Q1 2025 ZIM Integrated Shipping Services Ltd Earnings Call
Yeah.
Operator: Thank you for standing by.
Kate: Thank you for standing by my name is Kate and I'll be your conference operator today.
Kate: My name is Kate and I will be your conference operator today.
Kate: At this time, I would like to welcome everyone to ZIM Integrated Shipping Services first quarter 2025 financial results conference call. All lines have been placed on mute to prevent any background noise.
Speaker Change: At this time I would like to welcome everyone to the integrated shipping services first quarter 'twenty 25 financial results Conference call.
Speaker Change: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Kate: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you.
Speaker Change: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad if.
Atlanta Holzman: If you would like to withdraw your question, Chris Carr Wanna get Thank you I would now like to turn the call over to Atlanta Holzman head of Investor Relations. Please go ahead.
Elana Holzman: I would now like to turn the call over to Elana Holzman, Head of Investor Relations. Please go ahead. Thank you, operator, and welcome to ZIM's first quarter 2025 financial results conference call. Joining me on the call today are Eliyahu Glickman, ZIM's President and CEO, and Xavier Destriau, ZIM's CFO.
Speaker Change: Okay.
Speaker Change: Thank you operator, and welcome to Zimmer <unk> first quarter 2025 financial results Conference call.
Speaker Change: Joining me on the call today are illegally come on Jim's, President and CEO and Sylvia Leo the CFO.
Elana Holzman: 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. We wish to caution you that such statements reflect only the company's current expectations and that current events or results may differ, including materially.
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 such statements reflect only the companys current expectations.
Speaker Change: That current events or results may differ including materially.
Elana Holzman: You are kindly referred to consider the risk factors and cautionary language described in the documents the company filed with the Securities and Exchange Commission, including our 2024 Annual Report on Form 20-F filed with the SEC on March 12th. we undertake no obligation to update this forward-looking statement.
Speaker Change: You are kindly referred to consider the risk factors and cautionary language described in the documents the company filed with the Securities and Exchange Commission, including our 2024 annual report on form 20-F filed with the SEC on March 12.
Speaker Change: We undertake no obligation to update these forward looking statements.
Eliyahu Glickman: At this time, I would like to turn the call over to ZIM CEO Eli Glickman. Eli? moment to address the market environment. In recent weeks, it has become even clearer that we operate in a highly dynamic industry with a range of diverse external factors affecting both supply and demand in both the short and longer term. up in two months of Depressed Trans-Pacific Volumes, last week the United States and China announced a 90-day suspension on mutual tariffs. Enabling the reversal of the trend in cargo movement between the two countries. Overall, we view this development as positive.
Speaker Change: At this time I would like to turn the call over to Jim C. O early Glickman Ellie.
Speaker Change: Oh man to address the market environment.
Speaker Change: In recent weeks does it does become even clearer that we operate in a highly dynamic industry. You saw range of the various external factors affecting both supply and demand in both the short and longer term.
Speaker Change: After two months of <unk>.
Speaker Change: Whereas transpacific volumes last week.
Speaker Change: It States in China announced the 90 day suspension on mutual colleagues, enabling a reversal of the trend in cargo movement between the two countries.
Speaker Change: Overall, we view this development as positive.
Eliyahu Glickman: However, in the absence of a longer-term agreement, we remain cautious in terms of our expectation for Trans-Pacific Trade during the remainder of 2025. It remains too early to determine whether the surge in the demand we have seen in the last few days represents a turn to normalize U.S.-China volumes moving forward. Additionally, The updated USTR rule introducing short port fees on Chinese-built and owned vessels has added another level of uncertainty. We are actively exploring a mitigation plan and assessing the financial impact of the proposed action.
Speaker Change: However.
Speaker Change: The absence of absence of a longer term agreement.
Speaker Change: We remain cautious in.
Speaker Change: In terms of our expectation for Trans Pacific Trade Union.
Speaker Change: Of the 2025.
Speaker Change: It remains too early to determine whether the celgene the demand we've seen in the last few days represents a return to normalized U S shiny volumes moving forward.
Speaker Change: Additionally.
Speaker Change: Theyre up dated USTR own introducing shove bolt on.
Speaker Change: On Chinese build and own vessels has added another level of uncertainty.
Speaker Change: We are actively exploring.
Speaker Change: <unk> plan in assessing the financial impact of the proposed action.
Eliyahu Glickman: As we look ahead, With our core focus on continuing to navigate the highly uncertain geopolitical and macroeconomic conditions, we are confident in our agile approach and competitive position in the industry.
Speaker Change: As we look ahead.
Speaker Change: You saw go focus on continuing to navigate.
Speaker Change: Highly uncertain political and macroeconomic conditions.
Speaker Change: We are confident.
Speaker Change: Hey, Joel a bulge and competitive position.
Speaker Change: In the industry.
Eliyahu Glickman: Turning now to our financial results. Following an exceptional 2024, both financially and operationally, we begin 2025 with a strong first quarter performance consistent with our expectations. Upscaling our fleet employing larger vessels that have improved our cost structure coupled with strong underlying demand once again drove double digit carried volume growth year over year and immense profitability. Slide number four. We generated revenue of $2 billion and net income of $296 million in the first quarter, representing year-over-year increases of 28% and 222% respectively. Q1, Adjusted EBITDA was $779 million, and Adjusted EBIT was $463 million, with Adjusted EBITDA margin of 39%, and Adjusted EBIT margin of 23%.
Speaker Change: Turning now to our financial results.
Speaker Change: Following an exceptional 2024, both financially and operationally we begin twenty-twenty fun with the strong first quarter performance of course, consistent we sell expectations.
Speaker Change: Upscaling our fleet.
Speaker Change: Growing larger vessel, the TV pool and pool.
Speaker Change: Cost structure, coupled with strong underlying demand once again drove double digit carried volume growth.
Speaker Change: And then there's profitability.
Speaker Change: Slide slide number four.
Speaker Change: We generated revenue of $2 billion and net income of $296 million in the first quarter Revpar.
Speaker Change: Representing year over year increases of 28% and 222% respectively.
Speaker Change: Q1, adjusted EBITDA was $779 million and adjusted EBIT was $463 million with adjusted EBITDA margin of 39%.
Speaker Change: And adjusted EBIT margin of 23%.
Eliyahu Glickman: We maintain total liquidity of $3.4 billion as of March 31st, which at quarter end included $382 million paid in early April as a final dividend on account of 2024 results.
Speaker Change: Women.
Speaker Change: Total liquidity of $3 4 billion dollar <unk>.
Speaker Change: Smells thirty-first, which at quarter end included $382 million of Paragon.
Speaker Change: As the final dividend on account of 'twenty 'twenty four results.
Eliyahu Glickman: Slide number five. We remain committed to return capital to shareholders. Per our dividend policy, to distribute 30% of quarterly net income, our Board of Directors has declared a dividend of $0.74 per share, or a total of $89 million based on Q1 results. Despite the considerable uncertainty, we are maintaining our full ear guidance range. To remind you, we anticipate a just EBITDA between $1.6 billion to $2.2 billion and a just EBIT between $350 million and $950 million, with better performance still expected in the first half of the year versus the second half.
Speaker Change: Slide number five.
Speaker Change: We remain committed to return capital to shareholders.
Speaker Change: <unk> dividend policy to distribute 30% of quarterly net income our board of directors has declared a dividend of 74 cents per share or a total of 18 9 million dollar based on Q1 results.
Speaker Change: Despite the considerable uncertainty while maintaining our full year guidance ranges to remind you we anticipate adjusted EBITDA between $1 $6 billion to $2 2 billion dollar and adjust EBIT between $350 million.
Speaker Change: And $950 million.
Speaker Change: With better performance still expected in the first up of deal versus the second half.
Xavier Destriau: Xavier, our CFO, will provide additional contents and our underlying assumptions for our 25 guidance later on the call.
Speaker Change: Sylvia our CFO will provide additional confidence in our underlying assumptions for 25 Grand the guidance later on the call.
Eliyahu Glickman: Slide numbers. against the backdrop of the uncertainty.
Speaker Change: Slide number six.
Speaker Change: Against the backdrop of the uncertainties I mentioned as I mentioned before.
Eliyahu Glickman: I mentioned, as I mentioned before, learning is internally difficult. But we remain committed. to a proactive approach. We continue to take steps in line with our strategic objectives. that further enhances business resilience both commercially and operationally and competitive position in the industry. Over the past several weeks, we have adjusted our network, underscoring the agile nature of our commercial strategy. Our actions are a response primarily to changes in the trans-pacific demand as evolving U.S. tariff policy impacts global trade. Initially, in coordination with our partners, we modified our service rotations to mitigate the impact of the drop in exports from China to the United States, while ensuring we maintain extensive port coverage to uphold our service commitment.
Speaker Change: Internally difficult.
Speaker Change: But we remain committed.
Speaker Change: Drip walk people coach.
