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Compania Sud Americana de Vapores SA
SGO:VAPORES

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Compania Sud Americana de Vapores SA
SGO:VAPORES
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Price: 52.51 CLP -0.92% Market Closed
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Earnings Call Transcript

Earnings Call Transcript
2021-Q4

from 0
O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

[Foreign Language]

In person face-to-face meetings, we've taken the necessary measures. We hope that everything works well. We'll be -- check or review a presentation, a very thorough presentation on the status of the industry and the results of the year. The idea is to leave the questions for the end because we have a lot of people. But write your questions down, and at the end, we'll have plenty of time to answer them. So having said that, we'll start with our presentation. Can we use this mic? [Foreign Language]

Okay. They're ready to start then. So first, of course, the year's highlights, we have a result for 2021 that is quite solid. $3.21 billion in profits, that is driven by the results of Hapag-Lloyd. A couple of years ago, we decided that this was going to be our sole business. We also have, I believe, a very positive performance in our share prices. In Hapag-Lloyd, we have a 2021 that had a strong demand, asymmetrical depending on traffic. We'll talk more about that because that what explains globally to problems in traffic. The world did not grow evenly in consumption. And that created -- like pressing or choking an artery in your body, and that was what happened, so to speak, to the global network. So when you compare the numbers from 2021 in growth in volume, global of all ships and all shipping companies, it was 4%, not that much. But in a couple of routes, the traffic that was very large, and that creates global traffic jams, and the pandemic also do not help to solve that.

So in our particular case, our income is explained basically by an increase in expenses and the charges that we make to our clients, that although increased, the cost of those were higher for the company. The tension cost as our costs in general have rise 17% during the year, explained by many factors but mainly traffic. We have higher oil costs. We have higher costs and handling and haulage for containers, trucking, dwelling time; and obviously, charter costs, which is something that we'll say with the industry. This cost increases, there is an important proportion that should return to normality once the logistic chain returns to normality as well.

In Hapag-Lloyd, an extraordinary year also with an EBIT of $11.1 billion. In terms of growth, we reached an important goal, which was to grow in traffic that was sub-represented. In Africa, we made 2 transactions. We purchased a company called NileDutch and DAL that has presence in Africa and helps us not only with volumes but also create synergies. Because by having a small operation, we have higher costs than those that have larger operations from a network standpoint, and this allows us to have important synergies. And the synergies of these transportations are equal almost to the EBITDA of the companies that we purchased. So we will double our EBITDA during the next 2, 3 years with these 2 companies, which are small companies but that have a commercial network that is powerful to enter Africa, which is an important area for growth.

And due to all of the problems in traffic, the company has made decisions to mitigate the impact that this has on our customers. You can understand those that are exporters from here that the uncertainty of our clients is huge, the same one that we have, and our crew, of course, because we don't know in what port will be able to more -- if there's high traffic, the vessels are waiting. In the case of Long Beach, they can wait for 3 weeks to be serviced. In Chile, they can be for 1 week waiting. And these are cost problems and problems for our clients in the end. And that obviously creates a demand of customer service that we had never seen before. So we've had to -- and a high level of turnover in customer service because their clients are obviously not happy. And we've had to hire more people to be able to cover and to provide this service, among other things.

We have made more investments in vessels and containers. To give you an idea, we have placed orders for constructions for new vessels or we have taken new charters of vessels in a more long-term sense that equal 550,000 TEUs. We are ensuring future tonnage, and this does not imply that we will grow 550,000 TEUs when we receive the vessels in our location, but we have the flexibility in our charters to shed some charters and to have more owned fleet or to increase the average size of our ships. As we've said before, an important essential part of our business is this, and this is something that we wish to maintain. So all these vessels that we have been purchasing or leasing or renting are over 13,000 TEUs, and that will help us to increase our efficiency.

We've made important investments in containers. To give you an idea, in 2021, we invested $1.5 million in containers. We have made more boxes available. But the problem is that the bottleneck continues to exist in the same places. So the box can be loaded, but it's hard to load on the ship because the bottleneck is not solved at port. And that, theoretically, if you increased your fleet and have 10% more, that doesn't fix the problem. It doesn't fix the problem that the ship or the vessel works when it's navigating. If it's dwelling in some place, we would just extend the queue. And that makes it more predictable, the arrival of the cargo to destination. Because when you have 5 ships in Long Beach in a queue, it doesn't make any sense to send 6 ship to Long Beach from China. So the client that they had a container on the ship is no longer there. So all that obviously creates important disruptions in logistical -- global logistics chains or supply chains.

Now the relative performance ours compared with other players in the industry. Here we have a setback, and I'll explain that more in detail. Hapag-Lloyd, before COVID, we were consistently the carrier that had the best EBIT per TEU. That changed during the pandemic. And it changed basically due to 2 reasons. We have, as a carrier, an exposure, small exposure to traffic, which is the one that has grown the most, which is the Transpacific from Asia with the United States. Our representation there is lesser than Asian carriers, for example. On the other hand, also, we always have had, just as other European companies, have had participation in our sales volume, an important amount of contracts unless presence in the spot. That means that as tariffs rise, Asian carriers had -- were faster to be able to transfer that to clients. And what we've done is to respect our contracts.

So we move cargo from Asia to Latin America at $1,500 when spot was higher than that. So our long-term strategy and conversely, what we've done now is to increase the proportion of contracts. We haven't gone more to spot, but we've increased the amount of contract because we see an opportunity there for clients that have suffered more to have a more long-term relationship with these clients.

So I've shown this before, but this explains a bit the volumes in the world with different scenarios that existed since 2020 to January 2022. What occurs when the pandemic started in China, that retailers in the world, large importers decide to reduce their imports. Because obviously, thinking that this pandemic could create an economic crisis throughout the world, they didn't want to overstock themselves of products thinking that they wouldn't have to whom to sell them to.

So the first month where we had a very abrupt drop in the volumes, the volumes of transported goods, to the tune of 2 digits. We've had 2 years with negative growth: the Lehman Brothers fall and this. That's it. The rest is all positive. So it's something that is very unusual that occurred in the industry and that we increased the amount of idle fleet because the ships were leaving from Asia empty, and that makes the rate stable. There wasn't a drop hike. It kept stable.

But what happens in reality is that the governments in the world, Chile, United States and Europe, start to inject huge fiscal stimulus to compensate income of their citizens because remember, there was lockdowns and all that. And that created is that what people start -- went from consuming services, hotel, restaurants and the like, to consume products. So consumption rose, as you can see here. So a spiral starts to grow of importing more because they had it imported [ for 4 months ].

And from that moment on to date is that there's stock brokerage in any area. If you go to any retailer in Chile without naming anyone, you make a list of 40 products that they say they have, they'll give you 20 maybe. They don't have the colors. They don't have the sizes because there's been a disruption from that moment on because everything that comes is sold directly. So the levels of inventory globally are low. And that continues to be the case in the United States, especially. It has recovered a bit in Europe. But in the United States, a large market, inventory is historically low.

Now after volumes go back to normal by the end of the year, and we compare with 2019 volume, which is a relatively normal year. So during the year, there was a growth in demand compared with 2020. But in 2020, we have this drop here that affected the total volume of transported goods. [Foreign Language]

This is what I was trying to explain. If you observe this chart, which is port congestion, the leap in congestion is considerable. What happens here? Many things converge in this scenario. First, given that after -- imagine what happened practically. China closed shop in February, March. Ports -- containers started to get stuck in China, and China services 40% of global trade of our container business. So the consumption in Europe, the United States, continued as normal because COVID hadn't arrived there. But COVID started to progressed in phases. Not everyone got sick at the same time. So the networks, our networks, what they try to do is to predict the supply and demand of containers in different points in the world with a very complex software, but you have predictive power there. It says that in Chicago will have x amount of container that is occupied next week.

