Q4 2024 ZIM Integrated Shipping Services Ltd Earnings Call
Speaker Change: Hello, everyone, and welcome to ZIM Integrated Shipping Services, Fourth Quarter and Full Year 2024 Financial Results Conference call.
Speaker Change: Please note that this call is being recorded. After the speakers prepared remarks, there will be a question and answer session. If you'd like to ask a question during that time, please press star followed by one on your telephone keypad. Thank you. And I'd like to hand a call over to Elana Holzman, Head of Investor Relations, you may now begin.
Elana Holzman: Thank you operator and welcome to ZIM's fourth quarter and full year 2024 financial results conference call.
Speaker Change: Joining me on the call today are Eliy Glickman, ZIM's president and CEO and Xavier Destriau, ZIM CFO .
Speaker Change: 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 or results. We believe that our expectations and assumptions are reasonable.
Speaker Change: We wish to caution you that just statements reflect only the company's current expectations and that actual events or results may differ, including maternity.
Speaker Change: You are kindly referred to consider the risk factors in cautionary language, described in the documents the company filed with the Securities and Exchange Commission, including our 2024 Annual Report on Form 20F, filed with the SEC today, March 12.
We undertake no obligation to update these fraudulent statements.
Speaker Change: At this time, I would like to turn the call over to Zim CEO , Eli Glickman, Eliy.
Ana, and welcome everyone.
Speaker Change: 2024 March and Exceptional Year for ZIM, both financially and operationally.
Today, we are reporting our best results ever.
outside the extraordinary enemy generating during the COVID period.
Operationally
Speaker Change: Consistent with our strategic objectives to grow our volume we achieve in Q4.
a third consecutive quarter of record carried CEUs
and Deliver Double Digit Volume Gross for the Year.
Speaker Change: This is in line with our original guidance provided this time last year.
Deeds Achievement.
Speaker Change: Health Driver Outstanding Financial Performance, highlighted by 2024 net income of $2.2 billion and revenue of $8.4 billion.
Speaker Change: We ended it with total liquidity of 3.4 billion dollars.
Flag No. 5
Speaker Change: Soon, as we continue to generate strong cash flows, we are also delivering on our commitment to return significant capital to share orders.
Today,
Speaker Change: Our Board of Directors declared a dividend of $3.7, $3.17 per share, repeat $3.17 per share, or a total of $382 million.
This brings
Speaker Change: Our total dividend payout on account of 2024 results, including the special dividend
Speaker Change: to $7.98 per share, or $961 million, representing approximately 45% of 24 annual net income.
Speaker Change: We are proud of this track record and pleased to share our success with shareholders, consistently paying dividends based on our strong earnings.
Speaker Change: Looking forward to 2025, we are confident in our strategy and competitive position in the industry.
Speaker Change: Our guidance regions for the full year of 25 are adjusted EBDA between $1.6 billion and $2.2 billion.
An adjusted EBIT between $350 million and $950 million.
as well as economic, monetary and fiscal policies.
As such,
Speaker Change: It has always been characterized by a high level of uncertainty.
Speaker Change: Yet today the degree of uncertainty is more pronounced than ever in the range of factors some internet which could potentially impact both supply and demand.
Speaker Change: Are graded and more diverse than usual. Some of these factors include but are not limited to.
Speaker Change: The recent proposal from the Office of the U.S. Trade Representative to impose a new dollar for each protocol on Chinese-made vessels.
Speaker Change: A trade war between the U.S. and several of its trading partners resulting in tariff imposed on imports from Mexico, Canada and China.
Speaker Change: and uncertainty around the timing of the potential return to the Swet Canal.
Speaker Change: I would also note that in the recent weeks, we have seen a steep decline inflated.
Speaker Change: It is still unknown whether this is due to the typical seasonality or whether this twice movement will continue in the months ahead as the threat of over-capacity persists.
Speaker Change: Xavier OC4 will provide additional content and other line assumptions for our 25 guidance later on the call.
Flight No. 7
Speaker Change: Before I turn to our 25 strategic priorities, I would like to highlight the important progress we made in 24 upscaling our capacity and amazing our cost structures.
Speaker Change: We received the last four of our 46 new build containerships that we secure which include
Speaker Change: After re-delivering all more expensive capacities planned, when the 25 with 50% of our capacity
Speaker Change: A more fuel efficient and cost-efficient fleet overall. It is again important to highlight that 40% of our capacity is now LNG power.
ZIM was an early adaptor for LNG.
Speaker Change: And the government will remain the only carrier deploying LNG capacity of Asia to the U.S. East Coast.
Speaker Change: We operate two services on this trade, a key commercial differential for us, enabling ZIM to grow market share as we expanded our capacity.
Complementing our investment in the fleet.
Speaker Change: Our full site related to ZIM commercial strategy contributes to strong 24 results, namely, how the decision to increase our spot exposures in the trans-Pacific trade to about 65%
Speaker Change: This allowed ZIM to more directly capitalize on the strong spot rate environment that dominates you in most of the year in this trade.
Speaker Change: Autistic investment in ZIM's latest also contributed to our ability to serve as an attractive
Speaker Change: Our operational cooperation with MSC on the Asia-to-U.S. Iskostrade announced last September as just lunch and is working as planned.
