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spk06: Ladies and gentlemen, thank you for standing by. I am Nikola, your chorus call operator. Welcome and thank you for joining the SIEM, Integrated Shipping Services Q4 and full year 2022 earnings conference call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchstone telephone. Press the star key followed by zero for operator assistance. I would now like to turn the conference over to Elana Holtzmann, Head of Investor Relations. Please go ahead.
spk01: Thank you, operator, and welcome to ZIM's fourth quarter and full year 2022 financial results conference call. Joining me on the call today are Eli Glickman, ZIM's President and CEO, and Xavier Destrio, ZIM's CFO. 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 of 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 actual events or results may differ, including materially. You are kindly referred to consider the risk factors in cautionary language describing the documents the company filed with the Securities and Exchange Commission, including our 2022 annual report filed on Form 20F today, March 13, 2023. We undertake no obligation to update these forward-looking statements. At this time, I would like to turn the call over to Zim CEO, Eli Glickman. Eli?
spk03: Thank you, Ilana. And welcome to everyone to today's call. Slide number three. 2022 was a record deal for Zim in terms of EBITDA and EBIT results. We delivered adjusted EBITDA of $7.5 billion and adjusted EBIT of $6.1 billion, 14% and 6% higher than 2021, respectively. For the year, adjusted EBITDA margin reached 60% and adjusted EBIT margin reached 49%. The development of our quarterly results in 2022 reflect changing market dynamics throughout the year. Q1 2022 was our best quarter ever with respect to all financial and operational parameters. And since then, our quarterly results have declined sequentially with Q4 2022 results dramatically reflecting the negative impact of the declining freight rates. I'm incredibly proud to present these results today and of the ZIM team for their exceptional execution in delivering these record results and meeting our 2022 guidance, especially considering the evolving market conditions. Slide four. We haven't been idle for the past two years. As we benefit from highly lucrative market conditions, we took important steps to best position Zim to execute in a more normalized market environment, improve our cost structure to ensure that Zim is optimizing its performance for the benefit of our shareholders and creating sustainable value over the long term. Most important was our decision to adopt our vessel chartering strategy. We secured cost-competitive and fuel-efficient new build capacity in a series of chartering agreements to support our commercial strategy. These agreements include vessels ranging from our flagship 15,000 TU LNG-fueled vessels intended to our Asia to U.S. East Coast service to smaller, more versatile 5,000 and 7,000 fuel vessels. Notably, as we replace smaller vessels with large ones, our cost per TEU will decline, driving improvements to our cost structure throughout 2023 and beyond. This will allow ZIN to competitively operate in low freight rate markets and weaker demand environments and maintain our objective of maintaining positive EBIT. Our chartering strategy also underscores our ESG target. 28 of our 46 new-built vessels we secure are LNG powered, making us an industry leader in terms of low carbon intensity. The 15,000 TU vessels are ideally suited to serve on our core Asia to U.S. East Coast service, and we are the first liner to operate LNG vessels on this trade. This is a significant commercial differentiation, which enables us to immediately reduce the carbon footprint of ZIM and our customers. Next. Our global new strategy and customer-centric approach remain the foundation of our commercial strategy. Our customer relationships drive everything we do at Zim, and we continue to make progress in enhancing our customer experience. We continuously work to enhance our digital offering and employ strict KPIs to ensure we maintain the highest service quality while preserving our personal touch we focus on special cargo high value services we continue to invest and improve our sales tools sales tools to support our profitability objectives we also strengthen our local prison presence in important markets such as australia new zealand thailand and vietnam Our commercial presence today is more diversified as we focus on trades where we can establish a competitive position. We continuously review our services and strive to improve our network for the benefit of our customers. As market conditions evolve, we adapt our services, open new lines, modify rotation, and suspend loss-making services. Recent example of these changes include a new premium line from South America West Coast to US East Coast in which we redeploy vessels previously deployed in intra-Asia services. A new service covering major ports in Southeast Asia and Australia. Rotation changed to our Express Asia Baltimore ZXB service and suspensions suspension of zex our asia to la express service these changes are proof of our agile approach aimed at providing steering line services to our customers as well as responding swiftly to changing market dynamics we also recently established a joint venture with the largest domestic shipping company in Vietnam, high-end shipping services. We have