ZIM Integrated Shipping Services Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 20, 2025

Key Takeaways

  • Positive Sentiment: Q2 results showed $1.6 billion revenue, $24 million net income, $472 million adjusted EBITDA (29% margin) and $149 million adjusted EBIT (9% margin), and the company raised full-year guidance to $1.8–2.2 billion EBITDA and $550–950 million EBIT.
  • Negative Sentiment: Ongoing tariff volatility significantly disrupted Transpacific volumes (6% TEU decline in Q2), and a muted peak season plus reinstated capacity are expected to keep freight rates under pressure through 2025.
  • Positive Sentiment: The fleet transformation with 46 newbuild vessels, long-term charters for 10 LNG dual-fuel ships, and 40% LNG capacity enhances cost efficiency and commercial agility.
  • Positive Sentiment: Geographic diversification into Southeast Asia (Vietnam, Thailand) and Latin America (10% Y/Y volume growth) helped partially offset reduced cargo flows from China.
  • Neutral Sentiment: Industry unit costs remain above pre-pandemic levels due to higher fuel prices, elevated charter rates and increased cargo handling charges, highlighting ongoing cost challenges.
AI Generated. May Contain Errors.
Earnings Conference Call
ZIM Integrated Shipping Services Q2 2025
00:00 / 00:00

There are 7 speakers on the call.

Operator

Thank you for standing by, and welcome to the ZIM Integrated Shipping Services Second Quarter twenty twenty five Financial Results 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. Thank you. I'd now like to turn the call over to Elana Holtzman, Head of Investor Relations.

Operator

You may begin.

Speaker 1

Thank you, operator, and welcome to ZIM's Second Quarter twenty twenty five Financial Results Conference Call. Joining me on the call today are Eli Glickman, ZIM's President and CEO and Xavier Deslio, 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.

Speaker 1

You are kindly referred to consider the risk factors and cautionary language described in the documents the company filed with the Securities and Exchange Commission, including our 2024 Annual Report on Form 20 F filed with the SEC on 03/12/2025. 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?

Speaker 2

Thank you, Ilana, and welcome, everyone. Thank you for joining us today. Despite severe market disruption and volatility, mainly due to American tariff announcements, we leverage our transformed fleet and improved cost structure in Q2 to mitigate negative effects. Slide number four. We generated revenue of $1,600,000,000 and net income of $24,000,000.

Speaker 2

Q two adjusted EBITDA was $472,000,000 and adjusted EBIT was $149,000,000 with adjusted EBITDA margin of 29% and adjusted EBIT margin of 9%. We maintained total liquidity of $2,900,000,000 at June 30 having paid approximately $470,000,000 in dividends in the second quarter. Slide number five. Per our dividend policy to distribute 30% of quarterly net income, our board of director has declared a dividend of $06 per share of a total of $7,000,000 based on Q2 results. Despite the considerable uncertainty given our performance today, we are revising our full year guidance ranges.

Speaker 2

We are raising the lower end of our full year guidance such that we expect to generate adjusted EBITDA between $1,800,000,000 to $2,200,000,000 and adjust EBIT between 550,000,000 and $950,000,000. Xavier, our CFO, will provide additional context in our underlying assumptions for our 2025 guidance later on the call. Slide number six. While it has been an unpredictable 2025 so far with wide swings in freight rates, we are confident in our competitive position in the industry and believe ZIM is well positioned to navigate turbulent periods like the one we are in today. ZIL's trends lies in our modern competitive fleet and agile commercial strategy, and we will remain proactive responding to changes in demand across our global trade lanes.

Speaker 2

We have adapted our Transpacific network to account for the changes in the cargo flow following the various tariff announcement since April. We first rearrange we first rearrange our Transpacific network to address the sharp decline in cargo from China to The US and parallel improvement in cargo flow from other Southeast Asian markets. And later, we reinstate capacity to China after the spike in demand following the tariff suspension announcement in May. As we have previously discussed, we aim to build a strong commercial presence in key market in which we operate and diversify our geographic footprint to enhance our business resilience. Accordingly, Zim has worked to expand and diversify this network to both mirror changes in trade flows to The US as well as increase our exposure to trade from China to diverse end markets beyond The United States.

