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Zim: quarterly net loss of $163 million

2012-06-04     pageview 948


Despite the difficult market conditions in the first quarter of 2012, namely a continuous decline in freight rates to a low of more than 18 months and rising fuel prices following last year′s appreciation trend, ZIM recorded growth and an increase in carried TEUs compared to the comparable period last year. ZIM’s carried TEUs increased by 3% compared to the same period last year: 570,000 containers carried in the first quarter of 2012, compared to 555,000 in the first quarter of 2011.

In addition, ZIM successfully completed, in the first quarter of 2012, an adjustment of its financial covenants with all its relevant financing banks to reflect prevailing market conditions. The completion of this adjustment, gives ZIM flexibility and ability to cope with the difficult market conditions. In light of that, short term loans have been reclassified as long-term debt. ZIM is now implementing its business plan which was approved by the banks.

Towards the end of the first quarter of 2012 the market started to recover in terms of freight rates – as of today, the Shanghai Containerized Freight Index (SCFI) is up 50% since the beginning of the year. Further, more and more companies in the industry today are announcing freight rates’ hikes, announcements that reflect the continuation of the recovery. Simultaneously, a sharp decline in oil prices, recorded in the last few weeks, is expected to lower the company′s expenses. This recovery had not yet been reflected in Q1 results, but is expected to have a positive effect on the company′s results for the remainder of the year.

The company ended the first quarter of the year with a negative EBITDA of $69 million, a 13% improvement compared to the EBITDA in the last quarter of 2011.

In the first quarter of 2012 the trend of low freight rates and high oil prices continued, and combined with an increase in accounting (non-cash) financial expenses, it led to a net loss to shareholders of $163 million in the quarter, compared with a loss of $151 million in the previous quarter.

ZIM′s results reflect the overall situation of the industry: the company′s financial results are in line with the average operating margins in the industry, which points out the fact that ZIM′s results are not unusual in the current market environment. The 10 liner companies that so far reported their Q1 results recorded a combined operational loss of about $2.2 billion, reflecting a negative operating margin of 13%. Despite the difficult market conditions, ZIM continues to improve its efficiency and implement its strategy according to its strategic plan.

The quarterly loss is a result of the pincer movement of declining freight rates combined with the increase of oil prices; and is the primary cause for the losses introduced by all liner companies in the first quarter of the year.

Average freight per TEU decreased from $1,283 in the last quarter of 2011 to $1,236 per TEU in the first quarter of 2012 – a further 4% decrease, on top of a 5% decrease recorded in 2011. At the same time, oil prices in the market increased in the first quarter to $722 per ton of fuel oil (on average) compared to $639 per ton (on average) in 2011 – a nearly 13% rise.

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