Q4 2022 ZIM Integrated Shipping Services Ltd Earnings Call
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Good morning.
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Ladies and gentlemen, thank you for standing by.
I'm, absolutely your chorus call operator.
Welcome and thank you for joining some antiquated chipping services L. P D full year and fourth quarter 2021 earnings call.
Throughout today's recorded presentation, all participants will be in a listen only mode.
Patients will be followed by a question and answer session.
If you would like to ask a question you May press star followed by one on your Touchtone telephone.
Please press the stocky 450 for operator assistance.
Now I'd like to turn the conference over to Atlanta, Holzman head of Investor Relations. Please go ahead.
Thank you and welcome to Jim for full year, and fourth quarter 2021 financial results conference call.
Joining me on the call today are Ed Mcmahon, President and CEO and Sylvia just feels and CFO before we begin I would like to remind you that during the course of this call. We will make forward looking statements regarding expectations predictions projections or future events. It was that we believe that our expectations and assumptions.
A reasonable.
We wish to caution you that some statements reflect only the company's current expectations and then absolute sense or results may differ including materially.
Yeah cause I look forward to consider the risk factors and cautionary language described in the documents the company filed with the Securities and Exchange Commission, including our 'twenty 'twenty. One annual report filed on form 20-F dated March nine 2022.
Undertakes no obligation to update these forward looking statements.
At this time I would like to turn the call over to Jim CEO illegally.
Jamie.
Thank you Ilana.
And welcome to today's Covid.
Before doing so.
I would like to take a moment and say.
With over the past couple of weeks.
Witnesses.
Great.
And certainly the human tragedy.
Do you agree with this.
The people there.
Sure.
Our thoughts go out to the men and women.
Sure.
Children affected by design.
The third vehicle in Blue.
It has been.
Continues to be high.
Sure.
Since the outbreak of the war.
This is Jim.
Sue.
We are working with customer and you agree and support them in any way we could.
Or do you get your reserve human life exceeds all other considerations.
It's both a vulnerable.
That makes it to work and operate.
But the two California grid would victims.
Now back to the business.
Well it won't be long.
And extra ordinarily too soon.
We executed it.
And it is mainly important milestone.
With our listeners on this slide.
These actions.
We took in 2021 .
Makes me very optimistic about the future.
We have demonstrated.
No it.
I see and fast growing company.
Leadership and corporate culture to take full advantage of both near and long term favorable fundamentals.
Susan.
We believe the container industry.
Fundamentally true innovation through mhm.
And they've done well.
Oh competitive edge, we see a bright future for them.
It went through 'twenty, two and beyond.
I know that's too bad.
Hum.
A stronger position than ever.
In slide number five highlights we all led to a number of key operational accomplishments that contributed to our granted drove record results.
It is important to me.
So they've got employees worldwide for their hard work and dedication.
It is unique.
And also the depth of challenges.
There it goes directly contributed to gains momentum.
We recognize the 2021 would also be good for customers.
Continue to look for ways to provide best in class service.
Most notably we use our substantial cash generation and dragged it won't be one.
To make significant investments.
Equipment to facilitate the movement of God will blow customers.
We also significantly.
Oh good.
City, and lunch menu and new services.
On June 22, MD and CEO will be <unk>.
We don't really know.
Including New York's first lung tumor.
To meet growing ecommerce.
And mobile broadband shipping alternatives to opioids.
As a result.
He is good volume grew 23% in 2021 compared to 'twenty to 'twenty two.
Granted Wednesday, while global volumes grew only by approximately 7%.
It won't be bumpy.
We also took important steps to.
Secure access to high quality and cost effective donuts by entering into chartering agreement.
So two six.
First of all.
Oh, sorry, I'm, losing 10000 Teu.
Most of this capacity is LNG Pablo.
This access to new Cooktop so not.
We remain positioned to meet growing demand.
Learn more.
Attrition for months to assist our customers in meeting their own Douglas.
Uh huh.
Given the significant new build capacity because they weren't being more carbon in prostitution, one operating expenses.
Starting in 'twenty, one C suite.
Is there any.
It seems to be important as our competitive position.
Turning to slide six.
I loved our exceptional financial performance.
During the fourth quarter, we delivered yet another record quarter.
Revenue record adjusted EBITDA.
Reported net Walter.
You may begin to.
To achieve full year results.
Well David.
We generated $37 billion in revenues 616 billion and adjusted EBITDA and <unk> six 4 billion below net book.
We also grew shareholders' equity.
$4 6 billion dollar concur.
Consistent with our focus on profitability.
Gross margin as well.
For me, it's lumpy 'twenty, one margins were 16, 1%.
Our adjusted EBITDA and 54% for the.
Our adjusted EBITDA, we continue to outperform the alignment.
H.
Moving to slide seven.
This exceptional performance.
Visions.
So we've done some.
Potential capital to shareholders.
Our dividend policy states that we will distribute between 30 and 50%, although I'm more net income and dividend.
Hum.
Dividend.
To date.
We are delivering well.
Of this exit.
Expectations.
Based on our strong performance and our Q1 for our board declared a dividend of $17 per share.
We are also excited about the future we are watching for you. If you wanted to guide them.
Reflective of our strong performance in 2022 to date and further market outlet.
Yeah, our CFO will discuss in greater detail.
Specifically our guidance for 2022 is this.
We expect to generate adjusted EBITDA between seven and 7.5 billion dollar in adjusted EBIT.
Lynn.
1.5 to six.
5.6, excuse me two 6 billion in 2022.
Based on the midpoint of today's guidance versus our 2021 result, our 2022 focus.
A 10% increase you know we'd be done.
While EBITDA is in line with 2021 results.
Slide eight outlines key achievements and activities across the globe.
Strategic pillar.