Speaker 2

Our expanded presence in Southeast Asia, especially in Vietnam and Thailand, align with Regions' rise as manufacturing hub for The US and globally. ZYN's strong and growing position in this market will enable us to capitalize on the expected continued growth in these trades. During the second quarter, this presence in Southeast Asia served as an advantage, enabling us to partially mitigate the impact of reduced cargo flows from China. Nevertheless, the incremental volume from Southeast Asia was not sufficient to fully offset the shortfall as reflected in our overall carried volume for the period. The surge in Transpacific demand we experienced in May was short lived and current demand on this trade continues to be relatively weak.

Speaker 2

Furthermore, due to ongoing uncertainty regarding tariffs between The US and China and based on our current visibility, we do not anticipate a strong peak season this year. As a supply that was previously withdrawn from the Trans Pacific has been reinstated, we also anticipate continued pressure on freight rates during the 2025. In light of this development, we are pleased with our growing presence in Latin America where we saw 10% volume growth year over year. ZYNs tend to benefit from growing trade between Latin America countries and both The US and China. In addition to growing geographic diversification, our operational excellence remains a core strength.

Speaker 2

We operate today a modern and cost competitive fleet that is highly suited to the trades where we currently operate, and we continue to focus on ensuring access to the right capacity. Following a transition period from '23 to 2024, during which we had 46 new build vessels delivered to us, We entered '25 with transformed fleet significantly improving our cost structure and the efficiency of our of our operated capacity tends to larger, more modern vessels. Moving forward, our objective is to maintain and further enhance our competitive position while capitalizing on attractive opportunities that will ensure our fleet remain modern and cost effective. In April, we announced new long term chartering agreement for 10/11500 TEU LNG dual fuel vessels that will be delivered in 2027 and 2028. Not only in this versatile capacity ideally suited for ZIM's various global trades, but it will also further strengthens our core LNG fleet, which is a critical commercial differentiator.

Speaker 2

In the future, we see significant values as operators of LNG tonnage and customer increasingly seek eco friendly shipping solutions. We also view it as imperative that ZIM maintains some degree of flexibility at all time to act dynamically and reshuffle vessel capacity based on market demand. We recognize that the market realities of today may be different than the realities of tomorrow. We implement the same agility operationally, aligning our credit capacity with the shifting dynamics of the trending environment. This year, we regain this important optionally with respect to our fleet size and have redelivered charter capacity.

Speaker 2

Xavier will discuss our current fleet profile in more details. Overall, market fundamentals still point to supply growth outpacing demand moving forward. However, as we've seen, the rate environment can be volatile and unpredictable driven by range a range of factors impacting global trade and economic expectations. In the face of such uncertainty, our focus is controlling what we can to position ZIM for sustainable and profitable growth. We are confident that our commitment to its excellence and our agility will serve us well, and we continue to take steps forward to further enhance ZYN business resilience both commercially and operationally.

Speaker 2

On this note, I will turn the call over to Xavier, our CFO, for a more detailed discussion for financial results, 2025 guidance as well as additional comments on the market environment. Xavier, please.

Speaker 3

Thank you, Eli. And again, on my behalf, welcome to everyone. Slide seven, we present our key financial and operational highlights. Second quarter revenues were $1,600,000,000 down 15% compared to last year, reflecting lower freight rates and lower volume. Total revenues in the 2025 of 3,600,000,000.0 were up 147,000,000 or 4% year over year.

Speaker 3

Our average freight rate per TEU in the second quarter was $1,479 compared to $1,674 per TEU in the second quarter of last year. Q two carried volumes of 895,000 TEUs was 6% lower year over year due to the disruption in the market that Eli already referred to. Revenue from a non containerized cargo, which reflects mostly our car carrier services, totaled a $111,000,000 for the quarter compared to 128,000,000 in the 2024. Our free cash flow in the second quarter totaled $426,000,000 compared to $712,000,000 in the 2024. Turning to our balance sheet.

