Thank you for standing by and welcome to the ZIM Integrated Shipping Services Second Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Thank you. I'd now like to turn the call over to Elana Holzman. You may begin.

Thank you, operator, and welcome to ZIM's Second Quarter 2024 Financial Results Conference Call. Joining me on the call today are Eli Glickman, ZIM's President and CEO, and Xavier Destriau, ZIM’s CFO. Before we begin, I would like to remind you that during the course of this call, we will make forward-looking statements regarding expectations, predictions, projections, or future events or results. We believe that our expectations and assumptions are reasonable. We wish to caution you that such statements reflect only the company's current expectations and that actual events or results may differ, including materially. You are kindly referred to consider the risk factors in cautionary language described in the documents the company filed with the Securities and Exchange Commission, including our 2023 Annual Report and Form 20-F filed with the SEC in March 2024. We undertake no obligation to update these forward-looking statements. At this time, I would like to turn the call over to ZIM’s CEO, Eli Glickman. Eli?

Thank you, Elana, and welcome everyone. ZIM positive momentum continues in the second quarter and we are pleased to report strong Q2 results today, highlighted by double-digit volume growth to a record high carried volume and increased guidance for the full year. ZIM generated net income of $373 million and revenue of $1.9 billion at the second quarter. Adjusted EBITDA was $766 million and adjusted EBIT was $488 million, reflecting adjusted EBITDA margin of 40% and adjusted EBIT margin of 25%. We maintain a total liquidity of $2.3 billion at quarter end. I am particularly proud of the record we set this quarter in terms of our carried volume, which totaled of 952,000 TEU. We achieved double-digit growth as planned, significantly outpacing global container market growth. This achievement is, of course, a direct outcome of our strategic decision to upscale our capacity, but not less important, has been the exceptional execution of our employees globally. For that, I would like to send in the Slide number 5. Given our performance today and continued market strengths, we have raised our 2024 guidance ranges. We anticipate full-year adjusted EBITDA between $2.6 billion to $3 billion and adjusted EBIT between $1.45 billion to $1.85 billion. Xavier, our CFO, will discuss additional factors driving our 2024 guidance in his prepared comments. We remain committed to returning capital to shareholders, as such, per our dividend policy, which calls for a payout representing 30% of quarterly net income, our board of directors has declared a dividend of $0.93 per share, or a total of $112 million on account of Q2 results. As we look toward the remainder of the year, our outlook for the second half has improved, reflected in our new guidance. We now expect a stronger back half of 2024 as compared to the…

Thank you, Eli, and again, we welcome everyone. On Slide 8, we present key financial and operational highlights. Our second quarter financial results are indicative of continued market strength based on elevated freight rates and strong demand. Our second quarter average freight rate per TEU was $1,674, a 40% year-over-year increase and a 15% increase from the prior quarter. During the first six months of the year, our average freight rate per TEU of $1,569 was 22% higher than in the first half of 2023. At the same time, we continue to see the positive impact on carried volumes. As Eli just mentioned, our Q2 carried quantities of 952,000 TEUs was a record and 11% higher year-over-year. ZIM’s growth compares favorably to market growth of 6%. Revenues from non-containerized cargo, which reflects mostly our car carrier services, totaled $128 million for the quarter compared to $136 million in the second quarter of 2023. Total revenues in the first half of 2024, of $3.5 billion were up $811 million or 30% year-over-year Our free cash flow in the second quarter totaled $712 million compared to $321 million in the second quarter of 2023. And turning now to the balance sheet. Total debt increased by $585 million since prior year end, mainly due to the net effect of the incoming of larger vessels with longer-term charter durations attached. Turning to our fleet. We currently operate 148 vessels, including 132 container ships with total capacity of approximately 755,000 TEUs, as well as 16 car carriers. This compares to the overall fleet of 147 vessels as of our prior earnings calls in May. The change from three months ago resulted from the delivery of eight newbuilds and the redelivery of seven vessels. However, it is worth noting again that while we continue to operate…

Thank you. We will now begin the question and answer session. [Operator Instructions] Your first question comes from the line of Omar Nokta from Jefferies. Your line is open.

Thank you. Hi, Eli and Xavier. Good afternoon. Congrats on a obviously very, very strong quarter and a big guidance revision for the year. Nice to see double digit growth in the volumes, but also at the same time to see that in the freight rate, which many times that doesn't go hand in hand. Wanted to ask -- I have a couple of questions, but just wanted to ask on the volumes. You have highlighted several times in your comments about your target of double-digit growth for the full year. The figure for the second quarter of 952,000 TEUs, is obviously a big jump and a gap up from what you've done over the past several quarters. I know you've taken delivery of some bigger ships and so that's helped. But just as we think about volumes going forward, do you think this level is a new maybe baseline or run rate for ZIM. And is there any color you can give us on the third quarter and how these volumes have fared thus far?