When Joseph position and success rely on operational and commercial agility and can do it.
As we have discussed we view vessel.
As the means to achieve profitable growth.
Since mid 2020, we have taken advantage of attractive opportunities.
Necessary capacity to meet strong market demand and best positions to.
To continue delivering superior profitability.
Most recently, we announced the charter agreement for second hand vessels and they move is to further strengthen our operating fleet and.
Advance of urban strategy of chartering cost effective high diversity vessels to meet significant and sustained demand.
Global network.
Since the beginning of 2021 today, we've been convinced though created capacity by approximately 20% and we currently operate 125 versus up from 87 vessels.
At the end of 'twenty three.
We adopted our fleet management strategy to the change in the charter market what the average duration of new charter is in fact logo, we successfully maintain ample flexibility to allow us to adjust our fleet size to market conditions.
The capacity rather than 'twenty one.
The loss to further advance our global niche strategy.
Growing market demand.
I mentioned, our 17 new lines earlier.
Following the pandemic loads in the first half of 2020, we identified the recovering demand early and capitalize on the turnaround in the market economics.
Most notably we identified the opportunity to promote and alternative modes of transport.
For e-commerce customers and launch.
Our first Womens Express service from Azure to Los Angeles.
We have seen is expanding our network of express services and now.
For them to other destination, including yours, Doug Anmuth.
In New Zealand.
And now we have the new line to Boc scores to bulk terminal in Boston.
It's also important to note that we see strong customer retention.
New customer segment for <unk>.
Seaborne transportation and many of them are in.
Again long term contracts and another example of our ability to identify a global visible commercial opportunities.
<unk> Kocharyan services.
This is consistent with our focus on identifying attractive markets.
Well, we can develop competitive advantages.
At the beginning of our.
This included two car carriers and this number grew to eight qalqiliya, there's we haven't identified opportunity to drive the above target profitability.
A few weeks ago, we also announced the extension of opera.
Operational collaboration with two N alone on the LCR to the U S East coast and the U S Gulf Coast. Thanks.
The collaboration will now operate on the basis of the slot exchange and vessel sharing making him an important partner on this joint services.
Operationally our standards of excellence continues to serve us well to serve us well.
Component of this is advancing ESG targets, particularly sustainability objectives, we are seizing the opportunities to be a shipping sector.
And implementing policies and initiatives.
Mitigate the bus operations on the plan.
Of the 36, new agreements to be added to our fleet 28 of LNG fuel container vessels. This represents 276, two new of new tonnage when we take delivery of these vessels approximately 40%.
Operating capacity.
LNG fuel position us a default on its.
Its carbon intensity reduction among the local liners and supporting those customers.
ESG efforts to reduce the carbon footprint.
What they need to.
<unk> can be PSC.
No industry full when it is an opportunity given our strategy to finally operate charter capacity, we do not.
C suite to replace and can easily and quickly transition to greener donuts instead.
One more quick one equipment withdraw all container capacity by approximately 33% since January 2021 .
So at least 1 million Teu.
This is about investing in container is allow us to better support our customers. During these times of one congestion.
We're also in new vehicles and today operate at.
Best in class Reefer fleet.
This new referrals utilize the most advanced technologies and again offer customers a more environmentally friendly solutions.
Finally, we continue to position <unk> as the lithium digital shipping company focused on disruption and innovation.
Throughout 2021, we advanced multiple initiatives, such as well Bill of Lading Zimmer and chip for this introduced disruptive technologies and could be a significant future growth.
And James.
Internally, we continue to employ that that science and efficient intelligence tool.
For example, we launched in 2021.
Partnership with dice that the science group produced Jeep.
To develop advanced model to forecast demand.
And then shipping routes.
Ultimate logistical processes and more.
As we continue to focus on profit optimization.
I will now turn the call over to our CFO .
So it's going well now.
<unk> result, and market developments.
Thank you Randy and I also would like to welcome everyone and thank you for joining us today.
On slide nine we highlight that don't see Prs, demonstrating our extraordinary financial performance.
These were once again driven by continued elevated rates in the spot market as well as higher transpacific annual contract rates.
He has continued to prioritize better pain, toggle and always taken initiatives to capitalize on the ecommerce.
Which are key differentiators that have allowed us to even higher rates.
And particularly our average regulate the teu of $3630 in the fourth quarter I was wondering if they didn't have to spend a higher compared to the fourth quarter of 2020.
It is 12% higher than our average freight rates in the third quarter of this year.
For the full year of 2021, our average check with the team.
He used to that 2000 and $786 more than doubled compared to 2020.
Our free cash flow in the fourth quarter totaled $1 $7 billion compared to $391 million in the comparable quarter of 2020 that is an increase of more than three evidenced on 5%.
For the full year free cash flow was $4 9 million compared to $845 million in 2020.
Turning to our balance sheet in 2021 total debt increased by $1 $5 billion that is mainly driven by the increased number of vessels fixtures that we concluded during the period and also our indebtedness and for longer average duration.
<unk> cash position grew by more than three 2 billion, therefore, driving net EBITDA to a point that the company closed the period close to augment what you walk in a positive net cash situation.
Despite longer term chocolate, becoming more common in the average remaining duration of our charter capacity today is 36 one months.
On this slide.
From the $24 eight months that we do.
As far as mid November and bridging our first operated capacity due to the scheduled delivery of our GDS vessels.
Also on May 15, therefore that kept you from a newer renewals out of the remainder of 2022, and we have doubled that amount in 2023, reflecting approximately 33% of our total operating capacity.
This is Eddie continuously mentioned allows us to remain a giant EBITDA.
Our fleet size to changing demand fundamentals.
On Slide 10, you can see that we have delivered 12 consecutive quarters of consistent improvement in earnings.