And that normally, it works because it's predictable. But when you start to close the world by clusters, by groups and declare a lockdown in Italy and close Italy, you have a disaster with the containers that you thought were going to be unoccupied in Italy. The same for France or other places in Europe, everything starts to cascade and sequence. And that affects the predictability, and containers start to disappear. And there isn't 50% more containers in the world. So containers start to disappear, and that's why many clients start to not receive their own container shipments because the container is trapped in some place where there's lockdowns, where the highways are closed with sanitary ports.

A truck that normally would take 5 hours will take now 25 hours to reach to their destination because they have to stop 4 times along the route, and that starts to create chaos in the supply chain. That translates in -- to start to create bottlenecks of considerable size throughout the world, where containers are trapped and vessels are trapped. We continued -- the shipping companies were able to react rapidly to build more containers and to be able to create a massive surplus of container fleets. In 12 months, we're able to restock those. And that has created -- to have less limitation in containers. But there is limitation of the space of the ship because, as we repeat, the container can be loaded, but it doesn't arrive to port.

So now this fiscal stimulus, what it created, for example, in Chile, as the same in the United States and Europe. If you're a truck driver, somebody who has a considerable income compared to other jobs, in Chile, they make MXN 1.2 million to MXN 2 million per year. United States, a bit more. I saw everyone looking to maybe they should go to the United States to work. But fiscal stimulus, what they do is to incentivize that person with a job that he would drive 80% of his time. He's now in the traffic jam 80% of the time. And instead of making 3 trips from Santiago to San Antonio during the day, he can do half a trip because he's stuck in San Antonio for 2 days to deliver a container.

So his income starts to be affected. His quality of life starts to be affected dramatically, and the government comes and offers them fiscal stimulus. He accepts it, he purchased a car, starts working as an Uber driver, and he creates the same amount of income that he created before. And suddenly, you start losing truck drivers. So in Chile, to give you an idea, we need 10,000 drivers today -- 12,000 drivers today. That is a complete shift. They work out 2 shifts just as in the United States. And it's not that we're lacking assets, but we don't have drivers. And that is something that we haven't been able to solve. And this will imply a structural change in the supply chain because the only way to get people to come back is to increase their income. And that's what's happening. And these are structural changes that will be here to stay after COVID.

So what this creates is more cost for clients, more cost for us, but it creates a huge scarcity of space because what happens then is that client, a copper container, for instance, stopped at Antofagasta that has $200,000 of cargo. And that client has the capacity for payment to offer his container to leave versus a person that maybe for wood exportation was much more complex because a cellulose container costs $13,000. They have less.

So the market, when there is scarcity, resources are allocated through price, right? There's no other way because everything that you don't deliver to one is somebody else's need. So in the market, that the price system sorts that out, and that increases the prices in freight rates. And I've told before a friend of mine that an exporter of beauty products, the largest one here, and he calls me one day desperate because he imported cotton balls from China. And at $500 freight rate as it was for many years, or $1,000, made sense. So there are businesses that simply disappear with these rates but maybe shouldn't have existed in the first place.

So these times, we hope that they don't come back because they're not sustainable in the long run. And it's not sustainable to make cotton balls, for example, in China. So this will create noise. But we're sure that total volumes will not materially be different, only exceptional cases. So -- and this is what happens with freight rates. So when imports stopped, the Shanghai Index was stable, but it starts to rise quickly when this demand starts to appear and reaches a peak in the second week of January, and rates start to fall more than a little from $2,000 quite a lot, but it starts to fall.

And now what we see is that especially in some routes, from Asia to Europe, the supply chain has gone back to normal. Europe is dependent much more on trains. There are a lot of trucks, but there's also a lot of train freight trades. And the consumption rose less than United States. United States is very -- in a very bad position in congestion, and that's why you see the Transpacific, which is this rate in black, is stable because there's high congestion. Lower -- the tariff is lower. But this is the most profitable tariff in the world. It has less cost, and the tariff is less, but you are able to make more. But we've seen how things are starting to go back to normal.

When you look at on our -- the side of our costs, oil prices below, we see a very important increase of oil prices conducted with what's happening with the war in Ukraine. But our year forecast was an average price that was higher than what we had in 2021. We -- in our contracts that represent today almost half of our volume. For 2022, we have grown in contracts. They incorporate an oil clause where we transferred the cost of oil to our clients with a bit of a delay, but in the long term, it's transferred to them. So it's a neutral cost.

Regarding the spot, we depend -- or here, we've advanced extensively. We spent 0.35 ton of oil per 1 TEU. In 2011, we would spend 1 ton. Now, 0.35. And 0.35, when you calculate, if you have an increase of $500 a ton of oil, our costs by TEU would increase [ 150 ]. To give you -- so oil cost is very relevant with these rates. And it starts to become an important cost factor. But it's stopped being the highest cost in the industry. Today, it's the terminal. Now with these rates, this will start to gain back -- will start to come back.

Second charter, there have been a high increase in charter rates that had the same situation. Shipping companies, they were charging rates that were unsustainable in the long term with low investment. They rose their rates radically, and they have tried something that has happened in the industry before that if you want to charter, you have to charter in the long -- for long term. There's a rate for charging for in the short term and another one for the long term. And this, for us, in the long term will help us a little because although our charter costs are increasing, we, with the capital structure of different carriers in the world, we are the ones that have the most -- or one of the most owned fleet. So charter prices at the end, it's more of a problem for our competitors because red charter shipped panamax for $7,000, $8,000. Today, it's much higher. So we'll see in the first half of this year, that our charter costs will start to rise, but our competition will also -- and they will rise a bit faster than ours.

The order book, this is very important. We reached a historical minimum in June or October, where we have about 8% vessels and constructions which are not sustainable. You need to do scrapping by 3%, 4% per year. To be able to grow the volume space for cargo by 4% per year, you have to deliver every year, 7% of new fleet. And 8% is a year and a couple of months, and that's the 3-year order book. We saw coming an important scarcity in vessels by 2022 -- 2022, '23 and '24.

What the pandemic created is that like companies are really able to reestablish their balance. And to create resources, the order book increased very fastly and raised 24%, 25% of global fleet. But it hasn't risen more. This is an order book that we consider that is balanced. You divide that by 3, it gives you a gross increase of the supply. If you remove the balance scrapping, the net growth, as I showed before, tends to be similar to demand.

So what we see is that in this order book, there isn't a virus that will create excess of supply in the future. Obviously, if this reaches 35%, unless there's a technological shift. What could happen, as you know, there are discussions today to tax CO2 emissions. So when you have a ship -- 2 different ships that emit different CO2, that means that the cost of one ship with the other one will be -- will have very poor mathematics. And what these taxes will do is that the carriers will discard small ships, and they will go to larger ships, even larger ships, which is bad for traffic. Because large ships, what happens today, when you had 28,000 TEUs per week at a port -- or 28,000, let's say, which is a lot, so 4,000 TEU ship every day. It's 4,000 trucks per day. When you have 2 ships per week, when 12,000 TEUs, you need 12,000 trucks in 1 day, and that creates traffic congestion.

