Lufthansa Cargo may break even this year: CFO
August 03, 2017: German based Lufthansa Group has reported the strongest H1 results in 2017. They reported a 56.6 percent hike in the revenue by the group that amounted to EUR 672 million. Also, there were over all betterment seen in the H1 numbers of different verticals of the group.
Lufthansa Cargo has raised its constant currency yield by 9.3 percent owing to the improvement in demand. The company reported a positive adjusted EBIT for both the first and the second quarter, resulting in first half year earnings of EUR 78 million against EUR 45 million during the same period last year. The revenue climbed 19 percent to EUR 1.14 billion.
Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG, is hopeful that Lufthansa Cargo will break-even in the current year.
The Lufthansa Group increased its total revenues by 12.7 percent to EUR 17.0 billion in the first half of 2017 against EUR 15.0 billion in the same period last year. Traffic revenues were up by 14.2 percent to EUR 13.3 billion (EUR 11.6 billion in H1 2016). And the key earnings indicator adjusted EBIT was roughly doubled to over EUR 1 billion (EUR 529 million in 2016), giving the Lufthansa Group its best-ever first half year earnings result.
The earnings performance is attributable primarily to high demand and lower unit costs at the Group’s passenger airlines. Unit costs excluding fuel and currency effect declined by 1.2 percent in the first half-period, and by 3.4 percent in the second quarter alone. Unit revenues at constant currency were raised by 0.5 percent, and by 1.8 percent in the second quarter. Load factors were up on their prior-year levels in all traffic regions, despite increased capacity.
The adjusted EBIT margin of 6.1 percent was a 2.6-percentage-point improvement on the prior-year period. Higher fuel costs burdened the result with EUR 223 million: at EUR 2.6 billion, first half-year fuel costs were 9.5 percent up on their prior-year level. All the Group’s first half-year performance figures and fuel costs include the impact of the first-time consolidation of Brussels Airlines and the aircraft wet-leased from Air Berlin.
“We have achieved the best first half-year result in our company’s history,” says Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG. “In addition to strong demand and a robust pricing environment, this is attributable to the fact that we achieved a further structural reduction in costs. Our efforts in cutting our costs are reaping its rewards. But we must continue these endeavours: this is the most important way that our margins can be improved sustainably.”
Net profit for the first half of 2017 amounted to EUR 672 million, a 56.6 percent improvement on the prior-year period (EUR 429 million during the same period in 2016). Cash flow from operating activities rose more than EUR 1 billion to EUR 3.2 billion. The increase was driven by the good result and more bookings for the third-quarter period. With capital expenditure basically unchanged at EUR 1.2 billion, free cash flow rose by 87.0 percent to EUR 2.1 billion. Net financial debt was reduced by more than half – 57.8 percent – to EUR 1.1 billion. Pension obligations stood at EUR 8.1 billion as of 30 June 2017, some EUR 200 million below year-end 2016. The special contribution of EUR 1.6 billion into the new defined contribution pension scheme for the flight attendants of Lufthansa will now start in the third quarter and will continue in various instalments until the end of the year.
“Our core financial performance indicators have been significantly improved further,” Ulrik Svensson confirms. “Our free cash flow has almost doubled, and our net financial debt has been more than halved. Higher revenues and lower costs have enabled us to soundly finance the investments required for new aircraft and an attractive product. All of which is of vital importance in keeping our company the number one in Europe.”
Network Airlines with higher results, especially in the second quarter The Network Airlines of the Lufthansa Group raised their total first half year revenues by just under EUR 700 million to EUR 11.1 billion on stronger demand in all traffic regions. The Network Airlines reported an Adjusted EBIT of EUR 757 million for the period (last year: EUR 487 million).