ZIM jumps sharply after raising guidance

ZIM INTEGRATED SHIPPING SERVICES CO., LTD. ZIM (NYSE: ZIM) surprised investors today by significantly raising its annual outlook and beating expectations for the second quarter. The stock opened 14.32% higher on Wall Street, giving it a market cap of $2.622 billion.

The Israeli shipping company reported revenue of $1.9 billion in the second quarter of 2024, up 47.6% from the corresponding quarter of 2023. Revenue in the first half of the year was $3.5 billion, up 30.2% from the first half of 2023. The average container price rose 40% in the second quarter to $1,674. At the same time, the volume shipped by ZIM rose 10.7% in the quarter to 952,000 containers. Net profit in the second quarter was $371 million, beating expectations, compared to a net loss of $215 million in the second quarter of 2023. Net profit in the first half of 2024 was $462 million.

sharp rise in prices

ZIM CEO Eli Glickman explains that freight rates have increased four to fivefold, although they are still lower than during the Covid pandemic. “These are certainly prices that we did not see in 2023 and they are contributing to a significant increase in profitability. We also saw this quarter as a result of the entry of our new ships. We achieved a record number of containers,” he said.

“The journey from Asia to the US East Coast now takes 11 weeks, and the journey to Israel is similar due to having to go around Africa around the Cape of Good Hope, so it takes time to see the results expressed. Here we are back to the global crisis caused by the Houthi threats, which are blocking the passage of ships in the Bab el-Mandeb Strait and the Suez Canal, as well as the drought in the back of the Panama Canal, which has created a bottleneck there. All this is coupled with increased demand in the markets, especially in the US. This has led to a significant increase in prices due to the lack of supply and increased demand. The result is very strong in the second quarter and a further increase in profitability is expected in the second half.”

Is there a way to reduce volatility in financial results?

“The shipping market is known for its high volatility. As part of our preparation, we have invested in two things – a new fleet of 46 vessels, which will give us competitiveness even during the crisis in order to mitigate potential losses, in addition to a billion dollars that we have invested in new containers.”

Glickman points out that ZIM’s second-quarter EBITDA margin, at around 40%, was the highest of any shipping company that has reported. One reason, he says, was that when long-term contracts were renewed in early May (the renewal date each year), there was intense pressure on prices, with competitors signing contracts at prices below cost; ZIM, on the other hand, refused to sign and thus signed only 35% of the long-term contracts, with the rest benefiting from the price increases.







I took the risk

“We took a risk and took a risk. We did not agree to compromise, and there is no reason for us to support large clients on a global level/

What are the reasons for the high demand?

“We think this was due to the Covid-19 pandemic when there was a huge build-up of inventories in warehouses, then an ‘overshoot’ occurred and companies reduced their inventories dramatically, and because of the rising interest rates, they reduced inventories to minimal levels. Now the fear is that there will be empty shelves, so there is again an ‘overshoot’ and massive orders. We don’t know how long this will last.”

The stock price has more than tripled since its lows last year.

“We are responsible for the company’s results, not the stock price. Our goal is to achieve the best results for shareholders.”

ZIM will pay a dividend of $112 million, or $0.93 per share, for the quarter.

This article was published in Globes, Israeli Business News – en.globes.co.il – on August 19, 2024.

© Copyright Globes Publisher Itonut (1983) Ltd., 2024.


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