So larger ships are not good for congestions. They create more congestion but are more economically feasible, lower emissions, cheaper to transport per TEUs. So we see that the demand of supply that is more or less aligned doesn't have scrapping included. Scrapping is at historically low because 40,000 today -- for 4,000 TEUs for a 15-year-old ship has continued to paint it and to continue to operate with it because it creates revenue and also creates revenue. But when we get down from these high levels of tariffs and with new taxes that we could see more scrapping occurring. So that's why this order book for me, I'm not worried about it. And if it reaches 15 because -- or increase the temperature more because there is a new tax for emissions, well, the reason is not [ to put ] in place the ships that emit CO2 or too much CO2.

This is what I was explaining before, the inventory levels in Europe have become or returned to normal levels in millions of euros, and they're higher than normal, and it's obvious that they're going to be, and this is obvious that they're going to maintain because since there have been stock outages. So what companies are going to do is to maintain higher stocks. The United States had a stock level. Here, you can see an inventory level. In 2019, where there were no logistical problems, they had 1.45 months of inventory, and the U.S. does not produce anything. Everything comes from Asia. And the trip from Asia to the U.S. is about 25 to 30 days. So they had all the inventory in the water. And that, with these disruptions, is going to change structurally.

The companies are going to maintain a higher inventory. And if you look at the U.S., they have a lower level, and it's going to reach pre-COVID. So you would have the same phenomenon of Europe. And this restocking has to happen. So when you free capacity and you eliminate the congestion, this traffic, you're going to have still volume falling into consumption due to the restocking phenomenon.

So our result, if you explain it with 2020, $2.5 billion of EBIT. So we have $358 million additional. So our result -- our income is due to freight tariff and the tension in e-management. Oil, it's back, hurts us with an increase in cost of $358 million. This is price more than tons. The tons were about the same because volume is about the same, but this is price. Other expenses of voyage, higher rent, $200 million. Handling and haulage, where you have the highest impact in congestion, it increases $980 million. And all the expense in containers, repositioning of containers, more than $100 million.

And $180 million in personnel. This is an important component for COVID bonus and a special bonus due to the results, which is not recurrent. It isn't explained by 990 people we hired. These 990 people also are going to replace teams that are in different parts -- there are centers in Poland, and we're going to return to a number equivalent to the one we had before with higher wages, but not $180 million a year higher. Maybe this year, well, is the forecast -- but doesn't -- this is not a structural increase in cost. This is variable. So -- and then we have $11.1 billion of EBIT. So this is the same. Showing the EBITDA, we have to look at it, which is a sort of a predictor of cash flow, so against $3 billion, so it's profit increase from -- profit difference from last year.

I put this to understand the mix of traffic that we have and how the tariffs moved in different traffic. And this is what explains our lower -- relatively lower performance especially with the Asian carriers. If we see our exposure in the Transpacific, it's very low. We have 15% of our volume in that traffic. To give you an idea, one, which is our alliance has 30% of their volume in that traffic, in that road. The Asians are very strong in that area because they are focused on commerce between Asia and the U.S. and Asia and Europe. So it hit some harder the increase of that traffic. And they have a lower exposure to contracts because overall, the larger retailers of the world are Western. So the contracts of the retailers of the world are of the Western companies.

So if you see in the rankings, all those Western, Maersk, CMA, MSC does not publish income results, but our are lower than the majority of the [indiscernible]. But among the Europeans, we are the highest. We are better than Maersk, which is twice the size of us, so which says that our cost structure behaves well. So what explains that lower performance is basically rates, the mix of rates by contract and by route traffic. Because when you look traffic by traffic, we already did this exercise, we're charging in the spot the same as everybody else, but we have less spot. In each traffic, we are charging about the same.

It's a very competitive market. The rate is almost the same to everybody because we have intermediaries, which are free forwarders, which acts as a broker. So since we -- there's a very important change because it's thanks to what happened in the viability of the logistical chain, the supply chain, is that we launched a -- the management launched a program to manage to increase the number of contracts, the amount of volume. We come from 35%, and we're going to end up with about 50% contracts.

And contracts were all basically before to 1 year. Very few contracts beyond a year. Now we have signed about 10% of our volume, about 10% of our volume, a little bit higher in contracts to 3-year time, with a rate and space assured. So a contract -- current customer says, "I need 11 spaces a week." We have signed a contract for 3 years, 1,000 spaces. If he uses it, we are going -- or not, we build 1,000 spaces anyway. So -- and this we have done with about 12% of the customers.

These contracts are large. We're talking about 12%, 3 years of the -- so the commitment on both sides is very large. But this is why you can do it with some customers. The customers will have actually the backup to accept such a contract. This is going to produce a stability in a very important base of our business. Because when you see the spot rate falling, what you're going to see is the Asian rate. Just like it raised, it falls faster than ours.

So when will the curves meet? Maybe in the second half of this year. But we have more contracts than before because we have honored our contracts, and when you honor your contract, we're talking about billions of dollars that the company is putting on the table. It is a lot of money that we have invested in honoring our contracts. Under circumstances that I -- let me tell your -- my personal experience. And when I was a General Manager, I negotiated with customers, the spot rate had fallen below the contract on the spot rate, and I got calls from customers and say, "Well, change my rate, or I leave." That was the relationship that label freighters have had with their customers. It's not a fidelity relationship. But this is going to generate a more long-term situation. This is what we've been investing instead of trying to drive everything we can in the short term. And this is, of course, an investment that we hope it's justified.

Now given the result, we had announced a dividend of EUR 35 per share, which is a payout ratio of 68%, which is a little bit higher than last year. I've told you also, we have a shareholder agreement, where the minimum dividend is 50%, and to pay less than 50%, the 3 main co-shareholders need to be unanimously in agreement. Any of us can block going below 50%. So in general, we paid more than 50%. That was the case this year.

And it's a different strategy from other companies. Maersk is going to pay 40%. CMA, 10%, and they have invested a lot of money in logistics, not in ships because you see that the order book is stable. So it's good that they spend the money in something else and not in ship. They have the ships. They have a strategy we don't share of vertically integrating with the truck, with the warehouse, with the train and trying to force the customer to buy the whole product. It's a strategy. Let's see how it works forward. Maersk has that strategy about 4 to 5 years. And when you see the EBIT for TEU, here, you can't see it. So that EBIT involves a lot of services that we don't provide, but it still is lower than ours because the shipping business is very intensive in capital.

Our wages represent of the income of this year, maybe $1 billion over 25,000. I mean, maybe 4%. So in normal times, it's 6.5%, 7% in logistics. But the salary, the wages are 70%. So in logistics, they have to measure how many files did the guy in the computer do. So you measure the productivity of everyone. So you need to shut down the power at 6 p.m. because if you shut it down at 6:30 p.m., your profit goes into that. So we have a customer confidential phone calls, nothing -- we do. And it's a really dense industry, where there's no entrance barriers. So you're able to buy all the latest logistics you need, the value of all the shipping companies and multiply it by 5 because it's infinite. So it is not a sustainable competitive advantage if it works because if it works well, fantastic.

You buy the companies and new cycle, we don't see any sense in that. Well, this doesn't mean that you don't have to offer door-to-door services. You can do it. You need to invest in IT systems in order to be able to sell everything, but we don't need to own the trucks or the warehouse. We run an operation with the best operator in that place. We see -- and run a contract with them for an 8 or 10 years and offer their services in our system.

One of these companies, [indiscernible], has 70,000 employees. That's a complexity. So why do we want that complexity? We can do this without being the owners. That's our vision. And that's the game we're playing. So that's why we don't need this enormous amount of resources to buy a logistics company. We need to improve our IT systems. We're going to invest hardly in IT systems that 4 or 5 years, we have an order book that is about 25% of our fleet. We have a good order book. We can do a couple of things here and there, but this is not going to need resources, bank, ships. Our financial debt, we have a negative debt of $2.5 billion. So that's a capital cost that in time, when you solve, we can't be financed by equity -- just by equity. So ships don't -- eat about 30% of -- and what we have defined because given the -- and this is important as proceeds of profit.