Speaker Change: We continue to take steps in line with our strategic objectives.
Speaker Change: Further and in zinc business resilience, both commercially and operationally and competitive position in the industry.
Speaker Change: Although the past several weeks, we have adjusted our network underscoring the agile nature nature of our commercial strategy.
Speaker Change: Our actions.
Speaker Change: Sponsor primarily to changes in the trans Pacific demand as the evolving U S tariff policy impact global trade.
Speaker Change: Initially and called in Asia, We saw partner, we modified our service rotations to mitigate the impact of the drop in exports from China to the United States, while ensuring we maintain extent seed bulk coverage to AR.
Speaker Change: Hold our service commitment.
Eliyahu Glickman: In light of last week's development, we are again realigning our network to account for a return back to more normalized China-U.S. trade relations. Similarly, we have also reversed our initial decision to suspend our ZIM Central China Express Line ZX2 service, illustrating, again, our agility to react rapidly to changing market conditions. In terms of other demand trends in the region during this period, we have seen improved volumes from other Southeast Asian markets such as Vietnam and Thailand where we have a strong foothold. In recent years, we have expanded our position throughout Southeast Asia to benefit from the growth in manufacturing in the region and to diversify our business.
Speaker Change: In light of last week's development.
Speaker Change: We are again re aligning our network to account for a return back to more normalized China U S trade relations.
Speaker Change: Similarly.
Speaker Change: Similarly, we have also reverse our initial decision to suspend our zoom Central China Express line Zed X two service illustrating again, our agility jewelry up rapidly to changing market conditions.
Speaker Change: In terms of other demand trends in the region. During this period, we have seen improved volumes for.
Speaker Change: Other southeast Asian markets, such as Vietnam, and Thailand, where we have a strong foothold.
Speaker Change: In recent years, whereas we have expanded our position slowed southeast Asia to benefit from the growth in manufacturing.
Speaker Change: In the region and to diversify our business.
Eliyahu Glickman: This strategic positioning helps ZIM capture volume to partially compensate for the decline in Chinese cargo to the U.S. during the beginning of the second quarter. We are adopting a similar strategy in Latin America. to diversify the operation and increase our business resilience. We are strengthening our presence in the region to take advantage of the anticipated growth in trade between Latin America and the United States, as well as China and the region.
Speaker Change: This strategic positioning.
Speaker Change: Zinc capture volume to partially compensate for the decline in Chinese cargo to the U S. During the beginning of the second quarter.
Speaker Change: We are adopting a similar strategy in Latin America.
Speaker Change: So the work to diversify the operation and increase our business resilience.
Speaker Change: We are strengthening our presence in the region to take advantage of the anticipated growth in trade between Latin America, and do not the states as well as China and the region.
Eliyahu Glickman: Overall, the primary point to highlight in that ZIM has long recognized the importance of taking a nimble approach to fleet deployment. Identifying new growth opportunities and leveraging our commercial agility have continued to be a core strength for ZIM. We continue to maintain flexibility at all times to reshuffle vessel capacity based on demand. We expect to continue to react in changing market conditions as dynamically as possible. Our commercial success and improved profitability have been made possible by our transformed fleet. After receiving all 46 new builds we contracted in 2021 and 2022 which significantly improved the efficiency of our operated capacity, we entered the new year deploying larger modern vessels well suited to the trade in which we operate.
Speaker Change: Although the primary point to highlight in that zoom has long recognized the importance of taking nimble approach to fleet deployment.
Speaker Change: Identifying new growth opportunities and leveraging our commercial agility has been continued to be a core strengths for zoom.
Speaker Change: We continue to maintain flexibility.
Speaker Change: All times to reshuffle vessel capacity based on demand.
Speaker Change: We expect to continue to re up in changing market conditions.
Speaker Change: Dynamically as possible.
Speaker Change: Our commercial success and improved profitability have been made possible by our transformed sleep.
Speaker Change: After receiving all 46, new builds we contracted in 'twenty, one 2022 which significantly improved the efficiency of our operating capacity.
Speaker Change: We entered the new year deploying larger modern vessel well suited to the trade in which we operate.
Eliyahu Glickman: After growing our operating capacity for two years, we have regained optionality, which allows us to adapt ZIM capacity as the market conditions change.
Speaker Change: After going to our present capacity for two years, where we have regained optionally optionality, which allows us to adapt zinc capacity as market condition change.
Eliyahu Glickman: or our commercial strategy sheet. Moving forward, our goal has been to maintain and further enhance our competitive position while capitalizing on attractive opportunities that will ensure our fleet remains modern and cost-effective. consistent with long with this long-term approach. We recently secured a 12-year charter for 10 11,500TU New Build LNG dual-fuel container ships from an affiliate of the TMS Group. This Charter Agreement will ensure access to an important and versatile vessel segment that is generally unavailable in the charter market and ideally suited for several of our global trades, enhancing our commercial agility and advancing our growth strategy.
Speaker Change: All of our commercial strategy shifts move.
Speaker Change: Moving forward our goal has been to maintain.
Speaker Change: And further advance our competitive position while capitalizing on.
Speaker Change: Attractive opportunities that will ensure our fleet remains modern and cost effective.
Consistent with long with this long term approach.
Speaker Change: Recently as a few 12 year charter for 10, 11500, Teu Newbuild LNG dual fuel container ships from an affiliate of the Tms group.
Speaker Change: This charter agreement will ensure access to an important and versatile vessel segment that is generally unavailable in the charter market and ideally suited for several of our global trades in Aten, our commercial agility and advancing our growth.
Speaker Change: Strategy.
Eliyahu Glickman: This also represents a strategic investment in our core LMG capacity. which serve as a critical commercial differentiator for ZIM. As we expect, it will be commercially valuable with the growing demand from customers for eco-friendly shipping solutions. This vessel will also support our long-term decarbonization objectives. ZIM was an early adapter of LNG technology, which has helped us achieve significant milestones in our USG journeys. As we highlight in our 24 years G report, which we plan to publish shortly, we reduced our carbon intensity by 16% in 2024 compared to 2023. Moreover, in 2024, we surpassed our 25 target of a 30% reduction versus the 21 baseline, reaching a 35% decrease.
Speaker Change: This also represents.
Speaker Change: Our strategic investment in our core LNG capacity.
Speaker Change: Which serve as the critical commercial is differentiator for Zim.
Speaker Change: As we expect it will be a commercially valuable with the growing demand from customers for eco friendly shipping solutions.
Speaker Change: This vessel will also support our long term decarbonization objectives Zimbra was an early adaptor of LNG technology, which has helped us achieve significant milestones you know what.
Speaker Change: Is G journeys.
Speaker Change: As we highlight in our 24 ESG report, which we plan to publish shortly we will reduce our carbon intensity by 16% in 2024 compared to 2023. Moreover, in 'twenty 'twenty four.
Speaker Change: So first our 25 target of a 30% reduction versus the 'twenty one baseline.
Speaker Change: Reaching a 35% decrease.
Eliyahu Glickman: We remain committed to ESG as a core value and in this report, our seventh, we detail ZIM decarbonization roadmap toward net zero by 2050. together with a comprehensive overview of our ESG initiatives, achievements, programs, and updated targets.
Speaker Change: We remain committed.
Speaker Change: To ESG as a core value and this report our servants, we detail Zane de carbonization oldsmar towards net zero by 2050 together.
Speaker Change: Together with a comprehensive overview of our ESG initiatives achievement program and updated targets.
Eliyahu Glickman: Overall, we remain confident in our strategy and competitive position in the industry. We enter 2025 with a transformed fleet of cost and fuel efficient capacities, approximately 40% of which is LNG powered today, and are pleased to have taken steps to advance our fleet strategy for the future. Our nimble commercial approach, together with the prudent investment in our fleet, equipment and technology, continue to drive resilience in ZIM's business.
Speaker Change: Overall, we remain confident in our strategy.
Speaker Change: And competitive position in the industry.
Speaker Change: We enter 2025.
Speaker Change: We said transform fleet of cost and fuel efficient capacities.
Speaker Change: Ultimately, 40% of which is LNG power today.
Speaker Change: And I'm pleased to have taken steps to advance our fleet strategy for the future.
Speaker Change: Our mental commercial approach together with the prudent investments in our fleet equipment and technology.
Speaker Change: Continue to drive resilience in James' business.
Xavier Destriau: On this note, I will turn the call over to Xavier, our CFO, for a more detailed discussion of our financial results, 2025 guidance, as well as additional comments on the market environment. Xavier, please go ahead. Thank you Eliyahu and again on my behalf, welcome to everyone.
Speaker Change: I Wonder if not I will turn the call over to Sylvia our CFO for a more detailed discussion of our financial results 2025 guidance as well as additional comments on the market environment.
Speaker Change: Serviette. Please go ahead.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Thank you Ellie and again on might be half welcome to everyone.