Speaker Change: This collaboration along with others we have with MSC and other carriers illustrates how commitment to providing a broader offer to our customers and in a single efficiency in our network.
Speaker Change: Pomevolum gross perspective, ZIM 14% gross, far exceeded the overall market gross of less than 6%
Speaker Change: This accomplishment was driven primarily by shared gains thanks to the new capacity deployed on edge of the U.S. Oscars.
The successful expedited services to the U.S. West Coast.
and our extended presence in Latin America.
Speaker Change: Speaking broadly, the benefit of our fleet transformation was evident throughout 24 and are reflected in our strong performance.
Speaker Change: with larger vessels and fleet better suited to the trade in which we operate, together with the improved unit costs, we achieve our target double digit volume growth and deliver
Speaker Change: Slide number 8. As we enter 25, our focus in on continuing to advance ZIM strategic position as an agile container shipping player with the competitive cost and fuel efficient modern
Speaker Change: We see our commercial strategy, capital, we continue, put them in investment, in Ausley, equipment and technology, driving increasing resilience in ZIM business moving forward.
Speaker Change: We enter 25 with the highly competitive fleet, newer, greener and better suited to our commercial strategy.
Speaker Change: The transformative step forward we undertook is behind us, with the most critical capacity, namely the 28 energy vessels, secure or long-term charters.
Speaker Change: Now, we will remain diligent in maintaining and further enhancing this competitive position while capitalizing our practical opportunities to continue to modernize our fleet.
Speaker Change: The market realities of today may be different than the realities of tomorrow, and ZIM is prepared to take a long-term approach as we consider the future of our fleet.
Speaker Change: We also intend to preserve the flexibility with respect to our operated capacity, which we
Speaker Change: We are approximately 94,000 TU and 80,000 TU, which we could re-deliver to vessel owner
Speaker Change: If we choose to do so, due to the market conditions or shifts in our commercial strategy.
Speaker Change: Commercially, how present in the Trump-Pacific trade is strong and growing, we've also been successful in ensuring that ZIM is involved in trade from China to diverse end markets.
Not just the U.S.
Speaker Change: In the contents of uncertainty around Tari and the impact on global trade, we will expand the ZIM presence in other growth market in Mim, Asia.
Speaker Change: Such as Vietnam, Thailand and India as well as Asia to South America.
Speaker Change: We believe this is a trade that will see further growth in future years and from which ZIM stands to benefit.
Al-Qaeda-Western Greek approach remains the core element of our strategy.
Speaker Change: We have committed to providing best-in-class customer experience and continuously look for new
Speaker Change: Work, please, that our vision on our customer's side is underscored our success in making this
Let's save him, he's done.
Speaker Change: Highlight the consistently high level of service provided across all Kathomaer interaction.
Speaker Change: A part of this customer central approach, ZIM continued to invest in technology and digital tools to differentiate our operating and enhance our operational excellence.
Speaker Change: For example, who recently accelerated the rollout of advanced trackers on our dry containers making them smart containers?
Speaker Change: ZIM is a leader in this area with the most technological, advanced, dry-continent trackers from Hupo, given customers access to critical real-time data.
Speaker Change: in enabling tracking visibility while the cargo is in transit and supporting better decision-making across the supply chains.
Speaker Change: One of our efforts, we offer Zim Monitor, a best-in-class Monterized solution to secure, sensitive and high-value cargo.
Speaker Change: We also continue to believe there is significant value investing in gross engines.
Speaker Change: Our approach is to selectively invest in companies developing disruptive technologies related to our core shipping activities or border logistics ecosystem as well as sustainability
Speaker Change: Most recently, ZIM made an investment in Zutako, which falls in the latter category. Zutako develops a unique monster's tenable alternative to conventional air and water cooling of data centers.
Speaker Change: The waterless direct to cheap liquid cooling solutions can help data centers, cards are carbon footprint, and drive the development of more energy efficient and environmentally friendly AI data centers.
Speaker Change: On this note, I will turn the call over to Xavier, our Sivak, for more detailed discussion of our financial results, Update 25 Gundens, as well as additional comments on the market environment. Xavier, please.
Speaker Change: Thank you, Eliy, and again on my behalf, welcome to everyone.
Speaker Change: On this satellite, we present our key financial and operational highlights.
Speaker Change: Our strong full-year results are indicative of a robust market with elevated freightways and resilient demand.
Speaker Change: ZIM generated revenue of $8.4 billion in 2024, a 63% increase compared to last year.
Speaker Change: During the year, our average freightway per TAU was $1888,57% higher than in 2023, as we benefited from solid freight rail throughout the year.
Speaker Change: Thank you for. Our average freightway per TU was $1,886. The 71% increased year-over-year.
Speaker Change: So 24% lower than the Q3 average freight rate of $2,480 [inaudible]
Speaker Change: Fred Revenu from Non-Contenerized Cargo, which reflects mostly our car-carrier services, totaled $497 million for the full year of 2024, compared to $535 million in 2023.
Speaker Change: The decline resulted from a partial reclassification in 2024, within revenue types.
Speaker Change: I would also note that in November we delivered one of our car carier and are now operating 15 ships.
Speaker Change: and we may opt to re-deliver additional vessels in 2025, depending on market conditions.
