Israeli liner operator Zim has finally succumbed to what many saw as the inevitable and downgraded its earnings forecast for the full year.
The New York-listed, Haifa-based company expects to generate an adjusted Ebitda of $1.2bn to $1.6bn and is guiding an adjusted Ebit operating loss of between $100m and $500m this year.
Those numbers are way down on guidance issued barely two months ago.
In May, the carrier expected between $1.8bn and $2.2bn in adjusted Ebitda and an operating profit of $100m to $500m.
It blamed the downgrade on “continued weakness in freight rates across all the company’s trades, particularly in the Transpacific”.
That weakness is expected to continue in the second half.
Volume growth is also expected to be lower than originally forecast, as demand continues to be subdued.
Zim reported a net loss of $58m for the first quarter, but management had expected a recovery in demand with inventory restocking to begin in the second half, resulting in an improvement in freight rates.
Since then, the arrival of large numbers of container ships and the failure of demand to recover has dampened hopes of a rebound in freight rates.
“Near-term container shipping market conditions continue to be challenging, with demand expected to remain muted for the remainder of the year,” said chief executive Eli Glickman.
“While our second-quarter results are broadly in line with our expectations, we no longer anticipate an improvement in freight rates in the second half of 2023, consistent with seasonality, as previously assumed.”
“During this downturn, we will continue to actively manage and rationalise our fleet and services, to maximise our cash position.”
“We expect our strong balance sheet and ample cash to continue serving Zim well and allow us to maintain a long-term view.”
Glickman remains optimistic that the company will reap cost savings from the deployment of modern vessels on its core Asia to US East Coast services: “As we look to the future, we believe that our cost-effective and fuel-efficient newbuild capacity, particularly our newbuild LNG vessels, will markedly improve our cost structure and competitive position, allowing us to deliver sustainable value for both customers and shareholders over the long term.”
Zim will report second-quarter results on 16 August.
