Hapag-Lloyd Aktiengesellschaft ($HLAG)

Ladies and gentlemen, welcome to the Hapag-Lloyd Analyst and Investors Full Year Results 2025 Conference Call. Today, Hapag-Lloyd is represented by Rolf Habben Jansen, CEO; and Mark Frese, CFO. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rolf Habben Jansen. Please go ahead.

Thank you very much, and welcome also from our side as usual, and really appreciate you taking the time to listen to us. I think from our end, I'll give, as usual, a quick introduction, talk about some highlights. Mark will take us through the numbers, and then I'll try to say something about market and outlook. And after that, happy to take your questions. Maybe if we start with a couple of highlights when we look at 2025, I would say that a number of things to be mentioned. I think on the financial side, I would say the results were solid with as a real highlight that we have grown quite fast, significantly ahead of market, and we were able to keep rates at a reasonable level also if you compare that to some others. We certainly had a lot of transition costs when moving into Gemini, but in the second half of the year, we also started to see costs coming out. On the fleet side, we've continued to invest in modernizing our fleet. I think that's just normal. Looking at '24, we ordered a fairly large number of ships. We ordered some more ships this year. That is a process that will continue to move ahead. On Gemini, I think we're very pleased with where we are on Gemini after 12 months. I think if we go back 1.5 years, a lot of people were sitting on the fence and were in doubt on whether we were going to be able to deliver that 90% schedule reliability. I think we've -- together with Maersk, done a really good job in doing that pretty much from day 1. And we're also confident that going forward, we will be able to hold that up and that will start yielding dividends. On the terminals, good throughput growth. We've also been able to grow the portfolio with the terminal in Le Havre, and then we also signed an agreement in Brazil towards the end of the year. So good progress there even if that unit is still fairly new. And then, of course, we signed the merger agreement with ZIM, where we hope to conclude that transaction towards the end of this year. If we look maybe first at the terminal side of things. I think when you look at the terminal portfolio on Page 3, we've grown in La Havre, as I mentioned, operations started in March being used by Gemini, certainly improves our position in and out of France, good volume growth. We expect to see some more of that in the course of '26. Damietta, we've been constructing that port for quite some time, and it has now gone live in February, really good start, good productivity pretty much from day 1, but of course, volume will continue to grow. And then we have Aracruz, where we signed the agreement in December, and we will finish, hopefully construction somewhere in the course of '28, and that will then become another important hub in our network. In this case, of course, mainly focused on the East Coast of South America. So all in all, I would say, on good track. And when you look at it on the right-hand side, where we are these days, I think it's impressive what the team has done, especially keeping in mind that we established it only a few years ago. When we look at volume, -- on Page 4, we've seen really good volume growth globally, 8% versus market, approximately 5%. Very strong growth on the Transpacific, although admittedly, we had also lost a fair bit of market share there in the years running up to '23. In '24, we saw good growth and another piece of -- another chunk of good growth in '25. On the Far East, a bit ahead of market, Middle East and Africa also clearly ahead of market. And of course, if you would fast forward and would add in the potential acquisition of ZIM, that would certainly strengthen our position in the market and would reinforce our position as #5 as that would mean that we grow to roughly 18 million TEUs. A few words on Gemini. When we look at the schedule reliability, I think we're really proud, as I mentioned in the introduction about what we actually have achieved. And that is certainly a testimony to all the teams that have worked so hard on that. I know that when we look at the month of February that we are a little bit down on the back of very bad weather in Europe, but we will get back to this 90% within 1 or 2 months. So I think the model that we have designed actually turns out to be quite robust, and I also believe it can still be improved quite a lot. We did a little survey in terms of how do customers look at this. And there, I think you see that also when you look at NPS scores that -- the feedback from the customers is also very clear that when we look at Gemini, that clearly outperforms the other alliances. And of course, that should help us to continue to grow hopefully a little bit ahead of market, but it should also allow us to attract the best possible cargo mix. And I believe that in some cases, we also see that customers recognize that not only because we are more reliable, but also because the standard deviation of when we deliver so much smaller that they actually can start to reduce their inventories, which, of course, is a clear financial benefit, and that makes it possible to start thinking about how do we share some of that. On the modernization of our ships, we continue to work on that. We today have an order book of in total about 350,000 TEUs with 32 vessels. In addition to that, we also have a number of strategic charters. Our order book is currently well-sized. We have the 12,000 TEU and 17,000 TEU classes currently under construction, alongside the 9,000 TEU units ordered in 2024. In 2025, we ordered some dual fuel LNG of 4,500 TEU, while securing long-term charters for smaller feeder ships to balance the fleet. In the end, I think that underlines that we remain committed to not only modernizing our fleet, but we also do continue to focus -- we continue to focus on bringing emissions down. We see that our AER is meantime down about 20% versus 2022, which I think is a really good achievement. We have about 50 ships with alternative propulsion by the year 2030. We have secured some green fuels based on long-term uptake agreements. And also good to note that despite all the skepticism that we sometimes see in the market that last year, we sold over 380,000 TEUs via Ship Green, which was 90% more than what we saw in '24. And I think that's the third year in a row that we more or less doubled that. We hope to be able to grow that even more in '26. We think that the growth will definitely slow down, but 380,000 TEUs is not small and at least gets close to about 3% of the total volume that we move. Then a bit on cost savings. On Page #7, I think we see that those cost savings are starting to come. We do expect to get to full run rate by the end of 2026. If you look at where are they, a couple of categories mentioned here. Of course, the network has a lot to do with Gemini, but also has to do with reduction of third-party feeders and some changes that we make to the network in Gemini, but also outside of Gemini. Bunker efficiency because of the reliability, but also because of the money that we have invested in fleet upgrade. And then we have a whole bunch of other categories as well that we are working on. I think we've seen some real good traction on cost savings in the second half of '25. We do expect more than EUR 1 billion to materialize in '26. It is also fair to say, though, that the first quarter has been a little bit tough, and we'll come to that later on when we talk about outlook because of extreme bad weather in Europe, especially in the beginning of the year. And of course, we now also have to face the renewed crisis in the Middle East that causes significant additional cost for us, especially short term, where, of course, we then need to see how to recover that over the upcoming couple of months. But in parallel, we stay focused on Ventus, and we still think that over time, that will bring us a very material contribution to the success of Hapag-Lloyd. Then a few words on ZIM. We have initiated the -- you will have seen that we signed the merger agreement. Now we have initiated the process to try and get all the needed approvals -- of course, given the situation that we have today in the Middle East, that process may take a little bit longer because things simply move a little bit slower these days. Reinforcing our deal rationale, securing our position, access to a very efficient and modern fleet, great people, good customer base and a strategy that's very similar to ours. And of course, in the end, also because we believe that we will be able to realize up to EUR 500 million synergies per year. Time line, we signed in February. We have the extraordinary meeting of the shareholders scheduled for the end of April. We have initiated the process by now to get the approval from relevant authorities, starting with Israel, but also starting in other jurisdictions. And then hopefully, we will be able to get all those clearances before the end of the year, which would then allow us to close, hopefully, towards the end of this year or latest in the beginning of next year. So, so much maybe as highlights from my end as an introduction. And with that, I would hand it over to Mark, who will take us through the numbers. So Mark, over to you.