Speaker Change: Africa showing the first quarter totaled $1.1 billion compared to $128 million in the first quarter of 2023.
Speaker Change: Pre-cash flow in 2024 totaled $3.6 billion compared to $919 million in 2023.
Speaker Change: Turning now to the balance sheet, total deaths increased by $1 billion since prior year end.
Speaker Change: Mainly due to the net effect of the incoming larger vessels with longer-term charted durations attached.
Speaker Change: The new build capacity we have received, especially the energy vessels, are chartered for a period of 8 to 12 years, creating a predictability in our cost structure with respect to this core capacity.
Speaker Change: Furthermore, we hold options to extend the charter period on 25 out of 28 of our energy vessels as well as purchase options.
Speaker Change: Giving us the fact of full control over the destiny of these vessels, very much as if we were the actual vessel owners.
Speaker Change: Moving to our fleet, we currently operate 143 vessels, including 128 container ships with total capacity of approximately 780-4,000 TUs.
and 15 Kakarriars.
Speaker Change: These compares to 145 vessels in November , 2024, as we delivered seven container ships and
Speaker Change: and received six vessels, including the last four remaining new builds, that is the 3-8,000 TU Energy vessels, and 1-5,300,000-5,300 TU-YDB vessels.
Speaker Change: I think now we receive all 46 new builds we secured in 2021 and 2022. This phase of our fleet transformation is complete.
Speaker Change: And in 2025 and 2026, we have regained flexibility with respect to our operative tonnage.
Speaker Change: During the reminder of 2025, we have a total of 26 vessels up for charter renewal and another 23 vessels up for renewal in 2026.
Speaker Change: While our plan is to maintain in 2025 constant operated capacity when compared to 2024, we do have the optionality to scale back.
Speaker Change: This flexibility is important and will allow it seems to adjust its fit size depending on the operating environment and depending on our commercial strategy.
Speaker Change: As we consider with you all opportunities for this capacity, the typical charter durations are expected to extend between 1 to 5 years, therefore much shorter than the 8 to 12-year charter periods of our core LNG capacity.
Speaker Change: Our focus going forward is to ensure that we maintain and continue to enhance the competitive position of our fleet as we have recently done when we secured 4 additional 8000 TU vessel to be delivered in late 2026 and 2027.
Speaker Change: We also recently capitalized on an interactive opportunity to acquire 2 8.5 thousand TU vessels which we were already chartering.
Speaker Change: For the full year net income was $2.2 billion compared to a net loss of $2.7 billion in 2023. And to remind you here, the full year 2023 net loss included a $2.1 billion non-cash impairment charge that we recorded in the third quarter.
Speaker Change: At the GDP down in 2024 was 3.7 billion dollars compared to 1.1 billion in 2023.
Speaker Change: I just need to be done in EBIT margins for 2024, where 44% and 30%. Significantly higher than last year.
Speaker Change: Turning now to slide 12, we carried 980,000 TUs in the fourth quarter, compared to 786,000 TUs during the same period of last year, an increase of 25%, compared to market growth for the
Speaker Change: For the full year, we carried 3.8 million TUs, the 14 percent increase compared to 2023, and compared to the overall market that only grew by 5.6%.
Speaker Change: importantly, our Transpacific Volume grew 27% in 2024 and we expect to maintain our market share gains in 2025 with our Upsized Capacity.
Speaker Change: We open new services, serving Latin America and achieve the 77% euro of your volume growth in that region in 2024.
Speaker Change: Next, we present our cash flow bridge. For the full year, our adjusted EBITDA of $3.69 billion converted into $3.75 billion of cash flow generated from operating activities.
Speaker Change: Other cultural items include for 2024, dividend payments of $579 million and $2.55 billion of debt service, mostly related to all these liability repayments.
Speaker Change: Moving to our 2025 guidance, as Eddie mentioned, we expect to generate adjusted EBITDA between $1.6 billion and $2.2 billion. Adjusted EBITDA between $350 million and $950 million.
Speaker Change: with better performance expected in the first half of the year versus the second house.
Speaker Change: This range reflects the high degree of uncertainty related to global trade, geopolitical issues and particularly the timing of the Red Sea opening.
Speaker Change: Overall, we assume a significant decline in freight rates in 2025 as compared to 2024.
Speaker Change: Our base scenario is that the Red Sea will not open earlier than the second half of the year. Meaning again, that we expect a better first half of 2025 while rerouting continues to absorb significant capacity.
Speaker Change: Our guidance is used that we will maintain constant operated capacity as compared to 2024 as we will renew some of the existing capacity or at least similar tonnage, though at lower rates than the ones incurred in 2021 and 2022.
Speaker Change: As such, we expect to continue to see an improvement in our cost structure.
Speaker Change: With respect to volume, we expect to deliver single-digit volume growth in 2025, slightly better than expected market growth, and as for our local costs, we expect similar costs to tone in 2025 versus in 2024.
Speaker Change: Now, before opening the call to question a few comments on the market.
The risk of over-supply and the near future remains unchanged.
Speaker Change: The current older book to free ratio is approximately 27% or 8.5 million TUs of which approximately 25.2 million are scheduled for delivery in 2025.
and the remaining spread out until 2029.