Xavier Destriau: On the slide 7, we present our key financial and operational highlights. Our strong Q1 results reflect our success upscaling our fleet, supported by positive underlying demand trends. ZIM generated in Q1 revenue of $2 billion, a 28% increase compared to last year. During the quarter, our average freight rate per T.U. was $1,776. A 22% increase year-over-year, though 6% lower than the Q4 average freight rate of $1,886. Total revenues from non-containerized cargo, which reflects mostly our car carrier services, totaled $114 million for the quarter, compared to $111 million in the first quarter of 2024. To remind you, since November 2024, we have been operating 15 car carrier vessels.
Speaker Change: On slide seven we present, our key financial and operational highlights.
Speaker Change: Our strong Q1 results reflect our success of scaling our fleet supported by positive underlying demand trends.
Speaker Change: <unk> generated in Q1 revenue of $2 billion, a 28% increase compared to last year.
Speaker Change: During the quarter, our average freight rate per Teu was $1776.
Speaker Change: 22% increase year over year, those 6% lower than the Q4 average freight rates of $1886.
Speaker Change: Total revenues from non containerized cargo, which reflects mostly our car carrier services totaled $114 million for the quarter compared to $111 million in the first quarter of 2024.
Speaker Change: To remind you seems set in November 2024, we have been operating 15 car carrier vessels.
Xavier Destriau: Our free cash flow in the first quarter totaled $787 million compared to $303 million in the first quarter of 2020. Turning to the balance sheet, total debt decreased by $150 million since prior year-end. Throughout 2023 and 2024, our total debt increased, mainly due to the net effect of receiving the new-build capacity, namely larger vessels with longer-term charter durations attached. This trend is now reversed. as repayment of lease liabilities is higher than new liabilities being incurred.
Speaker Change: Our free cash flow in the first quarter totaled $787 million compared to $303 million in the first quarter of 2024.
Speaker Change: Turning to the balance sheet total debt decreased by $150 million since prior year end.
Speaker Change: Throughout 2023, and 2024, our total debt increased mainly due to the net effect of receiving the newbuild capacity, namely larger vessels with longer term charter durations attached.
Speaker Change: This trend is now reversing.
Speaker Change: As repayment of lease liabilities is higher than new liabilities being incurred.
Speaker Change: Yeah.
Xavier Destriau: Next, the following slide provides an overview of our operating capacity. Eli has already discussed certain aspects of our fleet strategy, and I would like to highlight a few more data points that we believe are important to underscore when thinking about ZIM currently operates 126 container ships with a total capacity of approximately 774,000 TUs. Around two-thirds of this capacity comes from the 46 new builds received during the last two years, 2023 and 2024. which carries out a duration from 5 to 12 years. and also another 16 vessels that are owned by ZIM. To remind you, we opted to secure our new-build capacity on long-duration contracts rather than continue to rely on the short-term charter market.
Speaker Change: Next the following slide provides an overview of our operating capacity.
Speaker Change: And he has already discussed certain aspects of our fleet strategy and I would like to highlight a few more data points that we believe are important to underscore when thinking about <unk> split.
Speaker Change: <unk> currently operates 126 container ships with a total capacity of approximately 774000 teus.
Speaker Change: Around two third of this capacity comes from the 46, new build received during the last two years 2023 and 'twenty four.
Speaker Change: Which carry charter duration from five to 12 years now.
Speaker Change: And also another 16 vessels that are owned by <unk>.
Speaker Change: To remind you we opted to secure our newbuild capacity on long duration contracts rather than continue to rely on the short term charter market.
Xavier Destriau: and that's to ensure that we have secure access to fuel efficient and cost competitive technology. We view this as our core capacity, and as such, maintaining flexibility with respect to this capacity is a secondary factor. 25 of the 28 LNG vessels carry a chartered period of 12 years, creating a predictability in our cost structure. Moreover, we hold options to extend the charter period for these vessels, as well as purchase options. giving us full control over the destiny of these vessels, very much as if we were the vessel only. We have a similar agreement for the 10 11,500 TEU dual fuel LNG vessels we recently committed.
Speaker Change: And that to ensure that we have secure access to fuel efficient.
Speaker Change: Competitive tonnage.
Speaker Change: We view these our core capacity and assets maintaining flexibility with respect to this capacity is a secondary factor.
Speaker Change: 25 of the 28 LNG vessels carrier charter period of 12 years, creating a predictability in our cost structure.
Speaker Change: Moreover, we hold options to extend the charter period for these vessels as well as purchase option.
Speaker Change: Giving us full control over the destiny of these vessels are very much as if we were the vessel audience.
Speaker Change: Okay.
Speaker Change: We had a similar agreements for the 10 11500 Teu dual fuel LNG vessels, we recently committed to.
Xavier Destriau: with a chartered period of 12 years and options to purchase the vessels at the end of the chartered period. The remaining one third of the capacity that we operate, approximately 260,000 TUs, allows us to maintain important flexibility. By the end of 2026, there will be a total of 44 vessels up for charter renewal. with 22 vessels or 81,000 TUs up for renewal in 2025 and another 22 vessels or 74,000 TUs in 2025. This optionality, to keep the capacity or to deliver to owners, allows them to adjust its capacity according to changing market conditions or shifts in our commercial strategy.
Speaker Change: The charter period of 12 years and options to purchase the vessels at the end of the charter period.
Speaker Change: The remaining one third of the capacity that we operate approximately 260000 teus allows us to maintain important flexibility.
Speaker Change: By the end of 2026, there will be a total of 44 vessels for charter in Europe.
Speaker Change: With 22 vessels are 81000 to use up for renewal in 2025.
Speaker Change: And another 22 vessels are set at 74000 Teus.
Speaker Change: 2026.
Speaker Change: This optionality to keep the capacity or we delivered to owners allows them to adjust its capacity according to changing market conditions or shifts in our commercial strategy.
Xavier Destriau: Longer term, our focus is to ensure that we maintain and continue to enhance the competitive position of our firm.
Speaker Change: Longer term our focus is to ensure that we maintain and continue to enhance the competitive position of our fleet.
Xavier Destriau: Now turning to additional Q1 financial metrics here on slide 9. Adjusted EBITDA in the quarter was $779 million, or 39% EBITDA margin compared to $427 million in Q1 2020. Adjusted EBIT was $463 million, or 23% marked. compared to adjusted EBIT of $167 million in the same quarter of last year. Net income for the first quarter was $296 million compared to $92 million in Q1 2020. Next, you will see that we carried 944,000 TUs in the first quarter compared to 846,000 TUs during the same period last year. That represents an increase of 12%, way ahead of market growth of 4.5%.
Speaker Change: Now turning to additional Q1 financial metrics on slide nine.
Speaker Change: Adjusted EBITDA in the quarter was $779 million or 39% EBITDA margin.
Speaker Change: <unk> two $427 million in Q1 2024.
Speaker Change: Adjusted EBITDA was $463 million or 23% margin.
Speaker Change: Compared to adjusted EBITDA of $167 million in the same quarter of last year.
Speaker Change: Net income for the first quarter was $296 million compared to $92 million in Q1 2024.
Speaker Change: Next you will see that we carried at 944000 teus in the first quarter compared to 846000 Teus during the same period last year.
Speaker Change: That represents an increase of 12% well ahead of market growth of <unk>, 5%.
Xavier Destriau: Our Trans-Pacific Volume grew 11% in Q1. It is important to reiterate that we maintain flexibility to reshuffle vessel capacity as the market evolves, driving resilience in our business. Notably, we achieved a 22% year-over-year volume growth in Latin America in this first quarter. and we anticipate further increasing our market share in this trade as we continue to strengthen our presence in the region.
Speaker Change: Our transpacific volume grew 11% in Q1.
Speaker Change: It is important to reiterate that we maintain flexibility to reshuffle vessel capacity as the market evolves driving resilience in our business.
Speaker Change: Notably, we achieved a 22% year over year volume growth in Latin America in this first quarter.
Speaker Change: And we anticipate further increasing our market share in Australia, as we continue to strengthen our presence in the region.
Xavier Destriau: Next here we present our cash flow bridge. For the quarter, our adjusted EBITDA of $779 million dollars converted into $855 million dollars of cash flow generated from operating activities. Other cash flow items for the quarter included $582 million of debt service, mostly related to our Lease Liability repayment. Debt service in Q1 cash flow includes $72 million reflecting repayment of lease liabilities related to the two second-hand 8,500 TEU vessels. and the last remaining LNG vessel that we received in January.
Speaker Change: Next year, we presented our cash flow bridge for the quarter, our adjusted EBITDA of $779 million converted into $855 million of cash flow generated from operating activities.
Speaker Change: Other cash flow items for the quarter included $582 million of debt service, mostly related to our lease liability repayments.
Speaker Change: Net service in Q1 cash flow includes $72 million, reflecting repayments of lease liabilities related to the two second hand, 8500 Teu vessels.
Speaker Change: We acquired <unk>.
Speaker Change: In the quarter as well as the downpayment for the last remaining LNG vessel that we received in January.
