The Israel-based container shipping company Zim said it had earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter of 2013 of $36 million, compared with a negative EBITDA of $6 million in the previous quarter and $46 million in the second quarter of 2012.
Revenues in the second quarter amounted to $976 million, a 6 percent increase over the first quarter of 2013, but less than the $1.05 billion in the same 2012 period.
The company said it “continues to enjoy full support from all its creditors that have agreed to continue the process of reaching the new business plan. This agreement is a major and significant step towards a long-term plan that will enable financial stability in the face of multiple challenges and changing market conditions, and is a testimony of the trust the company enjoys from all parties involved.”
Zim has been working on a plan to transform the company in the next three years, said Guy Eldar, Zim's chief financial officer, and stakeholders including shipyards and creditors have been presented with a plan to “align balance sheet to the company’s business plan.” The company is being assisted by Boston Consulting Group.
Zim has about 5,000 employees globally and about 750 at its headquarters in Israel. It announced it has reached an agreement with the company's employees' union and the General Federation of Labor (Histadrut) over early retirement for 100 employees at its headquarters. Several dozen have already retired.
Eldar said Zim is very focused on completing the reorganization "as soon as we can.”
“What’s encouraging is that everybody is still discussing with the company, and more than that, everybody continues to support the company by giving waivers, concessions, and other requests we have in order to maintain our stability for this period of discussion,” he said, adding “we are heading in a positive direction toward, I hope, a successful completion of this exercise.”
Part of that discussion involves the company’s plans for additional ships. Earlier this year, Zim canceled orders it made in 2007 for five 12,600-TEU ships from Samsung and received a $30 million refund on a downpayment. Eldar said the company is likely to cancel an order for a remaining four similar-size ships, for which it would also likely receive a similar refund. While the company will lose a 10 percent down payment on those ships, he said Zim would come out ahead because the same ships would cost more like $110 million today compared to the $170 million price tag in 2007. The ships would also have a much more energy efficient design.
“We lose $11 million, but we gain $60 million, but it is a great deal. It was a hard negotiation,” he noted.
The company also has four 8,800-TEU ships on order from Hyundai. The company will have those ships redesigned and the price of those assets, for which the company put down a 10 percent downpayment, is under discussion.
Eldar said Zim plans to “keep its position as a global player. What we are trying to do is find our special place within the global trade.”
For example, on the transpacific, he said in addition to Los Angeles, the company has services that call Vancouver and Tacoma, giving it a bigger share in the Pacific Northwest market and allowing it to get preferred terms with Canadian railways and good support from shippers.
“At the end of the day, the name of the game in the the liner industry is maintaining your network and optimizing your network and we don’t see ourselves retreating to become a niche player and only going to regional trades. We are continuing to develop our position as a global liner,” he said.
Zim is not a member of any alliance, but Eldar said it does partner with most of the top 20 carriers in some trades, including some of the biggest carriers and various alliances.
“Since we don’t have the resources of the bigger players and we have a smaller fleet, we enjoy the flexibility that is afforded us in allocating where it is good for us to allocate the capacity and finding the suitable partner to cooperate with us,” he said.
But Eldar said, as part of its strategic plan, Zim is “not trying to fix our thinking on anything” and at some point it might change its strategy and join or form a new alliance.
“Now in the specific market, we are not being punished by being part of can alliance, but long term anyone can see the benefit of joining an alliance, but right now I'm not sure it is in the benefit for us to join one," he said. - Chris Dupin