI Feb17

Source: IHS Global Insight, May 2017

2 4 6 8 20 15 10 5 Growth in % mTEU 2019e

16.3

5.0% 2018e

15.5

6.5% 2017e

14.6

5.1% 2016

13.9

1.4% 2015

13.7

5.1%

Volume Growth

5

5 10 15 20 10 8 6 4 2 2019e

8.7

2.8% 2018e

8.4

2.6% 2017e

8.2

7.9% 2016

7.6

17.8% 2015

6.5

4.6%

Growth in % mTEU

Growth Volume

Eastbound

Westbound

The Transpacific Eastbound Trade will continue to be strong

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23

HAPAG LLOYD TP TRADE STRATEGY: 3 Core Markets

EAST COAST ▪ Capitalize 10 years growth ▪ Economies of Scale Advantages from 2017 ▪ 30% + Deployed TP Capacity PACIFIC NORTH WEST ▪ Legacy from CP Ships Integration ▪ Complement to Industry Leading Canada Share ▪ Cross Border Expertise INDIA SUB CONTINENT ▪ Best In Class Indamex Product ▪ Good Mix of Direct Customers and 3 PL ▪ Cost Effective Ship Systems ▪ Almost 15% + Deployed TP Capacity

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How to differentiate yourself from an increasingly homogenous trade offering? ▪ Continue to Improve in Core Markets. Allow for creative approach and growth well ahead of the market. – Keep Strategy Consistent – Stay ahead of competitors in “home” markets – Compete on Product Not Just Price ▪ Offer mature Markets like Los Angeles and Growth Inland Markets like Dallas and Memphis as Complementary Services.

Hapag Lloyd offers a full range of TP and Global products while concentrating on what we do best.

Our primary focus is to offer an opportunity for customers to leverage Hapag-Lloyd’s expertise and premium products to deliver top quality end to end logistics networks

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THE Alliance

Cooperative 5 line approach to implement better network Development of new, ‘State-Of-The-Art’ Network THE Alliance TP market Share: 30% Common Goal Our Preparation Our Position Our Status Our Objective Satisfy and exceed customer needs Product Launched April 2017 Our Products Leaner, more streamlined slings

6/5/2017

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Services [#] Partners [#]

THE Alliance

78

G6

64

Vessels [#] Port Coverage

Source: Transmodal; internal data; Official Carrier information 1) Subject to regulatory approvals and closing; 2) Total operating capacity of THE alliance partners, not all to be deployed in alliance (Hapag-Lloyd including UASC)

Hapag-Lloyd – a strong partner in THE Alliance

▪ Comprehensive network of 32 services will connect more than 78 major ports ▪ Combined capacity of ~3.6m TEU or around 17%2) of world fleet – vessel pool of more than 241 ships ▪ Leading product characterized by fast transit times, broad port coverage & latest vessels ▪ Unique contingency plan – Independent trust fund to safeguard customers’ cargo on board

41% 17% 43%

K-Line, MOL, NYK Yang Ming Hapag-Lloyd

After Japanese JV1) we are three partners in THE Alliance:2)

THE Alliance G6

6 3

THE Alliance G6

23 32

THE Alliance G6

200 241

THE Alliance – THE enhanced product

THE Alliance has significantly improved the service product on the East West trade lanes

THE Alliance network offers faster and even more reliable service patterns with modern and most efficient vessels. 32 services with an extended port coverage will help you, our customers, to optimize your supply chains even better.

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 THE Alliance is about to implement shortly a new and unique contingency plan in the unlikely event a member of THE Alliance suffers a bankruptcy or financial distress  An independent trustee will manage funds to be used in case of an insolvency within the group  The contingency plan is designed to safeguard THE Alliance

perations and the discharge of customers’ cargo on

board of the affected member’s vessels  THE Alliance reacts to customer demand for a safety net after the Hanjin bankruptcy in late August 2016 when cargo got trapped on board of Hanjin vessels for several weeks

The contingency plan of THE Alliance will be the first

f its kind in liner shipping

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Our new Transpacific Product

