Isranomics

Zim’s 2022 success paves the way for strong 2023 results amid tough environment

by | Mar 13, 2023 | Company Reporting | 0 comments

ZIM Integrated Shipping Services (NYSE: ZIM), the Israeli shipping company, reported an outstanding year in 2022. Under the management of Eli Glickman, the company reported a 17% growth in revenue to $12.56 billion and came very close to the record profits it recorded in 2021, with a net profit of $4.6 billion. These results exceeded analysts’ forecasts and were driven by the surge in sea freight prices that made Zim the most profitable Israeli company.

However, 2023 has begun in a much more difficult manner, as the company is dealing with a different economic reality, with sea freight prices treading at significantly lower levels. The average transportation price per twenty-foot equivalent unit (TEU) has decreased from $3,630 in 2022 to $1,514 currently. Although the annual average freight price was $3,240, which is higher than the average for 2021, Zim transported about 3.4 million containers last year, down from about 3.5 million containers in 2021.

Despite the challenging outlook, Zim’s forecast for 2023 is viewed positively by investors, and the company’s stock jumped over 20% during the trading session on Monday. The company expects an annual adjusted EBITDA of $1.8-2.2 billion and an EBIT of $100-500 million. These forecasts represent strong results compared to the period prior to the pandemic, according to Glickman.

The long-term contracts that Zim signed in mid-2022 did not protect it from the drop in transportation prices. Glickman notes that “all the long-term contracts that were supposed to last until May 2023 did not last.” The difference between the transport prices on which the contracts were signed and the current prices was over 75%, making it impossible for the customers to stick to. Therefore, the company had to accept the lower prices.

Glickman emphasizes that the firm has been making decisions with the expectation that high prices will not remain forever. Zim is equipping itself with large ships that will put the company in the front row, both in reducing emissions and pollution and in lowering costs.

Zim continues to deliver high returns to its shareholders in the form of generous dividends. The company updated on the distribution of a dividend of $769 million, or $6.4 per share, which is 44% of the company’s profits in 2022. The dividend will be distributed on April 3. Overall, the total amount the company has returned to the shareholders has reached more than $4.5 billion in two years.

Zim is traded in New York with a value of 2.3 billion dollars. The company’s expanded report for 2022 reveals that the number of company employees increased by 9% to 4,830, with approximately 17% of them in Israel.

Mr. Glickman said, “While macroeconomic uncertainties, the precipitous decline in freight rates over the past few months, and the supply-demand imbalance continue to drive a challenging near-term outlook for container shipping, we are confident in ZIM’s strategy and believe we will generate positive EBIT in 2023.”

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