News / Zim enjoys record growth at double the market rate

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Israeli container shipping line Zim beat Wall St expectations after reporting healthy third-quarter results, which record a volume growth at over double the market rate.

And it said that, with some 35 vessels in its fleet due to come off charter next year, it was in a strong position to flex its fleet capacity should the market suffer a downturn in 2025.

Zim today reported a year-on-year quarterly revenue growth of 117%, to $2.77bn, and an adjusted EBIT of $1.24bn, representing an adjusted EBIT margin of 45%, compared with an adjusted EBIT loss of $213m in the third quarter of 2023.

The results came on the back of a 12% year-on-year volume growth, to 970,000 teu, during the period, while freight rates more than doubled, with its average freight rate per teu of $2,480 representing a year-on-year increase of 118%.

“Our growing earnings power is reflective of a strong rate environment, but also a testament to diligent execution, upscaling our capacity and enhancing our cost structure,” chief executive Eli Glickman explained.

“We’ve continued to see incremental benefits from our strategic investment in our operated capacity as new larger, more modern, cost-effective vessels join our fleet.

“Also contributing to our strong Q3 was a decision we made earlier in the year to increase our exposure to spot volumes in the transpacific trade.

“A key differentiator for Zim is our commercial agility and we intend to continue to leverage this strength to capitalise on market opportunities moving forward,” he added.

The carrier’s fleet modernisation programme, developed over the course of 2021 and 2022 when it signed a number of long-term charter deals with shipowners for new tonnage, is almost complete.

It ordered 46 new vessels and, as of today, 42 have been delivered, with the remaining four – a 5,300 teu wide-beam and three 8,000 teu LNG-powered vessels – to be added to its fleet in the remainder of this year.

This has resulted in a rapid fleet growth: in 2022 it had a combined capacity of 550,000 teu while today that figure stands at 780,000 teu across 130 vessels.

However, with the charter contracts on some 35 ships due for renewal next year, chief financial officer Xavier Destriau told analysts during an accompanying earnings call that the carrier had the opportunity to downsize its fleet if the market swings again next year due to substantial overcapacity, forecast by many liner observers.

“The 35 chartered ships that are up for renewal in 2025 are smaller ships than the ones we have received over the past two years out of the 46 ships.

“Altogether, those 35 vessels represent a total capacity of between 120,000 teu and 130,000 teu. We will have 120,000 teu potentially that we could let go next year without having to face any early penalty to get out of a charter.

“And it is very important to emphasise that the first vessels that will potentially leave the fleet, if any, will be the ones that are more expensive, less efficient for us to operate, leaving the company always operating core capacity which is far more efficient, far more cost efficient,” he said.

Another 22 vessels, representing a combined capacity of 82,000 teu, are up for renewal in 2026.

Meanwhile, the carrier upgraded its full-year profit guidance and now expects to post an adjusted EBIT of $2.15bn-$2.45bn, compared with the previous forecast of between $1.45bn and $1.85bn.

“We are expecting to slightly grow our volume as we will continue also to see the effect of the incoming new capacity. We still have four vessels that will be delivered between now and the end of the year…  [and] seven smaller ships for re-delivery over the same period.

“So, net, we continue to grow our operating tonnage and, as a result, we also believe we will be able to capture additional market share and fuel those ships – so, yes, there is still a volume growth assumption versus last year baked into our guidance for Q4,” Mr Destriau added.