Moving forward, the pandemic showed us that it is useful to have control over some kind of port infrastructure because when you don't own the port and the port is congested, and you get to a port controlled by Maersk. So most shipping companies own a port. CSAV, we had a port, but we separated during the crisis to be able to finance the losses and restructuring. So when you control the port and it's congested, well, your container leaves. The one that doesn't leave is your competitors' containers.

So we've had -- in some -- we have some gap, global gaps and some gateway ports which are relevant, some operational difficulties which have affected our service quality. So this is where we need to go in, probably, and we've had some announcement. We entered a port in [ Wilhelm-Hafen ], where we didn't have to pay. What we did was to commit load or cargo and feed the port. But we're going to have -- 50% or 60% of the volume of that port is going to be ours, and then we will have 30% of the equity. Therefore, it's an interest to Germany that we're going to control. And operations of that kind, we're going to see more of them because it's a world where we have to -- well, it's because they're more stable businesses. The capital investment in infrastructure, where it's less volatile than our business. So it's something that talks very well to what we do and also with the quality of the product we have to provide.

Well, here we have the comparative data of the industry. So if you look at the evolution of the tariffs or the rates, however you want to call them. So Hapag-Lloyd raised 80% on average. One does not appear last year, but they more than doubled their rate. And you see the profit margins among the Europeans, 42%, close to CMA, a lot better than Maersk, which has all these additional services. One, 50%, Asia. So Asian traffic with the U.S. and Europe were the most -- grows the most and the tariff increased or the rate increased and were exposed, so they had less contracts, so they did better.

Now, what is the guidance -- our guidance for the next year of the company? Volume growing slightly, increasing slightly. Depending on the solution or to the congestion, we added additional capacity in [ System 21 ], which should have generated volume. But since the congestion got worse that, that offset this additional allocation we weren't able to grow. So once the congestion is solved, and this will happen after the second semester, we will release capacity that allows us to grow in terms of volume.

In terms of the rate, basically, we believe that the average of the rate or tariff is going to be equal or a little bit better than last year. Now last year, it was as Pedro [indiscernible] said, from less to more. So it's going to be from more to less, that would be the outlook that we have because, obviously, we know the result of the first quarter, and we have a very clear picture of how the second quarter is going to be.

So we know that we're going to have a first semester, which is going to be extraordinarily robust in terms of results. And with a rate that are higher than last year on average. So this could decrease in the second semester. This is what we believe that's going to happen in the -- within the spot rate. But our contracts are going to be higher in price than last year. So we have the spread that will allow us a soft landing better than the Asian companies, for example, unless everything keeps going up and then the Asians are going to have a better result than ours.

If everything keeps on going expensive and there's no congestion improvement, well, we're going to have that situation. Now what does it imply is that we're going to have an EBIT in a range if you -- down in the middle range, basically like the one we have today. Now this outlook does not take into account that the war might -- overcome its borders. So obviously, if they attack Poland, well, not this outlook, no outlook whatsoever can be fulfilled.

And second, we don't take into consideration that there is a global recession. This assumes that the growth of the world is about 2.5%, 3%, 4%, and this generates an increase in volume. These are the assumptions. Now it does assume that the congestion is solved and therefore, that gives an impact to the rates. Yes, that is assumed in this forecast. But that this will begin on the second half of the year more than in the first half of the year. So this is why we have an accounting that has 1 month of lag. So we are standing in March, but we will see the results in April. So our estimation is low.

M
MarĂ­a Elena Palma
executive

Thank you very much. Hello. And now I'm going to give you the results of South America and which are explained by what Oscar has explained about the results. Well, I'm going to provide the results, so of course, you will know that, that explains with the results.

So as you know, the company does not operate directly other businesses, and everything is shown through Hapag, and the result of the last line 2020 versus 2021 is explained by this, which is basically this large bar here. And then in -- this is compensated by lower administration expenses. This is also what Oscar was telling you about. It's basically compensations and provisions for directors.

And on the other hand, we have a positive effect due to the exchange rate and a positive effect due to taxes. I want to mention a little bit the detail of the taxes because last year, we had a tax line, which was negative, and now this year is positive. So we have a compensation effect of $80 million, which has to do with the exchange rate associated to a debt in an intercompany that we have internally between Chile and CSAV Germany. So CSAV Chile has an account receivable with Germany. So when dollars appreciate and the euros depreciate, we generate a loss, therefore, net profit at a tax level. And with this compensation effects, positive [indiscernible], we reached a final line result of $3.2 billion, absolutely extraordinary and a historical record for the company.

Now if you look at balance sheet, the balance sheet is very solid. The assets are doubled when compared to the previous year. This is explained especially because of line of investments of Hapag-Lloyd, which is $3 billion. It's also explained by the effect of tax loss -- accrued tax losses, which is the deferred taxes line, the assets due to deferred taxes.

And also if you look at the liabilities and the equity, the equity grew $2 billion. It doesn't grow the $3 billion, which is basically the income because that $1 billion of difference is in liabilities, which is the minimum provisional dividend that we account as a liability. Therefore, within those liabilities, which is $1 billion of provisional dividend, there is a part that was already paid. I don't know if you remember the interim dividend we delivered on October last year that was financed with debt. That is why the debt raises in $450 million, and then the rest is seen in others, which is accounts payable associated to the dividend.

And here, you see a graph of the evolution of the price of the share versus IPSA since 2017, and you can see how our share has been responding to this better results and better income. And it couples itself from the IPSA, and in 2021, the share raises 155% versus IPSA, which is roughly flat. So this is a very good result on the shares for you, the shareholders. But also, we want to mention that this does not only have to do with good results but also for good income. But also, it's a response to a restructuring program that was begun on and an increase in capital. It was about $3 billion in capital increase until -- from 2011 to 2020. These have to do with refocusing the commercial business to have more fleet, buy more ships and also cover all the losses we had during 2011. We have to remember that in 1 year, we lost $1.2 billion. So this is also -- this good result are a prize for the shareholders who have stayed with us and who went to these -- all these capital increases.

So we also look at this from the other point of view, how was the evolution from 2011 to today, how much value has been created. First, we need to see what's the market cap of CSAV in 2011 and how it has increased. To date, how it should -- how is the actual value of the assets that we have underlying, which is 30% of the value of the participation in Hapag-Lloyd. So we are talking about $12 billion additional. If we subtract all the capital increases that we've performed, which are the $3.2 billion that we were talking about recently, we adjusted for that $3.2 billion.

And also we add the market cap SAAM has today. We have to remember that 2011, when CSAV began this restructuring, for each person when the company was divided into the shareholder of CSAV received 1 SAAM and 1 CSAV share. So if you're still a shareholder in SAAM, you should also perform that additional adjustments. So the value that CSAV has created in this term for the shareholders is more than $14 billion.

And very quickly look at the covenants and financial. So the debt increases at the end of the last year with this interim dividend, which is going to be covered as soon as we receive the Hapag-Lloyd [indiscernible]. Remember, there is a delay because Hapag-Lloyd pays its dividends at the end of May. And in terms of covenants, everybody is very loose. There's very little leverage -- low leverage. There's a high level of assets and good ratios overall. So -- and since you -- we have you here, we want to tell you that we've been working in a new plan of sustainability.

Last year, the Board of Directors approved a new project -- long-term project, where the company is redefining what its objective now that it began -- it became an investment firm and it doesn't operate directly any assets. So the idea is to refocus the business towards looking to be a relevant player and try to maintain this relevant player in global commerce and try to find different strategies to be able to continue being present not only with investors but also at the level of our society.

