ZIM Integrated Shipping Services (ZIM) Q1 2025 Earnings Call May 19, 2025 08:00 AM ET Company Participants Elana Holzman - Head, Investor RelationsEli Glickman - President and CEOXavier Destriau - Executive VP & CFOMuneeba Kayani - Managing DirectorOmar Nokta - Managing Director Conference Call Participants Marco Limite - Equity Research AnalystAlexia Dogani - Equity Research Analyst Operator Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like ...

Financial Data and Key Metrics Changes - The company generated revenue of $2 billion in Q1 2025, representing a year-over-year increase of 28% [6][18] - Net income for the first quarter was $296 million, compared to $92 million in Q1 2024, marking a significant increase [23] - Adjusted EBITDA was $779 million with a margin of 39%, and adjusted EBIT was $463 million with a margin of 23% [7][23] - The average freight rate per TEU was $1,776, a 22% increase year-over-year, although it was 6% lower than the Q4 average [19] Business Line Data and Key Metrics Changes - The company carried 944,000 TEUs in Q1 2025, a 12% increase from 846,000 TEUs in the same period last year, outperforming the market growth of 4.5% [24] - Total revenues from non-containerized cargo, primarily from car carrier services, totaled $114 million, slightly up from $111 million in Q1 2024 [19] Market Data and Key Metrics Changes - Transpacific volume grew by 11% in Q1 2025, indicating a recovery in trade between the U.S. and China [24] - The company experienced a 22% year-over-year volume growth in Latin America during the first quarter, with expectations to further increase market share in this region [24] Company Strategy and Development Direction - The company is focusing on maintaining flexibility in fleet deployment and adjusting service rotations in response to changing market conditions, particularly in the Transpacific trade [10][12] - A recent charter agreement for ten new LNG dual fuel container ships is part of the company's strategy to enhance commercial agility and support long-term decarbonization objectives [14][15] - The company aims to strengthen its presence in Latin America and Southeast Asia to diversify operations and increase resilience against market fluctuations [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the recent suspension of tariffs between the U.S. and China, viewing it as a positive development but remaining wary of long-term trade agreements [4][5] - The company maintained its full-year guidance for adjusted EBITDA between $1.6 billion and $2.2 billion, despite uncertainties in global trade and geopolitical issues [8][26] - Management highlighted the importance of agility in responding to market changes and emphasized the need for ongoing investment in fleet modernization and operational efficiency [12][16] Other Important Information - The company declared a dividend of $0.74 per share for a total of $89 million based on Q1 results, consistent with its dividend policy [7][81] - The company reported total liquidity of $3.4 billion as of March 31, 2025 [7] Q&A Session Summary Question: What are you hearing from customers regarding inventory levels and expectations for peak season? - Management noted that recent tariff changes have revitalized demand, with customers eager to move cargo quickly to avoid inventory shortages, suggesting a potential early peak season [36][39] Question: How do you view the situation with the Red Sea and Suez Canal? - Management indicated that safety concerns prevent a return to the Red Sea, despite incentives from canal authorities, and emphasized the importance of a stable network [40][41] Question: Can you provide insight into the Transpacific contract negotiations? - Management explained that uncertainties in the market led to a 70% split between contract and spot volumes, down from an expected 50-50 split [47][49] Question: What are the expectations for volume growth in 2025? - Management adjusted volume growth expectations to low single digits due to slower recovery post-Chinese New Year and changes in partnerships affecting fleet utilization [50][53] Question: How much of your fleet is Chinese-built and what mitigation strategies are in place? - Management stated that nearly half of the fleet is Chinese-built and is exploring options to minimize the impact of potential fees on operations [62] Question: What is the outlook for Q2 profitability? - Management acknowledged the recent increase in demand and rates but cautioned about the uncertainty of how long this momentum will last [64][66]

Financial Data and Key Metrics Changes - In 2024, the company reported a net income of $2.2 billion and revenue of $8.4 billion, with adjusted EBITDA of $3.7 billion and adjusted EBIT of $2.5 billion, reflecting a significant financial performance improvement compared to previous years [5][21][26] - The adjusted EBITDA margin was 44% and adjusted EBIT margin was 30%, indicating strong profitability [5][26] - Free cash flow for 2024 totaled $3.6 billion, a substantial increase from $919 million in 2023 [23][26] Business Line Data and Key Metrics Changes - The average freight rate per TEU was $18.88, a 57% increase compared to 2023, with Q4 average freight rate at $18.86, a 71% year-over-year increase [21][22] - The company carried 3.8 million TEUs in 2024, a 14% increase compared to 2023, significantly outperforming the overall market growth of 5.6% [27] - In Q4, the company carried 980,000 TEUs, a 25% increase year-over-year [27] Market Data and Key Metrics Changes - The company experienced a 27% growth in Transpacific volume in 2024, indicating strong market share gains [27] - The company opened new services in Latin America, achieving a 77% year-over-year volume growth in that region [28] - The overall market growth was less than 6%, highlighting the company's superior performance [12][27] Company Strategy and Development Direction - The company aims to maintain a competitive position in the industry by focusing on a modern, fuel-efficient fleet, with 40% of its capacity now LNG powered [10][15][68] - The strategic decision to increase spot exposure in the Transpacific trade to about 65% has allowed the company to capitalize on strong spot rate environments [11] - The company plans to continue investing in technology and digital tools to enhance operational excellence and customer experience [18][71] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy and competitive position despite high levels of uncertainty in the operating environment due to geopolitical factors and economic policies [6][7] - The company anticipates a significant decline in freight rates in 2025 compared to 2024, with guidance for adjusted EBITDA between $1.6 billion and $2.2 billion [29] - Management highlighted the importance of maintaining flexibility in fleet capacity to adapt to changing market conditions [15][25] Other Important Information - The company declared a dividend of $3.17 per share, totaling $382 million, bringing the total dividend payout for 2024 to $7.98 per share [5] - The company completed its fleet transformation program, receiving all 46 newbuilds secured in 2021 and 2022, enhancing its operational capacity [24][25] Q&A Session Summary Question: Clarification on guidance and Red Sea reopening - Management indicated that both ends of the guidance range assume the Red Sea will reopen this year, with the lower end reflecting an early reopening and the higher end a later reopening [35][36] Question: Exposure to Chinese-built ships and potential management-led buyout - Management confirmed that approximately 25% to 50% of their capacity is Chinese-built, and they are monitoring the situation closely regarding potential additional levies [38][39] - Management refrained from commenting on the rumor of a management-led buyout, focusing instead on executing their long-term strategy [42] Question: Outlook on CapEx and fleet renewals - Management stated that they do not provide quarterly guidance but expect the first half of 2025 to be stronger than the second half due to current market conditions [48][49] - The company plans to renew about 50% of the vessels coming up for renewal, maintaining flexibility in fleet management [51][52] Question: Current rates and fleet composition - Management acknowledged a drop in spot rates in February and indicated ongoing negotiations with long-term customers, with no significant weakness in demand anticipated [74][84] - The company aims to maintain a stable operating capacity in 2025, with potential for a slight reduction depending on renewal decisions [86]