At the same time, our net leverage is trending downward from $5 three in the first quarter of 2019 two zero.
Importantly, we continue to be positioned in the top tier of our industry and this result reflects the strength of our balance sheet.
The success of our differentiated approach is clear as we generated strong improvements across all financial metrics versus the prior year.
Revenue for 2012, Q1 was $12 $7 billion compared to $4 billion in 2020.
He led primarily by improved slightly as well as an increase in carrying volume.
Consistent with our focus on profitable growth net income for 2021 was at $4 $6 million compared to $5 $44 million for 2020.
Adjusted EBITDA was $6 6 billion for 2021 1 billion for 2020, representing growth of nearly 540%.
Our two starting 2021, adjusted EBITDA and EBITDA margin also improved this year to 61% and 64% respectively.
This is 26% and 18% in 2012.
Turning to our Q4 results total revenues in the fourth quarter increased to $335 billion compared to $1 4 billion in the fourth quarter of 2020, an increase of more than 105 wave.
50% due to improved freight rate and increased carrier volume.
Again, and consistent with our primary objectives to grow positively fourth quarter net profit was $1 7 billion compared to $366 million in the fourth quarter of last year.
Adjusted EBITDA in the fourth quarter also significantly increased to $2 4 billion compared to 531 million in Q4 2020.
Adjusted EBITDA increased to $2 1 billion in the fourth quarter compared to $439 million in the comparable quarter of last year.
Q4, 2021, adjusted EBITDA, adjusted EBITDA margin of 68% and 61%, respectively improved year over year and sequentially and continue to position along with <unk>.
<unk> leading performance.
Our Q4 results include a tax expense totaling $374 million for the quarter and that is $1 billion for the full year 2021.
As we previously indicated in 2022, we will be encouraging us to get to 23% of corporate income tax rate in Israel.
On the next slide we highlight the increasing our current volume by 23% in 2021 to $3 5 million teus compared to $2 8 million Teus in 2020.
This is significantly higher than the market growth rate of approximately six 6%.
Volume growth of 65% in intra Asia at 22% in transpacific.
Transpacific, where albeit foreseen the primary contributors.
This growth was a direct result of our focus on expanding our presence and entering new trades.
Our expanding network is also the basis for a positive forward outlook.
In 2022, we expect volume to grow in line with the market.
The fourth quarter of 2021, Vince carried volume increased by 7% to equity, which is the 8000 Teu compared to Calgary book 799000, Teu in the fourth quarter of last year.
While at the same part of global market volumes declined in the fourth quarter year over year by one 2%.
Sequentially, our fourth quarter 2021 carrier.
Slightly down due to supply chain bottlenecks and consistent with our vision experience across our industry.
And you mentioned our investments in equipment in 2021, repurchasing $898 million worth of equipment, adding approximately 306000 teu, while all container fleets.
Ill tell you the cost of $819 billion have already built.
EBIT to F 2021.
Turning to slide 14 regarding our cash flow we ended Q4 2021.
Total cash position of $3 $8 billion, which includes cash and cash equivalents and investments index deposits and other investment instruments.
During the fourth quarter.
Adjusted EBITDA of $2 4 billion converted into a $2 billion of cash flow from operations.
Other cash flow items in the fourth quarter 2000, 344 million of net capital expenditure.
We had $8 million of debt service and $299 million of dividend that we distribute in December last.
For the full year adjusted EBITDA was $6 6 billion converted into a 6 billion cash flow from operation.
Capex net for the year was $1 1 billion net.
Debt service totaled one 3 billion.
Dividend distributions totaled $536 million.
Moving to slide 16, I would like to discuss market fundamentals and our positive view moving forward.
While many including US I think initially expected a more normalized market towards the second half of 2021.
Projections were pushed out at port congestion worsen and demand remained robust.
Today, the underlying market conditions, which KOL breakfast and three remain elevated steel dynamics' president.
Centene is now turning to the second half of 2022 at the earliest.
Moreover, we believe that even with the flat deliveries of 2023 and 2012 before the need for replacement tonnage is the impact of IMO regulations expected to come into effect in 2023.
Fundamentals remain favorable in both the near and the longer term and the threat of overcapacity.
The ocean five minutes indicators demonstrate the depth of projection.
As seen here on slide 17.
The end to end transport time export dislocation to the port of destination of the fact that the group of 45 days.
More than 110 days.
Our supply chain goes longer there is a high demand for more vessels in companion to absorbed innovation.
An investor is on the move a growing larger as well.
These measures showed no signs that the supply chain crisis has passed.
Turning to the right the right lower port productivity is estimated to have reduced.
Capacity of the global fleet.
At 11% and 17% for 2020 in 2021, respectively.
And jewelry suggested highly focused and impactful 2022.
The next slide the graph illustrates that the charter hire Chinese speaking I forget driving higher charter cost as well as longer charter duration.
Turning to slide 19 higher fixed cost. We're also encouraged by the liners.
<unk> tonnage in the secondhand market to meet demand.
2021 extraordinary sale and purchase activity in terms of volume, but more important in terms of price.
We believe that higher fixed cost structure demonstrate the largest increase confidence in market strengths to state.
Looking at the chart of the right to the right. The demand for container shipping continues to be robust and is being supported by the largest ever restocking cycle in the U S.
<unk> equity ratio is slightly up the data continues to suggest the pressure on retail based in battery is partially spilling over to wholesalers as well.
So any replenishment for wholesalers continues to fail to keep pace and scale needed to evacuate to sales ratio.
Well below average.
We expect retailers and wholesalers to target higher inventory to sales ratio, we can do.
Getting to sustain strong demand for container shipping.
Turning to our full year outlook.
With our strong performance to date and favorable market outlook, we project in 2022 to deliver adjusted EBITDA within a range of $71 billion to $75 billion.