discussed the potential we believe this market holds and this joint venture uniquely positions them to serve local importance and exporters and more effectively connect local services with our international network. This joint venture will allow us to better serve manufacturers shifting from China to Vietnam, as well as potentially target the expanding Cambodia and Laos international trade. We also identified a commercial opportunity in the car carrier market, in which strong demand and tight supply are resulting in positive market dynamics. We currently operate 11 car carriers with plans to expand to 16 vessels by mid-year, turning our growth engine complementary to our core shipping activities. We continue to explore opportunities in early-stage companies, introducing disruptive technologies in shipping and broader ecosystems. Most recently, We participated in equity and debt financing for the company Fortisys, an innovative fintech platform designed to modernize cross-border trade financing. By using AI tools, Fortisys streamlines the credit application process and can offer small and medium-sized importers and exporters faster and cheaper access to working capital financing needs than traditional financial institutions. Moreover, Fortisys represents a unique financing solution that we will very soon offer to our customers as well, primarily via our digital freight forwarder, Shift Forward. There are valuable synergies between Shift Forward and Fortisys, and we are pleased to be able to offer our SME customers a new and innovative digital financing solution designed to assist them to grow their business. A positive development, which may benefit Wave Bill of Leading, one of our early investments, is a recent decision by the Digital Container Shipping Association, the DCSA, that was established in 2019 by most of the largest shipping companies with the objective of establishing IT standards for our industry. Together, the founding members represent over 70% of the global container shipping trade. This year's SA members recently announced their commitment to reaching 15% electronics bill of lading within five years and 100% by the year 2030. As you may recall, ZIM first introduced electronic bill of lading to its customer through the WaveBL solution back in 2017. And today, other major shipping companies are also offering the Wave solution to their customers. We are active investors in all our portfolio companies as we leverage our expertise, know-hows, and network to support these companies. We believe our portfolio of companies holds significant potential in the future. Our goal is to build financial resilience in our business, stay focused on our strategy and leverage our core strengths and ensure Zim is best positioned for a more volatile and uncertain market. We intend to employ our significant cash resources cautiously to support our future profitable growth. The actions that I have outlined are aimed at advancing primary objective to use our strengths to grow profitably and maximize value to our shareholders. Going to slide number five. Despite the current rate environment and challenging macro and industry dynamics, we are confident in our strategy and expect positive results EBIT in 2023. As such, for the full year, we expect to generate a just EBITDA between $1.8 billion to $2.2 billion and a just EBIT between $100 million to $500 million. Our CFO Xavier will shortly discuss the underlying assumption of our guidance and current market environment in greater detail. Based on our strong full-year results and confidence in our strategy, our board declared a Q4 dividend of approximately $769 million, or $6.4 per share. This brings our total dividend per on account of 2022 results to $2.04 billion or 44% of total 22 net income. Returning substantial capital to shareholders remain a priority as we seek to create long-term value and enable shareholders to directly benefit from our results. On that note, I will turn the call over to Xavier, our CFO, for his remarks on our financial results and additional comments on the market. Xavier, please.
spk05: Thank you, Elie. And again, welcome to everyone. On this slide, we present our key financial and operational highlights. As Elie did already mention, 2022 was a year of exceptional financial performance for Zim, even with the pace of normalization accelerating during the latter part of the year. Despite the deteriorating market, ZIM generated record revenue of $12.6 billion in 2022, and that is to be compared to $10.7 billion in 2021, a 17% improvement. During the year, our average freight rate to TU was $3,240, 16% higher than in 2021. as we benefited from the elevated freight rate environment for the majority of the year. In Q4, our average freight rate per TEU was $2,122, a 42% decline year-over-year and 37% decline from the prior quarter. Our free cash flow in the fourth quarter totaled $1 billion compared to $1.7 billion in the fourth quarter of 2021. Turning to our balance sheet, total debt increased by $1 billion since prior year end. As in recent quarters, this was mainly driven by the increased number of vessel fixtures, longer-term charter duration, as well as higher daily chartering rates. Regarding our fleet, we currently operate today 152 vessels, out of which 12 are car carriers. The average remaining duration of our current charter capacity is 27.3 months, essentially unchanged from November 2022. I would note that