Rising rates and record peak season volume lift ZIM profits

Rising rates and record peak season volume lift ZIM profits

ZIM reported a strong improvement in profitability in Q3. Photo credit: ZIM

Zim Integrated Shipping Services continued along its road to profitability as a solid peak season, record volume, and higher freight rates saw the niche carrier posting a $36.2 million profit in the third quarter. That took the carrier to a $51.3 million nine-month profit, a significant turnaround from the $151 million loss in the same period of last year.

Total revenue in the third quarter soared by almost 30 percent to $817 million as the carrier transported 688,000 TEU from July through September, a record quarterly volume that was up 10.6 percent year-over-year. Adjusted EBITDA was $89.2 million in the third quarter compared with $10.5 million in the same quarter last year.

Eli Glickman, ZIM president and CEO, said ZIM’s third-quarter results were a cause for optimism, and he hoped the momentum could be maintained through the next few quarters.

“However, we still face many challenges, including the uncertainty of market conditions, freight rates, and bunker prices,” he said. “I believe we are on the right track as we continue to outperform the industry."

The return to profitability for ZIM highlights the advantages of a global, independent niche carrier in a rapidly consolidating industry dominated by a trio of powerful carrier alliances. ZIM does not belong to 2M, the Ocean Alliance, or THE Alliance but has service agreements with some of the carriers within those vessel groupings.

In its third-quarter earnings report, ZIM said the industry was beginning to stabilize after the alliances were reshaped in April and the merger and acquisition activities that took place in the last few years and it was benefiting from a positive trend being seen in container shipping during the last four quarters.

The carrier’s significant growth in revenue during the three quarters mirrored that of the other container lines, with more boxes being transported at higher rates. The average freight rate per TEU was $1,008, up 12.2 percent compared with $898 in the comparable period of 2016.

ZIM carried 1.9 million TEU in the first nine months, an increase of 7.1 percent year-over-year. The carrier’s net profit for the January-September period was $21.1 million compared with a net loss of $168 million in l2016.

While the mega-carriers seek scale and scope globally, Zim was developing scale and scope within its existing service areas, George Goldman, president of Zim USA said earlier this year.

SeaIntel said by definition, smaller carriers were unique, even compared with each other, because each line developed a business plan built around its asset base, the trade lanes in which it operated, and most importantly, the value it provided to customers in particular niches. Presumably, the value proposition was such that each line’s customers were willing to pay a premium rate for a service that fitted its needs better than what the larger carriers offered.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.