The Israeli ocean carrier reported a net loss of $74 million in the second quarter of 2016, compared to profits of $12 million in the same 2015 period, according to the company’s most recent financial statements.
ZIM Integrated Shipping Services reported its second straight quarterly loss in second quarter 2016 despite an increase in cargo volumes carried, according to the company’s most recent financial statements.
The Israeli ocean carrier reported a net loss of $74 million for the three months ended June 30, 2016, compared to profits of $12 million in the same 2015 period. Revenues for the quarter totaled $611.8 million, a 19.8 percent decrease from $762.9 million in second quarter 2015.
The company attributed the drop in revenues to a first half 2016 container shipping market “characterized by historically low freight rates.” ZIM’s average freight rate in the first six months of the year dropped 24.8 percent to $903 per TEU carried, compared with the first half of 2015.
As a result, second quarter revenues declined even as ZIM increased cargo volumes 6.9 percent from first quarter 2016 to 617,000 TEUs.
ZIM reported an adjusted loss before interest and tax (EBIT) of $40.5 million, compared with a positive EBIT $49.8 million in second quarter 2015, and an adjusted loss before interest, taxes, debt and amortization (EBITDA) of $15.9 million, compared with a positive EBITDA of $74.2 million the previous year.
Operating cash flow stood at $17.6 million, down significantly from $86.0 million in second quarter 2015.
During the quarter, ZIM reached an agreement with creditors to reschedule $115 million in debt repayments during a period of 12 months beginning Sept. 30, 2016. ZIM said the agreement will “support the financial stability and growth of the company.”
The company said it will continue its strategy of focusing on individual trade lanes where it has an advantage over competing lines. ZIM primarily operates in the transpacific, Asia-Mediterranean, Asia-Indian Subcontinent, and intra-Asia trades, where more than 60 percent percent of the firm’s vessel capacity is deployed, according to ocean carrier schedule and capacity database BlueWater Reporting.
“The very challenging market situation impacts the industry as a whole. Our strategic business plan, focusing on select markets where the company has a competitive advantage, is keeping ZIM in the top of the industry in terms of EBIT margins,” ZIM President and CEO Rafi Danieli said of the results.
“The company keeps investing in customer service excellence and on-time delivery to our customers, as evident in a recent first place ranking awarded to ZIM in a schedule reliability performance report,” he added. “We have increased our carried TEU in Q2 over Q1 by about 7 percent, which shows the trust of our customers in the company. Our fast reaction to market changes, and cost efficiency programs, aims at allowing ZIM to cope with the challenges faced by the industry.”
Those market changes and challenges are numerous, to say the least. As noted above, container freight rates had fallen to historic lows earlier this year due to weak global trade growth and persistent overcapacity. Prices rebounded in the past month following the announcement that South Korea’s Hanjin Shipping was filing for court receivership, but only slightly.
Even with the collapse of Hanjin, however, analysts do not believe there will be a significant decrease in deployed capacity, nor a significant increase in trade volumes, meaning rates are likely to remain depressed. In fact, spot rates measured by the Shanghai Containerized Freight Index (SCFI) have already fallen back to earth the last two weeks as volatility stemming from Hanjin’s operational issues began to subside.
Following a string of mergers and acquisitions that included the merger of state-run Chinese carriers COSCO and China Shipping, CMA CGM’s purchase of APL parent Neptune Orient Lines, and Hapag-Lloyd combining with United Arab Shipping Co. (UASC), ZIM is now the 15th largest ocean carrier by deployed capacity (including Hanjin), according to BlueWater Reporting. The company currently deploys 60 vessels with a combined total capacity of 298,731 TEUs.
Source: BlueWater Reporting (Capacity figures in TEU’s)
ZIM is somewhat unique among the 20 largest container carriers, however, chartering over 90 percent of its capacity, the highest percentage of any top-20 carriers, according to industry analyst Alphaliner.