Zim swings to profit on higher rates, 2M pact

Zim swings to profit on higher rates, 2M pact

The volume of cargo handled by Zim in the second quarter of 2019 was lower than in the quarter a year ago, but its freight rates increased 9.5 percent. Photo credit: Shutterstock.com.

Zim Integrated Shipping Services swung to a $5.1 million profit in the second quarter, citing a deepening relationship with the 2M Alliance and a near-double-digit increase in average freight rates. 

The vessel-sharing agreement with the 2M Alliance, which was started in September 2018 and has been broadened twice since to cover additional services, helped Zim “provide its customers with improved product portfolio, larger port coverage and better transit time, while generating cost efficiencies,” the company said in its second-quarter earnings statement.

The improved performance helped raise the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) margin to 12.2 percent in the second quarter, from just under 3 percent in the same quarter a year ago. Zim’s second-quarter 2019 figure lags slightly the Maersk Line EBITDA margin of 14.9 percent in the second quarter of 2019, and the 14.7 percent margin reported by Hapag-Lloyd.

Eli Glickman, ZIM’s president and CEO, said in the company’s release that the “2023 strategy will double down on our efforts to strengthen our competitive position by growing with our partners, upgrading our customer service, while driving relentless cost management and striving for commercial and business excellence.”

Uncertain market forces

Ocean carriers have reported variable results for the second quarter, as they have negotiated the uncertainties of global trade this year, especially trade restrictions and tariffs.  

Hapag-Lloyd reported a doubling in profit at the EBITDA level in the first half of 2019, with a 2 percent increase in container volume and a 5 percent increase in freight rates to $1,071. Maersk reported its fourth consecutive quarter of profitability, with a profit of $154 million in the second quarter of 2019, and a 0.6 percent increase in revenue in the 2019 half over the same period a year earlier.

Zim’s $5.1 million profit compared with a loss of $33.2 million in the second quarter of 2018, as revenue increased to $834.3 million from $803.2 million a year ago. The carrier’s average freight rate per TEU was $993 in the second quarter of 2019 compared with $907 in the same period a year ago, with the carrier transporting 731,000 TEU in the 2019 quarter. That was down 5.3 percent from the 772,000 TEU carried in the same quarter in 2018.

A weaker first quarter of 2019, with a loss of $17.5 million, meant Zim’s first-half results showed a loss of $19.2 million, compared with a loss of $67.3 million in the 2018 period. The carrier moved 1.4 million TEU, a 4.9 decrease on the volume in the first half of 2018. Revenue in the first half of 2019 grew to grew to $1.63 billion, up 4.9 percent.

The average freight rate increased 9 percent in the half, to $1,005 per TEU. 

Contact Hugh R. Morley at hugh.morley@ihsmarkit.com and follow him on Twitter: @HughRMorley1.