Shipping surge buoys Zim

Financial recovery, cost-cutting measures and a sell-off of assets enabled Zim to meet targets, and it even made an operating profit in the second quarter of 2010.

By IRIT AVISSAR
November 13, 2010 21:59
3 minute read.
A ZIM cargo ship.

ZIM cargo ship 311. (photo credit: Courtesy)

 
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‘Just as no one anticipated the crisis, no one expected the recovery and return to these levels. It was much stronger than we expected,” Zim Integrated Shipping Services Ltd.

CEO Rafi Danieli told Globes. “In conversations with our colleagues, no one expected such a recovery. But when there is such strong volatility, there is concern that a powerful correction will follow.”

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Just a year ago, Zim, a wholly-owned subsidiary of Sammy and Idan Ofer-controlled Israel Corporation, was in the throes of the worst crisis in its history. The company was hit by a confluence of a severe crisis in global shipping and heavy debts, which threatened to sink it under a debt burden of $800 million.

In the wake of the complex settlement with scores of creditors to restructure billions of dollars in debt, Zim embarked on a new route based on a new strategic plan. Although the company initially missed the plan’s targets, financial recovery, cost-cutting measures and a sell-off of assets has now enabled Zim to meet the targets, and it even made an operating profit in the second quarter of 2010.

Zim expects even better results for the third quarter, including an operating profit of $100m., compared with an operating loss of $153m. for the corresponding quarter of 2009.

On Sunday, Zim sold its stake in the Port of Lagos’s Tin Can Island Container Terminal for $154m.

Globes: Do you intend to sell more assets? Danieli: “We have no plans for more sales at this time. This sale was planned for 2011, but we were able to bring it forward and make it this year.



Do you have holdings in other terminals? “We have holdings in terminals in Spain and the Netherlands, but these are both very important holdings, and we won’t sell them.

Even in the sale of the Nigerian terminal, we created a deal structure that could actually expand our operations at it.”

If you are planning no more sales, does this mean that the cutbacks are over? “I don’t like the word cutbacks. It’s always possible to continue to become more efficient, so that the company is under constant pressure to streamline. We’ve undertaken many measures, some of which are still under way.

We were under pressure to streamline in view of our financial results, but the tension should be kept even when the results improve, so as not to accumulate fat.”

When times were good, Zim considered an IPO on the Hong Kong Stock Exchange at a company value of $1.5 billion, but the company missed the boat and failed to raise capital before the crisis hit.

Although the crisis caused Zim to defer the IPO, Danieli has not ruled it out.

“We haven’t dropped the idea of an offering, and we definitely haven’t neglected it,” he said.

“We suspended the plan because of the crisis, but the rationale behind the IPO is still valid.

When the capital market and shipping industry allow it, we’ll reconsider an IPO.”

Has the shipping industry returned to normal? “The general trend in the industry is positive, but reservations are warranted, and note that the economy has not yet returned to its previous levels, so we have to look at the future with caution.

“In terms of activity, we haven’t returned to the level of 2008, and we won’t get back to that scale of business anytime soon. However, in terms of business and deployment, we’ve opened two new important shipping routes and we have plans for changes and development.

The current infrastructure is more efficient and solid for the future, thanks to changes in our debt structure and changes and reduction in unprofitable activities. The infrastructure for the company’s future activity is more solid now.”

Which markets have had strong recoveries? “Asia and Europe remain strong markets, and they are the shipping industry’s growth engines. The American market has also shown strong recovery, although it is still in crisis.”

Europe is struggling in a deep recession. How can it affect the shipping industry? “The crisis caused volatility, but in terms of trade, activity is still extensive.”

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