Adjusted EBITDA within a range from $5 6 billion to $6 billion.
In providing this guidance for 2022, we are assuming that the average freight rates in 2022 will be higher than the 2021 average and that rates will start to gradually decline starting in the second half of 2022.
Our contract mix for the Transpacific trade will most probably cover approximately 50% of our volume and.
And we'll be significantly higher than 2021 contracts.
In 2020, do we expect to grow our current volume inline.
Global market growth.
Average booked prior to 2022 will be higher than 2021 and asphalt charter rate. We expect next we've been stable in 2022, yet I would remind you that our exposure to the charter market is now limited in 2032 as already indicated we have only 15.
Vessel and for renewal before the end of the year.
The approximately $700 million higher depreciation costs reflected in our 2032 guidance, which is reflected in the difference between EBITDA and EBITDA are mainly the result of first.
Volume decreased as we will be operating more vessels in 2022 compared to 2031.
Second an inflation impact as renewal rate spot charter amendment has been consistently on the mix as well.
And.
Our cost application impact as we increase the percentage of long term charter.
That is chartered duration of more than a year and therefore shifting therefore cost opex down to right of use asset depreciation.
With respect to the impact of the warning that you create at this time, we don't believe that's the sustaining our services to ADESA and Russia will have an impact on our 2022 financial results.
We will easily deployed or redeployed vessels elsewhere, even the types of packaging.
But the situation is obviously clearly volatile and could change dramatically.
Regarding our dividend as discussed our board declared a dividend of $17 per share today.
Together with the third quarter, including dividend of $2 $5 per share annual 2021 dividend with total $95 per share representing 60% of 2021 net income.
They didn't give us the duration of the special dividend of $2 per share that we paid in September 2021, when we returned $41 $5 per share to shareholders in dividend.
Our first year.
The company, an exceptional achievement by it expenses.
The total dividend distribution since our IPO of $2 6 billion represents approximately 30% of our current market cap.
Is 50% higher than our IPO market.
We will now open the call to questions. Thank you very much.
Ladies and gentlemen at this time.
<unk> answer session.
Anyone who wishes to ask a question my first off on Taiwan Touchtone telephone.
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Anyone who has a question press star followed by one at this time.
One moment for the first question please.
And the first question is from the line of Randy given from Jefferies. Please go ahead.
Howdy Leds.
How's it going.
Good morning, Randy.
<unk>.
Oh, yes, good morning, and data congrats obviously on the half a quarter of the year massive dividend. So I had a few questions lots of cover but I'll try to keep it brief for your 2022 EBITDA guidance range. Obviously very strong also fairly tight right. So I guess, what assumptions or maybe total values and average rate.
We are using to get to the midpoint of that guidance and then in terms of revenue visibility to keep that tight range any updates on your upcoming contracts in terms of amount of value to them. So average rates durations.
Yes, so starting with the first part of the question when it comes to our volume assumptions in 2022 after having grown in 2021 by more than 43%, we are becoming a bit more conservative when cost of 2022, a gross volume assumptions and then we are.
Factoring in the Baltics.
6% to 7% volume growth in 2022, which would be a slightly above.
The average market growth thanks to the full year effect of the lag that we have opened in 2021.
From a rate perspective.
You mentioned I think in one of the slides our operating rate assumption for 2022.
We're to compare it to the average rates that we deliver.
2021 is going to be able to be higher and that is because we are entering now EBITDA.
First quarter of 2022 after having.
A very strong quarter in the fourth quarter consolidated do you want and we see the resilience in the great Lakes.
There, yes, EFI continues to be extremely strong therefore, pushing the of sustaining strong profit as we enter into 2022 and when it comes to the visibility of the second part of the year. This is where I think we get the also added visibility of.
We expect to see in terms of the contract cargo that we secure with our contracted customers, especially relevant on the transpacific trade at 50% of our volume that we.
Is that what gets finalized and we have got the best.
The ability to date, we expect to close on average.
The contract cargo at a premium rate compared to what we secured last last season, which will also support the overall the average rate reached towards the second half of 2022.
Okay can you quantify that a little bit you know better than us at 5% or 80 per se right in terms of the average rates and then for the durations as the majority are going to be 12 months.
Starting with the second part of your question and when that when we talk about the duration, yes. The vast majority of our contracts are likely to be.
Following a 12 months period.
At the moment, but that doesn't mean that we will not have a solid contract that makes them above and beyond.
Most of that some customers are.
Asking us to consider but that's by and large.
Vast majority should be four four or 12 months and then when that when it comes to wherever it can be lumpy in terms of.
The average freight rates that we prevail for visa contracted volume, we can say that we expect it to be significantly higher than what it was in 2021.
Too early for us to work together to quantify to what extent.
Maybe.
Sure.
That's why we can wait a few months of that Alright second question last one for me just around capital return right. How did you and the board determined that $17 dividend clearly above my expectations and probably anyone's.
Why did you decide on the 50% of net income all for dividends, maybe not balance that with share repurchases.
Talk to that process.
Yes.
What is very important for us is that we deliver on the promises we made to the market when we get a bit more than a year ago, and we always said that it was.
High on the agenda.
The work to return capital to shareholders and as you May remember, we have refined and updated our dividend guidance of dividend policy over the first quarter of 2000 experts. So we ended up.
They get back in Q4 last year that the intention would be to pay between 30% to 50% of return between 30% to 50% of the net income tax Michelle we ought to get closed in 2021 very strongly.
I think the numbers do speak for themselves. When we also look ahead into 2022.
We are cautiously optimistic that mid 2022 at least the beginning of the year as prospects are strong leads. So we think they are all the conditions are to be met to to deliver on our promises towards the 50% range as opposed to towards the roll rate of 30% that's the rationale.
