Expected Group Performance

Comparison with the Forecast of the Previous Year

Developments in the 2016 financial year are in line with the guidance last updated in autumn 2016. Container transport slightly exceeded the prior-year forecast for the 2016 financial year. Due to an unplanned one-off effect in the Logistics segment from terminating the lease for the Übersee-Zentrum – as communicated in the third quarter of 2016 – the operating result (EBIT) forecast in the previous year’s Annual Report was significantly exceeded. Delays in delivery and order execution meant that capital expenditure budgeted for the reporting period was not utilised in full. Some € 25 million was carried over into 2017. see Course of Business and Economic Situation.

Expected Earnings Position in 2017

The earnings forecast for the Group and the Port Logistics subgroup is primarily based on the anticipated macroeconomic and sector developments described above.

The formation of new consortia and the resulting changes to service structures during the year may lead to a shift in handling volumes between the ports and the container terminals. As negotiations between and with shipping customers were still ongoing during the preparation of this report, any assessment of throughput as of the second quarter of 2017 – which has a significant influence on earnings – is only possible to a limited extent. Against this background, HHLA initially expects container throughput in 2017 to be on a par with the previous year. By contrast, moderate year-on-year growth is expected for container transport. At Group level, this is likely to result in revenue similar to that of the previous year.

The operating result (EBIT) of the Port Logistics subgroup is expected to be in the range of € 115 million to € 145 million in 2017. Potential one-off expenses for organisational restructuring in the Container segment would reduce this by up to € 15 million.

The range of expected earnings will largely be determined by volume and revenue growth in the Container segment. This is due to the limited visibility from the second quarter of 2017 onwards as a result of the formation of new consortia, as outlined above, and the resulting uncertainty.

In view of this fact, EBIT in the Container segment is expected to be in the range of € 65 million to € 95 million. The potential one-off expenses described above may need to be taken into account over the course of the year.

Volume trends in the Intermodal segment are expected to lead to strong year-on-year growth in EBIT.

A positive EBIT result is expected for the Logistics segment in 2017, since no further operating losses will be incurred following the discontinuation of project and contract logistics activities.

As the operating result (EBIT) of the Real Estate subgroup is expected to be on a par with 2016, Group EBIT before potential one-off expenses in the Container segment is likely to be between € 130 million and € 160 million. Earnings in the Port Logistics subgroup and at Group level may continue to be depressed by exchange rate effects reported below EBIT as part of the financial result.

The nautical accessibility continues to be necessary to the competitiveness of the Port of Hamburg and thus for HHLA. Future developments will be significantly affected by the dredging of the lower and outer stretches of the river Elbe, which is still outstanding. According to the ruling of the Federal Administrative Court on 9 February 2017, it is essential that the parties to the proceedings swiftly remedy the deficiencies identified by the court so that dredging of the navigation channel can commence as soon as possible. see Risk and Opportunity Report

Should the expectations outlined in this forecast fail to materialise and lead to a substantially worse Group earnings position than the one described above, this may result in the need for additional adjustments to the value of assets.

Expected Financial Position

In principle, HHLA’s investment activities can be scaled in line with demand, particularly with respect to the potential consequences of changed service structures for shipping customers and the delays in dredging the lower and outer stretches of the river Elbe. Due to the ongoing trend in ship sizes, the Group also reserves the right to decide on investment activities that are not prompted purely by volume developments. Based on the measures described above to enhance productivity in the Container and Intermodal segments, capital expenditure at Group level in 2017 is expected to be in the region of € 160 million (including the amount carried over from the previous year). Most of this amount is attributable to the Port Logistics subgroup. Driven largely by the trend in ship sizes, key projects relate to the investment in container gantry cranes, portal cranes and ground-handling vehicles for the container terminals in Hamburg as well as the expansion of the railway station at the Container Terminal Burchardkai.

HHLA will continue to pursue its yield-orientated dividend distribution policy, which aims to pay out between 50 % and 70 % of net profit for the year after non-controlling interests in the form of dividends.

In order to achieve this objective and enable further value-oriented growth, the preservation of financial stability is the company’s top priority. Based on available liquidity reserves and the positive cash flows generated by anticipated earnings, HHLA is confident that sufficient financial funds will continue to be available in future, which can be supplemented by borrowing where necessary.