Zim boasts 90% return since New York flotation

Zim Marseilles  picture: Hillel Yarkoni
Zim Marseilles picture: Hillel Yarkoni

With the aid of the coronavirus-induced shipping boom, Israeli line Zim has put its losses and debt settlements behind it.

Zim Integrated Shipping Services Ltd. (NYSE: ZIM) is perceived by many as an Israeli shipping company mainly identified with heavy losses and debt settlements. But 2020, and particularly 2021, present an entirely different story.

After a dream year in 2020 came the flotation in New York which, for the time being at least, has turned the company's stock into a success story, with a return of almost 90% within six weeks. So how did a loss-making company on the brink of collapse become one reporting huge profits, and who are the main winners?

Zim will shortly release its 2020 financials, its first as a publicly traded company on Wall Street. The container shipping company, headed by Eli Glickman, has only benefitted from the coronavirus pandemic.

The company raised $218 million in its New York flotation at $15 per share, giving it a pre-money valuation of $1.5 billion, lower than the price range it had aimed for ($16-19 per share). Even so, the share price still managed to fall 23% on its first day, to a low of $11.15.

In the weeks since then, the direction has been positive. Zim's share price gradually rose until, at the end of last week, following a 30% jump the week before, it closed at $28.25, giving the company a market cap of $3.25billion. Since its flotation, the return on the share has been 89%.

Zim has made two important announcements in the past few weeks, supporting the upward trend in its share price. Both of them concerned the use of the cash raised in the flotation. In the first, more substantial announcement, Zim reported that it had signed a strategic agreement with Seaspan to lease ten natural gas-powered ships, in a deal amounting to over $1 billion. The second announcement was of partial redemption of two bond series listed on the Tel Aviv Stock Exchange. Altogether, the company will repay $85.4 million, 28% of the bond principal.

The partial repayment is not financially very material, but it is symbolic, and marks how far Zim has come since facing collapse only a few years ago. The company had to make two huge debt settlements, in the second of which, in 2014, it inflicted a haircut of 50% of debt amounting to $3.4 billion, the largest debt settlement on the local capital market.

Before the second debt settlement, Zim was owned by Israel Corporation (TASE: ILCO), controlled by Idan Ofer. Under the settlement, Israel Corporation was divested of most of its holding in Zim in favor of the company's creditors, and was left with a stake of just 32%. Later, part of Israel Corporation's business was spun off into Kenon Holdings, the shares in which were distributed as a dividend to Israel Corporation shareholders, including the holding in Zim.

Glickman, who became CEO of ZIm a long time after these events, said in an interview with "Globes" after the New York flotation, "To Idan Ofer's credit, he was the only one who believed in the company in the rough times. In the Israeli capital market he is regarded as someone out to maximize profits, but he lost hundreds of millions of dollars in Zim over the years, maybe even a billion. During the period that Zim was in difficulties, he invested (through Israel Corporation) $200 million, and forewent 68% of the shares in the company. Anyone else would have let a company in this kind of situation fall."

Today, Kenon Holdings, controlled by Ofer, holds 27.2% of Zim, currently worth $804 million, giving a profit on paper of $324 million in relation to the price in the offering in January.

Besides Kenon, other entities in profit are Deutsche Bank, which has a holding worth $396 million, and Danaos Corporation, with shares worth $256 million.

Danaos is itself a shipping company, also traded on the New York Stock Exchange, with a market cap of $981 million. While Zim's share price rose 68% in the period since the company's flotation, Danaos rose 92%. Other shipping and haulage companies have also enjoyed a positive trend in this period: Star Bulk rose 56%; Frontline rose 32%; and the largest company in the industry, Maersk, traded in Denmark, rose 11%.

2020, according to preliminary figures published by Zim in advance of the flotation, was a record year for the company, as container shipping prices boomed worldwide. The company expects to report revenue for the year of $4 billion, 20% more than in 2019, and to swing to a profit of $500-525 million, mainly coming in the fourth quarter, from a loss of $13 million in 2019.

World shipping prices are on the rise. According to a report by CNBC, prices in December 2020 were in some cases 300% higher than in March. The reason, the report said, was a shortage of containers, with desperate companies waiting for free containers for weeks. It quoted Ikea Singapore as describing the situation as a global shipping crisis.

In his interview with "Globes", Glickman said, "In the last three to four months we have seen peak prices for container shipping, leading to excellent results for the companies. Zim has been improving substantially for many quarters, and is a leader for its profit margins among shipping lines around the world."

Asked what enables the shipping companies to demand and receive high prices, Glickman said "It's a combination of several factors. First of all, the halting of air cargo services because of the pandemic contributes to extra demand at sea; secondly, people are sitting at home and spending less money on restaurants, vacations and trips abroad, so they have more money to spare and they invest in home improvements, in buying office equipment, building materials, and so on, and that creates extra demand in the Western world; thirdly, there's a rise in the transport of goods bought through ecommerce, which were mainly transported by air, such as mobile telephones and home appliances."

The link with Alibaba and digital shipping

Zim seeks to differentiate itself from its competitors by being a "digital shipping company". In his "Globes" interview, Glickman told of his decision to position the company as such, saying, "That's our advantage over our competitors. In the past, I was deputy CEO of Orange, and when I came to Zim I found an antiquated company, fifteen to twenty years behind in comparison with the mobile telephony industry. One of the things I introduced was a digital transformation: the use of Big Data, AI, and BI (business intelligence). Shipping is a commodity industry, and where we are smart is in managing to break through and not be price-oriented like everyone else but to offer digital innovation."

