ZIM Q4 2012 results

21/03/2013

ZIM Ends the Year with an EBITDA Profit of $107 Million and an Impressive Improvement in All Operational Parameters

The Company gained the financing banks' full support and trust in concessions in debt payments and an adjustment of the financial covenants

As per requests of some of the banks, the Israel Corporation agreed to place ZIM’s shares to the benefit of the company’s creditors, as a basis for the continuation of a long-term dialogue.

ZIM ends the year with an improvement in all operational parameters and with positive operational results despite the difficult market conditions that prevailed last year. In EBITDA terms the profit amounted to $107 million compared with a loss of $82 million last year, a $189 million improvement. The company's efficiency and optimization measures contributed to the continuation of the business results advancements, and in accordance, the company introduced higher than average operational results compared to other companies in the sector. The accounting loss to shareholders amounted to $433 million, of which, $133 million is a one-time loss due to cancelled ships orders.

Additionally, ZIM reports achieving the sponsoring banks' full trust and support, as expressed in concessions in debt payments and an adjustment of the financial covenants in order to face the challenges of the market.
The concessions include the delay of principal payments that were due in 2013 to the banks and other lenders, to be paid at the end of 2014; this delay will contribute to improved cash flow of about $166 million and will allow ZIM additional flexibility in its current activities.

As per requests of some of the banks, the Israel Corporation agreed to place ZIM’s shares to the benefit of the company’s creditors, as a basis for the continuation of a long-term dialogue.

The company has reached an agreement to cancel an order of five vessels with immediate effect, and to defer the delivery of the remaining ships orders to 2016. Additionally, the company secured a right to rescind orders of four remaining ships until January 2014, in accordance with the shipyard. The company will also receive a refund of $30 million off the deposit paid for the ships orders that were cancelled. The agreements include cancellation and postponement of payments of $235 million that were planned for 2013. The agreements free the company from an off-balance-sheet obligation of $1.4 billion. The company recognizes in Q4 a loss of $133 million as a result of the cancellation of ships orders. .

Revenues this year amounted to $3.96 billion, which reflect a 5% rise compared to the previous year. Revenues in the fourth quarter amounted to $981 million compared with $899 million in the comparable quarter in 2011, a 9% increase. The increased revenues resulted from a rise in the average freight rates per container, which gained 6.3% compared with the same quarter last year (from $1,283 per TEU [a 20ft container] at the comparable quarter in 2011 to $1,364 per TEU this quarter). Annual average freight rate rose by 2% compared with last year (from $1,314 in 2011 to $1,342 this year). Carried TEUs amounted to 2.4 million TEUs, a decrease of 1% compared with the previous year and of less than 1% compared with the previous quarter.

From an annual perspective, the company's operational loss amounted to $206 million compared with an operational loss of $276 million last year – a $70 million improvement. In EBITDA terms, the company ended 2012 with a profit of $107 million compared with a loss of $82 million last year, a $189 million improvement. Q4 ended with an operational loss of $170 million compared with an operational loss of $126 million in the comparable quarter of 2011, a worsening that resulted mainly from the cancellation of the ships orders. While in EBITDA terms the company recorded a $6 million profit compared with a loss of $79 million in the comparable quarter in the previous year – an $85 million improvement.

Operating cash flow in 2012 amounted to $94 million compared with $22 million in 2011, a $72 million improvement. In Q4 2012 ZIM recorded an operating cash flow of $49 million compared with a negative operating cash flow of $26 million in Q4 2011, a $75 million improvement.

In the bottom line, in 2012 the company recorded a loss to shareholders of $433 million, including a one-time loss of $133 million due to cancelled ships orders, compared with $397 million loss in 2011. In Q4 2012 the loss amounted to $239 million compared with $151 million in the same quarter last year. The Q4 2012 loss includes the one-time loss of $133 million due to cancelled ships orders that was recorded in that quarter.

Total financial assets excluding clients, other debtors and derivative instruments at the end of the year amounted to $197 million, compared with $198 million at the previous year-end – a $0.9 million decrease.

Looking ahead, conditions in the sector are still challenging. This is mainly attributable to the continuant entrance of new-buildings to the market, which creates a supply surplus and pressures on the freight rates, as well as to the high volatility of oil prices. In view of that and due to continued uncertainties in the global economy, ZIM approached its financing partners in order to achieve certain concessions in debt payments due in 2013 and an adjustment of the financial covenants, so as to reflect the current market conditions and the challenges attributable to uncertainties in the global economy and in the shipping industry in particular. ZIM reports achieving acceptances by all banks to certain concessions and an adjustment of the financial covenants, which reflect the trust and support the company gains by its financing partners. By April 30th, the company will introduce a 5-year business plan to the banks.
In conclusion it should be noted that in this quarter, same as in the previous quarters this

year, ZIM's operational results were similar to the average in the sector and from an annual perspective, were even above average. This demonstrates the significant advancements in the company's performance and its competitive status improvement. The company continues to implement efficiency and optimization measures, in order to further improve its results. The combined improved efficiency on the one hand, and the proper examination and evaluation of any possible change in the market conditions on the other, are expected to allow further advancements in the company's performance in the next few years relatively to the sector.