How Zim doubled its market cap in 2024
How Zim doubled its market cap in 2024
From losses to record profits: the shipping giant’s strategic comeback
When record-breaking transportation volumes coincide with a 40% increase in transportation prices, Zim concludes its second consecutive profitable quarter, following four loss-making quarters in 2023. The company exceeded analysts' forecasts and raised its annual outlook for the second time this year.
The Israeli shipping company, traded on the New York Stock Exchange, benefited from favorable global conditions during the quarter. These included the ongoing Houthi threat to trade in the Red Sea, which caused a global shortage of ships and containers, the extension of shipping lanes, and a rise in maritime transport demand, alongside increased demand for goods in the U.S.
According to CEO Eli Glickman, who spoke with Calcalist, "These circumstances met us with readiness just in time. We expanded our fleet with new ships and invested one billion dollars in containers. Additionally, we made smart business decisions; unlike other transport companies, we refused to sign two-year transport contracts in May, and just a few weeks later, prices went up."
As a result of the price increase, the average rate Zim charged for transportation rose by 40% compared to the same quarter last year, reaching $1,674 per container—a 15% increase compared to the first quarter of this year. Zim transported 952,000 containers during the quarter, a record for the company and an 11% increase compared to the same quarter last year. Consequently, Zim's revenues grew by 48% in the quarter, reaching $1.9 billion, surpassing analysts' forecasts of $1.8 billion.
The company's quarterly operating profit (EBIT) reached $468 million, compared to a loss of $168 million in the same quarter last year, and net profit stabilized at $373 million, compared to a loss of $213 million in the second quarter of 2023. This quarter serves as a stark contrast to the previous year, where freight prices dropped by 67% to $1,193 per container due to decreased demand for goods in the U.S.
In line with the previous quarter, where Zim updated its full-year forecast upward, the company now expects that "the results of the second half of 2024 will be better than those of the first half, due to continued supply pressures resulting from the unresolved crisis in the Red Sea and the positive demand trends currently present."
Zim's new forecast anticipates an end-of-year operating profit (EBITDA) of $3-2.6 billion (up from a range of $1.55-1.15 billion in the forecast issued at the end of the first quarter) and an operating profit of $1.85-1.45 billion (compared to the previous forecast of $0-400 million). However, in the long term, according to Glickman, "Once the Houthi threat is resolved, we are likely to see a shift in trend, leading to an oversupply of ships as shipping companies will no longer need to sail on longer and more circuitous routes."
Zim went public in early 2022, raising $217 million and beginning trading at a value of $1.7 billion. In March 2022, it traded at a record value of $10.6 billion, but a sharp drop in freight prices in 2022-2023 impacted its operations, resulting in a $2.7 billion loss for 2023. Since the beginning of this year, the company has been on a recovery trend, concluding its first half with a 30% increase in revenues to $3.5 billion and a profit of $465 million compared to a loss of $271 million in the same period last year.
Zim's market value has jumped by 99% since the beginning of the year, reaching $2.68 billion.