Xavier Destriau: Moving now to our 2025 guidance, we have reaffirmed our outlook and expect to generate adjusted EBITDA between $1.6 billion and $2.2 billion, and adjusted EBIT between $350 million and $950 million. with the second half still expected to lag the first half. We have maintained wide ranges reflective of the high degree of uncertainty related to global trade and geopolitical issues.
Speaker Change: Moving now to our 2025 guidance, we have reaffirmed our outlook and expect to generate adjusted EBITDA between $1 6 billion and $2 $2 billion and adjusted EBITDA between $350 million and $950 million.
Speaker Change: With the second half still expected to lag the first half.
Speaker Change: We have maintained white ranges reflective of the high degree of uncertainty related to global trade and geopolitical issues.
Xavier Destriau: Before touching on our underlying assumptions regarding freight rates, volume, and bunker costs, I would like to update on our contract volume. As can be expected, contract negotiations this year were affected by the uncertainty regarding tariff levels. And as such, the new annual trans-Pacific contracts, which went into effect on May 1st, represent approximately 30% of our expected trans-Pacific volume for the coming year. somewhat similar percentage to the one of last. Our view on freight rates and operating capacity aren't changed as compared to our guidance assumptions from March. We expect freight rates to be significantly lower in 2025 versus 2024, with average freight rates, in the reminder of 2025, lower than Q1 average.
Speaker Change: Before touching on our underlying assumptions regarding freight rates volume and bunker cost I would like to update on our contract volume.
Speaker Change: As can be expected contract negotiations this year were affected by the uncertainty regarding tariff levels.
Speaker Change: And as such the new annual Transpacific contracts, which went into effect on may the first represents approximately 30% of our extracted that transpacific volume for the coming year.
Speaker Change: Somewhat similar percentage to the one of last year.
Speaker Change: Our view on freight rates and operated capacity are unchanged as compared to our guidance assumptions for March.
Speaker Change: We expect freight rates to be significantly lower in 2025 versus 2024 with average freight rates in the remainder of 2025 lower than Q1 average.
Xavier Destriau: Also, we currently assume the sailing through the Red Sea will not resume this year. continuing to absorb significant capacity. We assume that we will maintain similar operating capacity, on average, to that of 2024 over the course of the year, as we renew some of the existing capacity of similar tonnage, though at lower rates than those fixed in 2021 and 2022. As such, we expect to continue to see an improvement in our cost structure. Given our exposure to the Trans-Pacific, we revisited our volume growth assumptions and now assume low single-digit volume growth year-over-year. Finally, as for bunker costs, we now expect slightly lower costs per tonne in 2025 when compared to 2021.
Speaker Change: Also we currently assume the sailings with RSC will not resume this year continuing to absorb significant capacity.
Speaker Change: We assume that we will maintain similar operated capacity on average to that of 2024 over the course of the year.
Speaker Change: As we renew some of the existing capacity or similar tonnage.
Speaker Change: At lower rates than those fixed in 'twenty, one and 'twenty two.
Speaker Change: As such we expect to continue to see an improvement in our cost structure.
Given our exposure to the transpacific, we visited our volume growth assumptions and now assume a low single digit volume growth year over year.
Speaker Change: Finally, as for our bunker costs, we now expect slightly lower cost per ton in 2025, when compared to 2024.
Xavier Destriau: Before we open the call to questions, a few more comments on the market. The current environment is marked by a range of factors greater and more diverse than ever, which significantly impact the supply-demand balance we typically track to assess the health of the economy. The expected growth in capacity is known. The current order book to fleet ratio is significant, approximately 29%, or about 9 million TEUs of equivalent capacity. but they are mitigating factors to consider with short-term and long-term impact. First, the delivery schedule for this capacity is spread out over the next four and a half years with more modest deliveries in 2025 and 2026.
Speaker Change: Before we open the call to questions a few more comments on the market.
Speaker Change: The current environment is marked by a range of factors greater and more diverse than ever.
Speaker Change: Which significantly impact the supply demand balance with typically track to assess the health of the industry.
Speaker Change: The expected growth in capacity is known the current order book to fleet ratio is significant approximately 29% or about 9 million teus of equivalent capacity.
Speaker Change: But there are mitigating factors to consider with short term and long term impact.
Speaker Change: First the delivery schedule for this capacity is spread out over the next four and half years is more modest deliveries in 2025 and 2026.
Xavier Destriau: Scrapping has been minimal in recent years and projections for the coming years are also low, resulting in an aging fleet. At some point, scrapping should catch up. Also, the industry's decarbonization agenda and the need to meet stricter emission targets or customers' expectations will also require a higher pace of heat renewal and could spur further scrapping. Yet, the most significant factor impacting supply today is exogenic to our industry, the rediversion around the Cape of Good Hope. As the current consensus is that we will continue to do so for the coming months, the outcomes for 2025 are likely to be mostly demand-driven, namely when and how we see resolution on US tariffs.
Scrapping has been minimal in recent years and projections for the coming years are also low resulting in an aging fleet.
Speaker Change: At some point scrapping should catch up.
Speaker Change: Also the industry's decarbonization agenda, and the need to meet stricter emission targets our customers expectations will also require a higher piece of fleet renewal and.
Speaker Change: And could spur further scrapping.
Speaker Change: Yet the most significant factor impacting supply today is exogenous to our industry. The re diversion around the Cape of good hope.
Speaker Change: As the current consensus is that we will continue to do so for the coming months. The outcome for 2025 are likely to be mostly driven by demons region, namely when and how we see resolution on U S tariffs.
Xavier Destriau: Last week's agreement by the United States and China to bring down the level of mutual tariff for a 90-day period is a positive step and will allow demand to recover at least in the near term. could also be viewed as mutual recognition by both sides of the need to reach an agreement. The efforts of the current U.S. administration to address its trade deficit are not yet resolved. The tariff rates that will typically be established between the United States and China, as well as other U.S. trading partners, will determine whether demand can return to previous levels or whether tariff levels will establish new trade barriers.
Speaker Change: Last week's agreements by the United States, and China to bring down the level of mutual tariffs for a 90 day period is a positive step and will allow demand to recover at least in the near term.
Speaker Change: It could also be viewed as mutual recognition, but both sides of the need to reach an agreement.
Speaker Change: The efforts of the current U S administration to address its trade deficit.
Speaker Change: Not yet resolved.
Speaker Change: The tariff rates that will typically be established between the United States and China as well as other U S trading partners will determine whether demand can return to previous levels or where the tariff level with established new trade barriers.
Xavier Destriau: Equally important is the timing of these agreements. as the ongoing uncertainty on tariff levels impacts purchasing and as a result, booking decisions leading to possible disruptions within the supply chain. Notwithstanding these tariff actions will motivate trade and manufacturing diversification as both the U.S. and China will most probably seek to reduce their mutual dependency.
Speaker Change: Equally important is the timing of these agreements.
Speaker Change: The ongoing uncertainty on tariff levels impact or chasing and as a result booking decisions leading to possible disruptions within the supply chain.
Speaker Change: Notwithstanding.
Speaker Change: Ending this tariff actions will motivate trade and manufacturing diversification as both the U S and China will most probably seek to reduce the mutual dependency.
Xavier Destriau: This, in turn, will further complicate supply chain management, which could present both risks and opportunities for our industry, and also require further investment in inland and port infrastructures, which, if insufficient, could hold higher potential for disruption.
Speaker Change: This in turn will further complicated supply chain management, which could presents both risks and opportunities for our industry and also require further investment in inland port infrastructures, which is insufficient could hold higher potential for disruptions.
Xavier Destriau: Thank you.
Speaker Change: Thank you and I forgot note, we will open the call to questions.
Kate: And on that note, we will open the call to questions. At this time, I would like to remind everyone, in order to ask the question, please press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A webinar.
Speaker Change: Our gross time.
Speaker Change: I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.
Speaker Change: We will talk later for a moment to compile the Q&A roster.
Muneeba Kayani: Your first question comes from the line of Muneeba Kayani with Bank of America. Your line is open. Thank you for taking my questions and thank you for the detailed commentary around what you're seeing in this market environment. So firstly, on the market side and demand, what are you hearing from customers in terms of inventory levels right now? And we clearly have seen the surge over the last couple of days.
Speaker Change: Your first question comes from the line of money that Kiani with Bank of America. Your line is open.
Speaker Change: And thank you for taking my questions and thank you for the detailed commentary around what you're seeing in this market environment. So firstly on the market side and demand what are you hearing from customers in terms of inventory levels right now and clearly have seen the surge over there.
Speaker Change: Last couple of days I, you kind of expecting possibly an early peak season in ocean shipping this year, and then a slower and.
Muneeba Kayani: Are you kind of expecting possibly an early peak season in ocean shipping this year and then a slower year end? Just wanted to understand some of your thinking and feedback.
Speaker Change: And I'm just wanted to understand some of your thinking and feedback from customers.