Yes, Omar, it is a good question. And the short answer is we basically hope so. Clearly, as we have been upgrading and upsizing our capacity, we keep on increasing our operative tonnage. Today, we operate give or take, 750,000 TEUs. By the end of the year, when we will have received the remaining eight ships that are yet to be delivered, and albeit we return 15 smaller vessels. We will end up operating an equivalent capacity close to 800,000 TEUs. So for us to clearly benefit from the lower cost per TEU carried, we need to make sure that at the same time, we increase the volume that we end up carrying. So we set a new record this quarter with 952,000 TEUs. We expect to continue to grow quarter-after-quarter and reach 1 million TEU per quarter in the not so distant future.

Okay, thank you. Interesting. And I guess, maybe big picture, obviously, on free cash flow, 2024 has turned out to be much stronger than you initially, and we all initially expected, and free cash flow has now turned positive quite meaningfully, how do you think about the uses of this excess cash flow that you are now bringing in into them, whether it is strategically or with respect to the balance sheet? Any thoughts you can give on the uses of that additional free cash?

Look, I think the first comment that I would want to make is that we are very happy and very pleased with the -- how the quarter did turn out and the outlook for the reminder of the year. So continuing to strengthen, at the end of the day, the balance sheet of the company, and the more the balance sheet and the capital structure is strong, the more opportunities we’ve in terms of capital allocation. So I think, in terms of prioritization, we’ll continue to make sure that we allocate capital to our assets, vessels, and containers. We’ll continue to rejuvenate the fleet of containers that we operate. From a vessel perspective, we did a significant completing [technical difficulty] we are completing our significant transformation that was initiated back in 2021, 2022, so maybe less rush on that front. And as importantly, I think we want to continue to return capital to shareholders, so we've done so since the IPO. I think we have consistently abided by our dividend policy in terms of dividend paid to our shareholders, and we intend to continue to do so as well in the foreseeable future.

Got it. Thank you. And then just maybe a final one for me and a follow-up to just the last one on the dividend. Obviously, you paid another -- or you've declared a 30% payout for this quarter, your second one this year. And presumably another one significantly is coming in the third quarter, how do you think, or how is perhaps maybe the Board viewing the potential of the full 50% at year end? I know it is obviously at the discretion of the Board, but do you think it is as simple as if the market remains above long-term averages, then 50% is realistic or do you think -- or is the mindset to prefer to hold on to the excess cash given maybe the uncertainty and as you highlighted the order book or the deliveries of the capacity is outpacing demand growth. How are you thinking about that in terms of that true up to 50%, is it -- I guess I'm trying to ask, is the mentality of the company to hold on to cash or pay it out if the market remains firm? Any color you can give there?

Look, I think maybe today is a little bit early for us to give a clear answer to that question. I think the Board and the company will closely look when the times come and that will be as far as the potential true up towards March next year. What do we think the [following] (ph) years will look like? Where will we be as an industry in terms of maybe going back to a more normal way of operating? The Red Sea disruption today are blurring a little bit the perception of what the new normal may look like. So I think this question will be obviously very much on the agenda at the time and the answer will be very much a function of what will we have delivered on a full year basis in 2024 to start with. But also as importantly, how do we project ourselves in the coming years depending on where the market dynamics end up being when we make that consideration again towards March next year.

Yeah, understood. That makes a lot of sense and appreciate you giving that framework. That's it for me. Thanks, guys.

Your next question comes from the line of Sathish Sivakumar from Citi. Your line is open.

Thanks, Xavier. Thanks Eli. I got three questions here, maybe just to start off with on the tax rate. If you look at in quarter two you had a plus $2 million, how should we think about going forward into quarter three and quarter four, maybe for the full year in terms of the tax charges on the P&L? And then the second one is around the vessels that are coming up for renewal. So you got about 51 vessels that are coming up for renewal, including 2024 and 2025, given where the rates are today, would you still be interested in like giving those vessels back or would you look to renew them? And then the third one, you did had a slide there in the cash flow bridge where you pointed about $380 million down payments for 10 LNG vessels and also payment for five vessels. How should we think about for the remaining eight vessels? And do you expect to take another debt service charge in the coming quarters or it will be mostly in '25? Yeah. Thank you.

