Q4 2020 ZIM Integrated Shipping Services Ltd Earnings Call
It will be difficult.
Okay.
Yes.
Ladies and gentlemen, thank you for standing by welcome to the teams integrated shipping services Ltd fourth quarter and full year 2020 result conference call.
All participants are present in a listen only mode.
Following managements formal presentation instructions will be given for the question and answer session for operator assistance during the conference. Please press Star zero.
As a reminder, this conference is being recorded March 'twenty.
2021.
Now like to turn the call over to MS. Atlanta, Hoffmann head of Investor Relations Ms. Koopman. Please go ahead.
Thank you operator, and welcome to this fourth quarter and full year 2020 financial results Conference call.
Joining me on the call today are <unk>, president and CEO.
Yes.
And CFO.
Before I begin.
Would like to remind you that during the course of this conference call. We will make forward looking statements regarding expectations predictions projections or future events.
We believe that our expectations and assumptions are reasonable.
We wish to caution you that such statements reflect only the companys current expectations.
Actual events or results may differ including maturity.
You are kind of referred to consider the risk factors and cautionary language described in the documents the company files with the Securities and Exchange Commission, including our 2020 annual report filed on form 20 extra day March 22021, we undertake no obligation to update these forward looking.
Yes.
At this time I would like to turn the call over to energy and.
Got it.
Thanks George.
But given a little sluggish.
I would like to listen to.
Everyone to Zim.
Also on this call.
Is it public.
New York Stock Exchange company.
Our successful IPO marked a major milestone in Zim 75, new stores.
<unk> Global Golden State again global containment alignment.
Two listings United States.
When I joined.
Does it feel like 2017, it was clear to me that the shipping industry.
All right.
Option <unk>.
The first few years, whereas Medicare D C. So a once in a generation one formation conducting a complete.
All of the gold zone.
Similar to what it'll be almost all in the wholesale since empty slots good insurance agent lead Robotically.
Sure James.
The shipping them out to exercise the call, we do not need to all the majority of our fleet and they need to drive the importance of technology to our business.
Real quick.
The three foot exceeded store newsprint in the golf equipment.
It makes us in spirit.
In a bull bullish in golf balls.
And we see the new realities of shipping.
Through the.
Zoom as a whole.
You know what it is and just do it yourself shipping company.
Well do better in school will discuss our strategic objectives accomplishment as priorities moving forward.
Before that I would like to briefly highlight.
Another important milestone.
For example.
These are large dog generic JD vertical wall street's opportunity in the fourth quarter.
Great interesting.
It is clear that dollar will make up or is it just all three drugs.
Hi, this is vital.
Doing all EBIT and EBITDA generation zoom.
Zoom is show consistent I don't even go and these are all of the regions.
In terms of profitability.
Hi, I'm glad to be doing.
You'll recall the adult you'll fall.
And EBITDA as.
Where are their hubs and older drivers ranch.
We will buy them back in Germany, Italy jobs before all of this is Jim.
So finishing phase two NGL fall dresses royalties, whereas the major.
All these oh the ball mill.
We saw EBITDA margin bridge bridging Saturday language.
J J.
So hope to talk with them.
Zero.
Understood.
To deliver industry leading margins.
That mission.
The elastic limit yourself liberal in Changzhou.
What's important to.
Position in golf and just total steel industry.
Cool.
We will share with you all in 2021 Guy goes and then.
Oh definitely I have David.
Shortly after it was watching a broad appeal, we announced a strategic long term chartering agreement restrict spa falter and 15.
15000, Teu and in June you'll go de.
I know versus.
But every day you spoke about versus drugs today will achieve a novel important objectives.
Well, it's actually in a position to meet the growing market demand on theirs.
Right.
As we will discuss later on the call. This is a gold.
Falls in really weird sides of the market share of about 9%.
Second.
We were launching eventual ability to provide the top level reliable service to our customers on this growing trend.
Of course system, we saw sustainability partners diesel and jet fuel is good which is also a bronco commitment to environmental issues specifically.
Let's stick with the clean Air and then use the industry.
Moving to a critical objective.
And I'll go through them.
Oh Wow.
This transaction positions us.
So it's those goggles and density at a more global level.
We are also delighted to partner with industry leaders to spelling so showing a good industry and look forward to deliver these vessels do you let them do it.