Muneeba Kayani: Second question around the Red Sea.
Speaker Change: Second question is around the Red Sea and there was some news recently that the Suez Canal expects.
Muneeba Kayani: There was some news recently that the Suez Canal expects, the authority there expects liners to resume transiting through the canal within a month after they offered some discounts on those fees. So I think you just said that you don't expect to open.
Speaker Change: That parity dead expects lineup to lithium transiting through the canal within a month after they offered some discounts on those fees and so I think you just said that you don't expect it to open to how are you thinking about that situation currently from an industry perspective as well as.
Muneeba Kayani: So how are you thinking about that situation currently from an industry perspective as well as from a ZIM perspective?
Speaker Change: From a certain perspective, and if I may ask a third question and I totally understand maintaining your guidance at this point, but now with the one queue behind you and you clearly said that Oh. The one eight second half comp comment and can you give us a sense of where do you think.
Eliyahu Glickman: And if I may ask a third question, I totally understand maintaining your guidance at this point, but now with one queue behind you, and you clearly said that the one-eighth second half comment, can you give us a sense of where do you think you'd be at this point landing up within your range, upper end or lower end? With respect to your second question, the Red Sea, yes, today we are of the view that it is more likely than not that in light of the current situation that continues to prevail in the Middle East, the Red Sea Canal will not be used by the industry for the foreseeable future.
Speaker Change: You'd be at this point lending up at Dania range at upper end, Deloitte and make point. Thank you.
Speaker Change: Thank you and when Eva as starting with your first question with regards to the market and the demand what do we hear back the inventory levels.
Speaker Change: All of our customers are clearly.
Speaker Change: Clearly I mean, we've seen the ups and down in the in the market over the past few weeks.
Speaker Change: In line with the changing situation with respect to where to target. So if we go back a it'll be a little bit dinner in time when that.
Speaker Change: 145% tariff barrier was announced.
Speaker Change: Not so long ago, a few weeks ago six five to six weeks ago that had clearly a significant immediate effect in <unk>.
Speaker Change: Using an cancel that bookings that we've experienced of the volume of cargo being moved out of China went down meaningfully from almost one day to the other so as a result, clearly on the other end on the receive U S receiving N in the U S retailers.
Speaker Change: Our retailers are have had to tap into their inventory levels in order to continue to offer our products to their customers and that was always the debate.
Speaker Change: And there are risks that if the situation was to remain as is at some point inventory would do dry out and the risk of empty shelves in the U S was it was looming around now.
Speaker Change: Now the recent.
Speaker Change: Announcements of a pause in the 45% of tariff had also an immediate effect to somehow revitalize the <unk>.
Speaker Change: Demand and they're pretty much all the shippers were willing to bring cargo as quickly as possible for many reasons because of the threat of no longer having your inventories I believe is one but also because the window is four now known of being 90 days.
Speaker Change: And what will it be thereafter is still a very mature very much unknown. So.
Speaker Change: So I think everybody is trying to take an opportunistic view here in this respect you were to try to move cargo during the times when the effects of the tariffs are potentially minimum. So is that does that mean and you're right in saying that from a timing perspective. This is a potentially not too far away from that.
Speaker Change: The start of the peak season, maybe we are advancing advances here in this respect the time will tell I think the more.
Speaker Change: Important element that will allow us to have a more definitive view as to how volume can can look like for the second half of 2025 will be very much where will we land from a tariff discussion perspective. Once the 90 day polls has elapsed which is now.
Speaker Change: Coming up soon July two nine months.
Speaker Change: With respect to your second question the Red Sea. Yes. Today, we are of the view that it is more likely than not that in light of the current situation that continue to prevail in the middle East.
Speaker Change: Wed see a canal with not the use by our by the industry for the foreseeable future I think and we are of course, we're aware of.
Eliyahu Glickman: I think, and we are, of course, well aware of the incentives that the canal authorities have conveyed to the market, trying to attract the capacity back to the canal. The way we look at it is clearly for us, we will only come back to the canal when we are certain that it is safe to do so, we will not take any risk with our seafarers, we will not take any risk with our assets in terms of vessels, we will not take any risk with the cargo of the customers that we carry. And also importantly, we will not just give it a go and try, because what I think is important to remember is that now we have a stable network going around the Cape, and if we were to return, and when we will return to the Red Sea, this in itself needs to be for the longer time, we cannot go in and out and assume that this is neutral to the repositioning of the vessels.
Speaker Change: Incentive that the Canada authorities have very convey to the market trying to attract the capacity back to back to the canal. The way we look at it is.
Speaker Change: Clearly for US we will only come back to the collateral when we are.
Speaker Change: Certain that it is safe to do so we will not take any year.
Speaker Change: Risks with our our seafarers would not take any risk with our assets in terms of vessels will not take any risk with the cost of the cargo of the customers that we carry and also importantly, we will not just give it a go and try.
Speaker Change: Because what I think is important to remember is that now we have a stable network.
Speaker Change: Going around the Cape and if we were to return and when we will return to the to the Red Sea is in itself needs to be for the longer the longer time, we cannot go in and out and assume that this is neutral to the <unk>.
Speaker Change: Repositioning of the vessels and the <unk>.
Eliyahu Glickman: And the effect that it has on our network. So that's why, for us, it is not really a tariff discussion or a canal fee discussion, this is not what is preventing us today from crossing the canal, it's very much the safety concerns that we believe are still extremely high.
Speaker Change: The effect that it has on the on our network. So that's why for US it is not really a.
Speaker Change: The tariff discussions.
Speaker Change: You cannot see.
Speaker Change: Discussion. This is not what is preventing us today from customers and the canal is very much the safety concerns that we believe are extremely high.
Speaker Change: Okay.
Eliyahu Glickman: And then to your last question on the guidance, I think you will agree that it is extremely difficult today to have a clear view as to how the situation will be like, especially, you know, again, after we've gone through the various milestones that are ahead of us. I mentioned July 9th, which is a key date where also the discussions on the tariff levels that will potentially prevail for all the countries, but China will potentially also change. We will get to the end of the 90-day period. August 14 will be the end of the 90-day pause on the China tariff.
Speaker Change: And then to your last question on the on the guidance I think you will agree that.
Speaker Change: It is extremely difficult today to have a clear view as to how the situation will be like especially again after we've.
Speaker Change: Going through the various.
Speaker Change: Milestones that are ahead of US I mentioned July 9th which is a key dates or were all sold yet.
Speaker Change: The discussions on the tariff levels that could potentially prevail for all the countries, but China will potentially also change we will get to the end of the 90 day period August 14 will be the end of the 90 day polls on the China tariff for those key dates are still ahead.
Eliyahu Glickman: So those key dates are still ahead of us, and depending on what will be the outcome here, will have a significant potential effect on the financial performance of the company going into the second half. So that's why we kept a wide range of options in terms of guided figures, both for EBITDA and EBITDA. That is cleared.
Speaker Change: And depending on what will be the outcome here will hover.
Speaker Change: He can potential effects on the financial performance of the company going into the second half so.
Speaker Change: That's why we kept a wide range of.
Speaker Change: Our options in terms of in terms of the guided figures, both EBITDA and EBIT.
Speaker Change: That is clear thank you.
Omar Nokta: Your next question comes from the line of Omar Nokta with Jeffreys, your line is open. Thank you. Hi, Elin and Xavier. A couple of questions for me. Xavier, you mentioned the 2025 contracts on the Trans-Pacific will be around 30% of volumes, like they were last year. You know, back a couple of months ago, you mentioned you had a bit more of a constructive negotiation period and that you were sounded like you were going to go back to maybe a 50-50 spot versus contract. We know obviously a lot's happened between March and May, but can you give color to maybe what happened or what drove the decline in that expectation going from 50-50 down to 37?
Omar <unk>: Your next question comes from the line of Omar <unk> with Jefferies. Your line is open.
Omar: Thank you.
Duffy: And Duffy here.
Speaker Change: Couple of questions for me Zavvi or you mentioned the 2025 contracts on the Trans Pacific will be around 30% of volumes like they were last year.
Duffy: Couple of months ago, you mentioned, you had a bit more of a constructive negotiation period.
Duffy: It sounded like you were going to go back to maybe a 50 50 spot versus contract. We know obviously a lot has happened between March and May but can you give color as to maybe what happened or what drove the decline in this.
Duffy: And that expectation going from $50 50 down to 30 70.
Xavier Destriau: Sure. Thank you, Omar.
Duffy: Sure. Thank you Omar look I think what I should start by saying is that this year just like last year. When we go into those discussions with our main customers on the transpacific trade at the state of mine has been in the same. So we were indeed open two of up to <unk>.
Xavier Destriau: Look, I think what I should start by saying is that this year, just like last year, when we go into those discussions with our main customers on the Trans-Pacific Trade, the state of mind has been the same. So we were indeed open to up to a 50% contract and remaining exposed to 50% of the spot market. But also, and just like last year, we had a minimum rate that we were not willing to compromise on in terms of expectation rates per customer that we believe was the fair rate for both parties to agree and settle out.
