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Flush with cash, ZIM buys boxes and pays a special dividend

After a record quarter ZIM is spending $588M on new containers rather than turning to the leasing market to increase its fleet

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Flush with cash, ZIM buys boxes and pays a special dividend

NYSE-listed ZIM Integrated Shipping has reported a strong set of results for Q1 2021. Net income for the first quarter was US$589.6M (compared to a loss of US$11.9M in Q1 2020), and adjusted EBITDA was US$820.5M, a year-over-year increase of 744%.

 

ZIM’s revenue increased 112% to US$1.74B in Q1, as its container loadings increased 28% to 818,000 TEU at an average freight of US$1,925 (+76%). EBITDA and EBIT margins in Q1 hit 47% and 39% respectively.

 

ZIM made more money in Q1 than it did in all of 2020, and has increased its guidance for the full FY 2021 to between US$2.5B and US$2.8B of Adjusted EBITDA and between US$1.85B and US$2.15B of Adjusted EBIT. The carrier has announced it will pay a special cash dividend of US$238M in September, and expects to distribute between 30-50% of 2021 net profits in 2022.

 

ZIM believes freight rates will remain high for 2021, especially on the transpacific trades. With US retail inventories at their lowest level in 28 years, ZIM expects inventory replenishment will continue to drive growth in the US market.

 

It has been a remarkable turnaround for ZIM. In Q1 2019 the carrier’s net leverage ratio was 5.3x, and it has now reduced that to 0.5x. Eli Glickman, ZIM President & CEO, said there is no objective or target date to be net-debt zero, however.

 

ZIM is using some of its cash to purchase new containers, and Glickman said it would spend US$588M on new boxes in 2021, with US$104M of that delivered in Q1. “Based on cash flow, we are purchasing rather than leasing,” he said.

 

Looking to the future, ZIM expects to outperform the market, both in terms of margins and growth in container loadings, in 2021. Glickman said he expects the market will still be showing growth in 2022, and ZIM will continue to invest in new equipment, while maintaining its “asset light” strategy on the vessel side and delivering superior margins.

 

“This is truly a momentous time in ZIM’s 75-year history,” Glickman said. “Following our successful IPO to become the first global container liner to list in the U.S., we are proud of our demonstrated accomplishments based on seamless execution aligned with our stated objectives. Driven by ZIM’s differentiated approach and proactive strategies, we generated our highest ever quarterly net profit, EBITDA, and cash flow, while continuing to deliver industry leading margins. We also significantly strengthened our balance sheet, with shareholder equity now in excess of US$1B. In a short time since going public, we have also achieved important milestones for shareholders.

 

"Specifically, we significantly strengthened our position in the growing and strategic Pacific and Intra Asia trades, with our long-term chartering agreement for large LNG dual-fuel container vessels and the launch of new services to address unmet need in profitable routes to generate superior growth. We also drew on our strong cash flow to redeem ZIM’s $349 million outstanding Series 1 and 2 Notes sooner than expected and earlier than the stated maturity by two years.”

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