Going to slide five.
Turning to the next slug.
I'll now discuss the newsy.
If you make in container shipping.
Smaller companies competing with Giants from all over the world, which requires us to be different and you know venting and flaring by news.
I'll start with James Center on the following complements really globin ratio.
We did not talk to us in that market based on size and boardroom, although we serve markets, where we have a competitive advantage and provides exceptional customer experience and luxury Muslim market position and profitability.
We also employ our unique asset light model.
Chocolate was named most of all capacity, but rather be on short term charter well it looks to optimize vessel deployment.
So first of all we can additional buses and exploit specific threat advantages based on market changes.
We will discuss this in more detail on the next slide which exhausted bullish about unity.
Next you saw focus on profitability.
With your big data.
Business intelligence and artificial intelligence to facilitate the shift away from audio and utilization Dore production sparkles on luxury lives enforcing.
Applying the most advanced technologies and email capabilities, we manage our buses and cargo mix to play out, but you have to run harder.
And then that's efficiency cost savings and profitability it caused the golfing.
Innovation is the go forward culture, and we've almost got to utilize sophisticated cause yourself strategies too.
Well most of it and digital consumers juice full gospel spin.
Specifically, we all that stopped operations DNA to develop goals set in June we stopped up as an industry leader, providing us additional revenue streams beyond our traditional shifting business lastly, we have a customer centric company that boost.
That's cool.
It's a go about commercial strategy.
We felt that we still got to work to develop smart solutions that significantly announced a spin and the others.
The success, we closely followed by all customers going to slide six.
As we move to the next slide I'll talk to do with the sleep. He says you make me tetlow drove things in.
Good luck.
We achieved impressive results from trusted with these achievements well Gladstone Paul mentioned below.
Operational and commercial agility.
Operational excellence.
Innovation and Digitization.
Globally.
We've confronted challenges directly and deploy a strict COVID-19 management plan.
Nevertheless to perform better than the market.
We identified the magnitude of the crisis very early and preparing for worst case scenario you need to be involved in all sub strategy.
Implementing cost reductions and avoidance measures and successfully aligned with dogs too about the Boston enough to adjust capacity to low demand.
All of this success was the only possible expense to zim exceptional people.
Oh God relational culture, driven by our unique cause these talks to our vision and button, which all year long.
Which fully align with and support our strategy and long term goals.
The man, who used to operational excellence, we were able to demonstrate exceptional operational agility D C.
Based on our asset light model quickly adopting to aligning our capacity to the changing market conditions, specifically, we optimize vessel deployment and such for placing 20 swimsuit to support our utilization of vessels and explore specific threat them advantages giving back.
Its condition.
Due to COVID-19.
Police, including six digits, Brexit and what's what's used to 59 in May 'twenty one.
As a global threat is a global threat with zoom and began to reach some slippage, where it justifies more opportunities and expanding those capacity Guangdong leased to 90 range versus this was all done in one year.
Oh commercial agility was also evident and reflected you know most of the increased capacity, we develop new growth engines like that yes.
A new law that you do still new when you my speech services to meet to meet market demand in response to growing E. Commerce trends. We also expect our partnership with Alibaba imagine logistics services to each customer and service provider do you see.
No great TV calibration.
Bob I hope, it's got somewhat of a more affordable Tom hoops instead of a team.
So I was just up there not too limited to cope with it seamless and easy to use interface. Finally, we continue to invest in developing best in class digital technologies.
A few example of Zynga and artificial intelligence to detect music collection of dangerous.
Let them go.
The company is developing an old style.
Software for cross border shipments to switch because of it.
The last example, Detroit died and internal digital revenue management tools.
Going to slide seven as they emerge.
Mentioned, our first quarter financial results reflect our consistent that only goes and all of the high end of the initial guide that switch disposable, but as importantly, we all own and continue to be below the level of gene therapy, which.
Would your company NEK and their religion, Pooping four five points to.
The one point tool all good the previous eight quarters position in glass and the adult English.
Well one of the leading carriers carriers instead of a profitability and are committed to consistently being one of the top three kids in terms of EBIT margin.
I will now turn the call over to our CFO. So yeah. Please comment on the financial results.
Thank you Amy and welcome everyone.
I will now briefly about kidney.
