ZIM Integrated Shipping Services Ltd.

Ladies and gentlemen, thank you for standing by my name is krista and I will be your conference operator today. At this time, I would like to welcome everyone to them integrated shipping service third quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise and 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. And if you'd like to withdraw that question, again, press star one. Thank you. And I would now like to turn the conference over to Ilana Holzman, Head of Investor Relations. You may begin. Ilana Holzman, Head of Investor Relations. You may begin. Ilana Holzman, Head of Investor Relations. You may begin. Ilana Holzman, Head of Investor Relations. You may begin. Ilana Holzman, Head of Investor Relations. You may begin. Ilana Holzman, Head of Investor Relations. You may begin. Ilana Holzman, Head of Investor Relations.

You may begin. Ilana Holzman, Head of Investor Relations. You may begin. Ilana Holzman, Head of Investor Relations. You may begin. Ilana Holzman, Head of Investor Relations. You may begin. Ilana Holzman, Head of Investor Relations. You may begin. Ilana Holz Joining me on the call today are Eli Glickman, ZIM's President and CEO, and Xavier Desleaux, 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 and cautionary language described in the documents the company filed with the Securities and Exchange Commission, including our 2023 annual report on Form 20F filed with the SEC in March 2024. We undertake no obligation to update these forward-looking statements. At this time, I would like to turn the call over to Zim's CEO, Eli Glickman. Eli.

Thank you, Ilana, and welcome, everyone. We are proud with Zim's strong performance in the third quarter, in which we again deliver record-carried volume as well as exceptional profitability which underline our strong financial results. We generated net income of $1.1 billion and revenue of $2.8 billion in the third quarter, as you can see in slide number four. Adjusted EBITDA was $1.5 billion and adjusted EBIT was $1.2 billion. We suggested EBITDA margin of 55% and adjusted EBIT margin of 45%, indicative of our continuous strong financial position. We maintain total liquidity of $3.1 billion at quarter end. Slide number five. Our nine months results are better than expected. and with an improved outlook for Q4 24. We are raising our 24 guidance ranges. We now anticipate fully adjusted EBITDA between $3.3 billion to $3.6 billion and adjusted EBIT between $2.15 billion to $2.45 billion. Also, thanks to our improved cash generation to date and strong balance sheet, our board of directors has declared a special dividend of $100 million on top of the regular dividend of $340 million or 30% of Q3 net income per our dividend policy. On a per share basis, we will distribute a total of $3.65 per share, which is made up of $2.81 per share on account of Q3 results plus 0.84 or 84 cents per share as a special dividend. Returning capital to shareholders has always been a priority And we are pleased to share our success with shareholders today with this substantial dividend. Slide number six. This water's result was the highest we have delivered since Q3 2022 and higher than any period prior to the extraordinary COVID market. While this quarter results were also driven by elevated freight rates, we have undertaken important strategic and commercial initiatives to maximize our earning power. We believe that these actions have improved our competitive position and will continue to benefit us going forward regardless of prevailing market conditions. First and foremost is, of course, our fleet renewal program. To remind you, in 2021 and 2022, we engage in a series of long-term charter agreements to secure 46 new-built vessels, including 28 LNG-powered container ships, to be delivered over the course of 2023 and 2024. The benefits of our fleet transformation are already evident in 2024, driving our strong results this year. Enter 2025, and once we receive all 46 new vessels and re-deliver some older capacity as planned, 50% of our fleet capacity will be new-built, resulting in more fuel-efficient and cost-efficient capacity. Our average vessel size has grown, making our fleet better suited to the trades in which we operate and improving our cost structure. Moreover, About 40% of our capacity will be LNG powered. ZIM was an early adapter of LNG, enabling us to be the first and only carriers currently operating two services on the Asia to US East Coast trade with LNG vessels. This has been an important commercial differential for us which supported our efforts to capture additional volume as we grew our operated capacity on this trade. In addition to reducing the environmental impact of ZIM operations, we have also seen financial benefit from our utilization of LNG. LNG is 25% more efficient as compared to LSFO and has been consistently cheaper than LSFO since we had our first 15,000 ULNG vessels delivered to us in early 2023. Importantly, we ensure reliable access to LNG, which is not as readily available as LSFO, by reaching strategic supply agreements with Shell Recently we entered into an additional agreement with Shell and now our services to the US East Coast are covered by long-term LNG supply agreements. This has enabled us to operate our dual fuel energy vessels on LNG and capture these cost benefits. Our improved competitive position on the Asia-to-US East Coast trade also helped us reach our new operational collaboration agreement with MSC, replacing the agreement with the 2M. More recently, we also agreed to a new operational collaboration with Hapagloid covering the Atlantic trade. These and other operational collaboration agreements we have in place allow us to improve network efficiency by promoting greater utilization of larger vessels as well as enhance our product offering to customers with better port coverage. Ryzim Secured calls competitive new build capacity to support its commercial strategy and was prepared to operate independently, these operational collaborations de-risked the significant capacity growth we have undertaken in 2023 and 2024. We have also been proactive in securing the necessary equipment to support our planned volume growth this year. As I already mentioned, a key factor contributing to our strong Q3 results has been volume growth. reaching 970,000 TU, which represents another record high for Zim. This 12% year-over-year growth significantly outpaced global container market growth. We are incredibly pleased with our progress in gaining market share, owing to our strategic investment in Zim Fleet, particularly on the Asia-to-US East Coast trade. we have also delivered significant growth in Latin America, a newer focus area for Zim. Identifying potential growth opportunity and demonstrating commercial agility have been and continue to be a core strength at Zim. Identifying the car carrier opportunity and expanding our capacity to 16 carriers is one example. Two more recent examples Our expanded focus on Latin America, which I just mentioned, and the expedite services we relaunched in 2024 from Asia to the U.S. West Coast to capitalize on the strong volume growth on this trade. Another commercial decision we made this year that contributed to our strong Q3 result was our strategy to increase ZIM exposure to spot volume. As you will recall, earlier in the year, ZIM chose to deviate from our previous approach of a 50-50 split between spot and contract volume and instead increase our spot exposure in the Trans-Pacific trade to about 65%. This enables ZIM to benefit more significantly from the upward pressure we saw on spot trades in the third quarter. Slide number seven. Looking ahead, market dynamics still point to supply growth outpacing demand in 2025 and 2026, setting up for a version following a period of strong rates that has extended for most of 2024. However, the rate environment can be volatile and unpredictable, dictated by macro conditions and times factor external to the shipping industry. As such, our focus has been and will continue to be on improving our cost structure and operational and commercial resilience. It is important to highlight that our position today is fundamentally better as compared to a year ago. The transition period of 2023-2024 is concluding and we are on track to complete our fleet transformation as planned. The benefits of our strategic investment in our fleet have already begun to materialize this year as I have detailed today. Our position in 2025 and beyond will improve further as we are regaining flexibility in terms of the size of our operated capacity, which a total of 57 vessels up for renewal in 2025 and 2026, which we could re-deliver to owners. We can choose to continue operating in similar capacity or scale back depending on the market environment. As market conditions continue to evolve, we intend to remain agile and build on our track record of taking advantage of attractive opportunities that benefit them both operationally and financially. We are confident that the steps we have taken have solidified our position as an agile container shipping player with a competitive cost and fuel-efficient modern fleet. On this note, I will turn the call over to Xavier, our CFO, for more detailed discussion of our financial results, our Update 24 guidance, as well as additional comments on the market environment. Xavier, please go ahead.