Yes. Thank you, Rolf, and also good morning from my side to our fiscal year '25 results presentation. And let's begin with the overview of our key performance indicators. So for sure, '25 was marked by a very challenging market environment. Yet, we can say we continue to demonstrate resilience and operational strengths across the group as we delivered strong volume growth in both of our business segments, and although the market's backdrop remained demanding, we achieved an overall very satisfactory financial results, underlying our ability to operate reliably and efficient even in these volatile circumstances and conditions. Free cash flow remains clearly positive and our balance sheet continues to be a strong one with ample liquidity, solid operational cash generation and a well-balanced funding structure we are well positioned to navigate the current uncertainty environment and invest in our strategic priorities going forward. And with that, let me walk you through the individual components in a little bit more detail. Revenues increased by 2% in 25%, mainly driven by higher transported volumes. As expected, earnings were lower year-on-year, and that is primarily due to softer freight rates and continued external cost pressure. For this year, group EBITDA came in at USD 3.6 billion, EBIT at EUR 1.1 billion and group profit at USD 1 billion. Overall, the results landed at the upper end of our earnings guidance, and it was slightly supported by positive operationally caused onetime noncash effect in the fourth quarter of around $150 million, which were mainly related to an improvement in our system supported process for revenue recognition resulting in the release of provisions. When we jump to our liner shipping segment, we saw there and achieved strong volume growth. At the same time, revenues were impacted by softer freight rates driven by rising trade imbalances and growing global tonnage supply. Operationally, new U.S. tariff policies continue to create the tension in the Red Sea, as we all know, and increasing port congestions, all added pressure on cost. Despite this challenging backdrop, we delivered a solid liner EBIT of USD 1 billion. Jumping over to rates and volumes. In '25, we transported 13.5 million TEUs, and that represents a volume growth of 8%, which is well above the market and this strong development reflects the successful implementation of Gemini Corporation and the supporting expansion of our fleet capacity. Significant reduction in network delays was one of the key success factors that enabled this remarkable volume performance, as you might imagine. The growth is particularly noteworthy given the tariff-driven demand volatility we have to manage in this year. While market volumes on the Transpacific declined due to the sharp increase in U.S. import tariffs, we were still able to grow our volumes by double digits and gained overall market share. We also delivered above-market growth on other Gemini trades, such as Far and Middle East. On the Atlantic, volumes increased only modestly due to the softer demand between Europe and North America, and we all know why. While operational disruption in several ports limited growth on the Latin America Europe trade. After that prolong decline, the average freight rate increased by 5% quarter-over-quarter in Q3 and supported by front-loading effect, especially, but eased again in Q4 to USD 1,310 per TEU and that is the lowest level since the fourth quarter of the full year, average freight rates stood at USD 1,376 per TEU, thus representing an 8% decrease compared to the year before. Jumping over to our unit costs. They increased by 4% in 25' to USD 1,328 per TEU, respectively and several factors caused this for sure, higher trade imbalances, fluctuating U.S. tariff rates and driving regulatory compliance requirements of which structurally increased our cost base and a weaker U.S. dollar further, for sure, amplified these effects just named. Operational efficiency also remained under pressure due to Red Sea rerouting and the persistent port congestions across key hubs. And as Rolf already mentioned, with our comprehensive cost savings program, Ventus, we began effectively counterbalancing these elevated cost pressures in the second half of 2025 and more to come. Following the successful phase-in of Gemini, the structural benefits of the new network has started to materialize, supporting efficiency and service reliability as key quality factors. Jumping over to the T&I, so to our terminal infrastructure segment. That business delivered strong throughput growth and they benefited from the synergies between both business segments. And they also benefited for sure, from the acquisition and ramp-up of new terminals. Revenues in the Terminals segment increased by 18% to USD 514 million in '25. European and Mediterranean hubs, in particular, saw a strong uplift from stable Gemini connectivity, as mentioned already before. Growth was further supported by our acquisition of the Le Havre terminal in France last March and the ramp-up of our terminal in Tuticorin in India. At the same time, the cost base was impacted by operational challenges, particularly U.S. tariff-related demand quality in our Latin American terminals as well as the unfavorable mix effects, one-off items and ramp-up costs associated with the new business segment. As a result, EBITDA remained broadly stable at USD 152 million while EBIT slightly declined to USD 66 million in '25. Jumping over to the cash flow. Operating cash flow for '25 for the group amounted to USD 2.9 billion. We invested around USD 1.8 billion especially in new vessels and containers and also in the modernization of our existing fleet under our fleet upgrade program. These investments are, as you know, key for us to further improve our cost efficiency on the one side and reducing our CO2 emissions across the whole fleet. The net cash outflow from investments totaled to USD 1.4 billion, and that was supported by USD 390 million from proceeds of proceeds from interest dividends and divestments we did. All in all, we generated another robust free cash flow of USD 1.45 billion. The financing cash outflows amounted to USD 3.1 billion results for sure of the dividend payment of USD 1.65 billion but also from debt and lease redemptions and interest payments. Our year-end cash guidance remains at a very healthy level of USD 4.1 billion. Looking at our balance sheet. And here, you can see that we continue to operate from a very strong financial position, which is really characterized by the liquidity we are having and our low leverage, including our highly liquid fixed income investments and our undrawn revolving credit facilities, our total liquidity reserve amounts to USD 7 billion. And this, for sure, provides us with substantial flexibility both to fund strategic investments, such as the planned ZIM acquisitions and to navigate periods of heightened market volatility. Jumping over to the next slide, and let me maybe before I conclude take a moment to reflect on our recently celebrated tenth anniversary as a public listed company with our clear focus on quality we are not only delivering an outstanding service offering to our customers but have also generated tremendous long-term returns for our shareholders. Since IPO in 2015, Hapag-Lloyd has distributed more than EUR 21 billion in dividends. And that's while consistently creating value and maintaining a strong balance sheet with a prudent financial policy. And to continue that and to continue sharing the success with our shareholders, the Executive Board and Supervisory Board will propose a dividend of EUR 3 per share at the AGM in May. This represents a payout ratio of 57% of our group's annual net profit and a total payout of EUR 0.5 billion, and that is fully in line with our dividend policy. Having said that, I hand it back to Rolf for a market update and our financial outlook.