our current fleet includes five new build vessels, four of 12,000 TU capacity and one of 15,000 TU, which is the first of the series of the 15,000 TU LNG vessels that we ordered in 2021. We have 22 vessels up for charter renewal during the remainder of the year, with 36 up for renewal in 2024. This means that we have a total of 58 vessels up for renewal compared to the expected delivery of 41 chartered new-build vessels during this same time period. Moving on to the next slide, you can see that we delivered strong results over the last two plus years. and as a result our net leverage ratio has trended downward at the same time and currently stands at zero as of december 31st 2022 as we end the year in a net cash position turning to our fourth quarter and full year financial performance fourth quarter net income was 417 million dollars compared to 1.7 billion in the fourth quarter of last year Adjusted EBITDA in the fourth quarter was $973 million compared to $2.4 billion in Q4 2021. For the full year, net income was $4.63 billion compared to $4.65 billion in 2021. And adjusted EBITDA was $7.5 billion compared to $6.6 billion in 2021. Lower margins sequentially. The second half of 2022 versus the first half, as well as Q4 versus Q3, are driven primarily by lower revenue. Turning to slide 9, we carried 823,000 TEUs in the fourth quarter compared to 858,000 TEUs during the same period last year, a decline of 4% compared to the market decline of 8.5%. for the full year we carried 3.4 million teu that is a three percent decline compared to 2021 slightly better than the market decline of four percent in that quarter i'm sorry in the full year period lower volume on trans-pacific driven by congestion and lower demand were partially offset by higher volume in other trade lanes next we present our cash flow bridge And we ended 2022 with a total liquidity position of $4.6 billion. Important here to emphasize that this includes cash and cash equivalent investments in bank deposits and other investment instruments. For the full year, our adjusted EBITDA of $7.5 billion converted into $6.1 billion of cash flow generated from operating activities. And other cash flow items included $314 million of net capital expenditure, $1.7 billion of debt service, mostly lease liabilities, and dividend distribution of $3.3 billion. Moving to our guidance, as Elie already mentioned, we expect to generate positive EBIT in 2023. Specifically, we expect to generate in 2023 EBITDA of $1.8 billion to $2.2 billion and an EBIT range between $100 million to $500 million. We believe freight rates are close to bottom and expect some improvement in 2023. Further, we also expect our volumes to grow in 2023 as compared to last year. As we receive our new build capacity, and are able to better optimize our fees. As for bunker costs, we expect lower rates this year versus last year. Overall, while we don't give quality guidance, we do expect improved results in the second half of 2023 as compared to the first half. So we are entering this unpredictable time with a strong balance sheet. a significant cash balance of 4.6 billion and zero net leverage. As such, our board of directors declared a dividend to shareholders, which, including prior dividends paid on account of 2022 results, totals 44% of 2022 net income. We do remain committed to returning capital to shareholders under our current dividend policy of returning to shareholders 30 to 50% of our annual net income. Other capital allocation priorities remain intact. We have a commitment of approximately $155 million and $340 million in 23 and 24, respectively, as down payments for new vessels chartered primarily from C-SPAN, of which we already paid $13 million for the first 15,000 TU ship delivered to us last month. will continue to renew our container fleet and we continue to explore inorganic growth through the potential acquisition of regional liners in key markets such as southeast asia or latin america the backdrop against we are providing guidance today is extremely challenging the supply demand imbalance points to oversupply in 23 and 24. demand is soft And as a result, congestion in U.S. ports and elsewhere has unwound. Despite lower volumes in recent months, inventory to sales ratio was still below pre-pandemic level, has not come down, and various large U.S. retailers expressed caution with respect to their 2023 sales. These factors, among others, are causing freight rates to continue sliding. though at a slower pace as compared to the fall of 2022. Yet, there may be factors on both the supply and demand side that could mitigate the supply-demand imbalance. Capacity may be impacted by slippage. In fact, we've received indications with respect to some of our charted new-built vessels on potential delays. Scrapping also remains low, but the combination of practically no scrapping in the past two years and increased compliance requirement with IMO 2023 regulation may also decrease net supply. On the demand side, we believe that in 2023, we will see a return to a more normal demand pattern with demand stronger in the second half of the year, especially given the current weak demand. And on this note, we will open the call for questions.
spk06: Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question, press star followed by one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is coming from Nocta Omar from Jefferies. Please go ahead and ask your question.
