Israeli container carrier ZIM has denied a report Friday that said it is looking to sell the majority of its global shipping operations to instead become a regional Mediterranean carrier.
The Wall Street Journal reported that one person familiar with the matter said ZIM's bankers "are traveling around the world with a sale prospectus," while another individual familiar with the matter said the company wants to split in half, selling services between the U.S. and Asia, theU.S. and the Mediterranean, and Asia and the East Mediterranean, "while holding on to a handful of ships for Mediterranean trades."
However,ZIM told American Shipper it is rejecting the rumor that it has intentions to sell its global shipping operations. "We have been a global player for the past few decades and we have no intentions what so ever to stop being one and provide worldwide services to our clients," the carrier said.
Thirty-twopercent of ZIM's shares are held by Kenon Holdings Ltd., while the additional 68 percent are held by financial institutions and shipowners, who acquired their majority stake in the company when it went through a financial reorganization, completing a debt restructuring agreement in July 2014.
Lastmonth, Rafi Danieli, the chief executive officer of ZIM, told American Shipper that his company had become a "global niche carrier," concentrating on specific global trades, including services between Asia and the Pacific Northwest of the U.S. and Canada where it now operates four strings, and Asia and the U.S. East Coast where it is on five strings.
Danieli said that ZIM, like other container carriers, is under pressure because of astrong decrease in demand and a big increase in capacity. He said this has caused rates to plummet and has resulted in "bad results for the whole industry.”
Kenon said in a filing with the U.S. Securities and Exchange Commission that ZIM carried approximately 617,000 TEUs in the second quarter of 2016 compared toaround 577,000 TEUs during last year's second quarter, and Danieli said the volumes increase "shows the trust of our customers in the company. Our fast reaction to market changes, and cost efficiency programs, aims at allowing ZIM to cope with the challenges faced by the industry".
ZIM’s revenues decreased to $612 million for the second quarter of 2016, as compared to $763 million for the second quarter of 2015, primarily due to a decline infreight rates, partially offset by the increase in cargo carried. ZIM’s net loss attributable to its owners totaled $75 million in the second quarter of 2016, as compared to a net income of $10 million in the second quarter of 2015.
In the three months ended June 30, 2016, ZIM's adjusted earnings before interestand taxes (EBIT) totaled a negative $40.5 million compared to a positive EBITof $49.8 million for the second quarter of 2015.
Still,Danieli said ZIM's "strategic business plan, focusing on select markets where the company has a competitive advantage, is keeping ZIM in the top of the industry in terms of EBIT margins." EBIT margin is the ratio of EBIT tonet revenue.
Meanwhile,Kenon cautioned, "Excess capacity has resulted in historically low freight rates across various major trade zones. The impact on net income from the declines in freight rates has been partially offset by the current relatively low price of bunker, one of ZIM’s significant costs. A continuation of the trend of low freight rates could negatively affect ZIM’s business, financial position and ability to comply with its financial covenants."
Because ZIM believes it will continue to face a difficult market, it had approached creditors, some of whom are also shareholders in the company, and negotiated are scheduled repayment of $115 million. The payments were extended seven to 12 months.
Asa result of current conditions in the container shipping market, Kenon said it has carried out an impairment test in relation to its 32 percent equity investment in ZIM as of June 30. "Kenon concluded that as of June 30,2016, the carrying amount of its investment in ZIM was higher than there coverable amount, and therefore, Kenon recognized an impairment loss of $72million with respect to its investment in ZIM in Q2 2016," the companysaid. "After the impairment, the carrying amount of Kenon’s 32 percentequity investment in ZIM is $90 million."
