It may be too soon for Zim Integrated Shipping Services to say the improvement it showed in its most recent financial results will serve as a launch pad for a return to profitability in the second quarter, but the Israeli carrier is in a “good position” to benefit from an uptick in the market and expects to make money in the third and fourth quarters, Chief Financial Officer Guy Eldar told The Journal of Commerce.
Zim, No. 16 on the JOC’s ranking of Top 40 Container Carriers in the U.S. import trades last year and 19th in the U.S. export trades, said the improved results in the first quarter “confirm the positive influence of the efficiency programs implemented,” which included an agreement with its works council to cut 100 jobs in Israel.
The carrier’s performance — it narrowed its operating loss to $48 million from $116 million a year earlier — was “pretty much on the average” of the industry, Eldar said.
Eldar said Standard & Poor’s recent decision to downgrade the company’s credit rating to a new low of “CCC” was a reflection of Zim’s negotiating a distress exchange offer with its lenders. Asked about S&P’s claim that Zim would face difficulties meeting its obligations in the second half of 2014, Eldar said, “We have all the internal resources to meet all our obligations in the medium and long term. As far as we are concerned we have a lot of time to generate initiatives” to meet Zim’s obligations.
Zim is in an “open dialogue” with its lenders about a five-year business plan it presented on April 30. The carrier struck an agreement with its bankers to waive covenants and defer principal payments due this year to the end of 2014 and secured $400 million of additional concessions.
The carrier, a subsidiary of Israel Corp., has debts of around $2.7 billion, just more than half of which is with banks, and the remainder with shipyards and bondholders.
Zim this week agreed to sell stakes in two Chinese container manufacturers for a combined $50.5 million and negotiating with potential buyers for some of its other non-core businesses, including logistics operations and stakes in global cargo terminals, Eldar said.
He confirmed that Zim intends to take advantage of lower shipyard prices to order more efficient replacements for five ships, each capable of carrying 12,500 20-foot-equivalent container units, that it had ordered at the peak of the market but canceled last year at a cost of $133 million.
The cancellation charge was partly responsible for widening Zim’s 2012 net loss to $433 million from $397 million in 2011.
Contact Bruce Barnard at firstname.lastname@example.org.