Zim Integrated Shipping Services intends to order cheaper and more efficient container ships to replace the five large vessels the Israeli ocean carrier canceled this week.
Walking away from the $580 million contract for five of nine 12,562-TEU ships ordered at South Korea’s Samsung shipyard does not mean Zim is scaling back its service coverage or abandoning an upgrade of its fleet, Chief Executive Rafi Danieli insisted.
“We are relieved of an uneconomic contract at above market prices ... now we have flexibility over new contracts,” Danieli said in a telephone interview. “Today’s ships are more efficient and cheaper.”
The canceled ships cost $170 million each when they were ordered in 2007 but can now be bought for around $100 million, according to Zim.
Zim, which took a $133 million hit on the canceled order, is not under any time pressure to place a new contract as the vessels would not be needed until late 2015 or early 2016, Danieli said.
The carrier, ranked 17th in the world, has an option to cancel contracts for the remaining four ships by January 2014.
Meanwhile, Zim is putting the final touches on an updated five-year business plan, which it will present to its mainly foreign banks, which hold more than half of its $2.75 billion debt, on April 30.
There have been no developments in talks with the government, which holds a veto-wielding golden share, to allow Zim to split its domestic and international operations, Danieli said.
This would allow the international wing, which accounts for around 85 percent of revenue, to eventually launch an initial public offering and also make it easier to form alliances and partnerships with other ocean carriers. “There is no deadline ... we have time,” Danieli said.
Zim announced this week that its net loss widened to $433 million in 2012 from $397 million in 2011, reflecting the negative impact of the canceled ship order.
But Danieli said the company’s operational performance was above the industry average in 2012, as it earned $107 million before interest, tax, depreciation and amortization, a $189 million turnaround from an $82 million loss in the previous year.
The key to the improved result was increased efficiency, achieved through changing lines in the network, combining lines, teaming with other carriers, revising port calls and cutting cargo handling costs.
Danieli declined to give a forecast for 2013, citing major uncertainties, including the price of fuel, the supply/demand balance in the industry and the state of the world economy.
Contact Bruce Barnard at email@example.com.