And for this, we have defined certain initiatives and strategies in all the areas: environmental, social and corporate social -- corporate governance. So in social terms, we have defined beginning to work within the port cities. We are sponsoring now in San Antonio. We're sponsoring some schools in San Antonio. We're inserting ourselves in those communities so that the benefits of -- cannot be seen only in financial results or income, but they can also be for the -- for society overall for the communities.

Also in terms of environment, we are defining our environmental policies, updating them because they did exist, but once again, they responded to a company which had active operations, and now this has evolved. So now what are the metrics of responsible -- environmentally responsible company, how to conduct an open transparent dialogue in terms of corporate governance. Also, we updated our policies and their -- public on the website and in the new financial report you're -- and you're going to see what this sustainability project is about. We're very glad to be advancing in that to be able to continue involving our interest groups and to be actively with this social role and in the territories.

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

Thank you very much, MarĂ­a Elena. And it's 10. So we should begin with the questions. I don't know if the microphone is running though.

M
MarĂ­a Elena Palma
executive

So there's going to be 2 people. The people who are online can write to my e-mail doubts that you may have. My e-mail, can you place it on the screen?

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

[Foreign Language]

M
MarĂ­a Elena Palma
executive

No, no, no. Not my e-mail, my maria.palma@csav.com.

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

[Foreign Language]

U
Unknown Analyst

[ Daniel Lorenzo, ] I represent [indiscernible] company. My question has to do with the order book that defines the rates to purchase new vessels. Some analysts have said that there's going to be some delays in the delivery because -- then one thing is when to place the order and another thing is when the vessel is or the ship is delivered. And there are a few shipbuilders or shipyards that can be able -- or that are able to deliver the size of the vessels that are required. And new technologies will have to be updated. So there's going to be delays there.

And in addition, in 2025, the large part of medium fleet, that will become obsolete. So -- but it's what they say is that there will be a super cycle for maritime transportation due to the lack of shipyards that are be able to respond to the demand.

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

So I think that if you look at all the goals that are around old fleets, we see regulators that are angling to place new taxes. But this is all in a context where we do not have an alternative fuel, a fuel at the scale that allows to move these ships at the site. That technology does not exist. And therefore, when we talk of reductions in CO2 or in emissions, the only way -- those that know the mechanics here. Oil consumption is exponential. If you accelerate, it's not linear. It's exponential.

So if they set an emissions target and I don't have the technology, the only way to meet it is to reduce our speed. But to reduce our speed has the same effect of removing ships from traffic because if your truck from [indiscernible] took 12 hours, you could do 2 trips in a day. And if now it takes 18, you can't do the same amount of trips. So my impression is that all these goals that we see around here will tend to disappear due to reality.

When we talked renewable energies, et cetera, it wasn't enough to power the world with that. Well now nuclear is appearing as a feasible option as a renewable energy. So what the carrier industry has proposed to authorities, the governments to charge us a tax and that tax is reinvested in a fund that allows to accelerate the search for fuels that have lower emission. Because today, you cannot order a ship that does not create emission. All ships emit, even the LNG ships. There's no -- there are no green methanol ships. There's not enough green methanol to power them.

Ammonia, there isn't enough -- we'd have to produce more, and ammonia is toxic. And it's a fuel that has low heat power. So you don't have the same power for a 30-day trip. The amount of fuel that you have to carry wouldn't allow you to carry containers. So the technology today does not exist. And there are many funds as Hapag-Lloyd. We have gotten into 2 initiatives, global initiatives where there's a lot of people investing and researching.

But to get to your question, I believe that the order book that we have is a balanced order book. I don't see it as being high or low. I see it adequate. And we see a scenario when ships start -- 4,000, 5,000 TEUs start to get penalized, scrapping will increase, but also the amount of ships under construction. So you could have an order book that reaches 30% due to these measures. Whether -- when ships start arrive, the others do scrapping, which is the same thing that happened with the Panama Canal.

I don't believe that you can state that a new super cycle is on the horizon. The industry has the fleet that it needs now, regulatory authorities and governments, to be able to -- with the intention of -- putting a stick in the bicycle spokes is a different thing. So the only alternative that we have is to go slower or to remove ships from the fleet.

So my impression is that the authorities will try to find a formula to really find a solution, a long-term solution. What happens today is that we could say, well, let's invest more in LNG, but LNG is not compatible with today's goals. The idea is to reach by 2050 zero emissions, and the LNG does not allow that.

But what alternative do we have? If that's your target, what will you try to do? You won't invest because the LNG ship -- why are we investing there? Because we can't do scrapping with it. But you can continue to do those type of investments because you'll reach 2050 and have to do scrapping. So if there isn't any technology and positions are not -- do not become more flexible, that's when we propose to accelerate investment in new technology.

U
Unknown Shareholder

First, to congratulate you. I've been a shareholder for 5 years, and what you have done with this company is amazing. The vision that you had, I haven't seen it in any other companies, at least here nationally. The other question that I have is a doubt. Could you maybe provide the amount of the dividend that we will receive in May? Would you -- the cash flow has been defined, right?

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

Reasonably so, but the decision of the dividend is a decision made by the Board and is proposed to the -- during the shareholder meeting in April because the meeting has to congregate 10 days because we also have an election for Board President. So 15 days before April 22, we will publish the dividend proposal. And our interest -- and we've said it in many opportunities, is that to be able -- is to be able to provide what is free cash flow that we received from Germany. That's our intention.

Now the free cash flow is something that depends on many things that could happen in Germany. There are taxes. There are retentions. We're seeing how to organize this infrastructure in a way that doesn't affect the business that much, but we still have some work to do there. And that's why we haven't informed and we haven't invite other shareholders.

M
Murilo Riccini
analyst

Murilo Riccini from Santander. I'd like to ask about the issue of tariffs, especially the prospects that we have for the -- forecast that we have this year. You commented a bit that it's probable that tariffs will normalize during the second semester. But what could we expect in terms of tariffs if they start to -- continue to accelerate or if there is a reaccommodation. I don't know if -- Francisco, if you would like to add something.

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

But what I've said before, we forecast -- to make forecast is very difficult. It's like forecasting investment. It's a difficult thing. And during the first semester, we will have higher tariffs than the average of last year. It's a fact. But we'll also have higher costs, right? We have higher costs in oil, charters. So we have higher tariffs during the first half of the year.

What will happen in the second half of the year? Honestly, today -- it's a crystal ball. Our perception is that the situation will start to decongestion because COVID has become less lethal. There's less sanitary regulations. So the return to normality, the easing of consumption of goods should also make -- the demand of products should go back to normal. And that should contribute. So the truckers -- truck drivers can go back to work, easing other sanitary guidelines, and that's why our forecast for the year is from more to less.

And the second half of the year, in our opinion, should have a lesser tariff than the first half of the year on average. Our tariff -- I mean, the spot is very volatile and spot -- you cannot talk of the average of the Shanghai Index. It's very tricky. As a concept even, if you take a container today from the United States, you'd pay $13,000, $14,000. A container, if you ship in China, pays less than $1,000. And it's the same traffic. But they go in opposite directions because there's an imbalance by 50%, the ship comes half empty from the United States and half empty from Europe.

So when we talk of tariffs and rates, we have to be very careful with that because averages are dangerous. Averages give you a notion, but we can't base everything on that. So that's why we talk of our average rate.

F
Francisco Paz DĂ­az
analyst

Francisco Paz, also from Santander. I wanted to ask how the industry is changing. And regarding hiring levels, would you be open? Or do you have an objective of contracts for what is sold on spot?