Thank you, Mark. And yes, maybe say a few words around the market where it's always about supply and demand. When I think when we look at global container volumes, I think that the growth of our market has actually been surprisingly robust, at least too many for the last 2 years. I think if we look at '24 and '25, we saw growth of 6% and 5%. But what's even more important is that when we look a little bit deeper into that growth, we see that the growth on the dominant legs, which actually determine how much capacity growth is needed was even higher. When we look at the growth on the dominant legs, it was actually 10% and 8% in '24 and '25, which probably also explains why the perceived overcapacity in the market is probably a lot less than many people feared 1 or 2 years ago. When we look ahead into '26, we expect to see slower growth. Of course, there is a big unknown at this point in time about what the impact will be of the conflict in the Middle East. In all fairness, also for us, that is still very difficult to assess at this point in time. And as we look ahead into '27, hopefully, we'll see a slightly more stable market. So for this year, demand growth and capacity growth probably roughly in line. Spot rates were remarkably low in the beginning of this year. I think we saw a decline running up to Chinese New Year, which was much -- I think rates were much weaker than one would expect based on the balance between supply and demand. But of course, at the moment, we also have the contract in the Middle East that is definitely disrupting some of the key corridors, but is also causing a sharply increased costs and certainly someone certainly on the rate side as well. Maybe if we flip to the Middle East, what have we done, we have suspended all transit through the strait of Hormuz, also through the Red Sea, where we were actually getting closer to returning to the Red Sea. We stopped all the bookings from and to the Upper Gulf region simply because we cannot move the boxes. We are adjusting our network. We've, we continue to offer the connections from Asia to the Middle East. Even if in some cases, it now goes with a different routing. Costs are increasing sharply. I mean if we look at the impact that this has on us, then we talk easily about $40 million or $50 million per week that we have -- that we are facing at this point in time, mainly related to bunker, but also insurance costs are up significantly and so our costs related to storage and in some cases, also Inland transportation. We have introduced a number of contingency and emergency charges to try and recover that. But as you know, these things, if they come, will always come with a certain delay. And right now, our priority is to try and mitigate those costs. But of course, first and foremost, to try and take care of our people, both on land and on the ships in the Middle East and that's going to remain our focus for a while. Then when we look ahead into 2026, we expect a challenging start of the year because we have had very significant disruptions in January in Europe, North and South Europe, mainly because of extreme bad weather, which disrupted our network for a fair bit during 3 to 4 weeks. And now of course, we have the situation in the Middle East. And in that context, our outlook remains as we have put it together over the last number of weeks. And that's what you can see here, a group EBITDA of between USD 1.1 billion and USD 3.1 billion and an EBIT of minus EUR 1.5 million to plus EUR 1.5 billion. Very important to say here that for us, the implications of the conflict in the Middle East are at this point in time, very, very difficult to assess. What we know is that the cost -- the extra cost is definitely there. What that will do over time to migrate and when we will be able to recover those costs. Most likely that will happen with a delay. And that means that we expect to see a soft first quarter, but we also see that the underlying demand actually remains robust and that's also why we stick to the outlook as we have presented this year that in fairness has not changed materially over the last 4, 5, 6 weeks as it is simply too early to assess what the impact could be net-net of the conflict in the Middle East. Our cost savings program will continue to lower that cost base but admittedly, we won't see that in Q1 because we've had a lot of extra costs, but we stay on that trajectory. And in the course of '26, we will see that coming back. So what are our priorities for this year but also beyond that, at the moment, clearly, the safety of our colleagues, both on land and on the vessels in the Middle East is a key priority, and we have the crisis team in place to manage that as good as we can on a day-to-day basis. We'll continue to focus on delivering outstanding operational and service quality as we grow not only our digital offerings, but also as we continuously focus on delivering that 90% schedule liability, we'll continue to strengthen our organization by developing our people, investing in training and education and making sure that they get stronger every year. Cost management was already mentioned and of course, a big focus for us is also the timely closing of the transaction with ZIM, where we still need to get all the approvals that we are all aware of. And with that, I think I'll wrap it up from our end, and we'll be happy to take any questions that you may have.