Q4, two years 'twenty 'twenty figures.
Including a strong cash position.
Before I do I'd like to start by making any comment on Siemens automation on the GDP I think Keith Manbeck.
What highly technical.
Finally, he drove our financial performance.
We continue to show up on earnings.
St.
Martin.
On the next slide slide number eight I'd like to highlight several kpis on a year over year basis.
People are all record results as discussed including strong cash generation and continued deleveraging of our balance sheet.
'twenty 'twenty presented unique challenges due to the COVID-19 and also people.
These are being.
Without a centralized puzzle it either a substantial benefit throughout the year.
We know what approach that was appropriate.
Small and then when the market condition should be.
Our strategy accordingly during the second half of the year.
Initially we extend in duration of dependencies.
We are diligently extracting cost and if you do that.
That's almost two five years.
To minimize the potential impact of any agency downturn.
This is a pretty heavy duty benefit although not all the vessels.
Yeah, it's a little tricky navi driven by increased demand phones.
Rather than two.
The team responded immediately to seize the opportunity.
I mean, I think that's the way to a peak when it makes economic sense and expanded capacity launching new premium too.
I actually just really e-commerce demand and its focus on safety.
On the surface.
While the rest of the industry turning to calculate a bogey to solve it in 'twenty do E.
She is currently slightly increased when compared to 2019.
He's got a critical need for a record result average and frankly, the tea rose, 22% due 2000 21020 to $79 compared to $1009.
Here.
It is important to note that not only benefit from industry tell me.
The higher the company's prioritization of better paying jobs with me and he should each extra light on the E Commerce food, where a key differentiator for nowadays.
Even at higher rates.
You got it all that she can be increased our cash position, which I will discuss shortly.
We also continue to improve our leverage ratio decreased to one two times for people and it takes time in 2019.
Turning to our free cash flow totaled $46 million it can be up to $490 million in 2019, presenting at a 107% increase.
We got to slide nine our ability to adapt to changing market condition is proving effective and it is clearly evidenced by year over year improvement.
All financial metrics.
Looking at our compliance engine revenues in the fourth quarter, well, one $4 billion compare to what you know where the 27 million in Q4 2019, 64% increase.
Full year revenue increased to $4 million compared to $3 3 billion in 2019% to 21% increase.
Even more importantly, we grew profitably as we successfully shifted towards promoting better being cargo over seeking additional movement in market share.
Net profit was a record 366, beginning the fourth quarter compared to $1 2 million in Q4 2019.
Full year net profit increased to $524 million compared to a lot of C. O N E.
All right.
Adjusted EBITDA in the fourth quarter. We also see if you can be increased to $571 million compared to 115 billion in Q4 2019.
Adjusted EBITDA increased to fall into the beginning of the fourth quarter compared with 47 million in the prior year period.
I think he mentioned this is a weird.
The high end of the guidance, we have provided and also all time records.
You, obviously gave you started to get to $1 billion compared to $386 million.
In 2019.
Adjusted EBITDA decreased 270 man.
Okay why don't we didn't force is not easy.
2019.
Importantly, consistent with our strategy of focusing on asset light approach I guess it'd be done at any policy, which I'm happy to be.
<unk> improved and continue to position.
It's all of the industry.
Q4, EBITDA margins were 39% and 32% respectively.
These are supposed to be there.
Well you know like say, despite the COVID-19 crisis.
Global trade should be easy to see.
Theory deeper.
People are able to come in slightly increase in 2020 compared to 2019.
Do you see most of these huge walk you expedite service team, that's Yang from South China Central It and see a exit from China to Australia, we orbit.
Half of the year as a response to identify tools can be met.
You can see that we need in a handheld position you know what do you expect integrated growing our volumes by more than 10% from 1017 thousand Teu in 2092, 1001, I'm going in 'twenty 6000 to use data to solve it in 'twenty.
One of our key twice that rate despite the actual move out.
Yeah right Okay.
Do you have any decrease slightly compared to solve it at 90, mostly due to COVID-19 impact on the Asia volume during the first half of 2020, which were not fully recovered in the second half.
On slide 11.
I'm sure you guys consolidated 20, a consolidated cash position of $183 million.
During the year.
EBITDA was a $1 billion.