We will behind we also looking obviously at how.
How do we best allocate our capital we want to make sure we continue to invest in.
Enhancing our commercial prospect that we secure the equipment the vessels that we need that say we are also continuing to invest in our digital transformation.
The financial results of 2021 again.
With the outlook of what you expect it to be justified for us to retain on the high end of the range.
Now you also touched upon share buyback, while not considering a share buyback, we always as you mentioned as well that.
Is that a.
There are other ways to return capital to shareholders.
Dividends share buybacks could be an option for now what we wanted to to promote is again that the track record to our shareholders by delivering on the dividend commitment what it means in terms of absolute numbers, but also in terms of frequency of payments as they will be paid quarterly again.
10%.
Record Es, which we believe should unlock shareholder value.
Got it okay. Thanks for that thorough answer you know share buybacks would've been the cherry on top but otherwise excellent results. Thanks again.
Thank you very much and you say that you are consistent.
Okay.
And we're looking forward we assume that this is.
The best way to deliver to show results.
So shareholders.
NUKEM alone.
Well the stock.
Shareholders.
Yes.
<unk> creates.
To the Moon.
This is assuming this is going to be the best way to deliver to them.
To ensure this.
Okay. That's fair thank you.
Thank you.
The next question is from Atlanta, You me back for Ya Li from Bank of America. Please go ahead.
Thank you for the presentation.
He wanted to ask about kind of the vessels waiting outside the quarter.
Long Beach, we've seen that kind of Q come down over the last couple of weeks. So if you can share why you think that has come down and what your outlook is for congestion at any long beach, specifically and if I may just get by second question Alex.
The dockworkers junior and B I L WTO negotiations.
How are those coming along with the contact and being made this year.
And how do you how do you factor that into your guidance on what the impact on the spot.
And then if I could ask a third one.
Why do you win.
With the strong growth in volume last year.
<unk> for the market. This year why is two nine down that he had and kind of what do you have any flexibility to be higher than kind of that six 7%.
Some volume.
Thank you.
Oh, yes.
I will start with the.
First one.
Language is very visible and I think under the spotlight. There are a lot of metrics that are being shared on a weekly basis is too.
Yeah.
Our next step.
That is very much prevailing in that at this terminal.
There are a couple of things I mean, let's remember that.
Today, our load in February is normally a weak months in a normal circumstances.
A bit of seasonality in our industry.
Just around just after Chinese new year, and they are a little bit less pressure from a volume perspective, two weeks, we shipped to some extent also start to assist in the clearing maybe some of the congestion in X y or maybe there's a little bit less.
Less vessels and another thing is that it does not.
Is there a need because we see less so in the vicinity of four overlay that those vessels are being pushed back a little bit further down the road.
So for the east.
And on their wave two.
So the way we see that is there is too.
The reduction in the span of a couple of weeks at the start where seasonality is also normally.
Yeah.
Suggesting that the volume should reduce.
<unk> is already.
The significance of a new trend that's maybe too early too early to say I would add to that.
When things are starting to get maybe a bit better it seems to be getting.
Maybe Nate.
Situations is worsening and some other or terminal b of the east coast or Vancouver.
What so the congestion and the bottlenecks are cleared very mix there.
As an industry to navigate with the.
Second question that you were referring to what is our expectation with respect to the negotiation of the unions that should take place in the coming out in the coming months.
Difficult for us to say.
What could happen there we know what happened.
When did it last.
On the agenda.
Difficult to say what may happen this time around but it is indeed, an additional level of uncertainty as to what.
The bottlenecks might finally ease in that is terminal as we know.
The global network of elite. So this may have.
Our sector is there.
So there is uncertainty here was for us that there is not much we can we can say as to what we anticipate.
Actual additional disruption coming coming out the risk is there.
Thank you Sir and to the third question that you raised with respect to our ability to potentially capture additional growth in the in the market we could always.
As you May remember the admission of the strategy of the company is to grow when we see opportunity.
And not to grow or to capture additional market share. So if we see opportunities for us to continue to grow and that will more than their markets, we will potentially look at.
Electric vessels opportunity.
After having grown by 23% in 2071, what it costs to providing guidance for 2022.
So that will remain.
Our conservative on that front.
Yes.
And one follow up.
100, <unk> one system.
Great.
We really don't know.
This is the situation.
Mid term.
But what we can see.
The vessels waiting from Google few weeks.
We see some pressure.
And the east coast terminals.
Such as a chance to.
So one on <unk> so the pressure is.
Some versus.
Cruise is underway.
Great.
Turning to the Pacific.
So.
The new regulation or procedures to go to EMEA.
Trying to reduce the number of places where to direct we are close to me.
I cannot share with you.
Not sure what you said.
Well to me with that situation.
Houston is currently.
Thank you Doug and thank you.
The next question is from the line of Oman Okta from Clarksons <unk> Securities. Please go ahead.
Thank you hi, guys congratulations.
Congratulations on a phenomenal 2021 and clearly the guidance for this year is quite strong and above expectations I wanted to ask just about the current climate.
That's affecting your business I know you touched on it a little bit.
And Bob you are in your opening comments.
I know, obviously the biggest footprint for them as the Trans Pacific, but in general are you seeing any direct impacts from the current Russia, Ukraine situation.
On your activities.
Yes, Youre right, obviously, we do see some impact but in terms of the way we manage the services that we.
We have called the Black Sea you create and we have the service from Ukraine, Romania and.
With Russia. The northeast. So we are I think we are.
Hitting at those two countries.
We are evaluating capacity, so but from an operations perspective, we are taking actions and we are making sure that.
Vessels will struggle.
Doug or elsewhere. So this is that this is what we do with the summit financial impact perspective today, we see very limited there is in effect.
Against those.
Those services do represent.
