Zim reports huge losses and reschedules debt

Idan Ofer
Idan Ofer

The Israeli shipping company lost $132 million in the first half of 2016, while revenue dropped 20% to $1.24 billion.

Zim Integrated Shipping Services Ltd., which has been undergoing a severe crisis due to oversupply in the international merchant shipping market, reported substantially weaker results for the first half of 2016, with a huge $132 million loss.

Zim, 32% of which is controlled by Idan Ofer's company Kenon Holdings Ltd. (TASE:KEN: NYSE: KEN-WI, reported a 20% drop in revenue, to $1.24 billion, in the first half of 2016. The sharp drop in revenue resulted in a $1 million gross loss, compared with a $163.7 million gross profit in the corresponding period in 2015.

Moreover, Zim had $70.9 million operating losses, compared with $81.4 profits in the corresponding period; overall, Zim reported huge losses compared with a $20.9 profit in the corresponding period. In the second quarter, Zim reported a 19.8% drop in revenue, to $611.9 million, a gross loss of $11.7 million, an operating loss of $47.8 million and a net loss of $74.6 million (compared with a $10.3 million profit in the corresponding quarter in 2015).

Revenue dropped despite an increase in the number of containers shipped by Zim, a 5% increase in the first quarter (to 1.19 million containers), since the average price for the shipping of a container dropped 24.8% from $1,200 in 2015 to $903 in 2016. In the second quarter, Zim shipped 6.9% more containers, while the average price per container dropped a further 24.7%, to $866.

Zim, managed by chairman Aharon Fogel and CEO Rafi Danieli, had requested to postpone publication of its statements in order to receive the creditors' approval for a rescheduling of some of its debts. The company had received a tentative approval to postpone paying a $115 million debt, which it was to repay for 12 months starting on September 30, to January 1, 2018. For this, it will pay Libor plus 2.8% interest in cash each quarter. Zim estimates that the outline of the new agreement will most probably be approved in the next few weeks. In parallel, Zim's covenants will also be adjusted.

Zim currently has a $1.8 billion debt, and its weak first half results led to a $62 million negative equity. The company has already undergone two large debt settlements in the past two years - in 2009, its debts were rescheduled, and in 2014 a further debt arrangement led to creditors being subjected to a 50% 'haircut' for a $3.4 billion debt. As part of the arrangement, banks, bondholders and the owners of ships leased by the company agreed to write-off a $1.7 billion debt for a 68% stake in Zim.

As part of the arrangement, Israel Corporation (TASE: ILCO), which fully controlled Zim before the arrangement, agreed to write-off a $238 million debt, inject $200 million, and provide it with credit and guarantees for further $60 million. After the completion of the deal, Israel Corporation kept a 32% stake in Zim Integrated Shipping Services Ltd., which it later transferred to Kenon, which was split off from Israel Corporation in early 2015.

Published by Globes [online], Israel business news - www.globes-online.com - on October 5, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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