[Operator Instructions] The first question comes from Parash Jain from HSBC.

I have 2 questions. First, if you can talk about how has been the upcoming contract looks like? And in uncertain time, do clients want to enter into a contract or they would focus on more a short term contract? And if you can share about expectation both in Asia, Europe as well as in transpacific? Secondly, with the Middle East crisis, it's highly uncertain when and how it will end. But where do you say if this crisis lasts beyond several weeks, do you see demand destruction as a real possibility? And till now, have you seen any demand destruction as a result of this?

Thank you. I think to maybe try to take them one by one. In terms of contracts, I think we've seen a fairly normal contract season. Most of the contracts also closed before the conflict in the Middle East reescalated both on Asia, Europe and TP, we see similar levels of contracting of the volume that we've contracted is similar to what we saw last year. I think net-net, we see that rates are probably a little bit down, yes. We have to see a little bit how that works with bunker but net-net, I think that they're slightly down. In terms of Middle East, whether that can result in demand disruption, of course, it could, I think if the conflict last long that will not be good for global trade growth, even if I think that, that will only be something which is temporary. When we look today at what we see, then of course, we are missing the bookings to and from the Upper Gulf but when we look at the rest of our business, then bookings remain strong and healthy. I think our run rate over the last couple of weeks has been somewhat lower than planned because we made those volumes from the upper Gulf, but the rest is pretty much on plan or even slightly a bit of that.

Just to clarify in terms of the contract rates. Does that include the fuel or the -- do you have a mechanism to impose the fuel surge, given the sharp ready we have seen on your contracts? .

I mean that, of course, normally, all those long-term contracts have a fuel clause. And in our case, there's also pretty much all the contracts have that. And of course, there, with the formula that we have, then the increase in fuel is going to be reflected in those prices, but with a delay.

The next question comes from Alexia Dogani from JPMorgan.

