ZIM's Q3 2025 Earnings Call: Contradictions on Rate Recovery, Network Strategy, and Dividend Policy

Date of Call: None provided

Financials Results

• Revenue: $1.8B, down 36% YOY
• Operating Margin: Adjusted EBITDA margin 33% and adjusted EBIT margin 15%, compared to 55% and 45% in the prior year, respectively

Guidance:

• Full-year 2025 adjusted EBITDA expected to be $2.0B–$2.2B.
• Full-year 2025 adjusted EBIT expected to be $700M–$900M.
• Q4 trending weaker than August guidance; guidance midpoints raised based on nine-month performance.
• Freight-rate assumptions softened vs August; operated capacity, carried volume and bunker assumptions unchanged.
• Anticipate continued freight-rate pressure into Q4 and 2026; Suez Canal reopening likely increases effective capacity and near-term rate headwinds.

Business Commentary:

* Financial Performance Amid Uncertainty: - ZIM Integrated Shipping Services reported revenue of $1.8 billion and net income of $123 million for Q3 2025, with Q3 adjusted EBITDA at $593 million and adjusted EBIT at $260 million. - The results were driven by maintaining service reliability, optimizing the cost base, and adapting to volatile rate environments and market conditions.

• Dividend Policy and Distributions:
• ZIM declared a dividend of $0.31 per share, representing approximately $37 million and 30% of Q3 net income.

• Since the IPO, ZIM has distributed over $5.7 billion in dividends, reflecting a commitment to rewarding long-term shareholders.

• Fleet Management and Capacity Adjustments:

• ZIM's operated capacity stood at 710,000 TEUs at September 30, down from 780,000 TEUs at the beginning of the year, reflecting a strategic approach to maintaining a modern and efficient fleet.

• The company plans to redeliver vessels upon charter renewal, focusing on more efficient, larger, and younger vessels, particularly as the charter market remains elevated.

• Strategic Diversification and Market Expansion:

• ZIM continues to expand its presence in Southeast Asia and Latin America, capturing new trade growth and offsetting reductions in Trans-Pacific cargo.

• The strategic focus on these regions is alignment with the long-term trend of economic decoupling between China and the US, as manufacturers diversify their export markets.

• Supply Demand Dynamics and Market Outlook:

• ZIM anticipates continued pressure on freight rates due to supply growth outpacing demand, with deliveries expected to surge in 2027.
• The reopening of the Suez Canal is expected to further increase effective supply, potentially adding pressure on freight rates.
  
  

  Sentiment Analysis:

  Overall Tone: Neutral

  • Management described "solid Q3 results" (revenue $1.8B; net income $123M) while warning "Q4 is trending weaker" and that they "anticipate continued pressure on freight rates" into 2026; they emphasize resilience, fleet modernization, and dividend actions but remain cautious on near-term demand/supply dynamics.

Q&A:

• Question from Omar Nokta (Jefferies): Can you comment on market chatter about a management buyout and the recent board composition changes? Also, on the Red Sea/Suez return: will ZIM shift to Asia-Europe routes and can you quantify cost impact from vessel redeliveries for 2026?
  Response: Board handled two resignations and appointed two new members; management gave no comment on any management buyout and said return to Suez/Red Sea awaits insurer/owner approval.

• Question from Marco Lemitte (Barclays): Given your guidance implies negative net income in Q4, can you remind us of dividend policy (and whether dividends will be paid if quarterly net income is negative)? Also, what visibility do you have on the Red Sea timing and why was the upper end of EBIT guidance adjusted?
  Response: Dividend policy: distribute 30% of net profit quarterly (board can approve special dividends); board decides on dividends and there is no comment on MBO; EBIT range adjustment driven by slightly higher depreciation/amortization from recent vessel acquisitions, equipment and IT capitalization.

• Question from Alexia Dogani (JPMorgan): Are you considering network resizing/cost cuts similar to prior downturns? Update on cash CapEx and new lease inceptions; how much chartered capacity will roll off in the next 12–18 months and any leverage targets?
  Response: Will continue to redeliver short-term/less-efficient vessels and retain long-term chartered and owned modern fleet; limited cash CapEx expected; ~80k TEU could be redelivered in 2026 with ~70–75% of capacity in long-term/owned core fleet.