So, for example, Zim has an agreement with Alibaba to transport some of its products at a cost 80% lower than air freight, with a supply time that is not much longer, under which it obtains a premium over regular container shipping prices.

Two years ago, Zim announced that it was joining a blockchain platform for digitization of physical shipping documents, with the aim of cutting dispatch times and lowering costs. Last week, the company announced its participation in a $8 million financing round by Israel startup Wave BL, alongside Marius Nacht, one of the founders of Check Point Software Technologies Ltd. (Nasdaq: CHKP).

Wave BL has been working for six years on a digital version of bills of lading, with the aim of obviating the need for paper certificates and the direct and indirect costs of using them, incurred for example by the need to use the services of courier companies like FedEx and UPS, and being dependent on their schedules.

Wave BL, which was founded in 2015, is one of the few startups in Israel, and in the world, devlpoing a blockchain-based product. Its digital bill of lading platform is in use by hundreds of customers, among them, besides ZIm, shipping giant MSC and HSBC.

Another thing that differentiates Zim from most companies in the industry is the fact that it owns only one ship, preferring to lease ships from others. Glickman says that Zim believes that this makes it flexible in crisis periods or when demand rises, and that it improves profitability. At the beginning of the coronavirus pandemic, Zim reduced its fleet, and expanded it again afterwards.

Disclosure: Marius Nacht is the former life partner of Anat Agmon, one of the owners of "Globes", and is involved in a personal and financial dispute with her.

Published by Globes, Israel business news - en.globes.co.il - on March 21, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Zim Marseilles  picture: Hillel Yarkoni
Zim Marseilles picture: Hillel Yarkoni
AI credit: Shutterstock As AI kicks in graduates in Israel struggle to find tech jobs

Tech companies have cut back on hiring juniors, as AI is already quicker, cheaper and more accurate in writing code, than computer science graduates.

Israeli apartments Credit: Shutterstock Apartments sold and rented

A selection of recent real estate deals in Israel in Kfar Saba, Even Yehuda, Rishon Lezion, Hadera, Haifa and Tzfat.

Jerusalem's Midtown project credit: DBLD architects Foreign residents dominate Jerusalem city center housing market

Wealthy foreign residents are increasingly pricing residents out of the market in central neighborhoods, as ghost apartments haunt the city.

Egyptian tanks in Sinai near Rafah credit: Reuters Mohamed Abd El Ghany Egyptian military violations in Sinai concern Israel

President Donald Trump's relocation plan for Gazans is further straining fraught relations between Israel and Egypt. "Globes" examines whether it could spark a war.

Yitzhak Tshuva credit: Gidon Levy and Tali Bogdanovsky Isracard shareholders approve acquisition by Delek

For the deal to go through, approval is now needed from the Supervisor of Banks and the Israel Competition Authority.

Air Canada Photo: Shutterstock Air Canada to resume Israel flights in June

The Canadian airline will resume Toronto-Tel Aviv flights on June 8 and Montreal-Tel Aviv flights in August.

NICE CEO Scott Russell credit: SAP NICE Systems falls sharply on disappointing 2025 guidance

NICE sees $693-703 million revenue in the first quarter of 2025, up 6% from the corresponding quarter of 2024, with non-GAAP earnings per share of $2.78-2.88 - 3.8% below the analysts' consensus for revenue and 2.4% below for profit.

Tel Aviv credit: Shutterstock Urban renewal plan approved in heart of Tel Aviv

The plan for the Hahashmal neighborhood opposite the Old Central Bus Station includes a 30-floor tower.

Smartshooter credit: Smartshooter Germany buys Kibbutz Yagur's Smartshooter AI sights

The product family includes systems mounted on personal rifles, remotely controlled systems, and systems carried by vehicles, robots, and even drones.

Chinese ship in Suez Canal credit: Suez Canal Authority Direct shipping to Israel could resume soon

The first shipments of vehicles are likely to reach Israel via the Suez Canal in the coming months.

Sde Dov credit: Guy Yehieli Sde Dov land prices down over 40%

Four huge tenders for almost 4,000 homes, which have been successfully marketed in the north Tel Aviv district, reflect prices over 40% lower than in 2022.

Wix president Nir Zohar credit: Alan Tzatzkin Wix provides cautious 2025 guidance after strong 2024

The Israeli website building platform company reported its first-ever GAAP operating profit in 2024.

Saar Yoskovitz and Gal Shaul  / Photo: Augury Israeli industrial AI co Augury raises $75m

The new round represents an increase in valuation for Augury, which maintains its position as a ‘unicorn’ startup.

Eitan Yochananof and Eyal Ravid credit: Eyal Izhar and Tali Bogdanovsky Regulator indicts Victory, Yochananof CEOs over price fixing

The Israel Competition Authority today issued first indictments, following the food price fixing investigation.

Shekel credit: Shutterstock Vladirina 32 Shekel gains continue as Gaza talks progress

The shekel continues to trade at its strongest levels against the dollar since early 2023.

New York credit: Shutterstock Tel Aviv - New York fares stay high despite US airlines return

Ticket prices to the US will continue to cost at least $1,200 return, according to Ophir Tours, with most fares ranging between $1,500 and $2,000, or even more.

Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018