Not significant percentage of our overall, our overall carry the product.
So really we CEO and we do take actions.
As of today.
Yes.
Dictation.
The assumption should we say that the conflict remains local for US we do not envisage a material effect.
Okay. Thanks up here and then obviously one of the big concerns here recently, but the surge in oil and commodity prices in general and how that could potentially start to stress.
Tumor spending.
How are you guys seeing that risk.
I guess in general and how Youre viewing the business, but also with respect to the guidance we've given today.
Yeah, Hi, how are you doing it maybe a heightened risk of a impact on consumer spending.
Yes, so for now we.
Have to work with what we know we need to make assumptions when we provide in our guidance. We cannot today are participate in what will be the duration of the conflict, we cannot anticipate whether the country might spread to other locations and have potential additional impact on trade that would be.
More relevant to us. So we are obviously monitoring and we continue to monitor the situation.
And I'm not going to be sitting on a weekly basis, because we do it on a daily on a daily basis, and if there was to be some of the widening or some additional impact of the anticipated we would obviously the effect of those events.
EBITDA guidance, just like we did in the prior year here, we will obviously year to do so when it comes to the effect, which is a very feasible today, which is the increase that bunkering costs, which are which is the skyrocketing.
Very very quickly.
As you know we are.
Have a quite efficient pass through the cabinets in debt.
We will continue to enforce to add to our customers, which is the way.
We'll have hedged by.
Type of mechanism.
I think he has a limit obviously and this is the <unk> work to remain elevated for a very significant duration. Then we would obviously need to factor that into our future estimates.
Difficult to say today or do you anticipate today what will be the.
With the bid price of the of the second half of the year, which is what is going to have to us when it comes to 2022 guidance by the way because as you know within a certain event. So he is already there for Q.
For most of Q1 Q2.
Okay, Yeah, and just the you mentioned, but just on the bunker fuel.
You're indicating that the.
The latest Spike this is something we're able to pass through.
On the short term and then potentially the long term still needs to be assessed.
Is that right.
Yes.
There is a lot of uncertainty ahead as you rightly pointed out with the Hanmi made assumptions here.
But.
If his institution was to remain.
<unk> got to continue to escalate to a point, where the what the issue of the bunker cost with the company.
Significantly higher.
Higher than it is today. The good thing is maybe if you look at our expectations for the year of 2020, we already have assume that the average freight rates.
The spot market with the.
Gradually normalized.
Gradually come down.
Leaving will be new wave.
Additional absorption of its products to.
<unk> cost.
We have to monitor and track the situation.
As it develops.
Great Yeah, Okay.
One one more and I'll turn it over just maybe more about the business.
Obviously, the past several years Trans Pacific has been your main footprint.
Asia now has really started to pick up and become over a quarter of your volumes. How are you seeing that develop here over the next say 12 months to 24 months with the new ships youre, bringing on.
Do you see the Asian market, becoming just as dominant as the transpacific in terms of your business footprint or potentially getting larger.
Uh huh.
We will see there is still a lot to catch up on a lot of catch up to do it in <unk> wants to contribute to the same extent that transpacific dose to date, but you're right that is an extremely dynamic at a trade where we are growing.
Quarter after quarter also for us.
Definition of intra Asia includes.
Asia was trailing EBITDA and also Asia Eastern West Africa, the wider Asia.
Should we be emphasized here and we've been there quite.
They are quite active in growing our volume.
As yet to Australia and between Asia Africa, So we see quite a lot of opportunity to continue to grow in this in this region also within the EBITDA Asia area. So it can very well be that from a volume perspective.
We will catch up for the <unk> user wave.
We catch up with the prevailing transpacific trades.
Very good.
Well, thank you, Eric and congratulations guys again on <unk>.
Slide 21.
Thank you too.
The next question is from the line of Satish Dr. Kumar from Citigroup. Please go ahead.
Thanks again for your presentation.
Again, congratulations on the <unk>.
Three questions. So first on the bookings is the limit.
Earlier, you mentioned that all of this debate.
And all that.
Oh.
And also you said that you are in a strong Q1.
Visibility into Q1.
So if we could I could comment on what are you actually seeing in terms of your bookings.
Like all of which have been the forward that you can actually.
As of today.
Yeah.
Yes. So today, we continue to see very strong demand from a booking perspective.
As I pointed out earlier on we are just a few weeks after Chinese new year. So we see the reserve bookings.
Coming back faster in 2022, then what's that.
It used to be the case.
Prior year, which is a good indication.
There is still a lot of.
Sure.
Onset. Despite this demand and as you know we also have <unk>.
Goes up.
The stronger the strong demand that we've been experiencing in the weeks ahead of the Chinese new year, we had another have a rollover cargos.
We are happy that they can afford also during the week.
Around Chinese new year. So the recovery volume is from a seasonality perspective is very strong and it's coming in very fast, so which which for the first quarter of 2021.
Allow us to conclude that we stick to a very strong first quarter.
Good luck with the fourth quarter of 2000.
I'm, sorry, 2021, the first quarter of 2022 is.
He's coming in are very strong.
The theater.
Similar type of ships that the fourth quarter of 2000 and for fuel.
Okay. Thank you my second question in fact now on the topic of capacity in the slide 18.
You're absolutely right.
Given a nice split that are all being the change.
Average duration is three five years, so that's not a good industry.
It could be so all of that to come.
What is your average charter duration.
Capacity today.
When we charter our when we secure a new chartering contract the vast majority of our charter agreements now offline for a period of between three to five years and I'm, leaving aside the long term charters that we entered into in 2021 for the Gpus in capacity, but the one.
Charter agreement that we secured for the usual clinical.
And it provides us a day three to five how does that translate when it comes to looking at what is the average reminder of the duration of the contract.
They are today for the 100.
