In a recent financial disclosure, US-listed Israeli carrier ZIM revealed a substantial net deficit of nearly USD 2.3 billion for the third quarter of the year. The deficit was primarily attributed to an impairment loss of USD 2.06 billion on the company’s assets.
The adjusted operating loss (EBIT) for the quarter, excluding the non-cash charge, stood at -USD 213 million. This marked a significant downturn from the previous year’s profit of USD 1.54 billion in the same quarter, highlighting the challenges faced by the Israeli carrier in the current economic landscape (3Q 2023: -USD 147 million).
The impairment loss was incurred due to a pessimistic outlook on the market, with ZIM expressing concerns about the recent deterioration in freight rates. The company anticipates little chance of a meaningful recovery until 2024. A substantial portion of the impairment charge, totaling USD 1.59 billion, was recorded on the fleet, with an additional USD 392 million on containers and handling equipment.
ZIM revised its full-year EBIT forecast, projecting losses in the range of -USD 400 million to -USD 600 million. This implies an adjusted deficit of -USD 26 to -USD 226 million in the final quarter of the year. Despite the current challenges, ZIM anticipates returning to profitability from 2025 onwards, citing lower per-TEU costs from future newbuildings as a contributing factor.
The impairment charge is expected to have a positive impact on future EBIT earnings by reducing depreciation expenses, resulting in an estimated ‘saving’ of approximately USD 150 million in the fourth quarter.
Operational conditions for ZIM have been challenging, with the company recording an average freight rate per TEU of USD 1,139 in the quarter, a significant 66% decrease compared to the same period last year. Although carried volumes increased by 3% to 867,000 TEU, the growth was lower than the estimated container market-wide growth of 5%. The company noted that rate increases observed on the transpacific in August were short-lived, and inventory levels showed few signs of declining.
ZIM’s stock price experienced a 9% decline, closing at USD 7.02 on Monday night compared to its pre-announcement price.
As of the end of the quarter, ZIM maintained a cash balance of USD 3.1 billion. However, the net debt (cash minus debt) increased to USD 1.62 billion, reflecting a USD 1.9 billion rise from the previous year when the company was in a ‘net cash’ position. Higher interest rates were cited as a factor contributing to increased capital costs, impacting the carrier’s forecasted discounted cash flow going forward.
Source: ZIM, Alphaliner.
