Israeli liner company Zim has logged its second consecutive loss-making quarter to close 2023 with a cash burn of more than half a billion dollars, according to analysts.
Investor focus ahead of the results had been on Zim’s outlook, given the impact of the Red Sea crisis on the container market and the company’s earnings potential.
Zim’s guidance for this year was introduced with a $600m range in core operating profit around breakeven and better than analysts had feared.
The Haifa-based, New York-listed carrier made a net loss of $147m for the fourth quarter of 2023, compared with a net profit of $417m in the same period a year earlier.
Net loss for the full year, including a $2.06bn non-cash impairment loss, was $2.69bn.
That is massively down from the net profit of $4.63bn for the full year of 2022.
“Overall, we estimate Zim burned $330m of cash during the quarter and $540m for the year,” said Jefferies analyst Omar Nokta.
“Looking ahead, cash burn is likely to moderate given the strength in freight rates.”
The results came against “a backdrop of weakened market conditions, industry disruptions and operational challenges in 2023”, Zim president and chief executive Eli Glickman said.
Zim has also adjusted its full-year forecast for 2024.
Nokta said Zim’s quarterly loss of $1.18 per share beat the consensus loss forecast of $1.75 per share.
Zim told shareholders that 2024 operating profit would come in between a red number of $300m and a positive figure of $300m. Nokta said the mid-point of 2024 guidance was above consensus.
The company had made “significant progress advancing our strategic transformation and are pleased to have already started to realise the favourable outcomes we projected”, Glickman said.
“Specifically, we are well on our way to markedly improving our cost structure, enhancing our commercial resilience, and enabling reduced carbon emissions for both Zim and our customers moving forward.”
Volatile market
“During a time when the market remains volatile, our strong cash position will enable us to continue to maintain a long-term view as we focus on generating sustainable value for both customers and shareholders,” Glickman added.
“Looking ahead, we intend to continue to take decisive steps to further benefit from our strategic transformation and expect Zim to emerge in a stronger position than ever in 2025 and beyond.”
While volumes remained more or less the same, Zim suffered from the decline in freight rates last year.
Carried volume in the fourth quarter was 786,000 teu, a year-over-year decrease of 4.6%. The tally was 3.3m for the full year, down 2.9% year-on-year.
The average freight rate was $1,102 per teu in the fourth quarter, a year-over-year decrease of 48%.
The corresponding figure for the full year was $1,203 per teu, a year-over-year decrease of 63%.
Revenues for the fourth quarter were $1.21bn, a year-over-year decrease of 45%.
Revenues for the full year were $5.16bn, a year-over-year decrease of 59%.
Fleet renewal
The company gave little input on the impact of earnings from the Red Sea disruption, which are likely to take effect in the first quarter of this year.
Adjusted Ebitda for the fourth quarter was $190m, a year-over-year decrease of 80%, while the figure for the full year was $1.05bn, a year-over-year decrease of 86%.
Operating loss, or Ebit, for the fourth quarter was $54m, compared to an operating income of $585m in the same period in 2022.
Operating loss for the whole of 2023 after the non-cash impairment was $2.51bn, compared to operating income of $6.14bn for the full year of 2022.
Glickman said that Zim’s fleet renewal programme is progressing as planned following the delivery of 24 new vessels to date.
That programme includes 46 container ship newbuildings, which will shift Zim’s reliance on older, less fuel-efficient vessels to a cost and fuel-efficient, more sustainable and largely LNG-powered newbuilding fleet, he said.
“Our cost per teu is declining and we anticipate additional improvements as our 22 outstanding newbuilds are delivered during the remainder of the year,” said Glickman.
“We continue to review our services to best address customers’ evolving needs and position Zim to capitalise on attractive growth opportunities.”