General

 Improved overall Transpacific product  Product differentiation by high service level, connectivity, reliability  Increased service range with streamlined sling structure

Pacific Northwest (PNW)

 We are one of the market leaders in the Canada market,

ffering an excellent service

 Continued service excellence between Canada and US Midwest Inland locations via PNW

Pacific Southwest (PSW)

 Improved State of the Art Service Network to and from PSW ports and inland locations  Direct Japan service re-introduced

Eastcoast

 Innovative and expanded service network to and from US and Canada Eastcoast  Increased capacity to and from Indian Subcontinent and Middle East

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 Comprehensive product portfolio across the Transpacific offering an

utstanding service in this important market

 Direct port coverage in Japan, South Korea, China, Hong Kong, Taiwan, Vietnam, Thailand, Singapore as well as Sri Lanka, Red Sea and Arabian Gulf locations  A wide variety of weekly services to and via the West Coast of USA and Canada, linking Asia with Vancouver, Tacoma and Seattle and the ports of Oakland, Los Angeles and Long Beach  Several weekly services connecting the US and Canadian East coast ports

f Halifax, Boston, New York, Norfolk, Wilmington NC, Charleston, Savannah,

Jacksonville and Miami (seasonal)  A new direct Vietnam – Pacific Northwest connection

Key service strengths on the Transpacific Trade

THE Alliance Services Transpacific

16 services across the Transpacific Services to: US/Canada West Coast US/Canada East Coast

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Our Transpacific Service – Your Benefits

Faster transit times Better service level, connectivity, reliability One of the best products in growth markets Extensive Asian feeder network Streamlined sling structure Greater port coverage Streamlined terminals Efficient North American rail network Large reefer and special equipment inventory

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DISCLAIMER

STRICTLY CONFIDENTIAL

This presentation is provided to you on a confidential basis. Delivery of this information to any other person, the use of any third-party data or any reproduction of this information, in whole or in part, without the prior written consent of Hapag-Lloyd is prohibited. This presentation constitutes neither an offer to sell nor a solicitation to buy any securities in the United States, Germany or any other jurisdiction. This presentation contains forward looking statements within the meaning of the 'safe harbor' provision of the US securities laws. These statements are based

n management's current expectations or beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially

from those described in the forward-looking statements. Actual results may differ from those set forth in the forward-looking statements as a result of various factors (including, but not limited to, future global economic conditions, market conditions affecting the container shipping industry, intense competition in the markets in which we operate, potential environmental liability and capital costs of compliance with applicable laws, regulations and standards in the markets in which we operate, diverse political, legal, economic and other conditions affecting the markets in which we operate, our ability to successfully integrate business acquisitions and our ability to service our debt requirements). Many of these factors are beyond our control. This presentation is intended to provide a general overview of Hapag-Lloyd’s business and does not purport to deal with all aspects and details regarding Hapag-Lloyd. Accordingly, neither Hapag-Lloyd nor any of its directors, officers, employees or advisers nor any other person makes any representation or warranty, express or implied, as to, and accordingly no reliance should be placed on, the fairness, accuracy or completeness of the information contained in the presentation or of the views given or implied. Neither Hapag-Lloyd nor any of its directors, officers, employees or advisors nor any other person shall have any liability whatsoever for any errors or omissions or any loss howsoever arising, directly or indirectly, from any use of this information or its contents or

therwise arising in connection therewith. The material contained in this presentation reflects current legislation and the business and financial affairs of

Hapag-Lloyd which are subject to change and audit, and is subject to the provisions contained within legislation. The distribution of this presentation in certain jurisdictions may be restricted by law. Persons into whose possession this presentation comes are required to inform themselves about and to observe any such restrictions. Neither this presentation nor anything contained herein shall form the basis of, or be relied on in connection with, any offer or commitment whatsoever. In particular, this presentation does not constitute an offer to sell or a solicitation of an offer to buy securities of Hapag-Lloyd in the United States. Securities of Hapag-Lloyd may not be offered or sold in the United States of America absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended. Hapag-Lloyd does not intend to conduct a public offering or any placement of securities in the United States.