Each of chunky adverse effect of $155 million of working capital. The other 75 million of investing cash flow 475 to 417 million of debt service and those of others. We finished this year with a.
Our cash position of 517 again throwing off cash your cash position, obviously exclude ideal could you.
We received in the first quarter each year.
And you would never know and I'll go back to work.
Yeah, no I'm going to enjoy the strong market fundamentals to continue to see in the law.
A sector and all positive going forward.
On this slide slide number 12.
We show that the market supply demand fundamentals are positive.
Pencil to supply the order book remains.
Luiz supporting focus near term dynamics and demand remain storms, which is integrated voyage charter hire and places specifically new Big news on all of us, including the recent good placeholder Baker is correctly that currently represent less uncertainty.
One, 3% so 10% of the total.
Total deployed capacity.
Which is a significant lower level.
Got you.
Which levers as high as 61% in 2008.
It should be noted that considering the new Oh listen you've been there what was the trend.
Where the router family view on this supply forecast.
Do those who when we close the lowest level of 5% in October 'twenty 'twenty.
We believe it's gone supply demand fundamentals.
For both.
Taking into account the demand growth forecast since for the same period.
The Liberals.
Combined with <unk> will boost demand has resulted in higher wage and spot rates.
Which in turn serves blood bank charter rates higher as well by increasing the size of false charter in vessel fleet doing do he was able to generate record profitability.
Despite these higher charter rates.
This is an important point I made earlier about the agility associated with asset light model.
In slide number 13.
Looking at the rates you can see that.
<unk> Shanghai concern or question the excuse of maintaining these positive trends.
Close to about 1000 points for the first time since Q since Q4, 2000 and talk to that.
Because I've experienced a very large kilowatt they've chosen.
Revenues since 2015.
And there is an increase of margin in terms of filling up the beds.
We're currently seeing lockdown called Poseidon much earlier than we used to use to date, we have signed five.
Five times as many quota.
Compared to the same period last year and debate.
The rate of about 50% higher than 2020.
The contract goes that contract grades are expected to last until 'twenty 'twenty two.
On the next slide slide number 14.
We just got the inventory and backup but.
Retail our retail load.
Right.
And the inventory levels out there.
In 28 years, we expect retailers to adopt to target the same inventory to sense that you.
It's real.
Two different done.
In terms of the effect of container demand, we expect import rules.
For the <unk> 2021 to women.
Elevated compared to 2019 simply we beat England towards the tip.
Because development and sits in the United States could swing the inventory replenishment sustained import containers rules for 2021.
Well I suppose that's posted significant gains in the months of February which growing optimism for improved demand as we spend the same rollout continues.
So to slide 15.
We have significant momentum.
The shipping industry like many other judges selected phase and the key to success is to us Besides estate and adjust.
I'm extremely proud of the progress we have made completely control, making zim into innovation leader seaborne transportation and logistics services well positioned for the 21st century.
We still mad.
Ted.
What are you doing commitments.
Building Zim schools and maximizing profitability into the future.
With a strong foundation, starting with professionalism and commitment to utilizing big data and technology, a cough jokes immigration and clear sustainability buzzing I'm excited for the future.
And this is a time to go to goddamn Black number 16 guidance, both 2021.
We intend to continue our positive trajectory and expect to deliver food is Wednesday 21, EBITDA, we've seen a range for one 4 billion to one 6 billion dollar.
Full year EBIT, we seen it range from Exxon.
$2 million.
Two 105 BB on the door.
Our guidance is based on assumption assumption what was expected.
And I echo that.
Freight rates, but also higher bunker rates and <unk>.
Charter rate in 'twenty.
<unk> 21 compared to 22 eight.
We would like to also provide some clarity of what can be expected in terms of dividend distributions.
We intend.
So this puts you in here.
Dividends have been gaming with 2021 element. So the dividends can be expected to be paid one equals no in Q1 'twenty 'twenty two.
Universal.
Could reasonably expect a dividend payout between 30% to 50%.
For 2021.
Pete.
Thank you very much.
We will now open the call to.
For Q&A.
Uh huh.
Thank you.
Ladies and gentlemen at this time, we will begin the question answer session.
If you have a question. Please press star one if you wish to cancel your request. Please press star two if you are using speaker equipment can be better.
Headset before pressing the numbers youre questions will be pulled in the order. They are received please standby while we poll for your questions.
