Zim continues posting growth in its activity scope despite the difficult market conditions stemming from the weakening of the global shipping line sector and the increase in fuel prices. In the current quarter, financial results continue to be in line with the average operating profit level in the shipping line sector. The company’s cashflow from operating activities is positive and there is an increase in throughput volumes.
These facts reflect the increased efficiency and strategic changes the company has implemented in accordance with the strategic plan prepared during 2010 and that it is currently being implemented.
Market conditions in the global shipping sector continued deteriorating in the third quarter of the year. Despite this deterioration, Zim closed Q3 2011 with a positive cashflow from its operating activities totaling $23 million, compared to a negative cash flow from ongoing activity totaling $7 million in the previous quarter; an improvement of sum $30 million.
The company’s financial assets total sum $340 million. The third quarter ended with an operating loss of $63 million, compared to an operating loss of $79 million in the previous quarter, an improvement of 20%.
The quarterly loss attributed to the shareholders totaled $66 million, compared to a $68 million loss in the previous quarter.
The net result was positively impacted by the low financing expenses totaling zero after posting revenues due to valuation of different accounting items in the company’s balance sheet.
The shipped quantity in the quarter totaled 646 thousand TEU, compared to 596 thousand TEU in the previous quarter and the corresponding quarter, an increase of 8% in the shipped quantity in relation to the previous quarter and the corresponding quarter. The company closed Q3 with a turnover of $973 million, compared to $1 billion in the previous quarter.
The average price per shipped container in Q3 was $1,311 per container – similar to the previous quarter. The relatively low shipping prices reflect the current difficult conditions in the sector, which mostly stem from an increase in supply following the entry of new ships into service in the market in the first nine months of the year. According to market estimation, during January up to October this year, some 160 ships with a capacity of over 1 million TEU entered the market (an increase of some 7% since the beginning of the year), creating pressure on shipping prices. Until the end of the year, some 200 thousand TEU (an addition of some 1.3%) are expected to be added to the sector, which deepens excess supply and continued pressure on shipping prices.
High fuel prices also contributed to the damage to the company’s results, and hurt its profitability. The average market price of shipping fuel (fuel oil/mazut) was some $650 a ton in this quarter, compared to an average of some $463 a ton in 2010. The trend of increasing fuel prices has already begun in Q3 2010 and continued all the more forcefully in 2011.
The company met its financial covenants for the third quarter, although in light of the difficult market conditions and uncertainty in the sector, the company expects its results in the next few quarters to be lower than previously estimated. Accordingly, it will prepare a new long-term business plan. Furthermore, the company asked the financing banks to waive or amend its existing financial covenants for the next 12 months. The company has reached understandings or agreements with most relevant parties which included an agreement by the Israel Corp. and Ofer Group to inject $100 million to Zim, and a new long term business plan which will be prepared by Zim.