spk07: Thank you. Hey, guys. Good afternoon. Nice earnings report today, clearly. yeah hi yeah yeah definitely earnings coming in stronger than a lot of us had expected and i just wanted to ask you know maybe about the if you could expand just a little bit about the the earnings uh surprise perhaps uh the the other revenue line item i guess the non-container uh portion of the revenue those are at their highest ever at 442 million what's behind the upwards move there and what can we kind of expect as we move here in the next several quarters
spk05: Thank you, Omar, for the question. As far as we're concerned, the Q4 results did not surprise us and are pretty much in sync with the guidance that we provided the market with back in November. But to your question with respect to the contribution of a non-containerized income, we did benefit still in the fourth quarter from two strong factors. detention and demurrage, especially relevant on the Trans-Pacific trade lanes and in the US, were still quite high. We still experience congestion in Q4, although now this has pretty much did unwind itself. And second, when it comes to our car carrier activity, we've been growing and we continue to grow our presence in this market, and it has contributed to also a significant impact on our revenue and also on our bottom line and we expect the car tire activity to continue to contribute positively to our earnings next year and in the years to come got it thanks Xavier and then maybe just kind of big picture clearly from you know the press release the presentation and your comments here
spk07: You at Zim, you feel very confident, despite the soft market we're seeing today, that you'll have positive EBITs and maybe perhaps positive earnings, I guess, overall for 23. I guess as we kind of think about the market as it is today, how would you characterize things as they are? You mentioned that you expect rates to be at bottom here in the near term and the recovery coming. What's going on in the market from, say, from your perspective, from, say, the demand angle? Are we seeing an actual substantial drop in demand or is this more of an unwinding of retail inventory and thus we may not really have a good clear picture of where demand is until that inventory unwinds completely?
spk05: That's a good question. There is clearly a lot of uncertainties ahead. And you said that we are confident. I would say that we are confident in the actions that we took in 2021 and in 2022 to make sure that we are well prepared to enter into this new normal post-pandemic. And so our cost structure is going down. And this is the one lever where we can have an action upon that we've been very active in ensuring that we drive the cost down. So that we've done. And now when it comes to the demand, clearly we've seen the demand softening throughout the second half of last year. We've seen a destocking type of strategy by the main retailers in the US that was very aggressively performed in the fourth quarter and into the first quarter of this year, of 2023. With that, you've seen that the capacity has been adjusted with more and more blank sailings. But as we were implementing more blank sailings, the demand was still softening even more. So we believe that at some point, this stocking effect will end and the retailers will have to come back and replenish their inventories. Hence why we are reasonably optimistic when it comes to the statement that we are making. We think that the market is close to reaching a bottom before the demand starts to come back. And as a result, we expect that we have a positive effect on the overall freight rate.
spk07: Thank you. Thanks for that color. And maybe just one final one just about the contracting that's hopefully or potentially underway now. How are things developing here for the 2023 contracting season? Clearly, there's been a big disconnect between contract rates historically and where spot rates are. What's going on in that market and how are you preparing for that?
spk05: Yes, clearly the market today, when we look at where the spot currently is on the main from specific trade lanes, kind of pushes the shippers to ask for a significant rate reduction compared to last year. And we very well understand that. So the one thing I would say is that the company is... has engaged with most of our key customers with whom we would like to enter into a contract settlement, both from a quantity perspective and from a rate perspective. First, what we are hearing today from our customer base is that they are very pleased with Zim and we hear a lot of positive feedback and comments on the very fact that we are the first liner to deploy in LNG service on the Asia to the US East Coast. And that resonates very strongly to vis-a-vis our customer base. So now we do hope that it will translate into the final discussions on the rates to levels where we would both shippers and ourselves be happy. We clearly have set ourselves a limit in terms of where we are not willing to go in terms of floor. For now, the discussions are ongoing. It's still too early to say what will be the final outcome of all those decisions. But clearly, we feel that from a commercial positioning perspective, the name and the brand of Zim resonates pretty high in the eyes of our customers in the U.S.
spk07: Got it. Thanks. Sorry, just one tiny follow-up to that. Are you able to give a ratio or percentage of how much of your 23 business you've got under contract so far?
spk05: We are still looking into 50-50 and the ratio that we've been dealing by over the past few years of 50% contract cargo and 50% spot is still pretty much where we would like to end. But again, we will see where we end when we finalize each of the discussions with each of our customers. And if the rates are not satisfactory to ourselves, we might revisit that percentage allocation and agree to expose ourselves more to spot marks. We think that the second half is going to be indeed better than the first.
spk07: Okay. And just for clarity, the 50-50 is just on the Trans-Pacific?