Duffy: 50% of contract and the remaining exposed to 50% of the spot market, but also had just like last year, we had a.
Duffy: Minimum rates that we're not willing to compromise on in terms of our expectation of rates for customers that we believed was a was the fair rates for both parties to agree in and settle a set of apps clearly discussions. This year, we're very much also affected.
Xavier Destriau: Clearly, the discussions this year were very much also affected by the current market uncertainties with respect to the trade and tariff discussions. So we also had some of our customers that were more on the wait and see mode. And this is why, again, at the end of the day, the outcome is the one I mentioned that for the reason I explained from a customer perspective, maybe a little bit willingness to wait before to commit. And from our end, also the clear instructions given to our commercial team to not go below certain rates that were pre-agreed internally led to this outcome of a 30-70%.
Duffy: By the current market uncertainties with respect to the trade and tariff discussions. So we also had some of our customers that were more on a wait and see wait and see mode and this is why again at the end of the day. The outcome is the one you've mentioned I mentioned.
Duffy: For the reasons I explained awesome from a customer perspective, maybe a little bit of willingness to wait before to commit and from our end.
Duffy: Also the clear.
Duffy: The clear instructions given to where our commercial team to not go below a certain rates that were pre agreed internally led to this outcome of a theory, 70% split.
Duffy: Okay. Thank you and then just kind of shifting a little bit maybe towards just volumes and expectations.
Xavier Destriau: Thank you. And then just kind of shifting a little bit maybe towards just volumes and expectations, you know, you're talking now for 25 low single digits versus single digits initially expected. I know it's not a substantial change, but I wanted to get, maybe if you could qualify, what's behind that? Is that because of, you know, what you saw in April? And so you've adjusted accordingly, or is it perhaps a more modest outlook for the remainder of the year? There are two things here. First of all, I think when we look at our volume in Q1, we are very pleased with the 12% volume growth year over year.
Duffy: You're talking now for 25, low single digits versus single digits.
Duffy: Initially expected I know, it's not a substantial change but wanted to get maybe if you could qualify what's behind that is that because of what you saw in April.
Duffy: And so you've adjusted accordingly or is it more.
Duffy: Perhaps more modest outlook for the remainder of the year.
Duffy: There are two things here first of all I think when we look at our volume in Q1, we are very pleased with the 12% volume growth year over year. However, initially we had expected a little bit more than what we delivered and we are we have faced.
Xavier Destriau: However, initially, we had expected a little bit more than what we delivered. And we faced the, you know, a few weeks after Chinese New Year, the recovery of volume in and out of the U.S. was a little bit, took a little bit more time than what was initially anticipated. So that's one. And this volume that we did not carry in the first quarter may not be caught up in the future ones. And the second element is also, as you know, we've transitioned to a new partnership with MSC, working away from the two web. And that transition, as well, has a little bit of effect in the overall utilization of the fleet.
Duffy: A few weeks after Chinese new year, the recovery of volume out in and out of the U S was a little bit took a little bit more time than what was initially.
Duffy: Dissipated. So that's that's one and this volume that we did not carry even there the first quarter that may or may not be a cold Chuck in them in the future once and the second element is also as you know, we've we've transitioned to our new to a new drug.
Duffy: Our partnership with MSC walking away from the two women that transition as well has a little bit of effect in the overall utilization of the fleet and that contributed as well to a little bit less.
Xavier Destriau: And that contributed, as well, to a little bit less volume being carried. So that, to the conjunction of those two elements, I think explain what has happened between now and May. And now also looking forward, we clearly do see a pickup in the demand from cargo movement between China and Asia to the US. We also, as Eli mentioned, did take decisions to redesign and adjust our network not so long ago. We are now canceling those decisions and bringing the capacity back. So that also has a little bit of an effect in the overall utilization of our fleet, as we need to reposition some of the ships.
Duffy: <unk> being a carrier so adapt to the conjunction of those two elements I think explain what has happened.
Duffy: We now and then in May and now also looking at looking forward.
Duffy: We clearly do see a pickup in the demand former from cargo movements between the China and Asia to the euro to the U S.
Duffy: We also as Eddie mentioned did that take decisions to work to redesign and adjust our network not so long ago. We are now canceling those decisions and bringing the capacity back. So that also has a little bit of an effect in the overall utilization of our fleet as we need to reposition some of the some of the.
Omar Nokta: So that's mostly why, overall now, we are a little bit more conservative in our volume assumptions for 2025 when compared to what we communicated earlier on in March. Okay, thank you. That's clear. And then the final quick one, perhaps, and then I'll turn it over.
Duffy: So that's mostly why overall now we are little bit more conservative in our volume assumptions for 2025, when compared to what we communicated earlier on in March.
Speaker Change: Okay. Thank you that's clear and then a final quick one perhaps and then I'll turn it over I'm able to give what portion of your transpacific volume is direct China U S related.
Omar Nokta: Are you able to give, you know, what portion of your trans-Pacific volume is direct China-US related? You mean, out of the transpacific, what is the weight of China in our loadings? Is that the question, Omar? Yeah, yeah, just basically the bilateral relationship, China, US, US, China, of that portion of the business, perhaps maybe in 2024, what that ratio was. Yes, yes, that's the significant majority of the cargo that we move originates from Asia to the tune of 60 to 70 percent. The rest would be Southeast Asia, neighboring countries, Vietnam, Thailand, Korea, you name it.
Speaker Change: Oh, you mean out of the transpacific what is the weight of China in our loadings is that the question Omar.
Speaker Change: Yes, yes, just basically the the bilateral relationship China USC West China.
Speaker Change: That portion of the business, perhaps maybe in 2024, yeah, yeah that actually it was yes, yes, that's the significant majority of the cargo that we move originates from the from Asia.
Speaker Change: To the tune of 60% to 70% the rest of it would be southeast Asia neighboring countries, Vietnam, Thailand Korea, you name it.
Omar Nokta: Okay, thank you.
Speaker Change: Okay. Thank you.
Marco Limite: I'll pass it back.
Speaker Change: Pass it back.
Marco Limite: Your next question comes from the line of Marco Limite with Barclays, your line is open. Hi, thanks for taking my question. I've got two. So the first one, the CEO clearly mentioned in its opening statement, but if you could comment a bit more about your exposure to the U.S. So if you could just remind us how much of your... and what are the actions that you could take. question is about your, let's say Q2 out. So, you have reported a very strong Q1. Now, If you think about the second quarter, the spot rate... and volumes are seasonally stronger.
Speaker Change: Your next question comes from the line of Mark Connelly, Mike with Barclays. Your line is open.
Speaker Change: Yeah.
Speaker Change: Hi, Thanks for taking my question.
Speaker Change: I've got two so the first one the Seo clearly mentioned opening statement, but if you could comment a bit more about your exposure to the U S. Port fee. So if you could just remind us how much of your fleet is Chinese deals and what are the action.
Speaker Change: Cool.
Speaker Change: You don't take in order to mitigate the risk.
Speaker Change: Second question is.
Speaker Change: He is about your let's.
Speaker Change: Let's say Q2 outlook in a way. So you have reported a very strong Q1 now.
Speaker Change: If we think about the second quarter spot rates are possibly going up sequentially because of the disruption and volumes are seasonally stronger so.
Speaker Change: Do you think is right to think about the Q2 profitability that is up quarter over quarter.
Marco Limite: Do you think it's right to think about the Q2 profitability that is up quarter over quarter or in Q1 there is... Thank you. which will have a...
Speaker Change: Our Q1, there is any sort of special effects, maybe delayed revenue recognition.
Speaker Change: Which will have an impact in the second quarter.
Speaker Change: Thank you.
Eliyahu Glickman: Thank you, Marco. First, on the USTR and the fee that will potentially be required to be paid by us if we were to call the US with Chinese-built or owned vessels, we are clearly looking into it right now. To answer your question, the fleet that we operate globally, as you know, we've changed meaningfully the profiling of our fleet over the past couple of years, 2023 and 2024. This is when we brought those 46 brand new ships that today allow us indeed to be far more competitive in our industry. But as those vessels are recent, we are more exposed to Chinese-built tonnage than maybe some of our competitors that have not had such a big new build activity over the past couple of years.
Speaker Change: Thank you Michael first on the U S. P R and the fee that will potentially be.
Speaker Change: Required to be paid via by US if we were to call. The U S with Chinese built or owned vessels.
Speaker Change: We are clearly looking into it right now to answer your question. The fleet that we operate globally as a as a as we are as you know we've changed meaningfully.
Speaker Change: Profiling of our fleet over the past couple of years 23 and 24. This is when we brought those are 46, a brand new ships that are today allow us indeed to be far more competitive in our industry, but as those vessels are recent.
Speaker Change: We are more exposed to Chinese that tonnage than maybe as some of our competitors that.
