Vapors afloat



VALPARAISO - CHILE - RODRIGO CISTERNA


© RODRIGO CISTERNAS
VALPARAISO – CHILE – RODRIGO CISTERNA

A good 2021 will have Vapors. This year the firm that leads the Luksic group will distribute dividends for the first time after a decade, which together with the best projections that Hapag-Lloyd CEO Rolf Habben Jansen sees for this year for the container market and the The better performance of the Companhia Sudamericana de Vapores (CSAV) shares makes the market have its eyes on the firm today. A relevant element to analyze is the progress that the holding discount has had, that is, the value of Hapag’s share compared to one of its main shareholders, Vapores. That ratio has dropped from 80% to 50% in recent weeks. Today the CSAV papers accumulate a rise of 12.66% in the year, after being one of the few that ended in blue in 2020 with a return of 11.71%.

“When the market began to internalize that after having absorbed the accumulated losses in the same extraordinary shareholders’ meeting in which the capital increase was announced (May), and that this year it would finally report profits, the punishment that the market applied to it began to decrease and the stock began to rise steadily, “says Guillermo Araya, from Renta4.

The Luksics joined Vapores in 2011. In that year, the shipping company that was in the hands of the Claro group, closed the year with historic losses for a Chilean company: US $ 1,250 million. Then, in 2012, the family had to take control of the firm to avoid bankruptcy.

The good performance that the company has achieved in recent quarters has not been free. Since 2011 there have been six capital increases. These operations total just over US $ 3.1 billion. The last one was announced last year, for $ 350 million. In the previous five, the Luksic family have arranged resources. In 2011, when they entered the property they already put in US $ 240 million, to which must be added five purchases of stock packages from the last decade, which, including those of 2011, yield another US $ 259 million. The last purchase occurred in September 2019, when they disbursed US $ 71.3 million for 5.28% of Vapores, after which it reached 61.45% of the ownership of CSAV.

All roads lead to Hapag

Hapag (HLAG) is responsible for just over 95% of Vapores’ revenue. The German firm has had a good performance, benefits that are transferred to CSAV. In 2019, Hapag-Lloyd’s stock soared 241.5%, and in 2020, 20.1%. So far this 2021, the company’s papers accumulate a rise of 12.8%. According to the market, part of the rise in the share of the German company is due to the war unleashed between Vapores and Kühne Maritime to reach 30% of Hapag’s ownership, a figure that the Chilean has already reached. In fact, the last capital increase in Vapores was to pay the US $ 330 million that it disbursed in the last purchases of shares. “When the Luksics managed to have 25% of Hapag, in 2017, the family was already thinking of reaching 30%. The participation increases have been done skillfully, because they have done it little by little and without increasing the share price. It has been a fairly subtle increase in participation ”, indicates a connoisseur of the internal history of Vapores.

With 30%, the source adds, the Luksics assured control, “because there was a shareholders’ agreement between Kühne Maritime and the city of Hamburg, which was valid for 10 years,” recalls the source.

Guillermo Araya also highlights the power that the group now has in Hapag. “The decision to reach 30% in view of the expectations of a consolidation in the shipping industry and that the future results of HLAG would be positive, has also been a very good reading of the evolution of the company. Reaching a 30% stake allowed CSAV, according to German law, to once again achieve the status of direct controller in Hapag-Lloyd. As CSAV already maintains the condition of indirect controller through the shareholders’ agreement with Kühne Maritime and the city of Hamburg, the obligation to make a public offer for the total of the issued shares was not generated when reaching 30% of participation ”, Explain.

Jewelry work

For a former director of the firm, the Luksic group has done “jewelry” work. “The group has put in a lot of money and they had many years of losses. They entered when the market was down and also in Vapores there was a relevant overinvestment in the fleet. In the Claro era, the CSAV had management problems, with business decisions that were not very assertive, but with the Luksic the company has progressively improved. They have done a good job and the result has really been surprising. That is remarkable, ”he says.

He adds that one of the good decisions of the firm managed by Óscar Hasbún was the one taken at the end of 2014, when they merged with the Hapag-Lloyd shipping company and were also benefited by the operation that the German carried out in 2017, when it merged with the shipping company of Arab capitals UASC. “The Hapag thing was a good deal. Today is the only thing they have. It is a mega-company, the fifth largest shipping company in the world. In addition, the group had considerable influence on Hapag’s administrative improvements, improved costs and put pressure on the different management areas. All this generated that the German company had profits in 2018, but dividends were not distributed because the debt was very large and this year the performance improved ”, he says. He adds that the work the Luksics did inside Hapag was important. Confidence a former director of the company who helped in the restructuring and pushed a business plan to improve the management of Hapag. “It was the big bet they made and today they will start renting them,” he says.

“For quite some time that the German shipping company has been doing things well, in fact, the merger between CSAV with Hapag-Lloyd and later the absorption of United Arabian Shipping Company (UASC), was already a successful operation that would generate synergies for up to US $ 400 million annually. The point is that, in 2017 there was an accounting issue under IFRS standards that implied a recognition of a loss of US $ 139.5 million, which the market did not understand, but which was an accounting loss and not cash flow ”, he recalls Guillermo Araya.

Another source close to the group highlights the work of Óscar Hasbún, a commercial engineer from the Catholic University, who until 2011 managed the family’s businesses in Croatia. Among its decisions, the management of the other Vapores businesses stands out, such as the sale, in 2017, of 100% of its logistics and freight forwarder business, and later the car carrier business. “All those businesses were not profitable,” says the source.

Promising future

The next few years should be positive for this industry. Last November, the CEO of Hapag-Lloyd, Rolf Habben Jansen, pointed out that this 2021 there will be a growth of the global market of almost 6%. Expectations fell well in the market, given that the rebound will take place, said Jansen, at a time when the world fleet will remain almost at its current level. This means a relatively stable ship supply in the near future, which will benefit all container shipping lines.

Furthermore, Guillermo Araya details, the growth rate of purchasing new ships has been lower than the rate of deregistering ships. “In addition, the consolidation process has implied that, as there are fewer players, there is no price war for freight, as was the case at some point when there were many players, they tried to survive at the cost of lowering margins, even beyond profitability, “he says.

For their part, freight rates have been growing since June 2020, accelerating in August as demand improved with global de-tuning and reaching record levels in October, despite an initial decrease in spot rates at the beginning of the pandemic, they indicate in the market.

In an October report, JP Morgan reiterated its recommendation for Hapag Llyod. “We are OW (overweight) in Hapag-Lloyd. We are positive for similar reasons why we are at Maersk. In particular, we see a considerable improvement in the context of the industry, ”the report said.

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