ZIM Integrated Shipping Services Ltd., a global container liner shipping company, announced today its consolidated results for the three months ended March 31, 2022.
First Quarter 2022 Highlights
• Adjusted EBITDA for the first quarter was $2,533 million, a year-over-year increase of 209%
• Operating income (EBIT) for the first quarter was $2,243 million, a year-over-year increase of 228%
• Revenues for the first quarter were $3,716 million, a year-over-year increase of 113%
• Carried volume in the first quarter was 859 thousand TEUs, a year-over-year increase of 5%
• Average freight rate per TEU in first quarter was $3,848, a year-over-year increase of 100%
• Net leverage1 ratio of 0.0x at March 31, 2022 (unchanged from December 31, 2021); reached positive net cash1 position of $779 million
• Declared dividend of approximately $342 million, or $2.85 per share, representing approximately 20% of first quarter net income
• Entered into multiple charter agreements for 17 newbuilds, of which 3 are LNG dual-fuel container vessels
Eli Glickman, ZIM President & CEO, stated, “Building on an extraordinary 2021 for ZIM, we maintained our strong trajectory in the first quarter of 2022, delivering on our commitment to outstanding execution and profitable growth. Driven by the proactive strategies we have implemented to capitalize on both the highly attractive market and ZIM’s differentiated strategy, we once again generated our highest-ever quarterly revenues, net income and adjusted EBITDA, while achieving industry-leading margins. Consistent with our focus on identifying new profitable market opportunities, we have launched 10 new lines since the beginning of 2022, and we increased our carried volume quarter-over-quarter during a time when overall industry volume decreased. Our balance sheet remains very strong, with a positive net cash position combined with shareholder equity of approximately $4.3 billion at the end of the quarter.”
Glickman added, “We continue to position ZIM for long-term success, as we strengthened our future commercial prospects and improved our cost structure. Since the beginning of 2022, we have announced attractive chartering transactions for 17 newbuild vessels, securing modern and efficient tonnage particularly well-suited to serve on our expanded network of expedited services. Importantly, we will maintain flexibility to adjust our fleet size based on market conditions and be positioned at the forefront of carbon intensity reduction among global liners. The vast majority of the new capacity ZIM will add to its fleet is LNG-powered, which ensures that we will be more carbon and cost efficient and allows us to offer customers a shipping solution aligned with their own carbon reduction targets. We also continuously improve and upgrade the digital tools, platforms and solutions offered to our customers, aiming to enhance our commercial offering and provide superb customer experience.”
Glickman concluded, “Our strong results to date, combined with the 2022 long-term contracts secured at rates significantly higher than those in 2021, have boosted our confidence in our 2022 results and our ability to achieve superior profitability. Based on these, we are increasing our full year 2022 guidance, and now expect to generate Adjusted EBITDA between $7.8 billion and $8.2 billion and Adjusted EBIT between $6.3 billion and $6.7 billion. Our exceptional performance has also enabled us to continue returning substantial capital to shareholders, including a Q1 2022 dividend of $2.85 per share. We are excited to carry our exceptional momentum forward, continue executing our global-niche strategy and advancing ZIM's position as an innovative digital leader of seaborne transportation to maximize long-term shareholder value.”
Summary of Key Financial and Operational Results
Q1.22 Q1.21 | ||
Carried volume (K-TEUs).................................... |
859 |
818 |
Average freight rate ($/TEU).............................. |
3,848 |
1,925 |
Revenue ($ in millions)....................................... |
3,716 |
1,744 |
Operating income (EBIT) ($ in millions)............. |
2,243 |
683 |
Profit before income tax ($ in millions).............. |
2,219 |
644 |
Net income ($ in millions)................................... |
1,711 |
590 |
Adjusted EBITDA1 ($ in millions)........................ |
2,533 |
821 |
Adjusted EBIT1 ($ in millions)............................. |
2,243 |
688 |
Adjusted EBITDA margin (%)............................. |
68 |
47 |
Adjusted EBIT margin (%)................................. |
60 |
39 |
Net cash generated from operating |
|
|
Earnings per share (fully diluted) ($)................. |
14.19 |
5.13 |
Free cash flow1 ($ in millions)............................ |
1,483 |
645 |
|
Mar 31, 22 |
Dec 31, 21 |
Net cash1 ($ in millions)...................................... |
779 |
509 |
Financial and Operating Results for the First Quarter Ended March 31, 2022
Total revenues were $3,716 million for the first quarter of 2022, compared to $1,744 million for the first quarter of 2021, primarily driven by improved freight rates, as well as an increase in carried cargo volume.
Operating income (EBIT) for the first quarter of 2022 was $2,243 million, compared to $683 million for the first quarter of 2021, resulting from higher revenues which more than compensated for increased costs, primarily bunkering and vessel chartering costs.
