Shares of ZIM Integrated Shipping Services Ltd. (ZIM) were trading lower on Wednesday after the company reported first-quarter results that reflected the ongoing weakness in the global shipping market. Revenue came in at $1.40 billion, down 30% from a year ago and well below the $1.585 billion analysts were expecting. The culprit? Lower freight rates and a drop in the volume of containers it shipped.
ZIM carried 866,000 TEUs (twenty-foot equivalent units) in the quarter, down 8% year-over-year. The average freight rate per TEU fell to $1,310, a 26% decline. Adjusted EBITDA plunged 60% to $313 million, with margins shrinking to 22% from 39% a year earlier. On a per-share basis, the company reported an adjusted loss of 71 cents, missing the consensus estimate of a 53-cent loss.
As of March 31, ZIM operated 114 container vessels with a combined capacity of 699,000 TEUs, plus 13 car carriers. Operating cash flow was $263 million, down from $855 million a year ago, while free cash flow came in at $235 million. Capital expenditures were $31 million, and the company's net debt stood at $2.93 billion.
CEO Eli Glickman addressed the headwinds in the company's earnings release. "The conflict in the Persian Gulf has sparked a sharp increase and significant volatility in bunkering costs," he said. "While the impact on first quarter results was minimal, we expect a more meaningful effect in the second quarter, before our actions to offset these costs, including increased freight rates and bunker-specific surcharges, begin to take hold."
Glickman also pointed to ZIM's early adoption of LNG technology as a potential advantage. "With a fleet comprised of approximately 40% LNG-powered capacity, ZIM not only offers shippers a pathway to significantly reduced carbon emissions but maintains a fuel-efficient and cost-effective fleet," he noted. The company has long-term agreements with Shell to secure LNG supply on competitive terms.
On a more optimistic note, Glickman said that "although market fundamentals remain challenging across ZIM's main trade lanes, we have recently observed a positive change in the trend on the Transpacific trade with freight rates strengthening alongside demand."
Of course, the big story for ZIM investors is the pending acquisition by German shipping giant Hapag-Lloyd. In February, the two companies announced a merger agreement under which Hapag-Lloyd will acquire ZIM for $35 per share in cash, valuing the company at about $4.2 billion. The deal has been unanimously approved by ZIM's board and is expected to close by late 2026, subject to customary conditions.
Because of the merger, ZIM is not providing any financial guidance for the full year 2026 and will not host a conference call to discuss its first-quarter results. That's a bit unusual, but when you're being bought out, there's less need to keep the market updated on near-term expectations.
At the time of publication on Wednesday, ZIM shares were down 1.33% at $25.21. That's still well below the $35 acquisition price, suggesting some investors are skeptical the deal will close at that price, or are factoring in the time value of money and risk. But for now, the company's fate is tied to both the choppy shipping market and the merger process.
