ZIM takes $2.06 billion impairment in Q3 on container shipping negative outlook

Taking out the non-cash impairment NYSE-listed ZIM reported an adjusted EBIT loss of $213 million for the third quarter of the year, which compared to a $1.55 billion profit a year earlier. Revenues dropped 61% year-on-year to $1.27 billion in Q3 2023 compared to $3.23 billion in Q3 2022.

Eli Glickman, ZIM President & CEO, stated, “ZIM’s third quarter results reflected current operating environment, as demand remained weak and freight rates continued to deteriorate.”

ZIM reported an average container freight for Q3 2023 of $1,139 per teu compared to $3,353 per teu in the same period in 2022.

The container line is not expecting any upturn in the market in 2024 resulting in the $2.06 billion non-cash impairment related to the company’s assets.

Speaking on an earnings call Xavier Destriau, ZIM’s Chief Financial Officer said, “We also recorded a non-cash impairment of $2.1 billion this quarter, mainly driven by our negative outlook for container shipping in the near term, namely the deterioration in freight rates observed in recent weeks, with little expectations for meaningful recovery into 2024.

“In addition, we also needed to consider the increase in interest rates, which in turn increased our average cost of capital. As a result, the expected discounted cash flow the company may generate going forward are lower than previously projected, resulting in the recognition of this impairment charge.”

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The non-cash impairment is primarily allocated to vessel values but also relates to equipment, containers and other assets of the company.

ZIM has also lowered its outlook for 2023 as whole to an EBIT loss of $400 - $600 million based on an expectation of no material improvement in freight rates for the remainder of the year.

ZIM highlighted its financial reserves built up during the industry boom in 2021 and 2022. “This period of exceptional profitability has today led to a significant cash balance, which at quarter-end stood at over $3 billion,” Glickman said.