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

If you could repeat the question.

F
Francisco Paz DĂ­az
analyst

I wanted to understand how the industry will change. And what is your vision regarding how much of what you sell will be by contract? And how much will be sold on the spot market, if you have an objective there for that?

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

Well, I've explained what we've done. What the competition is doing, I'm not aware of them. But Westerners are doing things similar to us. We are close to 50% of our volume by contract. And I think that if we're at that level, probably Maersk is -- they normally had a bit more than us. So I think the average volume by contract will increase. There will be less exposition to spot from here on.

But there are clients that can't be in spot because carriers do not serve small clients. So our clients that have contracts are large clients, right? That makes small clients that transport 300 containers per year, that's not a carrier client. They work with intermediaries, and they're more exposed to spot prices. So there'll continue to be a percentage for spot rates.

U
Unknown Analyst

[ Jaime Valenzuela, ] I'm independent. My question is related with taxes. I have doubts regarding what will happen with the dividends this year because I understand the dividends that pay taxes this year will be exempted of taxes. If you could provide more clarity on that.

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

The structure that we have in Germany -- as we made this investment, we sold our assets to an entity in Germany, the owner of Hapag-Lloyd shares. And that -- with all the assets we're taking to the merger with Hapag-Lloyd. And they received in payment Hapag-Lloyd shares. So that German company based in Germany has an owner, which are us, and has a credit or loan against us of EUR 1.5 billion. And that's what MarĂ­a Elena explained before.

Since the credits -- all these credits are in euros, and it's in euros because the German counterpart accountability -- or accounting is in euros. And it's an intercompany debt that doesn't appear in the consolidated. But Chilean law requires or forces you to introduce in your -- the liquid profitability this part. So when euro depreciates, which happened this year, Sud Americana loses money in their liquid income. So here, we have to consider. And conversely, if it's valued, we make money. So that affected taxes that occurs in Chile. Not in this year, but it could happen.

Do we have to pay taxes in Chile? Here, we'll go to our accumulated losses. Not from our cash flow but we reduced the firm accumulated losses, and we have a tax credit that goes against that. But in Germany, we don't have that. So if it would happen in Germany, to have profit in Germany, we would have to pay corporate taxes. And since Germany, we don't have -- we would have to make a check. And that's why the debt -- our debt is in euros.

Now in Germany, Hapag-Lloyd -- German law allows company to distribute dividends or to distribute a sort of capital. And from last year -- since last year, what was distributed in Germany were these sorts of capital allocations, which are a capital payment tax free. It goes all the way, tax-free. That, given the results of the year, is not feasible in '20 due to the dividend in 2021 that will be paid in 2022. So this is a profit allocation without applying German tax codes.

In Germany, there are 2 taxes, of which we are exempted up to 95% of those taxes. It's a 26-point something when you add both taxes. There's corporate German tax and a municipal tax from Hamburg. The addition is 26.65%. And we are exempted of up to 95% of that. So the effective tax that we have to pay in Germany is 1.65% of the dividend. Those are about $30 million. That's the actual tax.

Now how is the actual procedure? It's a bit cumbersome because German regulation was modified in July of last year because it had the same exemption of ours and those that didn't have it, started to abuse this. And what they would do is that they would purchase -- they would buy a share. They would sell shares to somebody that had the exception, and they will repay it, they wouldn't pay taxes. There was a whole scheme, and it was a bit of a scandal.

And they changed the procedure. The procedure is such that they retain -- 26.6% of tax is retained. In our case, it's a huge chunk of money. And you have to make a filing to recover that tax. And when your tax year ends, we file next year to recover that. That portion of the retention. But the effective tax that we will pay is $30 million. That's the effect of the real tax in Germany and also serves as a credit in Chile. The problem is that we can't use it because here, we have credits accumulated as a credit that we can use in the future. So there's a difference from the moment that we receive the flows from these dividends because a part of the dividend is retained by tax authorities, and we have to file to recover these.

Now one could -- to comply with the different scenarios, and we can give a dividend that's similar without the retention. But all that is something that we're working on, and it's a decision that hasn't been made yet. But in any event, the flows that come from Hapag-Lloyd, our intention is to allocate them to our shareholders. So this retention, we will allocate it and distribute it when we recover it or we can anticipate it as we did with the interim dividend at $450 million. That's all part of the engineering that we're designing, and you will be informed in a timely fashion.

U
Unknown Analyst

[Foreign Language] for 2022?

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

No. I apologize. Let me -- the dividend will arrive to Chile as cash flow that we'll have here. But in Chile, it will enter in 2 ways: as prepayment -- as payment for the loan, a part of it, an important part will be used for paying our intercompany loan; and the other part will enter as an allocation as Hapag-Lloyd did before, a reserve account. So it arrives kind of clean, if you will.

And the dividend that we will give to our shareholders, we're not paying taxes in Chile. It doesn't have credit. So when you receive it, they receive it through a society, you'll pay your taxes according to your tax regimen. You receive it as a person, and you'll pay your taxes according to your tax regime. So no application of deferred taxes. There's no application of that now. It will be paid for its totality.

U
Unknown Analyst

Is that what you're referring to that there is a credit that comes from the recovery from Germany? The other question that I had is that why is there so much difference between we have here in Chile as the value of Vapores. And in Germany, it's almost 4x that. Why is the difference if they're almost the same? Because the question that I ask is it would be easy to invest here -- it will be interesting to invest in Vapores and to invest in Germany with Hapag-Lloyd.

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

It also is -- it catches my attention. We established a plan 2 years ago that we've established. We removed -- got rid of all the assets that weren't Hapag-Lloyd. We confirm that we're going to provide dividends from the free cash flow. We've done that. This year, we're going to have an exceptional dividend. We have an outlook saying that our results for next year will be similar. So it's also -- curious also for me.

We did an exercise yesterday where -- when you look at the wax -- if you look at the tax where we are as Hapag-Lloyd, it's traded at 1.6 its book price, multiple EBITDA, 9x EBITDA. In Chile, it's at 1 -- the full stock, an EBITDA times 5. So there's a discount in Chile compared to tax, 45%.

So - and we -- unlike other holdings that exist in [indiscernible], our asset is not in Chile. So if you're an owner of an asset in Chile that has that discount -- holding discount, it would appear as lower. But our asset is in a market that doesn't have a discount, Germany in this case.

So we have a first discount of 45% simply for being in Chile because our asset is in Germany and so many [indiscernible] here in Chile. That's the first thing. So an important part of the discount is explained by that.

But we did the following exercise. If you -- with that information, you consider that -- on that, there's a 40% of additional discounts. Our "holding discount", not the Chile discount. The holding discount could be 40%. The normal discount should be 20% or even less. [indiscernible] having a dividend policy that should be adjusted. So I think that there's a high discount because the value Hapag-Lloyd is higher than what it is in reality. I put that into question. I question that.

I think the stock price, Hapag-Lloyd, the volume that it's traded is not low. It's traded at high volumes. And the company is worth $60 billion. It has a cash flow result of $11 billion from last year with an outlook that its profitability will be the same as last year. So therefore, the market cap is 30% to cash flow in 12 months.

So therefore, it doesn't seem for me that, that is off for the market. It's being traded -- depending on when you take a bit of understanding, when you earn $11 million, your book value increases on average by $1 billion per month. So I stop in June last year, next year, we could be trading at 2x or 2.5x.

So it doesn't seem for me that it's particularly expensive. The S&P trades 4x book price. So I'm not an expert in trading, but I just look at to understand it. And I think that those are some of the explanations. It's an asset that it's in Chile and the Chilean -- and the IPSA, now we're talking of the companies. If you look at the Dow, it has been multiplied by 3. So company equity has followed 34%.