Just to clarify, on Asia-Europe contract rates, you said a little bit down year-over-year. Is that low single digits, mid-single digits that would be quite helpful. And to clarify, secondly, you mentioned very helpfully that you're incurring $40 million to $50 million additional weekly cost. I mean if I annualize it, I get to something like $2.3 billion, which reflects predominantly the bunker price increase we've seen to date. Obviously, you've given a guidance range. What have you assumed within that guidance range given what you know today? How do you assume that full cost hits you and you recover X percent. Can you just help us understand what you have reflected in your guidance? And then can you give us some indication of what your customers are basically saying about these emergency surcharges you are currently imposing. I think there is some discussion in the industry that perhaps there could be some double dipping because bunker adjustment factors will eventually catch up. I think you mentioned there is a lag. So putting an emergence charge today is slightly trying to double charge. So can you just give us an understanding of what these customer discussions are focusing on. Yes, that's it for me.

Trying if you answer this, I think your first question was on rates on Asia, Europe. On a like-for-like basis, we talk about a single-digit percentage that they are down. Your second question was around extra cost? And how much of that will you be able to recover? And how is that reflected in your outlook in fairness that is not fully reflected in our outlook because we did most of the work on our outlook several weeks ago before the conflict broke out. Right now, we see no reason to adjust that outlook but the net effect of what that will mean in terms of cost and revenue is very difficult to determine. And to your last point on fuel surcharges, our ambition is clearly not to collect that twice. But what we do have is that because of a very steep increase in price that we have, we believe that it is fair that we can pass some of that on to the customers now. And in return, we would then pass on less labor. I mean, if you go to the petrol station today, you pay more than you did 4 weeks ago, and that's not a delay of 2 or 3 months because we say that the guy in the petrol station just needs to absorb that, and then we will pay more in Q3. Normally, those type of adjustment formulas that we have with a couple of months delay work fine. But in a period where you see that costs go up with 60%, 70%, 80% that doesn't work because we just -- for us, it is not possible to then just prefund $50 million a week in extra cost, and that's why we have that discussion with our customers. With the clear intention to recover the extra cost, but not with the intention to collect that twice. And that's also why when we talk to customers, we ask them for the additional charge, but we also commit to them not take that into account when we have to recalculate the regular formula in a couple of months from today.

That's very helpful. And can I just ask a follow-up. When you look back previous situations where you've seen a supply shock to the old price -- how successful have you been historically to recover the increased fuel goals? I mean is it usually that you can recover 100%, 70%, 60%? And what is kind of the variable that defines how successful you are to recover this increase?

I mean, normally -- this is all about contracted cargo, which is, say, 50% or so of the overall volume. Normally, we have been very successful, and I think that's also fair, normally, we have, through our formulas being able to recover that extra cost. And now we have an extraordinary situation because the increase is so steep. And that's why we believe it's fair that we pull some of that forward. But initially, because of the way that the formulas also work, I think this is an agreement that is fair for -- for the lines but also for the customers.

And if okay, just one final one. In terms of the fuel inventory, do you hold any actual bunker fuel inventory, which means there could be a delayed effect on the price applied. And if there are shipping lines globally that don't hold an inventory. Is there like a cash flow issue potentially because of the mismatched fuel price versus rate recovery.

I mean we don't hold the inventory beyond what we have on the ships.

The next question comes from Samuel Gouldson from UBS.

On the topic of the last couple of questions, and around fuel shortages, especially at ports in Asia over the next few weeks and months. Are you making any contingency plans for fuel shortages? Or do you believe that this is not a problem that is likely to materialize?

I mean I think the short answer is that we are definitely looking into that because we also see that there is potentially a risk of shortage. Asia is not one of our biggest bunkering locations, but it is certainly something to keep an eye on.

[Operator Instructions] The next question comes from Andy Chu from Deutsche Bank.

Could I just ask questions around Q1 just in light of -- I know it's a timing issue, but the sort of run rate of EUR 40 million to EUR 50 million of costs that just might be a timing issue. Let's say, there's a month's worth of that. That could be triple-digit millions of cost headwinds plus weather disruption in Europe and North America. So it feels to me that Q1 could be a sort of very heavily loss-making quarter albeit with timing effects. Could you give us a steer as to what the weather effect is going to be and what actual what we should be thinking of in terms of the print for Q1? Are you looking at sort of triple-digit million dollars of EBIT losses. Is that too negative or about right?

