Wallenius chief expects market boom to continue into next year
Lasse Kristoffersen, chief executive of car carrier Wallenius Wilhelmsen, not only expects 2024 to be a record year, he also ventures to predict the boom will continue into next year, which is also expected to break records.
The second quarter of the year delivered strong results, with the company achieving its highest operating profit to date at USD 507m.
A result that a pleased chief exec describes as ”good”.
The automotive market in general has been very strong due to sky-high car exports, especially from China, high demand for transportation and a very limited supply of car car carriers, and Wallenius Wilhelmsen is also feeling the effects.
”We have a better driving force. We did have full ships and thus more or less sold out all of last year, and we are also sold out throughout 2024. But the better result is due to greater demand, which has resulted in higher rates.”
Kristoffersen does not expect the market for the world’s car carriers to slow down until newbuilds come into operation.
There is no doubt in his mind that the results are due to the large backlog of newbuilds that companies have on order. This will affect the market over the next few years, but economic recovery is not around the corner.
The car companies have a total order of 198 newbuilds.
”But we also show with our Q2 report that even though a number of new vessels will be delivered this year and next year, the market is already saturated and under capacity. So 2024 will be very positive, and 2025 looks to be positive.”
”It’s hard to predict what 2026 and 2027 will bring because it’s a long way off, but we have contracts that secure both volumes and high rates for the next few years.”
Wallenius Wilhelmsen has 12 firm contracts for shaper-class vessels and the delivery of the first vessel is set for mid-2026.
Better contracts and balance
The shipping company is currently in contract negotiations and, according to the chief exec, Wallenius Wilhelmsen is ”sold out” of ships in 2024, which bodes well.
Kristoffersen emphasizes that new contracts will contain both higher rates and larger volumes than the current ones.
”We see that our customers want to do business with us because they believe we offer something unique. So we have loyal customers who are willing to renew contracts so they can use our services,” he says and continues:
”We are faced with having to renew 46% of the contracts that come into effect in 2025. We are aiming for these to be reflected in the 2025 earnings.”
The chief exec also emphasizes the company’s ability to adapt to the circumstances that have prevailed in recent months.
According to him, it has been working hard to balance its trading system.
”While the Red Sea is effectively closed and we’ve had a lot of other challenges following the bridge collapse in Baltimore, we’ve managed to stabilize our operations and our capacity at an impressive rate, which also has a lot to say.”
The Red Sea crisis has left the company with a 5-7% reduction in capacity, where the carrier, like many others, is forced to sail around Africa and not through the Red Sea.
Growth in logistics
While road freight and other shipping activities accounted for USD 409m of the result, the remaining almost USD 100m can be attributed to Wallenius Wilhelmsen’s logistics business.
The record-breaking trend thus continues, as this is the best result ever for the logistics business.
Compared to the first quarter of the year, this alone is an increase of almost 30%, mainly due to high freight volumes.
”We see that our logistics business is growing in all the segments we operate in. This provides both organic and non-organic weight opportunities as our customers are demanding more transportation of cars and integrated logistics, such as from factories and in port terminals and integrated supply chain.”
The company secured a project in a terminal in Brunswick, US, which is the largest ro-ro terminal in the US.
Kristoffersen says the company is currently looking for other terminals in the US to serve its customers.
”We have both increased the number of customers and we are growing because we can offer more value per car by offering different additional services such as car preparation, car storage, booth control, which helps increase our revenue.”
Wallenius Wilhelmsen’s revenue has increased over the past three months to nearly USD 1.4bn compared to USD 1.3bn in Q1.
Profits have increased by approximately USD 100m to USD 315m.
(English edit by Kristoffer Grønbæk)