Speaker Change: The disruption caused by the Red Sea closure absorbed significant capacity in 2024 and it remains a key unknown in 2025.
Speaker Change: Where there is no indication of the imminent reopening of the canal, once that happens, the capacity now absorbed by the rerouting around the Cape of Good Hope will be freed and will likely put additional pressure on freight routes.
Speaker Change: The external environment which Eliy already discussed is creating an unusually high degree of uncertainty for industry players.
Speaker Change: Yet, it is important to remember that carriers have tools at their disposal to manage over capacity as needed.
Speaker Change: In the short term, carriers can go back to slow steaming, which was used extensively in 2023 and which also has cost and environmental benefits.
Speaker Change: Tyrant can also opt to execute blank savings or put vessels on either.
Speaker Change: Scrapping is another important tool which has been underutilized in recent years and it can be expected to catch up at some point, particularly as older capacity which was charted during the COVID-19 period is finally re-delivered back to the vessel owners.
Speaker Change: The industry's decarbonization agenda and the need to meet the animals' carbon emission targets, or customers' expectations, will also require a higher pace of lit renewal and could spur further scrapping.
Speaker Change: And on this note, we will open the call for questions. Thank you.
[inaudible]
Thank you all so much.
Speaker Change: Thank you. We are now opening the floor for question and answer session. If you'd like to ask a question, please press star, followed by one on your telephone keypad that star followed by one on your telephone keypad. Your first question comes from the line of Muneeba Kayani from Bank of America. Your line is now open. [inaudible]
Muniba Kayani: Thank you for taking my questions. So firstly, on your guidance, I wanted to just clarify, it's clear you've said it's a second half earlier, it's a red cereal opening, but does that top end assume no reopening this year, and kind of the low end assume early second half? So if you could give us a sense of the timeline you've assumed in the range, that would be helpful.
Muniba Kayani: Secondly, just kind of on the USTR that you'd mentioned, was I right in thinking that you would consider moving capacity to other trade lanes in the scenario it is implemented? And can you tell us what's your exposure to Chinese build ships, industry sources suggests it's 34% is that correct?
Muniba Kayani: And if I may ask a third question, press articles last week suggested a potential management laid by out. Can you please comment on that? Thank you.
Referred to our guidance range.
to be able to be seen.
Muniba Kayani: It is clearly a development that we are monitoring very closely. I think we are still in the early days. We are still under the consultation period.
Muniba Kayani: which we lost up until, as you know, a March 24th. So it's a little bit early to jump into conclusion as to whether there will be enforced or not, but clearly we are looking into that. You are correct.
Muniba Kayani: When we look at the capacity that we operate, we operate a mixture of Chinese build tonnage and non-Chinese build mostly Koreans, and our Chinese build the capacity ranges within the 25-50% you know, Mark that is also referred to in terms of potential threshold for additional on the port called in the US.
Muniba Kayani: I said very early days to conclude what if there were to be enforced would be the effect on zoom in on the overall industry I think it would be very significant the first thing that we would want to do is try to make sure that we limit to the maximum extent possible our exposure to those additional.
Muniba Kayani: That would require potentially shifting as you suggested.
Muniba Kayani: Vessels from trade to trade it will also potentially.
Muniba Kayani: Require us with suffering a little bit.
Muniba Kayani: The the lines in the networks that we currently operate if I take an example today of one of our service.
Muniba Kayani: Move their cargo between Asia to the U S. East Coast is that it will be line has therefore port of call is in the U S.
Muniba Kayani: With with Boston, Baltimore, New York.
Muniba Kayani: And.
And the last one which is.
Muniba Kayani: Which is the Boston, New York, Baltimore and Norfolk.
Muniba Kayani: We might want to redo.
Muniba Kayani: Good.
The amount of call center and move more cargo into less potent than we would need to rearrange moving cargo inland or petering service. So there is a lot of potential options that will need to be considered.
Muniba Kayani: But clearly at some point, we would be left with some extra cost after having tried our best to limit the effect and the question will remain there who will absorb that extra cost we will need to find ways to web to web to recover this incremental the incremental impact.
Muniba Kayani: Lastly, your last question with respect to the rumor of the an mbo our policy has been.
Muniba Kayani: Since we went public in 2021 to not comment on market rumors. So we are not going to stop today, what I can say is that management. It clearly continues to be focused on executing.
Muniba Kayani: The strategy that we laid out for ourselves already seen so quite some time, which aim at ensuring that we build.
Muniba Kayani: Resiliency within the company for the longer term that we unlock shareholder value and that we continue to hopefully reward our return significant capital to shareholders as we've just announced today is the.
Muniba Kayani: Additional dividend over three to $17 per share.
Muniba Kayani: Thank you.
Speaker Change: Your next question comes from the line of Michael <unk> from Barclays. Your line is now open.
Hello, Thanks, a lot for taking my question.
Speaker Change: The first question is just a follow up.
Speaker Change: The outlook.
Speaker Change: Yes mentioned that you expect the first half to be quite stronger compared to the second half depending on maybe opening of their etsy.
Speaker Change: Are we.
I mean, my back and open the envelope calculation takes me too.
Speaker Change: Assuming an early reopening.
Speaker Change: At the beginning of the first half basically to first half EBIT positive and then.
