Zim reports best quarter in 2 years
Zim reported a net profit of $16 million in the third quarter, compared to a $66 million loss in the same 2011 period.
Revenues were $1.06 billion, 9 percent more than in the same period last year.
The Israel-based shipping company called it the best result since the third quarter of 2010.
Looking forward, in an interview with American Shipper
, Rafi Danieli, the chief executive officer of Zim, said “the basic factors in the industry remain unchanged. The economy is under pressure, the fuel is in the sky, and the overcapacity is here.”
He attributed the good result to Zim’s efforts to become more efficient and focus on improving profitability rather than market share.
While some of the increased cost of bunkers can be passed onto customers through surcharges or by hedging, he said the more volatile oil prices are, the more expensive hedging is.
“We are trying to manage it to the extent that one can manage something that is as volatile as oil prices,” Danieli said.
Despite the strong results in the third quarter, Zim said it “believes that the industry is still in a vulnerable condition. This is mainly attributable to the increase in available capacity as new-builds continue to enter the market, resulting in supply-demand imbalances and pressure on freight rates, as well as due to the high volatility of oil prices.”
Zim has 13 ships on order from Samsung and Hyundai for delivery in 2015, and Danieli said the company plans to postpone those orders until 2016, though it has some flexibility depending on market and financial conditions.
About 40 percent of Zim’s activity is in the Pacific, Danieli said, and he added the trade is more stable than the Asia-Europe routes, for example.
He said in the transpacific “Our strategy is that we are very strong and have strong power in this trade, and we are going to keep it in our portfolio at this level.”
Danieli noted that the Transpacific Stabilization Agreement has recommended rate increases for next month and in the spring when contracts are renewed, typically on May 1. (For example, from Asia to the U.S. West Coast, they amount to $400 per 40-foot container on Dec. 15 and $800 next spring.)
He said it is too early to say how shippers will react and how negotiations will progress, but added “the lines should see an increase in rate in order to cover costs.”
Zim said it's continuing to discuss with the Israeli government a possible split of the company into two parts—one company that would handle trade to and from Israel and the other on cross trades - even though freight for the two businesses move on the same ships.
Danieli said about 15 percent of the company’s business is to or from Israel, while another 85 percent is international trade that's outside of Israel, for example, between the United States and Asia or the United States and Europe.
Splitting the company into two firms would allow Zim to raise funds through a stock offering and be publicly listed. Today, more than 99 percent of Zim is owned by Israel Corp., a Tel Aviv-based conglomerate.
In addition to allowing the company to raise capital through an initial public offering, Danieli said the change would make Zim “more flexible in any alliances, cooperation or consolidation.” Today, such agreements must be approved by the Israeli government because it holds a so-called “golden share” in the company.
Danieli said there are still many details to be worked out, including how much of Zim that Israel Corp. would continue to own and where the company’s shares might be listed.
Zim said it "recognizes that there is still uncertainty and potential volatility in market conditions. Therefore, should the need arise; it will approach its financing partners, who have been supportive in the past, to achieve certain concessions or additional flexibility to help the company overcome any difficult period." - Chris Dupin