Zim Integrated Shipping Services Ltd. controlled by Idan Ofer's Kenon Holdings Ltd (TASE:KEN: NYSE: KEN-WI), finished the first quarter of 2015 with an $11 million net profit, following a sharp drop in shipping costs, and despite a more moderate decline in its revenue. Zim, which last summer completed a huge debt settlement with its creditors, reported $792 million in revenue from cargoes and related services in the first quarter.
Zim said this 8.6% drop, compared with the first quarter of 2014, was caused by lower revenue from transporting cargoes in containers and from related activities. Revenue from cargoes was down $36 million as a result of a 7.6% decrease in the number of cargo units transported, while the per unit price rose 2.8%.
In contrast to its weakness in revenue, the cost of the company's transportation and related services fell 14.6% to $685 million, thanks to lower global oil prices over the past year, which cut Zim's first quarter fuel costs by $64 million, leaving them 37% lower than in the corresponding quarter last year. Furthermore, quarterly costs for cargo handling were down $18 million. The lower costs enabled Zim to report a $40 million first quarter operating profit, compared with an $8 million operating loss in the first quarter of 2014. The company also enjoyed a 48% drop in its first quarter financing expenses, which totaled $26 million - a direct result of the debt arrangement with its creditors reducing the interest paid by the company by $17 million, compared with the corresponding quarter last year, which did not include the effect of the debt arrangement. Zim finished the first quarter with $80 million in equity, amounting to 4% of its total assets. As of the end of March, the company's debt totaled $1.45 billion, and its cash on hand totaled $240 million.
Zim generated $54 million from current activities in the first quarter, 2.4 times as much as in the corresponding quarter in 2014. Zim's creditors approved the company's second debt arrangement in its history in July 2014 - the largest ever in the local market - with half of the company's $3.4 billion debt being written off. The Israel Corporation's (TASE: ILCO) share in the arrangement included waiving $238 million in debt, a $200 million injection, providing $50 million in additional credit and a $10 million guarantee, and a dilution of its holdings to 32% (later transferred to Kenon, which was split off from Israel Corporation). The banks, ship owners, and bondholders received 68% of Zim's shares in exchange for waiving 50% of the debt.
Published by Globes [online], Israel business news - www.globes-online.com - on May 21, 2015
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