Speaker 3

Total debt decreased by a $115,000,000 since prior year end. As previously noted, total debt is expected to trend down as repayment of lease liabilities exceeds lease additions and extensions until we start receiving new build charter capacity in the 2026. Next, the following slide provides an overview of our fleet. While While Eli has already addressed a few key element of our fleet strategy, I'd like to expand on his comments and share additional data points that we believe are important to consider. ZIM currently operates 123 containerships with a total capacity of 767,000 TEUs.

Speaker 3

Two third of this capacity comes from the 46 new build vessels received during 2023 and 02/2024, which carry durations in terms of charter from five to twelve years, and also another 16 vessels that are owned by ZYN. To remind you, we opted to secure our newbuild capacity on long distance on long long term contracts rather than continue to rely on the short term charter market. By doing so, we ensured access to vessel sizes better suited to the trades in which we operate, which are not available on the charter market, thereby improving our competitive position. The longer term charter period also contributes to a better predictability in our cost structure. Moreover, for twenty five of the 28 LNG vessels, our core strategic capacity, we hold options to extend the charter period as well as purchase options, giving us full control over the destiny of these vessels, very much as if we were the vessel owners.

Speaker 3

We have a similar option to purchase the ten, eleven thousand five hundred TEU LNG vessels we recently committed to at the end of the charter period. The remaining one third of 250,000 TEUs allows us to maintain important flexibility. At the end of 02/1926, there will be a total of 34 vessels up for charter renewal, with 12 vessels or 64,000 TEUs still up for renewal in 2025 and twenty two vessels or 70,000 TEUs in 02/1926. This optionality to keep the capacity or we deliver to owners allows them to adjust its capacity according to changing market conditions or shifts in our commercial strategy. With respect to our car carrier capacity, we currently operate 14 vessels, having recently redelivered another car carrier.

Speaker 3

The car carrier industry has also been under some pressure given supply growth and the introduction of new tariffs on Chinese electric vehicles by both The US and the, European Union. While Xin expanded its car carrier capacity in the past few years up to 16 car carriers last year to benefit from favorable market trends, we do not have long term commitments on our chartered capacity, and we are prepared to adjust our participation if market dynamics change. Next, now moving on to slide number nine, we present ZIM's second quarter and six months 2025 financial results compared to last year q two and last year's first half. Adjusted EBITDA in this year's second quarter was $472,000,000, and adjusted EBIT was $149,000,000. Adjusted EBITDA and EBIT margins for the second quarter were 299%, respectively, to be compared to 4025% in the second quarter of last year.

Speaker 3

For the first six months of 02/2025, adjusted EBITDA margin was 34%, and adjusted EBIT margin was 17%. This is compared to 3419% in 02/2024. Net income in the second quarter was $24,000,000 compared to $373,000,000 in the same quarter of last year. Next, on slide 10, you see we carried 895,000 TEUs in the second quarter compared to 952,000 TEUs during the same period last year. That is a 6% decline.

Speaker 3

This decline was mainly attributable to weak Transpacific demand driven by tariff related disruptions as volume from other Southeast Asian markets were insufficient to offset the reduction in cargo from China. In Latin America, on the other hand, we continued to see growth 10% year over year in the second quarter. Next, we present our cash flow bridge. For the quarter, our adjusted EBITDA of $472,000,000 converted into $441,000,000 net cash generated from operating activities. Other cash flow items for the quarter included dividend payments of $471,000,000 and $470,000,000 of debt service, mostly related to our lease liability repayments.

Speaker 3

Moving now to our 2025 guidance, we have raised the lower end of our guidance range and now expect to generate adjusted EBITDA between $1,800,000,000 and $2,200,000,000 and adjusted EBIT between $550,000,000 and $950,000,000 with the second half still expected to lag the first half. We have narrowed ranges reflective of our performance year to date, but note the continued high degree of uncertainty related to global trade and the geopolitical environment. Our view on freight rates and operating capacity is unchanged as compared to our guidance assumption for March and May. We expect freight rates on a full year basis to be significantly lower in 2025 when compared to the ones of 2024 with average freight rates in the remainder of 2025 lower than the first half average. Also, view remains that savings with the Red Sea will not resume this year, continuing to absorb significant capacity.

