ZIM's 2025 Q3 Earnings Call: Key Contradictions Emerge on Fleet Renewal, Suez Canal Strategy, and Tariff-Driven Demand Outlook

Date of Call: None provided

Financials Results

• Revenue: $1.8 billion, down 36% YOY
• Gross Margin: 33% adjusted EBITDA margin, compared to 55% in Q3 2024
• Operating Margin: 15% adjusted EBIT margin, compared to 45% in Q3 2024

Guidance:

• 2025 adjusted EBITDA expected between $2.0B and $2.2B (midpoint increased)
• 2025 adjusted EBIT expected between $700M and $900M (range narrowed; low end raised)
• Q4 trending weaker than August guidance; freight rate view softened while operated capacity, carried volume, and bunker assumptions unchanged
• Continued uncertainty from orderbook growth and potential Suez Canal reopening may pressure freight rates

Business Commentary:

* Financial Performance and Guidance: - ZIM reported revenue of $1.8 billion and net income of $123 million for Q3 2025, with adjusted EBITDA of $593 million and adjusted EBIT of $260 million. - The company raised its 2025 guidance, expecting adjusted EBITDA between $2 billion-$2.2 billion and adjusted EBIT between $700 million-$900 million. - This was due to solid Q3 results and a refined view of full-year performance despite market uncertainties.

• Dividend Distribution and Shareholder Returns:
• ZIM declared a dividend of $0.31 per share, representing 30% of third-quarter net income, following its dividend policy.
• Since the IPO, ZIM has distributed approximately $5.7 billion in dividends, marking a significant return to shareholders.

• The board's focus on rewarding long-term shareholders and distributing special dividends when financial results exceed expectations drove this decision.

• Capacity Management and Fleet Strategy:

• The company currently operates 709,000 TEUs, having redelivered vessels due to a cautious market outlook and subdued freight rates.
• Approximately 70% of the capacity is considered core, with long-term charter periods, and 30% allows for flexibility.

• This strategy involves adjusting capacity according to market conditions and focusing on LNG-powered and modern vessels to enhance sustainability and cost-effectiveness.

• Geopolitical and Trade Environment Impact:

• Q3 results unfolded against a backdrop of geopolitical and trade tensions, affecting market dynamics and freight rates.
• The potential reopening of the Suez Canal is expected to influence capacity and possibly exert pressure on freight rates.
• Despite these challenges, ZIM remains confident in its strategic position and fleet versatility to navigate market volatility.
  

Sentiment Analysis:

Overall Tone: Neutral

• "Q4 is trending weaker than originally projected"; management: "we now expect adjusted EBITDA between $2 billion-$2.2 billion and adjusted EBIT between $700 million-$900 million"; cautioned they "anticipate continued pressure on freight rates" while noting confidence in long-term strategy and fleet advantages.

Q&A:

• Question from Omar Nokta (Jefferies): Can you comment on market chatter regarding a management buyout and the recent board composition changes? Also, on the Red Sea/Suez return — do you see this shifting your Asia-Europe focus and is it an opportunity to gain share? Finally, any quantification on cost savings or expectations for 2026 costs given vessel redeliveries?
  Response: No comment on any MBO; board managed resignations and added two new members; they are preparing to resume Suez/Bab al-Mandab transits but only after shipowner and insurance approvals; they expect to continue redelivering less-efficient vessels rather than recharter.

• Question from Marco Lemitte (Barclays): Given your guidance, implied Q4 net income may be negative — how should we think about dividend policy if profits turn negative? How much visibility do you have on Red Sea timing and discussions with authorities? Why was the upper end of EBIT guidance reduced and are China/US port fees included in Q4 guidance?
  Response: Dividend policy: standard payout is 30% of quarterly net profit (with an annual potential up to 50% and board authority for special dividends); no firm timeline on Suez return beyond approvals; EBIT range change driven by slightly higher depreciation/amortization (vessel additions, equipment/IT capitalization); no extra jurisdictional levies affecting guidance.

• Question from Alexia Dogani (JPMorgan): Are you considering network resizing/cost savings similar to prior downturns and what is the potential scope? Update on cash CapEx commitments and new lease inceptions? Given you won’t renew charters, how much asset base rolls off in next 12–18 months and any leverage targets?
  Response: They will retain long-term, efficient (mostly LNG/newbuild) vessels and redeliver older/less-efficient short-term chartered tonnage; about 70–75% of capacity is long-term/owned, ~25% flexible, and roughly 80k TEU could be redelivered in 2026; cash CapEx commitments are limited.