Now when companies are sold, that happens because there, the price actually appears. But the capital markets been affected by increases by capital gains taxes. So it's hard to know what you're actually buying today in our market. So I think it has explanations from all sides.

U
Unknown Analyst

[Foreign Language] income of the third quarter, you mentioned that Hapag-Lloyd was worth on the market [ EUR 200. ] And today, it's worth [ EUR 50. ] So the coordination between Hapag and others -- so maybe the relationship of the market is different. So my question is about the Shanghai Freight Index that you mentioned, and you can see that the increase has been 5x when compared to 2018. And that index is maintained in time. So this decrease in time -- and if you track the [indiscernible] of the main shippers, the company from Asia, it doesn't have the strength in tariff on rates. I have a mismatch between the rate that you can see in shippers and the result of the sales of the shippers. So when these indices of Europe in Shanghai, how do you do to match [ those ] tracking in time to be able to estimate the sale price of the shipping company?

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

Okay. The indices are a look on the rearview mirror, not forward. The indexes -- the spot price of cargo shipping last week, we're not looking. It's just data, but we don't look at it to set the prices. This is what all companies do, is that they set the price based in the using of assets. So if you have a ship that's going to leave in 4 days and it's half its capacity, the rates are going to fall. It's a very competitive market.

Now there are some traffics or some routes where 80% of the ship is sold in contracts. Chile is a specific contracted traffic because the large importers and the retailers have a contract and the exporters also are large. We have people who ship copper, fruit, wood, salmon. So there are also contracts. So in our ships, different from the Chinese, find a space for someone who doesn't have a contract in Chile to bring something or to ship something outwards is very difficult because we have very little exposure to spot market.

So there is not a single recipe to be able to compare how the index is explained in our rates. But the relative weighing of each index is different for one company or the other. We have very low exposure in Transpacific with this Shanghai rate index with the West Coast -- American Coast. We have higher exposure in index, for example, in the rate Asia to South America because 21% of the volume of the company is in South America. So it's difficult to track. We don't have a disclosure of our specific rates there on back both ways. So we had -- don't have to forget that the Shanghai Index are only the export rates from Shanghai to the world. China has a lot of other ports. So -- and they're growing, for example, Vietnam, Thailand, India are growing, and they're not captured in the Shanghai index.

So the Shanghai index is a tool which is limited. It helps measure the sort of temperature, but it's limited. So we shouldn't like try to find that correlation because then you have several other rates, which are the return to Shanghai. To explain the traffic of Shanghai is very insufficient because you have all the returning to Shanghai rates, which are a lot lower than the export rates. I wouldn't bang my head trying to find that correlation.

However, this is an ultracompetitive business where we -- where our contracts -- we fight for the contract in between 4 or 5 carriers with tenders that they open and you are invited to 4 meetings after they open the envelope. So it's not -- and they squeeze you for the lowest price possible. So you give your price and then you're negotiating for a month in parallel with 4 or 5 other guys. So it's very competitive. When we lose a contract -- we know at what price we lost it. So we have a very precise tracking of the values of the contracts.

In the spot market, it is, of course, a broker's table. So if this week is Shanghai -- this week, they're using their 70% utilization instead of 95%, we know immediately because a freight forwarder that says that they're going to move the cargo to someone else. So this is a very competitive market and very difficult to -- so supply and demand is -- there's very little demand in the spot rate.

U
Unknown Analyst

First of all, I want to congratulate Mr. Hasbun for his excellent and clear presentation. It's a very complex business and very difficult. And for the success you have achieved. And also I want to thank for the tax information that you have conveyed. Now the question I want to ask is that the dividends CSAV delivers to its shareholder depends on the dividend it received from Hapag. So do we understand Hapag distributes one dividend in May this year? That dividend policy of Hapag, can it be modified given the extraordinary results? Or it's going to be always the same, which causes to get a loan from Banco de Chile to pay its dividend to its shareholders?

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

Well, in Chile, where the interim dividend is also delivered to the Board of Directors with equity responsibility of the Board of Directors, we can't pay the $450 million. The problem is of the directors. So that the Board of Directors can do this. And in Germany, they count the only one who is allowed to authorize the dividend payment is the shareholders' meeting. So I go to the shareholder meeting myself. It's a shareholders where there's 1,000 people or more where 50% of the people ask for the floor or the word, and the company is forced to give it to them.

So that meeting lasts 8 hours, and it's full of lawyers and see if the general -- the manager or the Board or the Head of the Board of Directors or -- makes a mistake. And if there's a mistake, when there's a mistake, somebody says -- sort of files an injunction. So the minutes of the -- so cannot be closed. And so it's a very different scenario. So it's not free of risk to have a shareholders' meeting.

So what we do now is to define the dividend once we know the numbers. When we decide to pay EUR 6.2 billion in dividends, this is the largest dividend in Germany, by the way. Germany is a gigantic economy. This is the largest dividend in Germany, more than BMW. Hapag-Lloyd is the highest profiting company in Germany. So it is a very significant dividend.

It's a payout ratio, which is enormous, very significant, and it has to do with that. We have a strategy where we believe we have to invest in our business, which are ships and containers and something in infrastructure. But we don't have the vision that we need to go into all the businesses that have some degree of synergy with ours. So we have a focus there, and this allows us to be more generous in the dividend policy.

And although that's the case, we are going to be able to run very significant investments. We have done this, and we have 24% of our size. And we have the investments. We -- so we have the balance sheet to face new debts. We don't see any need that in an inflationary world that we are today, the company has maintained a high amount of cash in the bank because that will cause losses.

Each euro you have is giving money to the banks and the dollars -- the deposits pay less than inflation. So we don't want to transform our company's treasury in a private investment fund or a private equity. That can be done by the shareholders. So this is our philosophy. Therefore, we have defined as a shareholder agreement -- it's a minimum generous dividend, 50%. Very few companies have minimum share -- dividends of 50%.

M
MarĂ­a Elena Palma
executive

We have a lot of questions via e-mail. So I'm going to begin, and a person asked for the mortgage costs. Some of these costs is because the port takes too long to deliver the containers. Have you thought of charging -- instead of charging everything to the customer, transfer the cost to the port if there are delays.

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

Well, the port is going to say that the customers take too long to remove the containers because there's no trucks. So we need more trucks. So -- but of course, there are some expenditures that we can revert because -- that we have reverted because warehouses get filled. Although we are -- they're not ours, we tell them of the warehouse. But then the customer trying to return the container to the warehouse and the warehouse is full and does not receive the container returns it. So those are more -- costs that have been reverted.

But the mortgage cost is the only tool that we have to make the container flow. If I don't charge mortgage, the customers will have all the containers in the yards. They wouldn't have any incentive to return it. And the logistical change wouldn't work. This mortgage cost is sort of the rate meter -- the meter that causes the customer to run an effort to return the container because if not, we wouldn't have any containers.

U
Unknown Analyst

You begin charging the mortgage -- when you start charging -- when the ship announces the arrival to the port?

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

No, I don't. This is '22. If -- when the container is on ground, on solid ground. I'm not that sure about it. So it's -- when the container is on the ground, I have 7 to 14 days to withdraw it and return it.

M
MarĂ­a Elena Palma
executive

Another question is about the digitalization, the IT. How is it that you're addressing?

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

We're investing a lot of money in this because -- obviously, because -- for you to have an idea, it's about 20% of our sales are on the website. Our larger customer is less than 3% of the volume, but 20% of the volume is through the website. Therefore, there has been a very important growth in digital trade for us.