Speaker Change: <unk>.
Speaker Change: EBIT being negative and then ill end of the range.
Speaker Change: Would you agree with that.
Speaker Change: Second question is on Capex. So could you please explain a little bit more about the phasing of the renewals. So are those senior was more backend loaded or are just trough of the year.
Speaker Change: Is the Capex range, including lease for 2025, assuming none of those.
Speaker Change: Charter agreements.
Speaker Change: Are all of them are you. Thank you.
Speaker Change: Thank you for the question on the first the first part of your question with respect to the guidance.
Speaker Change: We do not really have communicated quarterly guidance, what we really wanted to say this time around is.
Speaker Change: There is a lot of uncertainties ahead in 2025, clearly as we have tried to list some of them, but we have as we sit today.
Speaker Change: Meet them meet that mid March have pretty clear visibility on the first quarter, obviously and to some extent as well on the second so we can say that the first half is that going to be in the outlook better than the than the second half that is also mostly driven by the fact that the.
Speaker Change: Good market conditions that prevailed throughout 2024, and as we entered into the early months or weeks of 2025 continued to be extremely extremely strong we had a very very strong volume pre Chinese new year with a very strong resilience on the ray.
Speaker Change: It's an environment that indeed, the contributed to a very strong start of 2025 now as we speak we are.
Just after Chinese new year.
Speaker Change: Sure.
Speaker Change: <unk> with the slack period of Chinese new year.
Speaker Change: See the volume coming back, but maybe not as quickly as that what would have happened in prior in prior years I think there is a lot of anxiety clearly steel.
Speaker Change: From that from the market with respect to what will be the ultimate effect of the tariff policies between the U S and China.
Speaker Change: Everybody is a little bit still on the wait and wait at CES mode. So so we'll see.
Speaker Change: How that pans out, but I think this is why we felt confident that we could say the beginning of the year looks good then.
Speaker Change: So many factors of uncertainty.
Speaker Change: Thereafter that we wanted to remain more prudent when it comes to the second half of the year.
Speaker Change: Now talking about <unk>.
Speaker Change: Second question, which is I think if I understand correctly, what is the strategy of the company when it comes to the fleet management strategy around the tonnage that we currently operate so just to give and reemphasize a few numbers as we start 2025.
Speaker Change: 128 container ships that we operate represent altogether 780000 teus of capacity.
Speaker Change: Important to say that two third of this capacity. So our 520000 Teus is the tonnage that is either a locked in for long term charter duration or owned tonnage by the by the company. So the exposure that we have on the short term charter if you will is.
Speaker Change: There is a third of the capacity that we operate today, so give or take 260000 Teu out of those 260000 Teu, we have a bit less than 100000 Teu worth of capacity that's come up for renewal in the coming months into the reminder of 2025 and today.
Speaker Change: <unk> Tvs to renew some of them, let go solved some of them.
Speaker Change: Pretty much 50% split between what we would renew what we would let go might be the correct assumption for our base scenario, but again, we will have the flexibility to change that along the way is that we believe that.
Speaker Change: It is a better alternative so I think it is not really capex in a way. This is just to.
Speaker Change: Going back to the to the charter market from a short term charter perspective for the noncore less strategy.
Speaker Change: Capacity that we operate today again, having now already since the end of 2024, having finalized our fleet transformation program secured for the longer term the core strategic tonnage that we intend to deploy for the for the foreseeable future.
Thank you and if I may just a follow up on this so are you willing to provide a range for sure.
Speaker Change: Capex plus service basically 25%.
Speaker Change: He is on whether you renew or not.
Capacity. Thank you.
Speaker Change: So capex.
Speaker Change: Why is the what we have in 2004. When you had in 2004 is limited that is container equipment, mostly and some also related capital expenditure. We have two in terms of vessels. We have two 8500 Teu ships that we announced recently we would acquire them.
Speaker Change: <unk>.
Would be for less than the $100 million.
Speaker Change: Transaction our combined.
Speaker Change: And apart from that from a vessel perspective, what will what.
Speaker Change: What will happen is there, whether we do or do not.
Speaker Change: Re charter some of the capacity that comes up for renewal in terms of debt service or lease liability repayment if.
Speaker Change: If you look at what was the situation.
Speaker Change: If you look at our cash flow statements for 2020 for the year total amount reached between two 5% to $2 $6 billion altogether that included the down payments that we paid for the Newbuild capacity that was delivered to us of 2009 ships altogether in them in 2000.
Speaker Change: 24, and also included the option that we exercise on five vessels earlier.
Speaker Change: Earlier in 2024, so that combined represented $440 million of one off.
Speaker Change: Amount paid and reported in our cash flow statement as the lease liability repayment because actually from an accounting perspective. This is what it is.
Speaker Change: So those will not be repeated obviously in that 2025.
Speaker Change: Decided the $90 million or $100 million that I talked about on the two vessels that we have announced we would purchase from the.
Speaker Change: From the vessel owner that is chartering those ships to us today.
Speaker Change: And we will see.
Speaker Change: So you should expect to see in 2025, a reduction from this 252 6 billion.
Speaker Change: We incurred in the in 2024, both because of the one off that is not happening and two an additional and incremental cash savings from a cash flow or cash outflow perspective due to the fact that we are letting go in a way the more expensive the moist.
