ZIM Integrated Shipping Services Ltd. (NYSE: ZIM), a global container liner shipping company, announced its consolidated results for the three and six months ended June 30, 2023.
Second Quarter 2023 Highlights
- Net loss for the second quarter was $213 million (compared to net income of $1,336 million in the second quarter of 2022), or a diluted loss per share of $1.792 (compared to diluted earnings per share of $11.07 in the second quarter of 2022). Net loss for the quarter was negatively impacted by a non-cash after tax item of $51 million related to the redelivery of certain vessels.
- Adjusted EBITDA for the second quarter was $275 million, a year-over-year decrease of 87%
- Operating loss (EBIT) for the second quarter was $168 million, compared to operating income of $1,764 million in the second quarter of 2022
- Adjusted EBIT loss for the second quarter was $147 million, compared to Adjusted EBIT of $1,764 million in the second quarter of 2022
- Revenues for the second quarter were $1,310 million, a year-over-year decrease of 62%
- Carried volume in the second quarter was 860 thousand TEUs, a slight year-over-year increase
- Average freight rate per TEU in the second quarter was $1,193, a year-over-year decrease of 67%
- Net leverage ratio1 of 0.5x at June 30, 2023, compared to 0.0x as of December 31, 2022; net debt of $1,633 million, compared to net cash of $279 million as of December 31, 2022
- Full year 2023 guidance: the Company expects to generate Adjusted EBITDA of $1.2 billion to $1.6 billion and Adjusted EBIT loss of $500 to $100 million3
Eli Glickman, ZIM President & CEO, stated, “We continue to take proactive steps to respond to current market realities, with a focus on minimizing costs while optimizing our commercial strategy. We have taken action to rationalize our existing capacity and routinely review our services to adapt our network to customer preferences and identify new commercial opportunities. We also explore opportunities to leverage operational collaborations to improve efficiencies. At the same time, as the year progresses, and into 2024, we expect our cost structure to improve in tandem with the delivery of our highly competitive, fuel-efficient, newbuild tonnage, including 28 LNG-powered vessels.”
Mr. Glickman added, “Although our second quarter results reflected continued near-term challenges in the container shipping market, our total cash position of $3.2 billion at quarter’s end remains strong. We believe our ample liquidity and solid balance sheet will enable ZIM to operate from a position of strength and maintain a long-term view even during a prolonged period of market weakness. As we overhaul our fleet profile and advance ESG objectives, for both ZIM and customers, we remain confident in the Company’s strategic positioning to drive profitable growth over the long term.”
Mr. Glickman concluded, “Based on a soft peak season and demand that is expected to remain subdued for the remainder of the year, ZIM forecasts full year Adjusted EBITDA of $1.2 billion to $1.6 billion and Adjusted EBIT loss of $500 million to $100 million in 2023. Moving ahead, we are committed to leveraging digital initiatives, enhancing our commercial and operational resilience, and further implementing our differentiated strategy to best serve our customers and generate sustainable value for shareholders.”
Summary of Key Financial and Operational Results
| Q2.23 | Q2.22 | 1H.23 | 1H.22 | |
| Carried volume (K-TEUs)……………………………. | 860 | 856 | 1,629 | 1,715 |
| Average freight rate ($/TEU)……………………….. | 1,193 | 3,596 | 1,286 | 3,722 |
| Total Revenues ($ in millions)……………………… | 1,310 | 3,429 | 2,684 | 7,145 |
| Operating income (loss) (EBIT) ($ in millions) | (168) | 1,764 | (182) | 4,007 |
| Profit (loss) before income tax ($ in millions)…. | (272) | 1,736 | (337) | 3,955 |
| Net income (loss) ($ in millions)…………………… | (213) | 1,336 | (271) | 3,047 |
| Adjusted EBITDA 1 ($ in millions)…………………. | 275 | 2,101 | 648 | 4,634 |
| Adjusted EBIT 1 ($ in millions)……………………… | (147) | 1,764 | (160) | 4,006 |
| Adjusted EBITDA margin (%)………………………. | 21 | 61 | 24 | 65 |
| Adjusted EBIT margin (%)…………………………… | (11) | 51 | (6) | 56 |
| Diluted earnings (loss) per share ($)…………….. | (1.79) | 11.07 | (2.29) | 25.26 |
| Net cash generated from operating activities ($ in millions)……………………………….. | 347 | 1,710 | 520 | 3,370 |
| Free cash flow 1 ($ in millions)……………………… | 321 | 1,639 | 463 | 3,122 |
| JUN.23 | DEC.22 | |||
| Net debt (Net cash) 1 ($ in millions)………………. | 1,633 | (279) |
Financial and Operating Results for the Second Quarter Ended June 30, 2023
Total revenues were $1.31 billion for the second quarter of 2023, compared to $3.43 billion for the second quarter of 2022.