I mean it's still a little bit early to comment on what exactly the first quarter will look like. But the first quarter, I mean, we certainly have an extraordinary amount of headwinds because of the very bad weather that we had in that we had in January and part of February. And of course, the extra cost that we are in disruption that we are facing now. So I think the scenario that you were outlining is certainly not impossible.

Can I could just ask about demand, which is obviously difficult to predict. Obviously, you've got a tough comp as you outlined 2 surprisingly good years growth and you printed 8% growth last year, the comp is quite challenging. So against -- I think there was a slide from an industry sourcing market growth of 3% for this year. Where do you think you will land versus that 3%? Do you think you can grow in line with that? Or do you think you'll be now on the wrong side of industry sort of 3%, if that indeed is the right number?

I think we will still be on the right side of the industry, to be honest. Q1 did -- Q1, I don't know because we are a little bit overrepresented in Europe, which was particularly hard hit in January and part of February. But when I look ahead into the full year of 26, I would still expect us to be on the right side of the of industry growth.

And then my last question is around the Middle East. I think you've got some ships that are kind of stranded can you just outline what capacity is kind of stranded at the moment in the Arabian Sea. And then in terms of ports, which are the Middle East ports are kind of share how much disruption is that causing you?

I think in total, we at the moment have 6 ships stuck in the Persian Gulf with the total capacity of about 25,000 TEUs. In terms of the ports that we cannot call while those are basically all the ports that are inside of the Gulf but we are still able to use, for example, Salalah and others and of course, also on the other hand, Jeddah.

Next question comes from Marco Limite from Barclays.

First question is on the outlook. So you are today providing an outlook with the EUR 2 billion range. If I look at the outlook for '25 at the start of the year, it was EUR 1.5 billion. So clearly, slightly wider than in the past. Now the key question, I guess, is what are your assumptions around the Red Sea. Is it fair to assume that the upper end of the range basically implies not Red Sea reopening for 2026 would be my first question. Second question is, again, to go back to the surcharge the fuel surcharges. So you have mentioned EUR 40 million to EUR 50 million times 52 weeks and divide it by, let's say, volumes. I do get something like the amount of surcharges that you've been asking. So am I right to assume that you basically have got a bit of a headwind in Q1 just because of the lag. But then when we think about Q2, Q3, Q4, your surcharges fully covered the EUR 40 million to EUR 50 million? Is that the way you have been calculating the surcharges, please? And yes, probably the third question. is on the cost savings. In the slides, you are talking now about EUR 1 billion of cost savings, EUR 26 million. I think with the Q3 presentation, you were talking about similar number, but yes, just to confirm that your view on cost savings this year has not really changed since the Q3 results presentation.

And then we try and take them maybe one by one, start with the savings. Yes, you're right. I think our perspective on that has not changed. We've seen good traction towards the end of '25. So that gives us confidence that, that EUR 1 billion is indeed achievable. In terms of fuel surcharge, you are right, that there is a time lag. How much that exactly is always a little bit difficult to determine also because you just have some notice periods that you need to take into account in some trades. So for sure, we have a mismatch between cost and revenue in March. I think we'll still have some of that in April as well. But we do expect to recover that additional cost when we look at the full year. And in terms of the outlook, I think in terms of the Red Sea, I think right now, it would not have been right to assume that the Red Sea opens up soon. So the scenario where that remains largely closed for 2026, I think is right now the most realistic.

Okay. And if I can ask you also to follow up on the upper end of the guidance. I mean, what can you tell us about the assumptions you have made on the upper end of the guidance? I assume Red Sea reopening, as you just said, anything on volumes and rates for the upper end of the guidance?

Okay. As I said in the beginning, I mean, I think it's almost impossible to give good guidance at this point in time. We try to take our -- we try to take a good go at it. We think that if you want to get to the upper end of the guidance, then we need to see a reasonably strong volume where we are able to grow ahead of market. And we'll also certainly need to see a normal peak season where we see a fairly good recovery of spot trade. And then it also assumes, of course, the recovery of additional fuel costs.