Speaker Change: <unk> tonnage and if we do replace some of the 28 ships that we have up for renewal in 2025, it is more likely than not that the rates that we would secure would be.
Speaker Change: Lower than the one we are currently paying as most of those charters were secured in 2021 22 during the height of the Covid days and at the heart of the charter market. So by and large you will see in 2025, when compared to 2024 a reduction.
On our lease liability repayments coming from two elements. The one off in 2000 and for that I'm not going to repeat themselves in 2005 and also the fact that we continue to benefit from the lower chartering rates of our new tonnage and possibly of the tonnage that we will renew in the period.
Speaker Change: Okay. Thank you very much.
Speaker Change: Your next question comes from the line of online Doctor from Jefferies. Your line is now open.
Speaker Change: Thank you hi, good afternoon.
Speaker Change: And Doug I, just maybe wanted to follow up I have a couple of questions. Maybe just first on the last point Savio you were just making in terms of the lease payments for 25 does that mean.
Speaker Change: If it was two 5% to $2 6 billion last year does that come out something like 1718. This year, assuming maybe half of those vessels rolling off you extend them at today's market rates does that sound in the ballpark.
Speaker Change: It will be clearly below the $2 billion.
Mark: Mark Thats for sure whether we're going to be 1817.
Mark: Seven and that remains to be seen but clearly below 2 billion yes.
Speaker Change: Okay Alright. Thank you and then you had mentioned in your opening comments just.
Speaker Change: Youre approaching that 4 million Teu run rate per year.
Speaker Change: Yes.
Speaker Change: In terms of and then you mentioned being able to maintain that.
Speaker Change: What is behind that in terms of the vessels coming up for renewal or is that assuming that of those 26 ships at roll off this year that half will be extended and the other half return.
Omar: Yes, maybe omar.
Omar: To help understand that let's look at what happened in 2024, so in 2024.
Increased operating tonnage from 640000 Teu at the beginning of the year to close at 780000 Teu at the end of the year and we added capacity months after months throughout 2024, as we received more tonnage than we delivered.
Existing tonnage, so 140000 teus of incremental tonnage.
Omar: Between the beginning of operating capacity between the beginning of 2024 and the end of 2024 and that allowed us to come to.
Omar: To deliver on the volume story that you rightly highlight that.
Omar: Matt.
Omar: That allowed us that would help the company to remove 14% more boxes in 2024 compared to the prior year 2020.
Speaker Change: Now when we look at 2025, our starting point is that 780000 Teu worth of capacity and with those 90 give or take thousand teus of tonnage that are up for renewal. If we were to to let go all of that tonnage, we would and we would end the year with.
Omar: In operated capacity that would be close to 700000 to use so still.
Omar: Significantly more than what we started 2024 with so that's why we're saying that we feel confident that we will be able to continue to grow our carried quantities with the capacity that we intend to operate in 2025, even though as of yet.
Omar: We still maybe have not made final decisions when it comes to the renewal of all or some of these 28 ships that are coming up for renewal in 2025.
Speaker Change: Thank you that's actually quite helpful.
Speaker Change: And then just final one and this is a bit more big picture strategically maybe just about the business you were discussing the USTR proposal still early in terms of figuring what that all means but you did mention that some of the complexity. That's now involved if it were to go through.
Speaker Change: In terms of servicing different ports in different customers in various areas.
Speaker Change: How are you thinking about.
Speaker Change: I guess going forward, you've operated obviously long term as an independent.
Speaker Change: Ocean shipping company any plans or thoughts.
Speaker Change: Terms of diversifying into related businesses that are either tangential or within the logistics.
Speaker Change: As a result, especially given how significant your cash position is.
Speaker Change: Look I think the number one priority of the company continues to date to ensure that we continue to position ourselves for the longer term as a very highly competitive.
Speaker Change: Ocean Ocean player. So we've done a series of we've taken a series of decisions and implemented a series of actions as well as the past four five years, starting with the renewal of our feedstocks in also with the collaboration.
Speaker Change: We had to win back in 2018 with MSC now as the two women.
Speaker Change: Deep deep.
Speaker Change: Good dismantled. So we are very well positioned we are commanding a significant market share in the key trade, where we decided to focus our attention just also to emphasize or reemphasize on the Asia U S. East Coast, We command a market share close to 12% and despite the fact that the zim globally on E Commerce.
Two 5% of the global shipping market on the trades, where we compete we are strong and we are and we are a big competitor as the partnership with MSC on the USA is constraint is a pure swap agreements are we bringing as.
Speaker Change: As much capacity as MSC and we both enjoy from.
Speaker Change: Sharing sharing slots on the onboard each of the vessels, we have been very active in and showing us that we differentiate ourselves with our LNG proposition. We were one of their first is shipping 90 to aggressively I think order newbuild LNG tonnage today, we just talked about the composition of the fleet.
Speaker Change: Out of the 780000 Teu of capacity that we operate 40% of that capacity is LNG powered we are the only shipping line, having two services.
Speaker Change: Between the Asia to the U S East coast. So we've built we believe a strong brand we get the recognition from our customers that transpires in our ability to capture additional volume as we just talked about generating more than 40% volume increase in 2024 versus 2023 now audiences.