spk05: Correct, correct. This is really the trade where we have a significant amount of our volume that is being contracted. We still, on the other trade lanes and mainly on the Asia Med, we also have a contract discussion with customers, but those are more quarterly as opposed to yearly. And in terms of quantum, I would say it's 25% of the trades compared to the 50% of the Trans-Pacific.
spk07: Great. Thank you. I'll turn it over.
spk06: The next question is coming from Bland Sam from JP Morgan. Please go ahead.
spk00: Hi, it's Sam Bland here. I have two questions, please. The first one is, on the chart, as you mentioned, the sort of maturity profile, is your current plan to let them run to maturity on the sort of agreed timescale, or are there any options to either accelerate or delay? How are you thinking about that? And the second question is, you mentioned slippage of the order book in the presentation. We've heard that from elsewhere as well. Do you think it's possible that the slippage could be quite a material amount of the orders or the deliveries planned for 23-24? Or are we talking about sort of small bits around the edges? Thank you.
spk05: Good morning to you, Sam. Yes, the first question in terms of the Charter. Clearly, we need to differentiate here, I think, the long-term Charter, the new-built vessels that we've ordered over the past two years. Clearly, we intend to take delivery of each and every vessel. We are eagerly awaiting those vessels. they are clearly in line with our vessel strategy and commercial strategy. So there is here no intention from the company to cancel, delay any of those contracts. On the more traditional charter market, when we charter from the tonnage provider existing tonnage, as opposed to the new build tonnage I was just referring to. In 21-22, we did enter into a significant amount of contract for a duration of three to five years. So by and large, this is what is driving the average duration of what's left in our chartering agreements. So meaning that between 2023-2024, we have a few vessels up for renewal, but it will really come back in 2025 and beyond. Now, when we look at the vessels that come up for renewal in 2023 and in 2024, that's clearly 50 vessels. Most of them, it is very likely, depending on what the market does, but if the market conditions remain difficult, most of those vessels will be delivered. We do not intend to break any of our commitment vis-à-vis any of the tonnage provider. We will make the decision to re-deliver tonnage when we have the ability to do so, or engage early with some tonnage provider to potentially discuss extension, if we think, and at a lower rate, obviously, if we think that this said vessel will be of use for us for a longer period. With respect to your second point and and slippage it's difficult to assess to what extent it will have a significant impact clearly for us, we are, we are very much. You know, in front of that of that matter, because we are awaiting the 15,000 to you ships that we've ordered the out of the 10 nine. of those ships initially were expected to be delivered in 2023. We have received the first one. We know that we will receive the second and the third in the coming weeks. But we've been advised that there might be a delay for some of the vessels that were meant to be delivered to us in 2023 from that very specific shipyard. So we do think that some of the shipyards in Asia do have manpower or resource issues, which is affecting us. There's no reason to think that it is not more widely affecting the overall industry. When it comes to the other vessels that we have up for delivery towards the end of the year, end of 2024, today we don't know yet, but we anticipate that there might be as well some delay.
spk00: Okay. Be sure, on the first answer, when you say re-delivered, so your current charter will be re-delivered, does that mean handed back to the charterer?
spk05: Correct, to the vessel owner.
spk00: Yeah, to the vessel owner.
spk09: Okay, thank you very much.
spk06: The next question is coming from Satish Sivkuma. Please go ahead.
spk04: Thank you. Thanks for the presentation. I got three questions here. So firstly on the restocking, right? So obviously there has been this sense of optimism that volumes are looking, at least it trends into second half of the year looking great, or we are seeing signs of recovery. And what are you actually seeing based on your conversation with the shippers and how does it actually differ from say normal seasonality related moments that you normally get around this point in the year? And the second one is actually around the 2M alliance. Obviously, with the MERS coming out of the alliance, what does it mean for you within 2M? How much of your VSA is actually related to MERS? What is your exposure to MERS versus MSC? And then, say, into the dividend payment for FI23, given that VR might see a second stepped on on normalization, would you still stick with your quarterly dividend payments, given potentially there'll be quarters where you could probably end up loss-making? What are your thoughts on the quarterly dividend payment? Yeah, thank you.
