ZIM Navigates Downturn as Impairment Loss Sinks Earnings

Israeli container shipping line ZIM announced its financial results for the third quarter of 2023, reporting a $2.2 billion loss driven by a massive $2 billion non-cash impairment loss.

This compared to a $1.2 billion profit in the same period last year.

Adjusted EBITDA for the quarter stood at $211 million, marking a year-over-year decrease of 89%. Revenues for the third quarter reached $1.273 billion, showing a year-over-year decrease of 61% despite a slight increase in transported volumes. Average freight rate per TEU declined significantly to $1,139, coming in 66% below the same period last year.

ZIM’s President & CEO, Eli Glickman, said weak demand and deteriorating freight rates had a significant impact on the company’s performance.

“We are currently in a transition period, which we expect will extend into 2024,” said Glickman.

ZIM’s overall negative outlook for freight rates in the near future led the company to record a non-cash impairment loss of approximately $2.063 billion in the third quarter, contributing significantly to its net loss.

The company has moved to enhance its commercial and operational resilience, including a fleet renewal program. This program involves the addition of 46 newbuild containerships, of which 28 are “green” LNG vessels. By replacing older, less efficient vessels, ZIM aims to improve its cost structure and drive long-term profitable growth.

Glickman also emphasized ZIM’s focus on reducing its cost base and enhancing operational efficiency. He highlighted the company’s ample total liquidity of approximately $3.1 billion as providing a strong foundation to navigate through the prolonged market weakness.

“Specifically, we have initiated significant cost control measures, rationalized our capacity and adapted our network, with a focus on both maximizing our cash position and delivering an exceptional customer experience,” Glickman said. “Additionally, we entered into an important new collaboration with MSC during the third quarter that enhances operational efficiencies and further elevates service levels.”

ZIM ranks as the world’s 10th largest liner operator with a fleet of 124 ships, the vast of majority of which are chartered-in, according to Alphaliner data. The company experienced a significant surge in stock price after its IPO in January 2021, reaching a peak of over $80 per share. However, its stock has gradually declined over the last year to its 52-week low of $6.77 following today’s earnings release.

Glickman expressed confidence in ZIM’s ability to emerge from the current downturn in a stronger position.

“While market challenges may continue in the near term, we expect that the combination of the initiatives we have undertaken and our solid market position will drive profitable growth over the long term,” Glickman said.

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