Speaker Change: And fees that we.
Speaker Change: Referring to.
Speaker Change: Ahead of us will affect the whole of the industry.
Speaker Change: We feel.
Speaker Change: With a strong about the fact that we now have the right tools and we are very well positioned to navigate those uncertainties.
Speaker Change: In the months and in the quarters to come so I don't think that.
Speaker Change: All those elements that we need to keep in mind and consider.
Speaker Change: Are of a nature to divert our focus and attention away from our core shipping activity.
Speaker Change: Said that we are on top of this.
Speaker Change: Core shipping only ocean liner strategy that we have and execute on we continue to look at investing and diversifying some of.
Speaker Change: Our activity towards that.
Speaker Change: Digital initiatives and we named a few in this respect we will continue also to do that but.
Short answer after maybe a long way is that we think that in the foreseeable future.
Speaker Change: The focus should continue to be on our core shipping business.
Speaker Change: Well. Thank you Xavier I appreciate your comments.
Speaker Change: Your next question comes from the line of Alexia <unk> from Jpmorgan. Your line is now open.
Alexia: Hi, gentlemen, thank you for taking my questions as well.
Speaker Change: Firstly you.
Speaker Change: You talked about the anxiety that customers are first facing very near term, but can you talk a little bit more about.
Speaker Change: The very current rates, we're seeing in activity in February because we've noticed that quite a material drop in spot rates in February and it's not very clear what is driving that given the red Sea remained closed so any commentary would be great.
Speaker Change: And in that context.
Speaker Change: You can give us a little bit of a rough evolution of rate for the next.
Speaker Change: 12 months.
Speaker Change: Your seasonality.
Speaker Change: What your assumptions are on that basis.
Speaker Change: Secondly on the fleet composition I remember when you came to market one of them.
Excellent points was your agility and the fact that you had very few.
Speaker Change: Vessels are capacity on longer term charters, obviously that balance massively switch during COVID-19 because of the constraints.
Constraints to secure capacity are you considering again to go back too much shorter.
Speaker Change: Charter durations to bring back some of that the GDP you had.
Speaker Change: Prior to Covid and.
Speaker Change: Can you help us understand that.
Speaker Change: At what scenario would you actually consider shrinking your.
Speaker Change: Asset base, obviously, youre, telling us over the next two years you have so far.
Speaker Change: And a 20% reduction assuming you don't renew any of this.
Vessels that are coming up for renewal is that.
Speaker Change: Scenario, you are considering as a team.
Speaker Change: And then just a kind of a very quick one and it's good to see that you chose to buy some vessels and why didn't you consider to buy more and instead.
Speaker Change: Kind of continue to pay the dividend.
Speaker Change: Nearly.
Speaker Change: It's quite expensive if I think about the yield and trade John.
Speaker Change: Trying to understand kind of the capital allocation there. Thank you.
Speaker Change: Thank you Alex.
Speaker Change: Quite a few questions here I'm, sorry, I'm going to try to take them. One after the other to allow me so maybe starting with the third one you were talking about the fleet and the agility.
Speaker Change: That was the one of the arguments that characterize the deep at the time of the IPO.
Speaker Change: At the time of the IPO you are right in saying that we're very much exposed to the short term charter market. We operated very little tonnage that we owned and we.
Speaker Change: We're very very.
Speaker Change: Not exposed to the long term charter.
Speaker Change: And that was an element of differentiation for 14.
Speaker Change: The agility of a yesterday are the drivers for the agility of yesterday are not the same for the agility of today and tomorrow, and our market and our industry landscape changed significantly.
Speaker Change: As the Covid years of 2021, and 'twenty, two and relying on the short term charter market.
Speaker Change: As a strategy that could work F&B and worked pretty well by the way for <unk> 'twenty, one including by the 'twenty one 'twenty two.
Speaker Change: After we felt that said clearly we had to change this strategy and make sure that we locked for the.
Speaker Change: Longer term, our core capacity, because we would otherwise run the risk to no longer have access to the right vessels. So as we also changed our commercial strategy and network strategy opening up to partnering with other shipping companies to have as we discussed earlier on.
Speaker Change: We wanted to make sure that we continue to upscale and generate economies of scale and the higher in terms of as you go in the charter market. The less you have availability in terms of in terms of vessels. So clearly we changed that and this is.
What triggered the fleet transformation program that we initiated back in 2021 and 'twenty. Two so we now are in a situation whereby as I've mentioned earlier on a two third of the capacity that we operate is locked in for either because it's long term charter also owned owned tonnage.
Speaker Change: And that is for the better because it first of all give us.
Speaker Change: Our guarantees access to tonnage we are no longer are subject to the fluctuation of the charter market and also it provides cost visibility because the cost that we're paying on this.
Speaker Change: Two third of our fleet are known as <unk>.
Speaker Change: Certain and not subject to any potential change and I would add that from a timing perspective, we went out in the market at the right time as we concluded those orders early on compared to today and we benefited from a very competitive pricing from the newbuild market that prevailed at.
Speaker Change: The time and that we would not be in a position to find I believe I believe today. So.