Speaker 3

We assume that we will maintain similar operating capacity on average to the one of 2024 over the course of the year as we renew some of the existing capacity or similar tonnage. Given our exposure to the Transpacific and weaker outlook for the remainder of 02/2025, we revisited our volume growth assumptions again and now assume flat volume year over year compared to 02/2024. Finally, as for our bunker cost, we expect slightly lower cost per ton in 2025 when compared to 02/2024. Now before opening the call to questions, a few more comments on the market dynamics. The supply demand balance previously used as an indicator for market expectations appears to be a less effective predictor.

Speaker 3

On the supply side, rerouting around the Cape Of Good Hope continues to absorb substantial capacity, while congestion also remains a factor influencing effective supply. Despite notable increases in supply, 10% in 02/2024, an additional 6% expected for the full year of 02/2025, scrapping has been minimal for this for several years. Idle capacity has stayed low, below 1%, for the past eighteen months, and the charter market has remained relatively strong. Demand, particularly of the Transpacific, on the other hand, has been greatly impacted both positively and negatively by uncertainty with respects to American tariff. Beginning in late twenty twenty four in response to anticipated higher US tariff, demand was strong entering into 02/2025.

Speaker 3

We've already discussed the effect of shifting tariff decisions throughout April and May on our Transpacific cargo float. On a positive note, inventory levels, are available up to June, remained relatively stable throughout 02/2025, suggesting that the strong demand we experienced from late twenty twenty four into early twenty twenty five did not result in significant inventory buildup. Recently, new trade agreements have been announced between The US and several significant trading partners, including the European Union, Japan, Korea, and Vietnam, resulting in higher overall tariffs on products entering The US. The long term impact of these changes is not yet clear. Additionally, a trade agreement between The U The US and China has not been reached, contributing to ongoing uncertainty that complicates planning for US importers and for carriers to forecast demand, particularly beyond the third quarter.

Speaker 3

Frequent tariff announcement and the introduction of unusually high tariffs, as seen in recent announcements regarding India and Brazil for various reasons have also introduced further unpredictability. It is important to note that that Zim or any other carrier for that matter need not be active in a particular trade to be impacted by these tariff decisions as container shipping works as a global network. If tariffs undermine a particular trade in the long term, the resulting network adjustment can create overcapacity on other trades. And on that note, we will open the call to questions. Thank you.

Operator

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

Speaker 4

Thank you. Hi, Eli and Xavier. Thanks for the update. A couple of questions from my side and maybe just first on the volume discussion you were just highlighting. Obviously, you're expecting flat volumes for the year, which implies the second half is going to be down year on year.

Speaker 4

Wanted to just check with you, is this expectation driven by your views on the market itself being down in the second half? Or is it driven by maybe a pullback on the part of Zim, given some of your vessels are rolling off charter and you don't plan to renew them?

Speaker 3

Hi, Omar. It's a little bit of both. I think first, when we compare year over year 2024 versus 2025 for the second half, benefited last year from a very strong volume growth if you remember. Quarter over quarter, we beat records in q three and and also in q four from a carried quantity perspective. This year, we we will operate a similar type of overall effective capacity in terms of TEU that we deploy on the various trades where we where we operate.

Speaker 3

But it is to be said that the peak season in q three is somewhat expected to be not as strong as what we experienced last year. And so that is, I think, why we don't believe that we are going to renew beating our record in terms of carried quantity into the second half. We still believe that we are going to hopefully come back to a, you know, higher volume sequentially. So q two has been a little bit of a weaker quarter from that perspective for the reasons we talked about and the reshuffling of our capacity as a result of the change in The US tariff discussions between The US and China that impacted us, give or take, 50,000 TEUs. So in q three, we expect that if we are to operate in a stable environment, we recover that volume.

Speaker 3

Whether we're gonna beat last year is less likely.