18 vessels that we are operating as of end of 2021.
This is a bit more than two years on average so I think it is if any 26 months or so.
That said there is liability that you see on balance sheet as of end of 2021 represents 26 months worth of charter for longer than 18 vessels.
For the six months of chocolate is left on the on an average on your portfolio and so all of that.
I'll leave it.
Vessel deliveries that youre likely to kick in from Q3 and from Q4.
Yes.
Yes.
All right. This is a very important business.
Working it hard.
The only is that the second half of 2020 by the way to make sure that we were in early 2021, when we decided to first COVID-19 .
We suspect that this first.
<unk> thousand Teu ships. So we are we are looking at ensuring that where those vessels.
Being delivered to us as early as January or February of the first one with you when we need to be delivered to us.
And then one a month so that we have the ability to either we deliver some of our current three operated capacity or keep that capacity of COVID-19 and grow and increase that significantly.
Sorry.
So we will have the option to do either for a second.
If you see the delivery of the CBD and either renew.
Some of the contracts that we've come up for renewal at that time.
Or renegotiate and secure that tonnage for alumina, we have 30 vessels that will cover for you in 2015.
In 2023, yes, yes, okay. Thank you.
The last question if I could here on the Capex, but if you look at your turnkey don't you on Capex. It goes.
About a million of Capex and I assume that the majority of that Capex is related to equipment, but is there any vessel related payments.
I'll do one and.
How should we think about going into 2022 .
Yes, you are right most of the Capex of 2021 related to equipment close to $900 million of cash capex related to the 306000 teus debt default.
In our fleet of containers, you had a little bit of a cash capex related to you may remember, we acquired 17 secondhand vessels in that in the course of it.
Two thirds of the fourth quarter of 2021, we've got very very yoga five out of the eight.
So that's been a form of payment is with respect a little bit.
More or less in the first quarter of 2022, when we get the last three vessels that we've acquired.
In the fourth quarter, but looking into 2022.
Our cash Capex, we will have a little bit of the vessels.
In terms of in terms of equipment, we anticipate maybe around the $200 million.
Additional equipment to continue to renew and contributed a fleet of Vegas.
Okay got it thanks that's helpful.
Thanks again for your time thank.
Thank you Lindsey.
The next question is from the line of <unk> from Barclays. Please go ahead.
Yes, good afternoon.
From Mizuho hotshot four months I have three questions as well firstly on Capex. Following on a question earlier and if we have $1 1 billion Capex in 'twenty one.
How much does this fit.
And also with relation to the tariff payments from one 4 billion, how shall we expect Cogs and.
In 2000 <unk> that's.
My first question My second question is this.
The slides that you have the ambition of growing two 1 million Gpus.
By what theory.
Is that and should we expect.
The 125 central currently operate to increase by the search et cetera.
On board to get the first one.
And then finally can you just.
Give us a little bit more color, what you think the black.
Implications of the new.
I am all regulations that are coming through next year, it will mean for capacity.
Scrapping rates for Ryanair expects.
And so I'm just trying to understand.
Next question, what happens post introduction of Regulus.
Next year. Thank you.
Okay.
Maybe starting with the Capex, but is that you have those basic question, we run them too yes. So the 1 million Teus. The first two are statements contained news that's the.
The capacity of <unk>.
Containers that we have it's not the capacity network.
Therefore capacity already.
So we increased our fleet of equipment from the 600000 to use at the beginning of the year close to 1 million Teu at the end of the year and so that's one thing and then at the same time increase our operated capacity from some vessels 485 vessels that we were operating like we said the vessel.
We operate at the beginning of the year 2021, 2019, and 155 vessels that we operate today.
Maybe just clarification on.
The 1 billion CEO , what we can see you relate to equipment.
With regards to the question on the Capex for for 2020 to be overall cash capex.
Anticipate adding.
I think that $200 million.
I mean.
Of of equipment, maybe double digits.
And even before that.
Digital front two add on investments and also capital for what is to be paid on the on the of the vesting cycle for all of its 500 million of those altogether and should be a good assumption for cash capex into 2022.
With respect to the last question.
Lola ethical or expected impact in 2023, yes.
At the.
It's difficult to assess what will be the.
The overall effect on the on the effective capacity in 2023, just to give maybe some indication when we look at the speed that is currently on the water.
<unk> 5 million Teu that Pfizer carbon fiber with the vessel altogether.
Although the first quarter 2023 half of that capacity will be 15 years old and older 50 years old and older and obviously, the OLED capacity and therefore, the most difficult of the more challenging it would be that would be the vessel to meet the emission regulation criteria. So.
In 2023 and gradually over time, what we anticipate is if it's quite quite quickly that the regulator will be posed Baltimore.
Restrictions on travel division, which will too.
Yes.
Yes, it is capacity average EBITDA.
Imposed on the vessel operator to lower the speed of it.
Of operation and I think that there are some studies out there suggest that.
If we were to reduce the speed by 5%.
In effect.
Our 7% over the epic capacity.
That's what we're referring to when we think that there would be a lot of high pressure.
Pressure on efficacy of the supply in 2022 and onwards.
And can I just check on Greek debt service payment should we expect that number to be flat from here or should we expect those 22 questions that need to be.
We like charter.
Pricing at the higher rate and drive a little bit of an increase.
Great.
The 1.5 hundred maybe an increase in the depreciation obviously capex is coming down and the.
Cash Capex is coming down so should the debt service payments go up.
You are raising a good point.
Maybe just maybe clarify here as I.
And now all the vessels that we currently operate almost all of the vessel that we currently operate are operated under long term charter agreement, which means that from an accounting perspective everything is classified as assets on our balance sheet and dependent is the lease liability so the debt.
That you see on balance sheet is mostly made all the lease liabilities at Cogs as a result of us.