Speaker Change: Have a have not had such a big.
Speaker Change: Newbuild activity over the past couple of years. So just to give you a little bit of an indication. We today when we look at the fleet that we operate the 780000 teus of equivalent tonnage a bit less than half of it is is a Chinese built and the rest is that is non Chinese so when we look.
Eliyahu Glickman: Just to give you a little bit of an indication, we today, when we look at the fleet that we operate, the 780,000 TUs of equivalent tonnage, a bit less than half of it is Chinese-built and the rest is non-Chinese. So when we look at the potential levy or fees that may come in in October this year, clearly we are now first of all looking at how we can shift, swap tonnage between trades to ensure that we minimize the effect of that fee on our cost structure and as a result, avoid having to incur incremental costs that we would need to at some point to try to.
Speaker Change: At the a P.
Speaker Change: Potential levy or fees that may have come in in October. This year. Clearly we are now first of all looking at how we can.
Speaker Change: Shift swap tonnage between trades to ensure that we minimized the effect over that fee on our cost structure, and then and as a result avoid to having to incur incremental cost that we would need to at some point to try to do.
Eliyahu Glickman: So it is a work in progress. We are looking at what are the options that we can take here. Again, in a view to ensure that we minimize, if not neutralize, the potential impact of those. With respect to your second question, I think I understand what you have in mind here. Clearly, as we said, the volume is picking up over the past few days. We've seen that, as I'm sure you have as well. As a result, also, when the demand comes back up, the rates tend to follow. So it is a likely scenario that at least for the few weeks to come, there will be a positive driver to support the profitability of the trade.
Speaker Change: So it is working progress.
Speaker Change: Our looking at what are the options that we can we can take here again in our view to ensure that we minimize if.
Speaker Change: If not neutralized the appetites.
Speaker Change: The potential impact on the of those fees.
Speaker Change: With respect to your second question I think I understand what you have in mind here clearly as we said the volume is picking up over the past few days, we've seen that as I'm sure you have as well as a result also when the demand comes back up the rates tend to follow.
Speaker Change: So it is a likely scenario that at least for the year a few weeks to come there will be a year.
Speaker Change: Positive.
Speaker Change: A driver to support the profitability of the of the trades, but I think what we are very careful about is how long will that will that last I'm going to go back to where the key dates that are still ahead of US. Yes of course, we are focusing a lot on there.
Eliyahu Glickman: But I think what we are very careful about is how long will that last. I'm going to go back to the key dates that are still ahead of us. Yes, of course, we are focusing a lot on China and we have it until August 14th. If nothing changes, this is the 90 day window where maybe trades will be supported in that period. But we also have, as I mentioned earlier on, in between July 9th, still the key data as to what will be the situation with respect to tariff levels that are today back to a minimum level.
Speaker Change: China.
Speaker Change: And we haven't been CLO August 14th.
Speaker Change: If nothing changes this is a 90 day window, where maybe trades will be supported.
Speaker Change: In the in the period, but we also have.
Speaker Change: As I mentioned earlier on the in between July and the ninth steer at the they're the key data as to what will be the situation with respect to tariff levels that are today.
Speaker Change: Back to a minimum level, but we don't know if that's going to persist after July Nashville, all the surrounding countries round around China, Vietnam, Thailand Korea.
Eliyahu Glickman: But we don't know if that's going to persist after July 9th for all the surrounding countries around around China, Vietnam, Thailand, Korea, Cambodia that I was talking about not so long ago. Those may be hit hard if there is no resolution between the US and those respective countries in terms of in terms of trade discussions. So there is a lot of uncertainties still ahead. Yes, good news to start with. However, how long the momentum will continue is that the big.
Speaker Change: Cambodia that I was talking about that not so long ago. Those may be hit hard if there is no resolution between the U S. In those respective countries in terms of.
Speaker Change: In terms of our trade discussions. So there is a lot of uncertainties as to your head yes. Good news to start with however, how long does the momentum will continue is is that the big unknown.
Speaker Change: Okay. Thank you and if you if I could sneak a third one very quickly.
Eliyahu Glickman: and a few if I could stick at one. So, over the last one or two weeks, China to the U.S. has recovered very, very strongly. How are the other trade lanes? My understanding was that other Asia to U.S. was very strong as an offset to China to the U.S. You know, I think today where we see a lot of movement in a way and fluctuation and variations are clearly those trade lanes that link China and Southeast Asia to the U.S. I would say that on the other trade lanes, it's more business as usual, if you will.
Speaker Change: So over the last one or two weeks.
Speaker Change: The recall has recovered very very strongly how.
Speaker Change: How are the other trade lanes are doing because my understanding was that other Asia to the U S was very strong as an offset to China through yes.
Speaker Change: Those trade lanes.
Speaker Change: As relates to normalize those are still very strong as well. Thank you very much.
Speaker Change: I think today, where we see a lot of movement here in a way and fluctuation in variations are clearly those trade lanes that link China and southeast Asia to the U S. I would say that on the other trade lanes, it's more business as usual if you if you will.
Speaker Change: Okay.
Alexia Dogani: Your next question comes from the line of Alexia Dogani with J.P. Morgan. Your line is open. Yeah, good afternoon. Thank you for taking my questions.
Speaker Change: Your next question comes from the line of election day, Donny with J P. Morgan Your line is open.
Speaker Change: Yes. Good afternoon. Thank you for taking my questions.
Alexia Dogani: Just firstly, can you discuss a little bit about your kind of network development thoughts near term? I think in Q1, you kind of exited from one trans-Pacific trade. Where did that capacity go and how quickly would you reintroduce services in the region? Should there be a kind of more lasting kind of trade policy agreement?
Speaker Change: Just firstly can you discuss a little bit about your kind of mentor developed.
Speaker Change: And then Andrew thoughts Nick matching in Q1, you're kind of like it did from one man.
Speaker Change: And transpacific trade does that capacity go and how quickly would you reintroduce surfaces in the region should there be kind of more lasting and kind of trade policy agreement and then secondly can you help us.
Alexia Dogani: Then secondly, can you help us distribute your capacity in different kind of charter duration buckets? If you talk about how much of your capacity can renew within the next 12 months, how much between one to five years and how much over five years, that would be quite helpful to understand kind of the profile.
Speaker Change: Distribute your capacity in and defend kind of.
Speaker Change: Duration backend.
Speaker Change: Can you talk about how much of your capacity and can renew with them.
Speaker Change: Ron how much between one to five years, how much over five years that would be quite helpful to understand kind of the profile and then finally.
Alexia Dogani: And then finally, are you looking at the whole to kind of your cost base more structurally when you think about unit costs compared to, let's say, pre-pandemic levels, where there could be some savings, where could those savings come from, so we can understand a little bit current levels of profitability on... I guess kind of current spot rates, obviously last week was a big move, but just to give us kind of a broad understanding of how close are we to breakeven currently. Thank you. Thank you, Alexia.
Speaker Change: Are you looking at all to kind of.
Speaker Change: Sure.
Speaker Change: Space more structurally when you think about unit costs.
Speaker Change: And compared to that.
Speaker Change: So pre pandemic levels.
Speaker Change: There could be some savings or could those savings come from so we can understand a little bit.
And levels.
Speaker Change: D R.
Speaker Change: I guess kind of current spot rates.
Speaker Change: Last week was a big move but.
Speaker Change: Give us kind of a broad understanding of how close are we to breakeven currently thank you.
Speaker Change: Thank you Alex here, so taking your questions in the in order.
Eliyahu Glickman: So taking your questions in order, the first one with respect to the network. I think what we mentioned is indeed we've tried and we will continue to try our best to always dynamically react to changing market conditions. And we have reacted and we did react following the hike in the tariffs between US and China. And this is precisely what we did to suspend and we announced the suspension of what we call our ZX2 service, which is a service linking China to the West Coast, to LA, because we did clearly see the bookings from China dropping meaningfully, as I mentioned earlier on, following this announcement of 145% tariff.
Speaker Change: First one with respect to the network here I think what we mentioned is indeed, we've tried and we will continue to try our best to always die.
Speaker Change: Dynamically react to changing market conditions, and we have a.
Speaker Change: Reacting and we did react following the hike in the tariffs between U S and China and this is precisely what we need to spend and we announced the suspension of a what we called out was that X to a service, which is a service linking.
Speaker Change: That too to the west coast to actually.
Speaker Change: Because we did clearly see the bookings from China are dropping meaningfully as I mentioned earlier on the following this announcement of 145% tariffs.
Eliyahu Glickman: But a few weeks later, we are in a very different situation. And indeed, with the pause in the enforcement of this 145% tariff, we've announced that we were unwinding our decision to suspend and we have resumed the service as from next week. So we are very quick and very fast. And I think agility is the name of the game here to try our best to anticipate changing market conditions. But more importantly, because anticipation is difficult and more importantly, to react extremely fast to changing market conditions. So to your point, yes, we did announce not so long ago the suspension of that service to a few weeks later, come back and know this announcement and resuming the service between Asia and the West Coast.