• Question from Chloe D (Citi): With route diversification into Southeast Asia and Latin America, which routes are currently more or less profitable and how quickly can you reallocate capacity? Given incoming new capacity and anticipated rate pressure, when might rates recover and what pivot would drive recovery?
  Response: Profitability is trade- and time-dependent; they adjust capacity gradually to ensure reliable service while expanding selective routes; rate recovery timing is uncertain and depends on vessel deletions/retirements and supply-demand rebalancing (orderbook and Suez reopening are key risks).

Contradiction Point 1

Capacity Management and Fleet Renewal Strategy

It involves the company's strategic positioning regarding capacity management and fleet renewal, which directly impacts operational costs and market competitiveness.

Can you quantify or outline expectations for 2026 costs compared to this year's average? - Omar Nokta (Jefferies)

2025Q3: We are likely to continue redelivering vessels coming up for renewal due to a cautious outlook. The charter market is still elevated, making it expensive to recharter tonnage. As a result, we will likely keep the more efficient and newer capacity. - Xavier Destriau(CFO)

If market conditions do not improve, what portion of the 34 ships up for renewal between now and the end of 2026 would ZIM look to renew? - Omar Mostafa Nokta (Jefferies)

2025Q2: The core capacity, which is about 2/3 of the current fleet and accounts for 140,000 TEUs, will likely be maintained. The remaining ships, which amount to about 250,000 TEUs, will act as variable capacity, with the possibility of downsizing if market conditions worsen. The decision to renew or let go will depend on market trends. - Xavier Destriau(CFO)

Contradiction Point 2

Suez Canal and Red Sea Reopening

It involves ZIM's strategy regarding the reopening of the Suez Canal and Red Sea, which are critical for their operational efficiency and freight rates.

Does ZIM have an operational plan for transitioning once the security situation in the Suez Canal stabilizes? - Omar Nokta (Jefferies)

2025Q3: We are preparing an operational plan to resume passage through the Suez Canal once the security situation has stabilized. Resuming passage offers opportunities for improved fleet efficiency and operational cost savings but may add pressure on freight rates as effective supply increases. - Eli Glickman(CEO)

What timeline assumptions did you make for the Red Sea reopening in your guidance? - Muneeba Kayani (Bank of America)

2024Q4: Our guidance includes scenarios with early or late reopening of the Red Sea. - Xavier Destriau(CFO)

Contradiction Point 3

Vessel Renewals and Capacity Management

It involves ZIM's approach to managing its fleet capacity through vessel renewals and charters, which directly impacts its operational costs and competitiveness.

Can you provide quantification or expectations for 2026 costs compared to this year's average? - Omar Nokta (Jefferies)

2025Q3: We are likely to continue redelivering vessels coming up for renewal due to a cautious outlook. The charter market is still elevated, making it expensive to recharter tonnage. As a result, we will likely keep the more efficient and newer capacity. - Xavier Destriau(CFO)

Can you explain the phasing of vessel renewals and whether your capex guidance accounts for charter renewals or non-renewals? - Marco Limite (Barclays)

2024Q4: Nearly 100,000 TEUs come up for renewal in 2025. We plan to renew some vessels while letting go others. Our 2025 guidance assumes stable or slightly reduced capacity from 2024. - Xavier Destriau(CFO)

Contradiction Point 4

Market Conditions and Profitability Outlook

It involves the company's assessment of market conditions and the expected profitability of key regions, which influences strategic decision-making and investor confidence.

Which is more profitable: Southeast Asia or Latin America? How quickly can you adjust capacities to opportunities? - Chloe D (Citi)

2025Q3: Both markets offer opportunities, and profitability depends on market dynamics. We focus on reliable service and customer satisfaction while adjusting capacities. - Xavier Destriau(CFO)

What were the key cost improvement initiatives in Q2, and what are the plans for freight rates in H2? - Tianyu Fu (Citigroup)

2025Q2: Both markets offer opportunities, and profitability depends on market dynamics. We focus on reliable service and customer satisfaction while adjusting capacities. - Xavier Destriau(CFO)

Contradiction Point 5

Impact of Tariffs on Demand

It affects market demand projections and strategic decision-making, which are crucial for company performance and investor expectations.

Where do you expect rates to recover and what will be the turning point? - Chloe D (Citi)

2025Q3: Rates are likely to stabilize and recover once capacity is managed, and aging vessels are retired. The market needs to find equilibrium between supply and demand. - Xavier Destriau(CFO)

What are current customer inventory levels? Will ocean shipping experience an early peak season followed by a slower year-end? - Muneeba Kayani (Bank of America)

2025Q1: Recently, we've seen fluctuations in demand due to tariff changes. When US tariffs on Chinese goods increased, demand dropped, affecting inventory levels in the US. With the recent pause in tariffs, demand revived, with shippers eager to move cargo. The volume surge could potentially advance the peak season, although the key will be how tariffs evolve post-July 9th. - Eli Glickman(CEO)