Thank you, Sathish. I'll try to take your questions one after the other. So, the first one with respect to tax rates for the full year 2024, we don't expect to incur significant tax charge in 2024, as we will still be able to benefit in a way from the tax losses that we generated in 2023 and that we can carry forward in terms of the profits that we’re making or expect to make in 2024. So you should not expect a significant tax charge in our yearly P&L. With respect to the vessels, the fleets plan. Clearly, when it comes to 2024, we intend to continue to execute on the strategy that we laid out already a few quarters back, which is redelivering the vessels that come up for renewal. Those are smaller vessels, somewhat expensive capacity as well, that was secured in the times of the COVID era days during which the chartering rates were at elevated levels. And we continue to need to make room for these new ships that are yet to be delivered, the eight ships that are coming between now and the end of the year. And as I was saying also earlier on, by doing just that -- we will continue to increase our operating capacity from 750,000 TEU today to 800,000 TEU by the end of the year. Then comes 2025, and then we do not have any newbuild delivery expected, but we have indeed 36 ships that will come up for renewal in 2025. And we will need to make the determination as to whether we want to recharter some or all of this capacity to continue to operate on the 800,000 TEU equivalent tonnage or less, depending on where the market will be in 2025, on a monthly basis…

Okay, thank you. You mentioned about like rate levels would determine whether you wanted to renew them. So just to clarify, so you -- it's mainly about the freight rates rather than the charter rates, right or would you still --.

I guess, Sathish, it is a combination -- I mean it's -- the two are somewhat linked. If we’re in a situation where the charter environment continues to be elevated, I guess that's a translation of there is still a shortage of capacity, and the shortage of capacity is normally a good factor to sustain elevated freight rates. So if we are to be in this environment, we might want nevertheless to take some charter in order to continue to capture these good market conditions. What I think we will be very mindful about at that time, if we were to be opportunistic, bearing in mind that the long-term view or the longer-term view still points towards potential significant overcapacity. We would want to limit our commitment in terms of charter duration to a short-term charter. So I think the arbitrage will be on the duration. And if we decide to reach out to some of the capacity, if the rates and the chartering rates are perceived elevated, we would not want to lock ourselves for long period, but potentially recharter on an ongoing basis for as long as we see the freight and the demand supporting this type of commitment.

Got it. Thank you. Thanks, Xavier.

Your next question comes from the line of Neils Thompson from (inaudible) Securities. Your line is open.

Hi, thanks for taking my question. It is just -- so we understand you correctly, I think you alluded that freight rates will be higher in Q3 and then they will trend downwards in Q4, and that's what's baked into your guidance. But can you tell us something, what you expect in terms of the container demand? Do you expect a normalization of the year-on-year growth that we've seen so far towards the end of the year, or is that based on a continued growth in the containers throughput throughout the year?

Look, I think we believe that 2024 overall in terms of growth in demand will be better than what we initially planned when we entered into 2024. So clearly we are in a strong start of the year. We talked about maybe this is because in the second quarter we had a little bit of an early peak season in which case some of the volume that would have been expected to come later in the year may have been a little bit front loaded. What we think is still the second half should be okay from the overall demand perspective. What we’re monitoring, obviously is the inventory level in the US, and if that was to pick up meaningfully, then I’d suggest that maybe the underlying demand is not as strong. But today, although those inventories have started to pick up from lower levels earlier this year, they are still not yet at alarming levels. So it will very much be a function of whether the demand continues to be okay, that will potentially lead to rates continuing or sliding or reducing at a lower [price] (ph). That will really much be a function. This is why it's very difficult to forecast the fourth quarter because the two will be most probably linked. In terms of capacity, there is no surprise to be expected here. If we assume that the Red Sea disruption continue towards the second half, then the new build tonnage that is going to be delivered in terms of overall TEU equivalent is known, so the unknown is to which extent the demand will soften in the second half compared to the first. But today we don't have any clear alarm signals that the demand in the second half would collapse.

Okay. Thank you.

And this concludes our question-and-answer session. I will now turn the call back over to Eli Glickman, ZIM President and CEO, for closing remarks.

Thank you. We are very pleased to report strong Q2 financial and operational results today. This performance illustrates ZIM's continued success in advancing our fleet transformation, our commercial agility, and outstanding execution while capitalizing on a rate environment that has remained stronger for longer than anticipated. We are confident the steps we have taken to enhance our operational and commercial resilience will continue to drive long term sustainable growth. As we look towards the reminder of 2024, we increase our full year guidance and now believe that the back half of 2024, will be stronger as compared to the first half. In the second quarter, we achieved record carried volume, as a direct result of ZIM's strategic decision to upscale and modernize our fleet, and we expect to continue to see incremental benefits as new, larger, cost-effective vessels join the fleet. We are committed to further implementing our differentiated strategy, best serving our loyal customer, and maximizing value for all our stakeholders. Thank you again for joining us today. We look forward to sharing with you our continued progress.

This concludes today's conference call. Thank you for your participation. You may now disconnect.