Speaker Change: Clearly we changed our fleet strategy. We believe this was the right the right decision for us to embark on and will allow for us to build resilience in our model going going forward and why did we not buy vessels as opposed to enter into long term charter the reason.
Speaker Change: I think it was very apparent at the time, when we said that we wanted to make sure that we get towards the greener technology.
Speaker Change: At the time and still today by the way we there was the two options LNG maybe in methanol. We believe the energy was the better one, but we don't want to take the residual value risk of the technology that you would be taking issue with the vessel owner, we are happy that the lessor the vessel owner keeps that.
Speaker Change: The residual value risk on the technology.
Speaker Change: We believe there between now and the end of the charter period. It is possible that there will be an alternative technology, which will be a greener more efficient and.
Speaker Change: This will allow us to switch and transition to that prevailing technology.
Speaker Change: Easily when time, Scott So that was really one of the driver for the for the decision making process I would recall I would remind you that from a capital allocation perspective, we did also allocate some of our capital to those transactions and this was the way for US also to utilize.
Speaker Change: Good.
Speaker Change: Earnings that were generated back in 2021 and 'twenty two so the upfront payments that we've been paying for each of the ship at delivery that represented two for some of them more than then.
Speaker Change: 15% of the value of the of the Newbuild itself was a way for us to.
Speaker Change: Clearly invest make our cash work for our for us and and contribute to reducing the daily cost that we are now paying on the on those on those ships.
Speaker Change: With respect to your first two questions I think that are more linked to what is the current trading environment and you were referring to the rate environment that is.
Speaker Change: Certainly as of today clearly I think we are.
Speaker Change: Just outside of the just.
Speaker Change: Just after the Chinese new year period.
Speaker Change: Colliding with this end of the slack season in a way we have the tariff uncertainty.
Speaker Change: That will at some point to have some effect is very difficult to say, which but.
Speaker Change: But we are still looking at what the what the how the market will develop in the weeks to come clearly, we see volume coming back not as quickly as one would have initially anticipated is that the beginning of a trend or is this something that will dissipate in the coming weeks.
Speaker Change: It's a little bit early to say one thing that I would say our AD is that you know that we have started the negotiation with the long term customers for the contract cargo that we would allocate to some of our best use of grateful. It is on the Transpacific trade Lane.
The discussions were kicked out and delaying a week a week ago and what we are hearing from our customers is quite.
Speaker Change: Encouraging on that front there is no at this stage no sign of a significant.
Speaker Change: Weakness in the potential demand and the discussions are ongoing as we speak with very little disruption of course, everybody is talking about the tariffs, but nobody seems to suggest that the volume will be affected meaningfully at least at par as part of those.
Negotiation discussions that are just being initiated as we speak.
Speaker Change: Thanks, and sorry can I just ask a follow up in your guidance comments, you basically expect stable operating capacity and therefore, we should expect.
Speaker Change: And lease.
Speaker Change: This is up for renewal will be renewed to get to stable operating capacity is that right.
Speaker Change: No.
Speaker Change: Maybe we were not.
Speaker Change: Clear enough here, what you should assume is that the capacity that we've worked with throughout 2024 will be pretty much the same as the one we will operate throughout two.
Speaker Change: 2025.
Speaker Change: Maybe maybe a bit a bit.
Speaker Change: So like I said, maybe Omar I think has a question earlier on we grew by 140000 to use of capacity between over the 12 months period of 2024.
Speaker Change: To let go all of the ships in 2025, we would that we have available both represent only 98000 Teu worth of tonnage that the factor we would be operating more tonnage in 'twenty five that in 'twenty four.
Speaker Change: Okay.
Speaker Change: Right. Thank you.
Speaker Change: This concludes our Q&A session I would now like to hand, the call back over to early Glickman President and CEO.
Speaker Change: Thank you.
Speaker Change: In summary, 24 was outstanding Gainful Zim highlighted by our best results ever.
Speaker Change: Excluding the extraordinary COVID-19 period.
Speaker Change: We made important operational progress upscaling, our capacity, which resulted in three consecutive quarters of record carry teu, 14% volume growth for the year.
Speaker Change: Well our base in the market.
Speaker Change: Our strong earnings in 'twenty, four and allowed us to share our success with total dividends paid to shareholders slow deal.
Speaker Change: Excluding today's dividend.
Speaker Change: Our total payout on account of 24 results is $7 nine a dollar per share.
Speaker Change: $961 million.
Speaker Change: <unk> approximately 45% for net income.
Speaker Change: I want to <unk> employees globally for their contributions in making this performance possible and steadfast commitment to achieving the highest operational standards and delivering an exceptional level of service to our customers as.
Speaker Change: As we enter 2025, our business environment is bold, but usual unusual dig.
Speaker Change: Degree of risks and unknowns, yet with a transformed fleet of modern cost and fuel efficient capacity.
Speaker Change: 40% of which is LNG mode. We are confident that we continue to leverage our agility and implement our differentiated strategy.
Speaker Change: Well just on competitive position in our industry and are well positioned to navigate the external uncertainties.
Speaker Change: Thank you again for joining US today, we look forward to sharing our continued progress with you all.
Speaker Change: Thank you for attending today's call you may now disconnect.
Speaker Change: [music].
Speaker Change: Yes.
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Yes.
Speaker Change: Yeah.