News / Surging North American imports boosts Zim's first quarter bottom line

Photo 291521811 © Jiawangkun | Dreamstime.com

Israeli container carrier Zim today bucked the recent trend of its peers in announcing first quarter results that showed an improvement on the same period year-on-year.

Revenues during the period grew 14% to reach $1.56bn, while adjusted EBIT swung from a $14m loss in the first quarter of 2023 to a $167m profit, implying an 11% margin.

The improved financial picture came largely on the back of stronger spot rates and higher volumes – it carried 846,000 teu during the period, a 10% increase on the 769,000 teu it carried in the first quarter of 2023, and above the 9.2% growth witnessed across the market.

Its strongest trade remained the transpacific, where the introduction of larger vessels helped volumes grow 27% to 348,000 teu, while the fastest growing trade was to Latin America, which saw volumes surge 127% to 116,000 teu.

Its transatlantic services also saw growth of 27% to end of the quarter on 139,000 teu – these increases offset a 21% decline in intra-Asia volumes and a 40% decline on Asia-Mediterranean services, which were hit by the Red Sea crisis.

Although the Red Sea crisis has had a positive impact on the rates in the quarter, Zim’s average freight during the period was $1452 per teu, compared to $1,390 per teu last year, indicating that it is only in recent weeks that the rate hikes have fed through to its bottom line.

However, the current rate environment led the company to raise its full-year guidance.

“Given the recent improved freight rate environment currently impacting more trades, we have increased our full year 2024 guidance and today forecast full year adjusted EBITDA between $1.15bn and $1.55bn, and adjusted EBIT between zero and $400m,” chief executive Eli Glickman said.

“Looking ahead, we now expect freight rates to remain stronger for longer than initially anticipated due to a combination of continued pressure on supply and availability of equipment and a recent uptick in demand.

“While the rate environment during the latter part of 2024 remains unknown, we are confident in ZIM’s strategic positioning as an agile container shipping player with a competitive cost- and fuel-efficient, modern fleet,” he added.

Chief financial officer Xavier Destriau explained that the rise in spot rates had taken place while the carrier was in the middle of contract negotiations with transpacific shippers and had persuaded it to change its contract versus spot volume strategy, which is traditionally a mix of 50% of volumes under contract and 50% on the spot market.

“For the year ahead our spot exposure on the transpacific trade will remain relatively high as new contracts represent about 35% of our expected volumes.

“We chose to revisit our 50-50 approach given our expectation that spot rates on the transpacific will outperform contract rates, which were signed at only slightly better levels than last year,” he said.

Mr Destriau added that the company’s fleet renewal programme is expected to be completed over the next couple of years – it has 16 newbuilds, all under long-term charters, that will arrive through the remainder of this year, with a total of 58 vessels due to come off time-charters through to the end of 2025. Under the current outlook, Zim expects to redeliver these units to their owners rather than renewing its charters.