Entering into those contractual obligation VW to finish providers.
And on the depreciation side, if you look at the.
The depreciation lives what is it that we depreciate the assets the quality of assets.
But we've just booked on balance sheet when we secure those those are contract and you have the depreciation is there of the.
Of the contingent of the equipment and then when do we guide for 2022, you see that there is $1 five billions of dollars difference between maybe you said EBITDA. This is the amortization of our assets our assets being mainly the vessels I just talked about and the continuous like $100 million for companion the risk is.
Is it these.
Is that fair.
These are the one 4 billion that you see in amortization will ashish tied pretty much perfectly with the debt service because it did as we said is that is also on the reduction of those commitments. So the debt service.
Is 19 years.
The amortization that you see here that you see our balance sheet. The one thing that I just would like also to highlight of two things that I would like to highlight two to complete the picture here is that first.
As a result of the new relationship with <unk>, where we are no longer buying slots from from our partner as we are on the swap.
There is no longer any financial exchange between.
MFC meeting.
Cost perspective.
Chartering Starbucks is no longer there in 2020 to us from the first of January onwards.
April onwards.
And so that contributes as well too we're reducing.
Our opex.
And second of all they can unlock their importance of where just want to emphasize that all of our software part chocolate, meaning that if you look at the amortization of $1 5 million units that includes not only the depreciation of the asset itself, but also all of the revenue costs.
Operating those assets.
<unk> related costs.
Technical management of the vessels.
And thank you for that comprehensive answer so yeah, I'm actually if you don't mind go.
Can I just very quick one.
And for 'twenty, two what is the bunker fuel assumption within that.
The guidance range you gave them.
We.
Every associate is extremely relevant.
For me to disclose that information.
As I mentioned earlier, we are working under the assumption that any.
The increase in fuel costs would be platform to our customer as of yet.
The bunker surcharge.
Okay, great. Thank you for that.
Okay.
The next question is from the line of Sam Bland from JP Morgan. Please go ahead.
Okay. Thanks for taking my question.
$3 million.
The first one is on cash tax.
It has been quite low turnout could we have.
A bit of color on how to think about cash tax, particularly in 2022 expense is there a catch up.
Element to that.
The second one is on your exposure to contracted rates I think across the whole portfolio that was about 25% of volume was on contracted rates.
Is that still is it still roughly around that.
That kind of level would you how would you like to increase it.
And the third question is on the 36 new ships on order.
Could you talk about the second.
How much higher the unit cost saves.
Operating those shifts.
This is the one you've already got a pre COVID-19 .
Charles.
Costs on those 36 new ships.
Okay.
Okay.
The first one on the cashback gift in 2022.
We'll be paying whatever is left you in relation to 2021 and that is $500 million thick and we will also pay on the council of what is the likely.
Likely to be our overall tax rate of 2022, but there will be from a cash perspective, a catch up in the 2022.
But that's for the first for the first question. The second question with regard to our contracts we are indeed there.
<unk> expect to lock in 60% of our transpacific volume for a contract cargo and they're seeing some specific volume account for.
You don't take their half of the overall volumes that we carry that's how we come to the 75% of our contracted cargo. So that's the number is one.
One of these should be for the year over year and you should not expect a significant shift.
In this respect with regards to your third question and the <unk> cost of operation of the new build capacity that we've.
All of it.
Seaspan and and others.
So it is the cost of operation will be lower when we would get delivery of that capacity compared to the cost of operating the capacity that we operate today and this is exactly why we.
Entered into those contracts early in 2021, because we wanted to get away from the.
Two high reliance.
We had on the spot charter market four vessels that we knew we had.
Long term use for and so we are and you have to look at those vessels in terms of coffee alright in light of the new building market Youll be point as opposed to the chartering market. So the cost per Teu of this new more efficient and green as tonnage will actually.
We reduced.
<unk> adds to the cost that we reduced compared to the capacity that needs to be replaced.
When we take delivery of these vessels as opposed to it.
Just be sure is that she's got a lower cost.
As chartering ship today, or a lower cost versus let's say the pre COVID-19 level.
I mean, if you look at the the chartering market as the industry is always side over the over the past few if you're a few years. So pre COVID-19 via chartering market was that was that the rock low level. So I wouldn't suggest that this is the right benchmark to date, but it clearly is.
If you compare the fact that the cost of operation of <unk> in 2021, and what we expect to see 2022.
What will be the cost in 2015 and beyond once we take delivery of the vessels.
Actually we did improve.
Understood.
Thank you very much.
Thank you.
This ends the Q&A session and I would like to hand back to Jim CEO , Mr. Erik Glickman for closing comments.
Thank you very much operator.
2021 was a remarkable year presume.
First as a public company.
We deliver.
Record results significantly exceeded all of our original projections.
This performance was driven by unusual market conditions, which push freighters to historical highs.
But also things store for us.
Strategies, which enabled us to outperform in terms of growth and profitability.
We are sharing this remarkable results we saw with shareholders.
In total since our IPO.
Returning to shareholders.
Approximately $2 6 billion.
The 1.5 dollars the issue.
We also provided.
Our strong outlook for 2022, according to which we expect 'twenty to 'twenty two performance to be similar to 2021 .
But my optimism about <unk> future results are detailed in our anticipated performance in 2022.
In the past, we utilized our strong cash generation to strengthen.
Operationally.
And commercially to improve our competitive position.
And we are excited to carry.
This momentum forward.
Rainfall.
New container shipping.
We're very positive about this.
And believe we will continue to generate sustained profitability and deliver long term value to our shareholders.
If you again for joining us today.
As a group.
Ladies and gentlemen, the conference has now concluded and you may disconnect. Your telephone. Thank you for joining and have a pleasant day goodbye.
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