Deutsche Telekom for new deal; Hapag-lloyd profit rises

BERLIN: Deutsche Telekom’s reported forecastbeating second quarter results, lited by the $23 billion takeover of Sprint by its US business T-mobile, and said it was looking to do deals in Europe from a position of strength.

The Sprint transaction, which closed on April 1, has tilted Deutsche Telekom’s centre of gravity towards the United States where T-mobile now generates three fiths of group revenue and has challenged AT&T as the No.2 carrier.

Chief Executive Tim Hoetges is now turning his atention to Europe, where he said Deutsche Telekom was well placed to drive consolidation ater its market value grew to 72 billion euros ($85 billion), puting it ahead of competitors Vodafone, Telefonica and Orange.

“We have created a currency (in the form of our shares) that protects us against possible takeovers, and that we can also put to work,” he told reporters on a conference call.

The transatlantic telecoms group issued new guidance for core profits to hit 34 billion euros ($40 billion) this year, above consensus forecasts, but said the cost of integrating Sprint would initially dent group cash flow.

A 47% rally in the T-mobile share price this year has, however, not been matched by Deutsche Telekom’s own shares, which even ater trading 2% higher on Thursday are ahead by just 6%.

Deutsche Telekom’s 43% stake in its US business is now worth $61 billion, puting a so-called “stub” equity value on the rest of the group of just $23 billion.

Recognising that shit, management highlighted strength of Deutsche Telekom’s German home market - where fixed-line gains offset mobile service revenues hit by the coronavirus pandemic - and in its Europe division.

“The best way to improve the valuation of the non-us business is operational performance - and that was very impressive in the second quarter,” said Chief Financial Officer Christian Illek.

As for potential restructuring measures that could realise value, Illek said no decision had been taken on the future of Deutsche Telekom’s towers unit, while it was considering options for its Dutch mobile operator.

Group revenue rose by 37.5% to 27 billion euros in the quarter, above expectations, although ater stripping out the impact of the US merger and exchange-rate effects there was a 0.6% decline. Core profit, measured as earnings before interest, taxation, depreciation and amortization ater leases ( EBITDA AL), rose by a reported 56.4% - also beating expectations - while on an organic basis it rose 8.4%.

HAPAG-LLOYD: German container shipping line Hapag-lloyd nearly doubled net profit in the first half of 2020 and kept its full-year outlook intact but warned that the coronavirus crisis bears indiscernible risks for its operations.

“We have not put the pandemic behind us. Compared to a normal situation, customers’ booking behaviour is volatile,” Chief Executive Rolf Habben Jansen told Reuters.

Transport volumes at Hapag-lloyd, the world’s number five in the industry, were down 3.5% year-on-year at 5.8 million 20-foot equivalent units (TEU).

Habben Jansen said those volumes were recovering but were unlikely to reach their 2019 level this year as economies worldwide have contracted amid lockdowns.

Net profit between January and June soared by 95% to 285 million euros ($336.78 million) versus 146 million euros in comparable 2019.

Habben Jansen partly attributed the improvement to capacity discipline plus lower shipping fuel costs in the second quarter.

He said fuel costs remained at that low level. They rose by 4% on the year in the first half due to new environmental fuel regulations that kicked in worldwide on January 1.

The company adjusted capacity due to lower demand and took additional cost-cuting measures as part of its performance safeguarding programme, he said.

Earnings before interest, tax, depreciation and amortisation (EBITDA) in the full year should be between 1.7-2.2 billion euros and earnings before interest and tax (EBIT) between 0.5-1.0 billion, he reiterated.

First-half EBIT was at 511 million euros, surpassing 389 million a year earlier while EBITDA came in at 1.17 billion euros, up from 956 million euros in the comparable 2019 period.

Analysts think container shipping could benefit from the resumption of more Chinese business activities and a tentative recovery.

Meanwhile, Daimler said on Thursday it has reached agreements costing nearly $3 billion to settle civil investigations by US regulators and lawsuits from vehicle owners stemming from a long-running probe into sotware to cheat diesel emissions tests. The settlements in principle address civil and environmental claims tied to 250,000 US diesel passenger cars and vans in the United States and include claims from the Environmental Protection Agency, Justice Department, California Air Resources Board (CARB) and the California Atorney General’s Office.

The German carmaker said it expects the costs of the setlements with US authorities will total $1.5 billion, setling with owners will cost about $700 million and “further expenses of a mid three-digit-million euro amount to fulfill requirements of the setlements.”

A spokesman for CARB confirmed the setlement “will reach $1.5 billion and affects 250,000 vehicles nationwide.” The agency said it would disclose more details ater binding consent decrees with the US government agencies are filed with a US district court, currently anticipated for mid-september.

The maker of Mercedes-benz cars said it expects an impact on its free cash flow over the next three years as a result, with the main impact within the next 12 months.