spk05: Thank you, Satish. So with regard to your first question on potential restocking, this is early days to come to a definite conclusion as to when the volume or the demand will come back up. But clearly we are getting some early indication and early signs that the inventories, and once the inventories have come down to the level where the main retailers want them to be, the demand will resurface. And that, from a seasonality perspective, also indeed collides in the first quarter of 2023 with the traditional slack season that is the period in terms of ordering and demand affecting the trade lanes where we operate. So today, in the early days of 2023, we have the combination of those two elements. which is the destocking and the slack season. Hence why again, we truly do believe that we are near to a bottom in terms of demand and therefore in terms of potential rates in some trade lanes. When it comes to the second question, the 2M and the breakup or the future breakup of the alliance between Maersk and MSC, I think by and large, this doesn't come as a significant surprise for all of us that have been watching this industry and how everyone is pursuing different strategies. As far as we're concerned, We have been collaborating with both of them, and we do collaborate with both of them on the Transpacific trade lanes, obviously, but also individually on some other trades. Our relationship with Maersk and with MSC is extremely good. We have benefited, and I think all of us did benefit from working together over the past five years now, or four years, should I say. We started in 2018 in the summer. And we intend to continue to discuss with all the major shipping lines on the trade where we do believe it makes sense from a company perspective, from an industry perspective, and from an end customer perspective to better utilize and better operate our fleet. So we are an important player in terms of market share on the Trans-Pacific, and we see no reason why we will not continue to work with MERS, with MSC, with both of them, with one of them in the longer term. For now, the relationship is still very strong and very efficient up until, I think, January 2025 is the date where they will part ways. And with respect to your last question on dividend, yes, it's been very important since day one for the company to return a significant capital to shareholders. And we've been, I think, true to that statement since day one. We, for now, there's no reason to think that our dividend policy may change. As of today, it stands as it is. As you know, every quarter, no matter what, irrespective of the dividend policy, the board makes a decision and renews a decision every quarter as to what is the dividend that is due to be paid. So we see where we end in 2023. Every quarter, the discussion will take place at board level.
spk04: Okay, thank you. Just to follow up on the comment on Maersk and MSC, so would you need to say that into 2025 or beyond that you would still work with both MSC and Maersk on an individual basis?
spk05: What I'm saying is I don't know whether we will. I see no reason to think today that we won't. That's what I'm trying to get to. I don't know. We don't know today what will be the new set or the new scene in terms of whether Maersk and MSC will operate independently, whether there will be some reshuffling in the way the other shipping lines do interconnect. We don't know that. What we know is that there is no reason for us not to consider working with any of them or with some others. By the way, it could also be very possible. We will see. What we think is that we are a very important player, again, in terms of the market share that we command, especially on the Asia-US East Coast trade lane. We have a very efficient fleet with the 15,000 TU ships that we are currently scaling up in this trade. So we are a very interesting partner to partner with. And there's no reason for us to think that the future, when it comes to cooperation, is not going to offer opportunities for Zim and for our potential future partners.
spk04: Okay, thank you.
spk09: That's quite helpful, Xavier. Thank you.
spk06: The next question is coming from Alexia Dongani. Please go ahead.
spk02: Oh, hi. Thanks for taking my question. It's Alexis Duggan from Barclays. Just three as well, please. Firstly, on the outlook for 2023, given Eli's comments around profitability improving in the second half, are we basically expecting EBIT losses in the first half? And subsequent to that, obviously, you've talked about, Javier, your expectation of spot rates improving from here. how much improvement are you expecting to meet your guidance range? I mean, to the extent you're willing to share. Secondly, following up on Sam's question on the vessels and the 58 vessels that are coming up for renewal over the next two years versus the 41 that you've already chartered, the net of this should be kind of a double-digit decline in unit costs or less. And just on the comment of handing it back, would you be willing to reduce your feed size from 138 container ships at the moment down by 58? And under which scenario would you do that? And then finally, in terms of CAPEX, can you remind us Cash capex, expectations for 23 and 24, and lease capex as well. Thanks.