Speaker Change: A few weeks a few weeks later, we are in a very different situation and indeed that was the year with <unk> in the in the enforcement of this 145% sorry, we've announced that we were unwinding our decision to suspend and we ARVO resumed the service.
Speaker Change: As far as from the next week. So we are very quick and very fast and I think agility is the name of the game here to try our best work dissipates changing market conditions, but more important vehicles anticipation is difficult and more importantly to react extremely fast to changing market condition. So.
Speaker Change: But to your point, yes, we did announce and not so long ago. The suspension of that service to a few weeks later.
Speaker Change: Come back in there and I know you said this announcement.
Speaker Change: Assuming the service between them between Asia and the.
Speaker Change: <unk>.
Speaker Change: Annually in the West Coast.
Eliyahu Glickman: With respect to charter duration, when you look at the capacity that we operate today, 780,000 TUs worth of capacity, two-thirds of that capacity is owned or long-term charter. Precisely to your question, we define a long-term charter commitments that exceed five years. So two-thirds, 520,000 TUs today are either owned, and that is 16 shifts, give or take 100,000 TUs, and the rest, 460,000 TUs, give or take, is chartered for a period or duration exceeding five years. And that allows us to have a clear visibility on our cost structure because those charter rates are known. And also, as I mentioned earlier on, we have options to extend, we have options to buy those vessels at the end of the charter duration.
Speaker Change: With respect to charter duration, what when we look when you look at the capacity that we operate today.
Speaker Change: 780000, Teus worth of capacity at.
Speaker Change: Two third of that capacity is owned or long term charter precisely to your question. We define a long term charter commitments that exceed five years. So to serve 500 in the 20000 to use today are either owned and that's that is a 16 ships you got.
Speaker Change: 100000 to use and the rest 416000 to use give or take is chartered for a period of duration.
Speaker Change: Ceding five years and that allows us to have a clear visibility on our cost structure because those charter rates are known and also as I mentioned earlier wrong, you have options to extend the option to buy.
Speaker Change: Those vessels at the end of the charter duration. So we have a clear visibility of what.
Xavier Destriau: So we have a clear visibility of what the cost structure of the company can be as far as those vessels are concerned for the foreseeable future.
Speaker Change: Cost structure of the company can be as far as those vessels are concerned for the foreseeable future and then the rest so a third 33% representing a 260000 Teu worth of capacity are made of small smaller sized vessels that are being chartered is sourced from the short term.
Xavier Destriau: And then the rest, so a third, 33%, representing 260,000 TUs worth of capacity, are made of smaller-sized vessels that are being chartered and sourced from the short-term charter market. So here, as we say, less than five years. So we have 80,000 TUs of capacity that comes up for renewal in 2025, a similar number in 2026, which gives us the flexibility to adjust at least some of the capacity that we will operate in the coming quarter.
Speaker Change: Charter market. So here as we say a lesser less than five years and even today when we look at the profiling of this tonnage is there. It is maybe when the vast majority less than that less than three years. So we have.
Speaker Change: 80000 to use of the capacity that comes up for renewal in 'twenty five.
Speaker Change: Similar number in 2026, which gives us the flexibility to work to adjust or at least some of the capacity that we will operate in the coming quarters.
Xavier Destriau: And then lastly, to your question, when we look at our cost structure and where there are, of course, areas to potentially improve, we are always looking, obviously, at extracting cost in our cost structure. I think we've done a significant or achieved a significant improvement by finalizing our fleet transformation program. But what we are also looking at right now is maybe, as opposed to reduce costs, to also try to avoid costs that could potentially be not incurred. And this is ensuring that we are doing a better job in reducing the repositioning of empty containers. So that requires tools, digital tools, to know precisely where the equipment is, where the equipment will be in the coming weeks, in order to motivate also the commercial team to take export cargo and make sure that we optimize the flow of equipment.
Speaker Change: And then lastly, too.
Speaker Change: No question that when we look at our cost structure and where there are of course areas to potentially improve we are always looking obviously at extracting cost in our cost structure I think we've done a significant or achieved a significant improvement.
Speaker Change: By finalizing our fleet transformation program, but.
Speaker Change: What we are also looking at right now is there may be as opposed to reduce costs to also try to avoid.
Speaker Change: Cost.
Speaker Change: It could potentially be.
Not incurred and this is ensuring that we are doing a better job in reducing the repositioning of empty containers so that.
Speaker Change: Requires tools digital tools.
Speaker Change: To know precisely where the equipment is where the equipment will be in the coming weeks in order to motivate also commercial the commercial team to take.
Speaker Change: Export cargo and make sure that we optimize the flow of equipment. So I think that's one area that we can talk about another one is clearly also a as you know we've been and we will continue to invest heavily in further digitizing digitizing our industry.
Xavier Destriau: So I think that's one area that we can talk about. Another one is clearly also, as you know, we've been and we will continue to invest heavily in further digitizing our industry and our company in order to also make sure that our customers enjoy a seamless experience when working with ZIM and potentially entrust us with their cargo more than to others. So that will continue to be a key element for the company.
Speaker Change: Our company in order to also make sure that our customer.
Speaker Change: Enjoy a seamless experience when working with <unk> and potentially the interest.
Speaker Change: With their cargo or more than 202 with two others. So that's where we'll continue to be a key element for the company now the one thing that Unfortunately, we do not really control is the cargo handling charge that we pay on that when we call terminals and as you know.
Xavier Destriau: Now, the one thing that unfortunately we do not really control is the cargo handling charge that we pay on when we call terminals. And as you know, the effect of the discussions that took place between the unions and the terminals in the East Coast led to an increase in the cargo handling charge in the US. And that obviously is somewhat affecting our cost structure. Thank.
Speaker Change: The effects of the discussions that took place between the unions and the terminals in the east coast led to an increase in the cargo handling jobs in the U S and that obviously is somewhat affecting our cost structure.
Speaker Change: Thank you.
Eliyahu Glickman: This concludes our Q&A session.
Speaker Change: This concludes our Q&A session I will turn the call back over to Mr. Brookman for closing remarks.
Eliyahu Glickman: I will turn the call back over to Mr. Glickman for closing remarks. We are pleased with ZIM's strong first quarter of 2025 in which we grew carried volumes by 12% year over year and delivered improved profitability. Our performance reflects the benefits of our transformed fleet, improved cost traction. Outstanding commercial agility and execution as well as strong underlying demand during the first part of the year. We continue to share our success with investors. and declared a dividend of $0.74 per share for a total of $89 million, consistent with our dividend policy and capital allocation priority.
Speaker Change: Thank you.
Speaker Change: We are pleased to resume strong first quarter of 'twenty 'twenty four.
Speaker Change: Which we grew could volumes by 12% year over year and delivered improved profitability.
Speaker Change: Profitability.
Speaker Change: Our performance reflects the benefits of ports on the phone please.
Speaker Change: <unk> cost structure.
Speaker Change: Outstanding commercial agility and execution as well as strong underlying demand during the first part of the.
Speaker Change: We continue to share our success with investors and declared a dividend of <unk>.
Speaker Change: <unk> is 474 workshop 74 cents per share.
Speaker Change: Our total with $89 million.
Speaker Change: System, we saw dividend policy and capital allocation priorities.
Eliyahu Glickman: In a few weeks, ZIM will mark its 18th year anniversary. For a humble beginning as an operator of a single-passenger ship, ZIM has established itself as a global container shipping company, hauling more than 330 ports. and serving over 30,000 customers worldwide. We are proud of our market position and the reputation we have among industry players as an innovative provider of seaborne transportation and logistic services. Following our successful strategic transformation and fleet renewal program, we are confident even against the backdrop of highly uncertain market environments. that are differentiated, Sathish. An enhanced industry position will drive sustainable growth over the long term.
Speaker Change: In a few weeks zoom will markets.
Speaker Change: Use anniversary.
Speaker Change: Oh and humble beginning as an operator with a single passenger ship Zim.
Speaker Change: Zoom has established itself as a global container shipping company holding more than 330 ports.
Speaker Change: Serving over 30000 customers worldwide.
Speaker Change: We will Vodafone market position and the reputation we have among industry players as innovative provider.
Speaker Change: <unk> transportation and logistics services.
Following our successful strategic transformation and fleet renewal program, we are confident even against the backdrop of highly uncertain market environment.
Speaker Change: With our differentiated strategy.
Speaker Change: And industry position will drive sustainable growth over the long term.
Eliyahu Glickman: Thank you again for joining us. We look forward to sharing our continued progress with you all.
Speaker Change: Thank you again for joining us we look forward to sharing our continued progress with you all.
Kate: Ladies and gentlemen, that concludes today's call. Thank you all for joining.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Kate: You may now disconnect. Thank you so much for today.
Speaker Change: Thank you so much for today.
Operator: Real Peer
Speaker Change: We're out here.