SHIPPING: CMA CGM’s credit profile stronger than peer Hapag-Lloyd

The credit profile of French container shipping company CMA CGM S.A. (CMA, B2 positive) is more robust than that of German competitor Hapag-Lloyd AG (HL, B2 negative) on account of its higher profitability, bigger market share and more diverse geographic presence, Moody's Investors Service said in an Issuer In-Depth report.

However, HL's financial and liquidity profile has been more stable than CMA's, while Moody's expects both companies' credit metrics to reduce some of their gap.
"CMA's advantage over HL is particularly evident in its ability to maintain higher profitability levels," said Marie Fischer-Sabatie, author of the report. "During the 2007-14 period, CMA's EBIT margin (including Moody's adjustments) was double that of HL, averaging around 8% compared to HL's 4%."
In its report, Moody's also noted that while both companies have materially reduced their costs, HL's average operating costs per 20-foot equivalent unit (TEU) have remained higher on average than CMA's.
Moody's notes that CMA has an advantage over HL in terms of size, market share and geographic diversity. While the combination of Chile's Compania Sud Americana de Vapores S.A. (CSAV, unrated) container shipping activities with those of HL, in a deal that closed in December 2014, will increase HL's scale, CMA will remain larger in scale by some distance.
However, HL has maintained a more stable financial and liquidity profile than CMA's over the years (including during the 2009 financial crisis), backed by strong support from its shareholders. However, CMA has recently improved materially its liquidity profile and strengthened its governance.
While CMA's credit metrics are currently stronger than HL's, Moody's expects this gap to narrow within 12-18 months of CSAV's integration. CMA has had better credit metrics than HL over the past two to three years. However, the rating agency expects the differential to narrow because HL's combination with CSAV results in economies of scale and synergies and HL recently benefitted from a $500 mln capital injection.