But given that the level of automation we have in the customs and the tax authorities in different countries and the ports is still precarious, not very good, the digital booking are still intermediaries, they are not final customers. So it's not a guy who has a shop and makes that moves 500 containers a year. So it's a freight forwarder who does all the paperwork associated to the load in the entrance as well as in the export.

But that is something that, in time, given that customs automated itself, the internal revenue -- I'm talking about Chile, but in the world -- other -- in other places in the world, it's a lot more advanced, you might be able to book. And you're going to be able to book something on the [ shelf. ] And that booking is going to include other services, customs, withdrawal from customs, and everything is going to flow. Today, that doesn't exist because you need to automate the whole chain, the whole logistics chain. We're advancing in that direction right now and, of course, e-commerce at this level.

M
MarĂ­a Elena Palma
executive

I think we have another question about this. Somebody is asking about the new Biden policies on the rate increase in sea freight. What do you think that this could have -- could happen with this?

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

Well, honestly, I am surprised that in the world where the free economy is born, there is a lack of understanding that the only way the world can assign scarce resources is the price system. Because a shipping company, for example, keeping in mind, if you don't have the containers, how do you decide who to deliver the container to? The one who's my friend because it means my friends, I'm going to give them a container? Or should I give them all out and I just get the one who pays better? Who defends the shareholders of the company if I make this arbitrary decision because it ends up being arbitrary?

So the price system resolves that. And this is what happened. And that same price system was the one that made us lose $1.2 billion in 2011 because we had extra capacity. Nobody called me, "Hey, you're losing so much money. Let's pay you $500 more." No, that never happened.

Now we are in a situation of imbalance, Yes. We had it in 2011, 2012, 2014, the company didn't recover the capital cost. So today, we have a situation of imbalance as well. It could last a second year, but I think it's going to correct itself.

But I don't -- we don't have any breach of any regulation or anything. The risks of our industries, we have mentioned it. So we have 2 relevant risks in our business moving forward, I believe. One is the technological risk, which due to this environmental regulations, which I believe are necessary. But they might hit us on the wrong time. Part of the fleet might be left obsolete, and this is going to generate a very serious problem in global trade because we don't have ships in a shelf to just buy them. So we're going to have a problem with space. So it's going -- we're going to have an adjustment time. We have a risk in environmental regulation.

The other one is regulatory risk because to operate like we operate with alliances, we require stable regulations and that they exist for a long time. These -- what these special regulations allow is that shipping companies operate together services. I've explained it in other opportunities, but building a highway from Santiago for 1,000 kilometers, it's about $1.5 million per kilometer. So it's $1.5 billion for 1 track here to Puerto Montt. So what we do is to build a road on the water from Santiago to China, and the investment is $2.5 billion for 1 road. The differences between the road in Puerto Montt, there is a tender, where there is a monopoly assigned by the government so that the operator can finance his road.

In some concession models, there is also a guaranteed minimum income. We buy the ships. We buy the containers, we place service. And tomorrow, somebody else goes in, and there's no interest barriers. What is allowed by the global authority is that there is joint work to use the same infrastructure between shipping companies. These alliances and consortiums, we share ships so that the investment is performed between several companies. And the sales and capacity on that system, obviously, independently competing one way against the other, but they use the same ship. This is what allows the extensions we have.

Now if anyone believes that eliminating that is going to help the customer, it means that they don't understand anything about this because this allowed the oil consumption to fall from 1 ton per TEU to 135 tons per TEU. It's falling because we have been -- we've been allowed to use very -- larger ships, which we fill altogether. So instead of having 1 service, if I did it myself, from San Antonio to Shanghai, we have 3 different frequencies that cover different ports. When the cherry comes and we taken 20 days, all that is because you pool your capacity and allows you to be faster, cheaper and more efficient.

If you eliminate that, what will happen is once again is the same thing as removing because the ships to be filled are going to go -- need to go to more ports each month. And that implies a higher transit time. And the consequence of eliminating that is bad for customers.

Now evidently, there is an imbalance today. But it's a market imbalance that's not caused by us. The ships -- the idle ships is the lowest. All ships are operating. A lot of ships have been built -- are being built. We have bought millions of containers to be able to solve the problem, but it's not solved because we're not the ones with sanitary barriers. We didn't put this money in the pockets of people. We did not decide public policies. We haven't generated the lockdowns.

This is what has caused the problem. And the problem is translated in price. Cars have reason in price. And it's not because their freight shipping is more expensive. Because there are no parts, factories have closed, people have productivity problems in their factories because people are not returning to work. So whenever you -- the economy is operating normally and you have too much intervention from external factors. And I don't say this is not justified. The lockdowns were necessary. The -- also the government aid was also necessary. So I'm not questioning it.

But an economic model that have no problems that allowed -- the average inventory in the U.S. was 1.4 months of sales. When somebody intervenes in this, you tighten here, but the tumor appears 2,000 miles away. So when all this intervention begins appearing and the integration lowers and the supply chain begins to flow, the things are going to go back to normal. They're not going to go back to 2013 because that wasn't normal either.

So if somebody has this based on a rate of $800 from China to Chile, I suggest to close down because they're going to lose money because that's not sustainable. As we had imbalance on the rates, we -- these businesses require a lot of capital, and the capital needs to have a return because that has a lot of risk. And this is an equation that needs to find its own balance.

So I believe postpandemic, we're going to find this balance, a balance which imports and exports is viable and profitable as today for the different products that are -- have tariffs, and the industry returns to an adequate capital that allows it to reinvest and grow based on what the market is going to grow. So we've seen in the United States, well, the risk is that the regulator begins questioning the operational models. And well, that's a discussion that we will need to have in time, and it is something that is still to be cleared. I don't know.

M
MarĂ­a Elena Palma
executive

Thank you very much. Given -- we will have another question though to be able to release you.

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

I have a Board of Directors meeting right now.

M
MarĂ­a Elena Palma
executive

So somebody is asking here about sustainability in Hapag. How is this being done to comply with the new regulations, regulation of efficiency in the ships, which will begin to be enforced IMO in 2023? And in Hapag, plans to enter the European energy to produce renewable energy and methanol?

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

I don't now the institution that we signed up to. You have the name of it. We are participating in 2 initiatives that are researching clean fuels.

M
MarĂ­a Elena Palma
executive

Yes, the call for action, that one?

O
Oscar Eduardo HasbĂşn MartĂ­nez
executive

No, no. We have -- we are -- we contributed to a foundation. And what we're doing now is compressed natural gas -- liquid natural gas allows us to reduce emissions, which should go to a larger ship, all this investment plan. We have had announced larger ships rental -- of a lease of larger ships, that we're going to be getting rid of smaller ships, which from the standpoint of emissions, are poorer performers.

So we issued a green bond where we have full commitments to comply with, and we want -- we're going to fulfill them. So we are in a practice of reducing our emissions. We have conducted investments with things that look like less sexy, but for example, generate less oil consumption, for example, painting the holes. So these more expensive paint but are -- induce less drag. We replace, I think, for example, propellers, more efficient, more modern. So there are $4 million or $5 million per ship, but they reduce the consumption per mile and this causes us emissions.

So the spectrum of what's available, we are doing a lot of things, which will allow us to fulfill our goals. And among the research, we are contributing to 2 initiatives, which are important, 1 with Maersk, which is the leader of the industry, which has an institute dedicated to this. So we joined that initiative. And the other one, I can't remember the name, but we could put in the website later.

Last question? And if there's no other questions, we'll leave. Well, thank you very much for the time. We are a little bit late, but thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

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