ZIM Integrated Shipping Services Ltd. Q2 FY2024 earnings call

• ZIM reported strong Q2 results with record carried volume of 952,000 TEU, up 11.7% y-o-y. - Raised full-year guidance: adjusted EBITDA expected between $2.6 billion to $3 billion and adjusted EBIT between $1.45 billion to $1.85 billion. - Fleet renewal program progress: 38 of 46 new-build container ships added to the fleet, including LNG-powered vessels. - Tech investments: Invested in CarbonBlue (climate-related tech) and an e-commerce startup with robotic grasping technology. - Strong performance in Transpacific and Latin America trades, with Transpacific volume up 29% y-o-y and Latin America volume up 90% y-o-y.

In the second quarter, ZIM generated revenue of $1.9 billion, with net income of $373 million. Adjusted EBITDA was $766 million and adjusted EBIT was $488 million, with adjusted EBITDA margin at 40% and adjusted EBIT margin at 25%. Carried volume totaled 952,000 TEU, a record high, with double-digit growth. Transpacific carried volume grew 29% year-over-year, and Latin America volume grew 90% year-over-year. Revenue contribution from container shipping was the primary segment, with non-containerized cargo (car carrier services) totaling $128 million in Q2.

• Raised full-year 2024 guidance, expecting adjusted EBITDA between $2.6 billion to $3 billion and adjusted EBIT between $1.45 billion to $1.85 billion. - Outlook for the second half of 2024 is stronger than the first half. - Volume assumptions for 2024 guidance remain unchanged, expecting double-digit volume growth. - Fleet renewal program provides visibility into cost structure, and 2024 results not impacted by Red Sea crisis charter market rates.

• Red Sea crisis ongoing, causing supply constraints, port congestion, and equipment shortages. - Long-term market dynamics point to supply growth outpacing demand, leading to potential reversion of peak rates. - Volatility in the container shipping industry remains a risk.

Q: Regarding volumes, is the 952,000 TEU in Q2 a new baseline and color on Q3 volumes?

A: Xavier Destriau said they expect to continue growing, aiming for 1 million TEU per quarter soon as they upgrade and upsize capacity.

Q: Thoughts on uses of excess free cash flow?

A: Xavier Destriau mentioned prioritizing balance sheet strength, capital allocation to assets, fleet rejuvenation, and continuing to return capital to shareholders via dividends.

Q: Board's view on potential 50% dividend payout?

A: Xavier Destriau said the Board will closely assess full-year performance and market dynamics near the time of considering the true-up towards March next year.

Q: Tax rate for full year 2024 and vessel renewals?

A: Xavier Destriau said no significant tax charge expected due to carryforward of 2023 tax losses; for vessels, 2024 renewals involve redelivering smaller vessels, and 2025 renewals will depend on rate environment and market dynamics.

Q: Down payments for remaining vessels and charter decisions?

A: Xavier Destriau said there are down payment commitments for remaining vessels, and charter decisions will depend on rate environment and duration arbitrage.

Q: Expectations for container demand in the second half?

A: Xavier Destriau said demand in the second half should be okay, monitoring inventory levels in the US, but no clear signal of demand collapse yet