ZIM Integrated Shipping Services Ltd. Q1 FY2024 earnings call

Fleet Renewal

• Secured 46 new build container ships, including 28 LNG-powered. 30 new builds have joined the fleet. Replacing older, less efficient vessels with larger, more cost-efficient ones.

ESG Progress

• Achieved 23% drop in carbon intensity in 2023. Aim to reduce carbon intensity by 30% by 2025 vs 2021 baseline. Committed to net 0 GHG emissions by 2050.

Operational Updates

• Grew volume on Transpacific by leveraging larger capacity vessels and new lines. Expanded network in Latin America. Redelivered 11 vessels in 2024 and anticipate redelivering remaining 21 by year end.

In the first quarter, ZIM delivered revenue of $1.56 billion and net income of $92 million. Adjusted EBITDA was $427 million with an adjusted EBITDA margin of 27%, and adjusted EBIT was $167 million with a margin of 11%. Total cash position at quarter end was $2.25 billion. Non-containerized cargo (car carrier services) totaled $111 million in Q1. The main product segment is container shipping, contributing the majority of revenue.

Revised Full Year 2024

• Expect adjusted EBITDA in range of $1.15 billion to $1.55 billion and adjusted EBIT between $0 million to $400 million. Stronger rate environment and volume growth drive this.

Volume and Costs

• Volume growth expected to outpace market growth as fleet is upsized. Bunker costs slightly higher than previous guidance assumptions.

Market Dynamics

• Red Sea tensions and equipment constraints contribute to higher spot rates, but longer-term oversupply remains a concern.

• Market Volatility: Extreme volatility in container shipping market.
• Red Sea Tensions: Continued disruption in global trade with no immediate solution.
• Oversupply Concerns: Longer-term expectation of supply growth outpacing demand, especially with significant vessel deliveries in 2024 and 2025.
• Equipment Shortages: Constraints on equipment adding to supply pressure, impacting certain trades.

Q: What's behind the broad-based rate increase?

A: Both supply side (Red Sea disruption extending voyages) and demand side (low inventories, strong consumer demand in US).

Q: Plan for charter renewals?

A: Redelivering vessels coming up for renewal to make room for new builds; reassessing on a case-by-case basis.

Q: EBITDA phasing and dividend?

A: First half expected stronger than second; dividend paid as per policy, Board comfortable with payout.

Q: Leverage and charter costs?

A: No financial covenants; chartering costs not exposed to current market as focus on new builds; LNG vessels cheaper to operate than traditional fuel.