• Question from Chloe D (Citi): With diversification into Southeast Asia and Latin America, which routes are currently more or less profitable and how quickly can you redeploy capacity? When do you expect rates to recover given incoming capacity?
  Response: Profitability is trade- and timing-dependent; capacity can be redeployed gradually but reliably; management cannot predict timing of rate recovery—recovery depends on removal of older tonnage/scrapping and supply-demand rebalancing, and is currently uncertain.

Contradiction Point 1

Rate Expectations and Market Recovery

It involves differing expectations regarding the recovery of freight rates and the market conditions, which are crucial for understanding ZIM's strategic positioning and financial outlook.

When do you expect rates to recover, and what will signal the turning point? - Chloe D (Citi)

2025Q3: Rates are influenced by new capacity coming online and Suez Canal reopening. Vessel retirements are needed to stabilize the market. The timing remains uncertain, but industry adjustments and vessel retirements could lead to rate recovery. - Xavier Destriau(CFO)

Why hasn't the capacity influx been redirected, and when do you expect it to shift given the Transpacific market remains soft? - Omar Mostafa Nokta (Jefferies)

2025Q2: There is a lot of new capacity coming online, and there is more capacity coming online than what is forecasted to come online that is being forecasted right now. - Xavier Destriau(VP & CFO)

Contradiction Point 2

Network Strategy and Route Adjustments

It highlights inconsistencies in ZIM's approach to network strategy and route adjustments, which are crucial for operational and financial performance.

Are you considering reducing the network size or implementing efficiency measures during the current downturn? - Alexia Dogani (JPMorgan)

2025Q3: ZIM aims to maintain efficient tonnage with long-term charters, planning to return less efficient vessels. The goal is to keep modern and cost-effective capacity, adjusting to market conditions. - Xavier Destriau(CFO)

Can you discuss your near-term network development plans? - Alexia Dogani (JPMorgan)

2025Q1: ZIM's network strategy involves dynamic reactions to market conditions, adjusting service as needed. The recent suspension and resumption of the ZX2 service reflect this agility. - Xavier Destriau(CFO)

Contradiction Point 3

Dividend Policy and Payout

It involves discrepancies in the communication of ZIM's dividend policy and payout, which are important for investor expectations.

With Q4 net income potentially negative, will a dividend be paid, and has the dividend policy been updated? - Marco Lemitte (Barclays)

2025Q3: ZIM's dividend policy is to distribute 30% per quarter and up to 50% annually from net profit. The board has the authority to declare special dividends as in the past. The company has returned more than 25 times the IPO amount in dividends since 2021. - Xavier Destriau(CFO)

Where do you expect to be in your guidance range—upper-end, lower-end, or midpoint—after Q1, given that you're maintaining current guidance? - Omar Nokta (Jefferies)

2025Q1: ZIM has a robust balance sheet and is committed to prudent capital allocation. The Company believes it can grow dividends while maintaining a strong balance sheet. The Company's dividend payout ratio is typically 30% to 50% per quarter and up to 50% annually from net profit. - Eli Glickman(CEO), Xavier Destriau(CFO)

Contradiction Point 4

Red Sea Reopening Timeline

It involves differing expectations regarding the timeline for the reopening of the Red Sea, which could impact ZIM's operational planning and financial outlook.

Can you clarify ZIM's stance on returning to the Red Sea post-Suez Canal incident and whether there's an opportunity to gain market share on Asia-Europe routes? - Omar Nokta(Jefferies)

2025Q3: ZIM is awaiting insurance company approval to return to the Red Sea, Suez Canal, and Bab al-Mandab. - Xavier Destriau(CFO)

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

2024Q4: Most of our guidance assumes the Red Sea will reopen sometime in 2025, with the lower end of the guidance incorporating an early reopening and the higher end assuming a later reopening towards the end of 2025. - Xavier Destriau(CFO)

Contradiction Point 5

Market Share and Capacity Strategy

It involves differing statements regarding ZIM's strategy to maintain market share and adjust capacity, which could affect its competitive positioning and financial performance.

Are you considering resizing the network or implementing efficiency measures amid the current downturn? - Alexia Dogani(JPMorgan)

2025Q3: The goal is to keep modern and cost-effective capacity, adjusting to market conditions. - Xavier Destriau(CFO)

How does ZIM plan to maintain its 4 million TEU run rate? - Omar Nokta(Jefferies)

2024Q4: ZIM grew operating tonnage from 640,000 TEUs to 780,000 TEUs in 2024. Even with renewals, ZIM will retain a significant capacity base, ensuring the ability to grow volumes in 2025. - Xavier Destriau(CFO)