Next question comes from Ulrik Bak from Danske Bank.

Just on Gemini and schedule reliability. Can you perhaps share the level of scheduled reliability in the feeder network compared to the main trade lanes, which I believe is what the intelligence is tracking? Is the 1 you showed on the slide? And then also, secondly, can you discuss the robustness of this Gemini hub-and-spoke network in a situation with disruptions that we see at the moment compared to our previous network sales.

I mean, first of all, the -- I think the schedule liability, as is being measured, it includes the main liners, but also the shuttles. So there's actually not a material difference in the scheduled liability across the network. . The second point on how robust it is. I think this hub and spoke network is definitely more robust than the network that we used to have in the past. If I look at the extraordinary disruption that we have seen in Europe, in January that, in our case, then led to a drop of schedule liability to 80% more or less. But in April, we will be back to 90% so that has not taken all that long to recover that. If I compare that to the network that we had in the past, we would have dropped much, much more than 10 percentage points, and it would also have taken us a little longer to recover. And in a way, if you look today at the number of holes that you see in the schedules of some of the other alliances, I think that also tells you a bit of a story whereas we have barely had to blank anything. So to answer your question, the charters in the main liners have a very comparable schedule liability, and the network that we have today is significantly more robust than what we had in the past..

[Operator Instructions] We now have a follow-up question from Alexia Dogani JPMorgan.

Just 2 questions on the Middle East situation. Clearly, you hopefully said you have 6 ships currently stranded. What's the plan to let the ship exit because clearly, we've heard from the UN that there's a bit of humanitarian issue for the seafarers are you working actively to try to secure safe passage to basically evacuate those ships from the region? That's my first question. The second question, obviously, the region represents something like 3% of global container volumes -- how much is the region's demand impaired at the moment? So I understand critical cargo is getting in. But if you said it's kind of 75% intact, this is 50% intact? That would be just quite helpful to understand what is actually happening to demand near term? And then finally, just so there's no misunderstanding -- what is your contract exposure? Is it 50% still? And is it fair to assume that if you are successful in passing on the fuel surcharges, really we will see it in the spot rate -- and then the contract share will be adjusted through the BAF.

Maybe to take the last 1 first. I think our contract ratio is indeed still around 50%, and I don't expect that to really change. As far as the ships are concerned that are stuck in the Persian Gulf, we do everything possible to try and get them out and we will explore every possibility that there is -- but so far, we have not been able to find one. And in terms of volume, I mean, the volume that currently moves into the upper Gulf is very, very low. And yes, there is some cargo that's being moved on the land bridge, but I don't know the exact numbers, but one should assume that the volume that moves there in and out is reduced very significantly. I don't know you take [indiscernible]

No, that's helpful. I understood the point. I guess kind of on the contract of exposure. One question is, obviously, the spot rate last week were flat, week on week. What does that kind of say, in terms of the industry's ability to pass this fuel surcharges currently. I mean, you can argue bunker didn't move that much week on week. But can you help us read the movement in the rate last week, please?

I mean these things move every week in a couple of weeks before that they moved up quite a lot. No, I cannot -- if I would be able to read what the spot rates are going to do, then I would probably be in a different business. None of us really knows where those things are going. I think it's quite clear that capacity is reasonably tight at this point in time. It's also clear that costs go up. So normally, one would expect those costs to trend upwards. -- should also not forget, though, that this is more or less the slowest season of the year. And there is always a lot of volatility and short-term rates post-Chinese New Year until May-June. So that's the period where it's difficult to -- where it's difficult to assess. Overall, I would still say that, especially out of Asia, demand is still pretty strong. costs are up. So it would be quite logical that those short-term rates also trend upwards. But on a week-by-week basis, that's very difficult to judge.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Rolf Habben Jansen for any closing remarks.

Okay. Well, nothing to add from my side. Thank you very much for all of your questions, and thanks for making the time to listen to us today. I hope that was informative and then hope to see or speak to you again very soon. Thanks very much.

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