spk05: Sure, thank you, Alexia. First, on your question with regard to the outlook for 2023, yes, as we said, we expect the second half to be an improvement compared to the first. We do not, as you know, provide a calendar view when it comes to the guidance. You were asking whether That meant that we were expecting a bit losses in the early part of 2023. Not necessarily that we didn't say that. In terms of improvement also for us, when it comes to the question on tradeways, what do we expect to see? As far as we're concerned, it will be also a function of where we end up in our contract discussions with our customers on the Trans-Pacific trade lane. If we are saying that 50% of our volume is meant to be contracted and then 50% will be on the spot, it's going to be a different effect if we end up otherwise. But providing that we end up where we think we will from a contract rate perspective, this provides us the comfort that we think that the second half in 2023 will be better market conditions overall for ZIM. With respect to your second question, 58 vessels that potentially come up for renewal against the 41 that we will take delivery from over the next two-year period, so all the way to the end of 2024. As to whether we will let go all of those 58 vessels, we will see it's not a one for one. I think this is what we need also to bear in mind. Very likely that the smaller capacity vessel, the feeder size type of ships that currently we employ or we deploy mainly on the intra-Asia business as a feedering line, but also as an intra-Asia or intra-Asia services, Those vessels are needed by the company to maintain service and servicing those areas where we think there is, by the way, quite significant opportunity for growth. So what will happen? is that there will be a cascading effect we will take on larger capacity vessels those will come and replace ships that will be redeployed elsewhere so we start with the 15 000 tu ships that will come and replace the 10 000 tu that we currently uh uh employ on the asia usc score those will go and uh and upsize the zxb and and so on and so forth and then at the end of the day we will uh we will let go uh some some vessels that will be in the panamax size type of segment mainly so the big ships will keep on the big east west trade the smaller feeder side feeder size vessels will be very much needed also in the uh in the regional trades where we where we operate And in terms of addressing your last question on CAPEX, we have the commitment to pay down at delivery of each of the LNG vessels that we've ordered a down payment, as you know, $13 million per ship for the 15,000 TEU vessels and $20 million per ship for the 7,000 TEU vessel. So that adds up to roughly 140 million in 2023 and another 350 million in 2024, according to the current delivery schedule. On top of that, we will have the renewal of equipment, which will be limited because we have already secured and purchased a lot of equipment back in 2021. With the congestion being less of a problem this year, the rotation of the equipment is being facilitated. So we need less equipment in order to carry the same cargo. But still, we will continue to replace all the boxes with newer ones. And we will continue to invest in developing our digital solutions, which is very important to us. the forefront of the digital transformation of the industry, and we intend to continue to keep this technological edge.
spk02: Thanks, Javier. And if can I just ask a clarification on the first answer. I mean, historically, contract rates are struck at a spot, at a discounted spot for obvious reasons, because shippers get a kind of a discount for the volume they commit a year forward. Based on the comments you made, it kind of makes me think that you share the opposite view. If that's the case, why should contract rates, let's say, be struck on spot or at the premium spot conceptually? Thanks.
spk05: I think today's market environment is a little bit unique in a way. We just concluded two years of extraordinary situation. We are today, from the pendulum effect, if I may use this analogy, the market has gone very strongly in the opposite direction. I think both shippers and liners know that there is a middle range that is the natural equilibrium that we should all attend and lean towards. Otherwise, the disruptions might affect the shippers as well. If we don't get the rates that we believe make sense for us to continue sailing, we will stop sailing. And then if we stop sailing, then it may have a more drastic effect on the ability of our customer to uh to secure their supply chain so so i think it's not that simple in terms of where the market dynamics are leading us today uh they are still quite a few weeks ahead of us before we finalize the discussions on the uh on the contract uh cargo whether we will end above below or close to uh spot remains that remains to be seen for us like i said we have our objective and our objective our customer by customers we don't treat all customers the same way we we we We have a one-to-one relationship, and we know exactly where we can go and where we want to go. Thank you.
spk06: This concludes our Q&A session, and I hand back to Eli Glickman, President and CEO, for closing comments.
spk03: Thank you. Despite challenging market conditions toward the end of the year, we continue to execute our global needs strategy and deliver outstanding execution and profitable growth in 2022. Fully EBITDA and EBIT results were all-time records. As a result of our outstanding cash generation and strong balance sheet, we declare a Q4 dividend of approximately $769 million, or $6.4 per share. While the near-term liner industry outlook may be uncertain with increased supply and weaker demand trends, as Xavier discussed, we believe there are reasons for optimism as we look ahead. We took deliberate steps over the past two years to both diversify our commercial presence and improve our cost structure, enabling the company to continue to serve in more normalized environments like the one we are experiencing today. We remain highly confident that we have the right strategy in place with our competitive, efficient, and cost-effective new build capacity on the way. And our investment in digital innovation and disruptive technologies continue to position Zim to best serve customer and shareholders over the long term. Thank you all. Thank you.
spk09: Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone.
spk06: Thank you for joining and have a pleasant day.
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