Zim Integrated Shipping Services Ltd. (NYSE: ZIM) is considered by many to be an Israeli shipping company that mainly identifies with large losses and debt settlements. But 2020, and especially 2021, is a whole different story.
After 2020 of a dream, flotation in New York followed which, at least for now, turned the company’s shares into a success story, with a return of almost 90% within six weeks. So how did a company that creates losses on the verge of collapse become the one that reported huge profits and who are the main winners?
Zim will soon announce its finances for 2020, the first as a public company on Wall Street. The container shipping company, headed by Eli Glickman, only benefited from the coronavirus pandemic.
The company raised $ 218 million to $ 15 per share in New York flotation, giving it an estimate of $ 1.5 billion before it started in the price range ($ 16-19 per share). Despite this, the stock price still managed to fall 23% on the first day, to a low of $ 11.15.
In the following weeks, the direction was positive. The winter stock price gradually rose, until at the end of last week, after a jump of 30% the previous week, it did not close at $ 28.25, giving the company a market capitalization of $ 3.25 billion. Of the flotation, the yield per share was 89%.
Zim has made two important announcements in the past few weeks, supporting the upward trend in its stock price. Both concerned the use of cash collected in flotation. In the first, more significant announcement, Zim reported that he had signed a strategic agreement with Seaspan to lease ten natural gas ships, in a contract worth more than $ 1 billion. The second announcement was about the partial redemption of two series of bonds listed on the Tel Aviv Stock Exchange. In total, the company will repay $ 85.4 million, 28% of the bond principal.
The partial repayment is not very significant financially, but it is symbolic and marks how far Zim has come since he faced collapse just a few years ago. The company had to make two major debt settlements, the second of which, in 2014, caused a 50% debt cut in the amount of $ 3.4 billion, which is the largest debt settlement in the local capital market.
Prior to the second debt settlement, Zim was owned Israeli Corporation (LEVEL: ILCO), under the control of Idan Ofer. Under the settlement, Israel Corporation was deprived of most of its stake in Winter in favor of the company’s creditors, leaving it with a stake of just 32%. Later, part of the Israeli corporation’s business was set aside in Kenon Holdings, whose shares were distributed as a dividend to the Israeli corporation’s shareholders, including the holding in Winter.
Glickman, who became CEO of ZIM long after these events, said in an interview with Globes after the flotation in New York, “Thanks to Idan Ofer, he is the only one who believed in the company in difficult times. In the Israeli capital market. is considered someone who wants to maximize profits, but has lost hundreds of millions of dollars, perhaps even a billion, over the years in the winter.During the period in which Winter was in trouble, he invested (through an Israeli corporation) $ 200 million, and caught a 68% stake in the company. Anyone else would let the company fall in a situation like this. “
Today, Cannon Holdings, controlled by Ofer, holds 27.2% of Winter, currently worth $ 804 million, giving a profit of $ 324 million on paper compared to the price on offer in January.
In addition to Canon, other earning entities are Deutsche Bank, which has a stake worth $ 396 million, and Danaos Corporation, with stakes worth $ 256 million.
Danaos is the shipping company itself, which is also traded on the New York Stock Exchange, with a market capitalization of $ 981 million. While Winter’s stock price rose 68% in the period since the company’s flotation, Danaos rose 92%. Other shipping and transportation companies also enjoyed a positive trend during this period: Star Bulk grew by 56%; Frontline grew 32%; and the largest company in the industry, Maersk, which is traded in Denmark, grew by 11%.
According to preliminary data published by Zim before flotation, 2020 was a record year for the company, as the prices of container ships rose sharply. The company expects to report $ 4 billion in revenue for the year, 20% more than in 2019, and make a profit of $ 500-525 million, which will mainly come in the fourth quarter, from a loss of $ 13 million in 2019. .
World shipping prices are rising. According to a CNBC report, prices in December 2020 were in some cases 300% higher than in March. The reason, the report said, was a lack of containers, and desperate companies waited for weeks for free containers. She quoted Ikea from Singapore as describing the situation as a global shipping crisis.
In his interview with Globes, Glickman said, “In the last three to four months, we have seen top prices for container transport, which has led to excellent results for companies. Winter has improved significantly for many quarters and is a leader in its profit margins. among shipping lines around the world. “
Asked what allows shipping companies to demand and receive high prices, Glickman said: “It’s a combination of several factors. First of all, stopping air cargo services due to a pandemic contributes to additional demand at sea; second, people sit at home and spend less money on restaurants , vacations and trips abroad, so that they have more money in abundance, and invest in home improvements, in the purchase of office equipment, building materials and so on, and this creates additional demand in the Western world, thirdly, increased transport of goods purchased -shops that were mostly transported by air, such as mobile phones and home appliances. “
Connection with Alibab and digital delivery
Zim wants to differentiate itself from its competitors by being a “digital shipping company”. In his interview with Globes, Glickman recounted his decision to position the company as such, saying, “It’s our advantage over our competitors. In the past, I was Orange’s deputy CEO, and when I came to Zim, I found I am an outdated obsolete company that lags fifteen to twenty years behind the mobile phone industry.One of the things I introduced was digital transformation: the use of big data, AI and BI (business intelligence ).Speditioning is a commodity industry and where they are smart in to be able to break through and not be price oriented like everyone else but to offer digital innovation.
So, for example, Zim has an agreement with Alibab to transport some of its products at a price 80% lower than by air, with a delivery time that is not much longer, according to which it receives a premium over regular container prices.
Two years ago, Zim announced that it was joining a blockchain platform to digitize physical documents with the goal of reducing shipping time and reducing costs. Last week, the company announced its participation in the round of financing of eight million dollars of the Israeli startup Wave BL, together with Marius Nacht, one of the founders Check Point Software Technologies Ltd. (Nasdaq: CHKP).
Wave BL has been working on a digital version of bills of lading for six years, with the aim of eliminating the need for paper certificates and the direct and indirect costs of using them, incurred, for example, by courier companies such as FedEx and UPS.
Founded in 2015, Wave BL is one of the few startups in Israel and around the world to develop a blockchain-based product. Its bill of lading digital platform is used by hundreds of customers, among them, in addition to ZIM, the shipping giant MSC and HSBC.
Another thing that distinguishes Zim from most companies in the industry is the fact that he owns only one boat, preferring to rent boats from others. Glickman says Zim believes this makes him flexible in times of crisis or when demand grows, and that it improves profitability. At the beginning of the coronavirus pandemic, Zim reduced its fleet, and then expanded again.
Data disclosure: Marius Nacht is the former life partner of Anat Agmon, one of the owners of “Globus”, and he is involved in a personal and financial dispute with her.
Posted by Globes, business news in Israel – en.globes.co.il – March 21, 2021
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