Zim Integrated Shipping Services Ltd. (NYSE: ZIM) has reported exceptionally strong results for the second quarter of 2021, buoyed by a global shipping boom. The Israeli shipping company reported a net profit of $886 million in the second quarter of 2021, 50% higher than the preceding quarter and a whopping 35 times higher than the corresponding quarter of 2020.
Just a decade after Zim was compelled to seek a debt settlement, Zim is perhaps the most profitable company in Israel today with profits of $1.48 billion in the first half of 2021.
The company is benefitting from the global boom in shipping prices since the outbreak of the Covid pandemic and the rising demand for the shipping services that it provides. During the second quarter, Zim shipped 921,000 containers (TEU), a rise of 44% over the corresponding quarter of 2020, while the average price of shipping a container was $2,341, up 119% from the corresponding quarter.
Second quarter revenue totaled $2.4 billion, triple the corresponding quarter of 2020 and well above the analysts' estimates of $1.77 billion. First half revenue was $4.1 billion, up from $1.6 billion in the corresponding period of 2020.
Zim held its IPO on the New York Stock Exchange in January 2021 at a company valuation and the share price fell 23% on its first day of trading. But it recovered quickly and the share price yesterday was up 203% since the IPO. The share price is up a further 4.05% today at $47.28, giving a market cap of $5.4 billion. Kenon Holdings (NYSE: KEN; TASE: KEN) controlled by Idan Ofer, is Zim's largest shareholder with a 28% stake.
Zim CEO Eli Glickman emphasizes that the rise in the volume of shipping by Zim is significantly higher than the industry average. "We don't control prices but the market. We try to be better, more efficient and more original and to be in the markets where the prices are higher. We are a global but niche player and we go to places where our profits are higher.
"Shipping prices for containers have doubled according to the Shanghai Index but at a local level there are lines where prices have risen ten-fold. For example, from Asia to the US, where the average a year ago was $2,400 per container and today it's possible to see $20,000 and there is no room on the ship. People are knocking on my door and are ready to pay any price, and as in many industries, today the negotiations are about finding a place on the ship.
How has this come about
"In the wake of Covid, the crisis began with production in China, which was shut down for two months and from there it shifted to demand, especially in western countries. There is a massive demand surplus, because people have money freed up that they don't need for hotels and flights and probably got into expenses for renovations and e-commerce orders, so from a situation where ships stood 'idle' today there are no ships worldwide. We have adjusted correctly. At the peak of the crisis we had 54 ships and today we are on the way to 120 ships and our number of containers has risen from 600,000 to 1,000,000. These were decisions that today have justified themselves."
Will this global trend continue or do you expect things to stabilize?
"Demand is only growing and strengthening. Throughout the world there is disorder in the supply chain and consequently we can see a bottleneck: a shortage of ships, a shortage of containers, at ports, particularly in the US ships are kept waiting around. In Los Angeles dozens of ships are waiting over 10 days. I don't see this improving."
We also see this at Israel's ports
"I don't want to speak about Haifa or about Ashdod. There are things related to the culture of the workers committees and not at all about demand. We are losing a lot of money because we are waiting at inefficient ports around the world."
Glickman concluded, "As of now our forecasts improve each week. How long will it go on for? I don't know but at the moment there are no changes in the trends."
Published by Globes, Israel business news - en.globes.co.il - on August 18, 2021
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