ZIM carried 860 thousand TEUs in the second quarter of 2023, compared to 856 thousand TEUs in the second quarter of 2022. The average freight rate per TEU was $1,193 for the second quarter of 2023, compared to $3,596 for the second quarter of 2022.
Operating loss (EBIT) for the second quarter of 2023 was $168 million, compared to operating income of $1,764 million for the second quarter of 2022, resulting mainly from the decrease in freight rates.
Net loss for the second quarter of 2023 was $213 million, compared to net income of $1,336 million for the second quarter of 2022. The expected redelivery of certain vessels sold and leased back by the Company in 2018 negatively impacted net loss by a non-cash after tax amount of $51 million.
Adjusted EBITDA was $275 million for the second quarter of 2023, compared to $2,101 million for the second quarter of 2022. Adjusted EBIT loss was $147 million for the second quarter of 2023, compared to Adjusted EBIT of $1,764 million for the second quarter of 2022. Adjusted EBITDA and Adjusted EBIT margins for the second quarter of 2023 were 21% and -11%, respectively. This compares to 61% and 51% for the second quarter of 2022, respectively.
Net cash generated from operating activities was $347 million for the second quarter of 2023, compared to $1,710 million for the second quarter of 2022.
Financial and Operating Results for the Six Months Ended June 30, 2023
Total revenues were $2.68 billion for the first half of 2023, compared to $7.15 billion for the first half of 2022, primarily driven by the decrease in freight rates.
ZIM carried 1,629 thousand TEUs in the first half of 2023, compared to 1,715 thousand TEUs in the first half of 2022. The average freight rate per TEU was $1,286 for the first half of 2023, compared to $3,722 for the first half of 2022.
Operating loss (EBIT) for the first half of 2023 was $182 million, compared to operating income of $4,007 million for the first half of 2022. The decrease in operating income for the first half of 2023 was primarily driven by the above-mentioned decrease in revenues.
Net loss for the first half of 2023 was $271 million, compared to net income of $3,047 million for the first half of 2022. The expected redelivery of certain vessels sold and leased back by the Company in 2018 negatively impacted second quarter net loss by a non-cash after tax amount of $51 million.
Adjusted EBITDA was $648 million for the first half of 2023, compared to $4,634 million for the first half of 2022. Adjusted EBIT loss was $160 million for the first half of 2023, compared to $4,006 million for the first half of 2022. Adjusted EBITDA and Adjusted EBIT margins for the first half of 2023 were 24% and -6%, respectively. This compares to 65% and 56% for the first half of 2022.
Net cash generated from operating activities was $520 million for the first half of 2023, compared to $3,370 million for the first half of 2022.
Liquidity, Cash Flows and Capital Allocation
ZIM’s total cash position (which includes cash and cash equivalents and investments in bank deposits and other investment instruments) decreased by $1.4 billion from $4.6 billion as of December 31, 2022 to $3.2 billion as of June 30, 2023.4 Capital expenditures totaled $26 million for the second quarter of 2023, compared to $82 million for the second quarter of 2022. Net debt position as of June 30, 2023, was $1,633 million compared to net cash position of $279 million as of December 31, 2022, a change of $1,912 million. ZIM’s net leverage ratio as of June 30, 2023, was 0.5x, compared to 0.0x as of December 31, 2022.
Use of Non-IFRS Measures in the Company’s 2023 Guidance
A reconciliation of the Company’s non-IFRS financial measures included in its full-year 2023 guidance to corresponding IFRS measures is not available on a forward-looking basis. In particular, the Company has not reconciled its Adjusted EBITDA and Adjusted EBIT because the various reconciling items between such non-IFRS financial measures and the corresponding IFRS measures cannot be determined without unreasonable effort due to the uncertainty regarding, and the potential variability of, the future costs and expenses for which the Company adjusts, the effect of which may be significant, and all of which are difficult to predict and are subject to frequent change.
Full-Year 2023 Guidance
As previously announced on July 12, 2023, the Company expects to generate Adjusted EBITDA of between $1.2 billion and $1.6 billion and Adjusted EBIT loss of $500 to $100 million. This guidance reflects continued weakness in freight rates across all the Company’s trades, particularly in the Transpacific, which the Company expects to continue during the second half of 2023. Volume growth is also expected to be lower than originally forecasted, as demand continues to be subdued.
Dividend Policy and Second Quarter 2023 Dividend
ZIM’s dividend policy remains unchanged, according to which the Company intends to distribute 30-50% of annual net income as a dividend to shareholders. Dividend payments will be made on a quarterly basis at a rate of approximately 30% of the net quarterly income of the first three fiscal quarters of the year (cumulatively), while the total annual dividend amount to be distributed by the Company (including any interim dividends paid during the first three fiscal quarters of the year) will total 30-50% of the annual net income. All future dividends are subject to the Company’s Board discretion and to the restrictions provided by Israeli law.
In accordance with its dividend policy and in light of the net loss recorded in the second quarter of 2023, the Company will not distribute a dividend to shareholders on account of its second quarter results.
