ZIM Integrated Shipping Services Ltd. Reports first quarter results

ZIM’s revenues in the period of the report amounted to about $918 million, compared with about $865 million in the corresponding period last year – an increase of about $53 million. The increase in the total revenues stems, mainly, from an increase in the revenues per container, in the amount of about $68 million, income from layover fees and in the amount of about $8 million, offset by income from uncompleted voyages, in the amount of about $23 million. In the period of the report, the quantity shipped increased compared with the corresponding period last year by about 5.6%, from about 570 thousand containers to about 602 thousand containers. The average shipping price per container increased by 4% – from about $1,236 per container to about $1,282 per container.
In the period of the report, ZIM’s operating expenses amounted to about $894 million, compared with about $905 million in the corresponding period last year – a decrease of about $11 million. The decrease in the operating expenses stems mainly from a decrease in the ship leasing expenses, in the amount of about $19 million, and in the fuel expenses, in the amount of about $14 million, offset by an increase in the cargo handling fees, in the amount of about $17 million.
ZIM’s operating loss in the period of the report amounted to about $48 million, compared with a loss of about $116 million in the corresponding period last year. The decrease in the operating loss stems mainly from an increase in the number of containers shipped , an increase in the average shipping fees and a decrease in the fuel expenses.
ZIM’s EBITDA in the period of the report amounted to a about $6 million, compared with negative EBITDA of about $69 million in the corresponding period last year.
ZIM’s net financing expenses in the period of the report increased by about $18 million compared with the corresponding period last year. The increase in the financing expenses stems mainly from a change in the revaluation of derivatives in respect of the debt arrangement.
Other developments in the period of the report and thereafter:
1. On May 6, 2012, Maalot notified ZIM with respect to a reduction of its rating to ilB (from ilBB–), with a negative rating outlook. On September 20, 2012, Maalot notified that the rating (ilB), with a negative rating outlook remains unchanged due to the concern regarding ZIM’s ability to meet the liquidity requirements imposed by the financing banks, which were made stricter as a result of their waiver of most of the accounting covenants up to the end of 2013.
On May 2, 2013, Maalot notified ZIM with respect to a reduction of its rating to ilCCC, with a negative rating outlook, due to estimates that in light of ZIM’s actions to arrange its capital structure there is a relatively high probability of executing a restructuring with the banks in the near future, which given ZIM’s credit rating, could be considered a “distressed exchange offer”, that is, a debt-default value of the issuer.
In light of the continuing crisis situation in the shipping industry and its negative impacts on ZIM, as stated, and further to ZIM’s estimate that it may encounter difficulties meeting its liabilities on time commencing from 2013, ZIM took and is taking a number of steps in order to allow it to cope with the effect of the continuing crisis in the shipping market, including: (1) during the period of the report, ZIM agreed with a number of the banks to which ZIM’s commitment to comply with financial covenants is secured, with respect to waiver/revision of the financial covenants, and also agreed with secured banks financing the ships, with respect to postponement of the principal payments commencing from March 1, 2013 and up to December 31, 2013 to the end of 20143. For additional details – see Section 9.19.7 of the Description of the Corporation’s Business Report for 2012; (2) ZIM reached agreements with shipyards from which ships were ordered with respect to postponement of delivery and/or construction of the ships, and cancellation of some of the ships ordered. (3) ZIM has endeavored and is continuing to make efforts vis-à-vis the owners of the ships leased to ZIM (including related companies) for part of the lease fees. For additional details – see Section 9.4.2 of the Description of the Corporation’s Business for 2012; (4) ZIM reached agreements regarding the repayment schedule of a loan received from a shipyard, in such a manner that $49 million that was supposed to have been paid during 2013, was postponed to 2014 and 2015;
(5) ZIM continues to be committed to improved operating efficiency.
As part of the agreements with the secured banks, as stated, on April 30, 2013 ZIM presented a 5-year business plan, together with a plan in connection with ZIM’s capital structure, with the goal of achieving long-term stability. The plan includes a proposal for a debt arrangement of ZIM with its creditors. ZIM has commenced negotiations with its creditors in connection with the said debt-arrangement proposal.
6. Subsequent to the period of the report, a special collective bargaining agreement was signed between ZIM’s management and the Employees Committee whereby agreements were reached regarding, among other things, retirement of employees. Regarding this matter – see Note 5.C.5 to the financial statements.
7. During the period of the report, ZIM’s Audit Committee and Board of Directors approved extension of lease of car ships from interested parties. The current lease period ends on May 23, 2013, and the extension is for a period of 12 to 14 months at a price of $14,000 per day. For additional details –
8. Further to Section 9.2.2 to the Description of the Corporation’s Business for 2012 and pursuant to ZIM’s business plans, on May 23, 2013, a framework agreement was signed between ZIM and a third party for sale of ZIM’s holdings in two companies that own container factories in China (hereinafter – “the Container Companies”). The consideration set for sale of the Container Companies is about $50.5 million. The capital gain ZIM is expected to realize from the transaction, as stated, is about $31.5 million. Detailed agreements for sale of shares of the Container Companies have not yet been signed and the agreement is subject to preconditions.
In addition, pursuant to the agreements, an advance deposit was paid in the amount of 10% of the consideration and loans were repaid that were provided by subsidiaries of ZIM to the Container Companies, in the amount of about $11.7 million. According to the provisions of the framework agreement, the advance deposit will not be returned to the purchaser even if sale of ZIM’s holdings in the Container Companies is not executed, except in cases where ZIM breaches the framework agreement.The parties will endeavor to sign agreements for sale of specific shares to each of the companies and will make efforts to obtain the approvals required from completion of sale of the Container Companies.
There is no certainty that the agreements for sale of ZIM’s holdings in the Container Companies will be signed, and if they are signed, there is no certainty that they will ultimately be executed.
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Source: Israel Corporation Ltd.