Yeah.
Okay.
The first question is from Omar New Qatar.
Oxen Kudos Securities. Please go ahead.
Hi, Hi, Thank you hi, guys.
Congratulations on such a strong performance, obviously in terms of our results and and stock price and it's very nice to see so early on.
Jim's life as a public company.
You know clearly the results are very strong in your guidance points to things just continuing to stay firm for quite a bit longer a couple of questions for you on and I think you mentioned in your remarks, just a few minutes ago I wanted to ask about the revenue mix and the shift into some of your business being more.
<unk> term could you just go over that again did you mentioned that the contract businesses about five times as much that you've booked so far this year relative to last year.
The answer is yes.
Do see tight demand for long term contract.
That's compared to 20 at this time.
20.
If we compare we see as high multiples by funds.
Speaking about the more let's call it the quantity of contracts being signed.
And we are speaking about much higher rate.
50%, how do they compare to 'twenty 'twenty. So we're speaking about called the talk is that the plan was to begin in May 'twenty, one until May 22 in fact the.
The customer.
That's all they ask us to implement this contra.
So the day.
That we signed the contract. So we are in much better position and very high confidence positive confidence towards 2021 and the beginning of 'twenty 'twenty two.
Okay interesting.
And so what do you what do you think that is.
Do you think about it.
Today.
I believe that the late February around 98 ships, you've taken a handful of basketball than earlier this year T C L.
How do you feel about your existing footprint.
With that type of visibility, becoming more I guess longer do you see opportunities to add more ships do you want to increase the footprint today are you or do you feel comfortable with where it is.
I would say getting on ships that may be able to follow a cheerful.
It's a.
Lotteries.
We announced together with the two Maersk and MSC unexplained is all about a specific game.
With the new surveys flown with no I'm sorry, She says, yes to Savannah U S East coast. So speaking about the talk specifics.
We have grown first Russo partners actually competitors.
We'll go to Lisa on the services that we are on the scope with a twist.
Many services as part of the partnership so tissue expander sponsorship risks to it.
And more than that.
We see we have decided that you know to grow so fast gaming LNG vessels. So we are going to resolve this as.
We have gone to gig.
The Mexican and the C zone.
The same percentage on the new versus so we are going to be soon.
More of it.
Some services.
Lastly, ecommerce lines for example for them.
To directly excuse me functions in China.
And is this a base.
Develop they've come in slightly by Oh said this land we are not part of the corporation to it.
Maybe if I just I wanted to add that to a point that we are.
I think we look at the market.
But you can see that too.
That's why we have as you pointed out you have that open you treats.
And towards the second half of 'twenty, 'twenty, and we will obviously capitalize on the strength of our 2020 one full year.
And we see great desktop office.
Sure.
Obviously, you continue to expand.
Or do you like.
Got it.
Yeah.
Got it thanks for that color.
And maybe just one final question a bit more broadly for the industry. You know obviously, the we've seen freight rates at very elevated levels of health here kind of studies for the past couple of months we've.
We've seen early signs maybe that are you know the indexes are showing some some signs of softness but nothing material.
Maybe just from your vantage point, how would you characterize the current situation when it comes to pay the squeeze on box availability port congestion.
That maybe changed here today versus say three months ago.
I think you know what I'm, saying, if we look at what happens just to want to take care of the house with T. F. 'twenty before he came back very very strongly very rapidly.
Maybe.
Everyone, everyone by surprise you, but also for the Oh personal issues that you are referring are awesome. So they're used to and we think there's still some issues second dose we didn't actually hopefully ease in the offering.
Oh by the way.
Out of that steep right.
My question is I think maybe beyond the generic question. Thanks, a lot Pete what.
Not all of it.
Oh for the.
Or do you just see what is to be expected to be called to say, we don't have a crystal ball here. The one thing that I think.
Unfortunately, maybe but where we see we think that we are positioned in that trade.
You have competitors that all day long.
To support that type of.
Market, but you are also capturing additional tahoe, we shopped with you saw a little bit more little sheep.
I see and we.
We are also capitalizing on the growth of <unk>.
E Commerce straight and we think that could be 19 E next.
And actually the range of a trend.
We expect.
After it could be that and depreciate it both for me.
So, yes, we see them.