Net income for the first quarter of 2022 was $1,711 million, compared to $590 million for the first quarter of 2021. Net income for the first quarter of 2022 included a tax expense of $508 million, compared to $54 million for the first quarter of 2021.
Adjusted EBITDA was $2,533 million for the first quarter of 2022, compared to $821 million for the first quarter of 2021. Adjusted EBIT was $2,243 million for the first quarter of 2022, compared to $688 million for the first quarter of 2021. Adjusted EBITDA and Adjusted EBIT margins for the first quarter of 2022 were 68% and 60%, respectively. This compares to 47% and 39% for the first quarter of 2021.
Net cash generated from operating activities was $1,660 million for the first quarter of 2022, compared to $777 million for the first quarter of 2021.
ZIM carried 859 thousand TEUs in the first quarter of 2022, compared to 818 thousand TEUs in the first quarter of 2021. The average freight rate per TEU was $3,848 for the first quarter of 2022, compared to $1,925 for the first quarter of 2021.
Liquidity, Cash Flows and Capital Allocation
ZIM’s total cash position (which includes cash and cash equivalents and investments in bank deposits and other investment instruments) increased by $1,255 million from $3,850 million as of December 31, 2021 to $5,105 million at March 31, 2022[2]. Capital expenditures totaled $183 million for the first quarter of 2022, compared with $133 million for the first quarter of 2021. ZIM increased its net cash position from $509 million as of December 31, 2021 to $779 million as of March 31, 2022. ZIM’s net leverage ratio as of March 31, 2022 was 0.0x, with no change from December 31, 2021.
Q1-2022 Dividend
In accordance with the Company's dividend policy, ZIM's Board of Directors declared a cash dividend of approximately $342 million, or $2.85 per ordinary share, reflecting approximately 20% of first quarter 2022 net income. The dividend will be paid on June 8, 2022 to holders of ZIM ordinary shares as of May 31, 2022.
Dividend policy: the Company intends to distribute a dividend to shareholders on a quarterly basis at a rate of approximately 20% of the net income derived during such fiscal quarter with respect to the first three fiscal quarters of the year, while it expects that the cumulative annual dividend amount to be distributed by the Company (including the interim dividends paid during the first three fiscal quarters of the year) will total 30-50% of its annual net income. All future dividends are subject to the Company's Board discretion and to the restrictions provided by Israeli law.
Chartering Agreements
During the first quarter, ZIM entered into multiple charter agreements for a total of 17 newbuilds, as follows:
· 3 x 7,000 TEU LNG dual-fuel newbuild container vessels chartered from an affiliate of Kenon Holdings
· 8 x 5,300 TEU wide beam newbuild vessels chartered from Navios Maritime Partners
· 6 x 5,500 TEU wide beam newbuild vessels chartered from MPC Container Ship
These versatile vessels can be deployed across ZIM’s various global trades, including the Company’s expanded network of expedited services. The vessels are expected to be delivered to ZIM throughout 2023 and 2024.
Collaboration with 2M Alliance Partners
In February 2022, the Company announced the formal extension and modification of its operational collaboration agreement with the 2M alliance partners. Effective April 2, 2022, ZIM and the 2M alliance partners began operating their joint services on the Asia – US East Coast (USEC) and Asia – US Gulf Coast (USGC) trades based on a slot exchange and vessel sharing agreement. Accordingly, ZIM currently operates two out of the six joint Asia to USEC services (ZCP & ZSE) as well as three additional vessels on one of two joint Asia to USGC services (ZGX).
Updated Full-Year 2022 Guidance
The Company increased its previously provided guidance for the full-year 2022 and now expects to generate Adjusted EBITDA of between $7.8 billion and $8.2 billion and Adjusted EBIT of between $6.3 billion and $6.7 billion.
Management Appointments
Nissim Yochai has been appointed EVP, President of ZIM USA, and is also responsible for the Latin America business unit, following a 6-year tenure as EVP Transpacific Trade. Hani Kalinski has been promoted to EVP Transpacific Trade, replacing Yochai. Kalinski has filled various management roles at ZIM, most recently as VP Medium & Small Countries.
Use of Non-IFRS Measures in the Company’s 2022 Guidance
A reconciliation of the Company’s non-IFRS financial measures included in its full-year 2022 guidance to corresponding IFRS measures is not available on a forward-looking basis. In particular, the Company has not reconciled its Adjusted EBITDA and Adjusted EBIT because the various reconciling items between such non-IFRS financial measures and such corresponding IFRS measures cannot be determined without unreasonable effort due to the uncertainty regarding, and the potential variability of, the future costs and expenses for which the Company adjusts, the effect of which may be significant, and all of which are difficult to predict and are subject to frequent change.
[1] The number of shares used to calculate the diluted earnings per share is 120,438,898. The number of outstanding shares as of March 31, 2022, was 119,810,688.
[2] Subsequent to quarter end, $2.04 billion were distributed to shareholders in connection with the Q4-2021 $17.00/share dividend.
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