News / Stock sinks, losses mount and guidance weighs heavy for Zim

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Israeli container carrier Zim today reported a full-year 2023 net loss of $2.69bn, including a $2.06bn non-cash impairment, and a net loss of $147m for the fourth quarter, prompting a 15% decline in its share price.

These results compared with a full-year profit of $4.63bn in 2022, and a net profit of $417m for the fourth quarter 2022, with the declines largely based on a steep revenue drop: 2023 revenues came in at $5.16bn, a 59% decrease on 2022; while Q4 revenues declined 45% year on year to $1.21bn, as freight rates plummeted over the year and only began rebounding as the Red Sea crisis unfolded.

With a total debt of just under $5bn, and cash reserves of $2.69bn, Zim has entered 2024 with a net debt of $2.3bn, leading to leverage of 2.2 times the 2023 EBITDA of $1.05bn, 86% below 2022 EBITDA, when its net leverage was 0.

Chief financial officer Xavier Destriau explained that the larger debt was the result of its signing long-term charters between 2021 and 2022 to take on 46 newbuild containerships and “the lease liability that we have on balance sheet will continue to go up, up until we get delivery of the last vessel,” he told analysts in today’s earnings call.

“Towards the end of 2024, we should see an increase in our lease liability on the balance sheet before it starts to trend back downwards in the years thereafter.”

Of the 46 vessels, 24 have been delivered and the remaining 22 are due to be in operation by the end of the year. At the same time, its has 30 ships on charter which are up for renewal this year, but these will be returned to owners, as they are older, smaller and less fuel-efficient.

“We don’t intend to recharter vessels between now and the end of the year, rather we will redeliver vessels that are coming up for renewal in order to make room for our newbuild and cost-efficient vessels,” Mr Destriau added.

He also said the new larger tonnage was the basis for ambitious volume targets for this year. In the final quarter of 2023, Zim shipped 786,000 teu, a 5% decline year on year, although Mr Destriau claimed that the market slipped 7%.

Its full-year volume was 3.28m teu, a 3% decline against what he termed a flat market, indicating that it had begun to win market share in the latter stages of 2023, and he explained that Zim was targeting an upturn higher than the expected market growth of 3%.

“We have more ambitious objectives in terms of growing our volume of carried teu, as a result of upsizing the vessels we are deploying in many of the trades; transpacific trade is clearly one where we have significant gross volume assumptions.

“We are upsizing the vessels that are currently being deployed on our trades between Asia to the US east coast and we intend to fill those ships. And as a result, we have gross volume assumptions on those tradelanes,” he said. The carrier was also targeting North American backhaul volumes to Asia was well as expanding its presence in Latin America trades, he added.

However, the key to Zim’s 2024 financial performance will depend on freight rates, which themselves remain dependent on the Red Sea crisis and subsequent vessel diversions and hikes in spot rates, the carrier’s executives admitted, after announcing an extremely wide full-year guidance of $850m to $1.45bn in EBITDA, and an EBIT ranging from a $300m loss to a $300m profit.

“We are taking a cautious approach to the guidance,” explained CEO Eli Glickmann. “While this disruption had minimal impact on our Q4 results, we expect first-quarter and, potentially, second-quarter earnings in ’24 to reflect the improved spot rates. Yet there is a fundamental difference between the current disruptions and the prevailing market conditions during the Covid-19 pandemic.

“Current market conditions are primarily supply driven, and the significant spot rate increases remain somewhat limited to trades more directly impacted by the disruptions.

“Once the Red Sea crisis is resolved, we will likely revert to the supply/demand scenario that began to play out last year, setting up a more challenging third and fourth quarter of ’24 for the industry, including us.

“Given that market dynamics will depend largely on the duration of the Red Sea disruption, we are taking a cautious approach in our ’24 guidance,” he said.