So the behavior, we are remain very strongly towards e-commerce, where we are.
Yes.
Uh huh.
So there will be some sort of normalization.
And you know any sort of collapsed in D C.
Let's also remember that Jesus yet demonstrated he used to be.
You can navigate to sheets.
Maybe in the manner that it may be the lesson learned from the COVID-19 situation.
How about yourself.
Yeah, Yeah, Yeah, clearly new territory and it'll be interesting to see how things develop from here Oh. Thanks again, Thank you and congratulations on such a strong performance.
Thank you.
The next question is from Randy given of Jefferies. Please go ahead.
Howdy gentlemen, how's it going.
Thanks, Joe.
Hey, Congrats obviously on the I P O in there in your first call as a publicly traded company a few questions on my end looking first at your net debt and the balance sheet right. It's fallen to $1 $2 billion net leverage has fallen to one two times.
So I guess going forward, how much of net debt and what kind of leverage are you expecting maybe as at the year end 2021 'twenty 'twenty two like how low are you willing and able to take it.
Thank you and thank you very much.
I think youre right that you have had a very I think impressive.
Just to recap over the past few quarters, and we all know who they are.
I never took one point too so how low can we go.
The guidance that you provided for 2020.
The one that we should continue to expect.
Sorry, yeah.
Very strong with special provision for that.
Not to go into cash and AR and therefore actually.
Sure Shneur.
Our balance sheet.
Please go ahead.
You bet.
Great.
Yeah.
It's too soon to.
To go back to a higher leverage and we are very fortunate to be in position now where our balance sheet.
If we are required to engage in that maybe we need additional debt on football obviously.
Keep all equally weighted.
Not too many.
Yes, definitely that's you can call.
On the charter excuse me watch, but she yoghurt piece of capital structure today, we spoke as well, but she used to be COVID-19.
Got it Okay. That's fair.
And then in terms of the dividend I guess two questions around that why an annual dividend instead of a quarterly dividend and then secondly, how do or maybe will you determine that amount within the 30% to 50% range.
I think we're just starting with your first your first question D. R. D C.
Okay.
And then in the next few days.
A lot of parameters that we cannot control.
Talk about volcker without even with diesel.
Gotcha.
Like demand dynamics.
We have you are reacting to it. So there is that seasonality is where do you know in our industry. So usually second mutually agreed eat when you're a global player.
Is that what makes sense.
If you did.
The distribution policy and Swire.
If you split out what it cost you are the most important what it cost you are assessing what will be the recommendation of the bank.
And to the board of directors.
We are pleased with that.
Hey, you mentioned that.
We are seeing that device should be between 30 to 50.
And he sees what we can say at this stage Oh excuse.
We see more of a blend.
Me too.
Yeah.
Actually.
And this is important.
Loves to let's say dividend policy that we shared with you.
During the prospectus and before the IPO and we will stick and specifically on 2021.
Got it yep.
Sounds good and then briefly just to wrap up the question around your contracting on your volumes you know historically you.
Contracts about 25% of your volumes in this one year kind of fixed rate bookings with your customers. I know you said the rate is about 50% higher.
What is your plan for percentage of volumes to be contracted here in the next few weeks for a year.
So for US is there a reason why you are referring to the 25% and just maybe to clarify here at E train.
It's very much a go to long term contract with the transpacific trade.
You see the close to Oh excuse.
Because that's a week or so and what we talked about you know historically either secured.
Okay.
All over Florida guarantee you, hence why it's only 5%.
We don't have to we want to keep a significant percentage of us wanted to be carrying.
Keep in exposure on the on the spot market.
To date, there is no real reason to think that certain niche.
You said, it's all about.
Overall percentage of contract versus spot.
Got it okay. So around the same numbers.
Good yeah, well, thanks again, yeah nice to see the stock are getting off the floor, there and well above the IPO prices. So we will talk soon.
Yeah.
This concludes the Q&A session Ms. Glickman would you like to make your concluding statement.
I would like to sunk those who will be leaving the company.
Pursuant to that those are the questions.
And we are here to support the company looking forward to break the new codes that we already achieved thank you very much.
Thank you. This concludes the Chin integrated shipping services fourth quarter and full year 'twenty 'twenty results conference call. Thank you for your participation you May go ahead and disconnect.
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