Speaker 4

Okay. Thank you. And I guess from you know, clearly, market is is can be very volatile, and you mentioned, you know, how the current market dynamics are in your commentary. I guess what's your best guess if you were to think about the business over the next eighteen months? You have the 34 ships that are up for renewal between now and the '26.

Speaker 4

If you don't get a change in the market dynamic, what portion do you think of those 34 would you look to renew?

Speaker 3

That's an interesting question, an important one. What is very important to us is that what we label as our core capacity, which mostly relates to the large capacity vessels going back to those 46 ships that we ordered and got delivered to us in 2324. We know that this is the capacity that we need in the longer term and that we will continue to operate in the longer term. So that's you know, with the capacity that we own, that's two third of the capacity that we operate today. And, yes, we have, give or take, 250,000 TEUs today of capacity, this 34 shift that you were referring to, that will come up in terms of a charter period for possible renewal between now and the end of of next year.

Speaker 3

And, clearly, those shifts are the you know, will act as variable for us to navigate the market conditions. And if the market is, you know, continuing to deteriorate more likely than not, we will let go more of the ships than we will re recharter. And if this is to be a different story, then then we will we will recharter. But back to your question, I think if the market is trending down meaningfully into 02/1926, chances are that we will end up downsizing as opposed to renewing those those vessels.

Speaker 4

Okay. Thank you, Xavier. And one final one for me, I'll turn it over. Eli had mentioned the capacity on the Trans Pacific that's been reinstated, and then you have it in combination with the muted peak season that kept rates depressed. Why would you say that the capacity influx that we did see, why has that not been rerouted?

Speaker 4

And when would you expect to see that start to kind of shift away from the market given the market remains fairly soft on the on the Trans Pacific?

Speaker 3

That that's that's, you know, a an interesting question. I think you we when we look still ahead of us for q three, q four from a volume perspective, even though we may not beat our last year volume in terms of carried quantities, we still anticipate quite a robust volume in in in the second half, and that also obviously applies to our expectation on the on the Transpacific. You know, I think there is also and you're no stranger to the fact that the alliances have been reshuffled a little bit into earlier this year. And so the the network and the various partners and the various alliances also, you know, got into the the initial year of working together. So that also, I think, plays a little bit in favor of maybe less less agility in terms of managing capacity, but that may change.

Speaker 4

Great. Thanks. Thank you. I'll I'll pass it back.

Operator

Your next question comes from the line of Alexia Degani from JPMorgan. Your line is open.

Speaker 5

Yes. Thanks for taking my questions. Just two questions, please. Just firstly, when we look at the third quarter, is there any kind of timing effects of the exit rate from the high June spot rates that will benefit you? And do you have kind of a sense of that already?

Speaker 5

And then when you look at your deployed capacity, I understand the number of vessels have come down year over year, but these are larger vessels. So in fact, in the second quarter, you actually increased capacity quite substantially and yet volumes were also down quite substantially. When we look at the second half, I'm estimating that you will still grow capacity year over year based on your average deployed capacity last year, should we expect the load factors to continue to erode therefore? Or are you taking more near term action now? And then just a follow-up on the previous question, I think you talked about 250,000 TEUs that could be up for renewal in the next eighteen months.

Speaker 5

But on the slide, I only get a 140. What am I missing, please? Thanks.

Speaker 3

So first, on the on your question with respect to the timing effect, I think you're you're correct. When we look at what has happened in the in the in this in this first half, the the the tariff effect of April, you you may remember in the on the April 9, the tariff were hiked to a 145 for import of cargo between the China from China to The US. And as a result of that, what happened, we saw pretty much overnight the export or the bookings out of China take a take a nosedive. And what we did is change the capacity and the and and as a result, we lost the volume that we just talked about in in the prior during the prior question. But then what happened is when in May mid May, the ninety day pause was introduced, what we saw is a very sharp rebound in demand.

Speaker 3

All the, indeed, the the importers in The US trying to benefit from this window of opportunity to to scale back up their their inventories, and that also came with a nice increase in the spot rate, spot market to which we, Zim, are significantly exposed. But when it comes to revenue recognition perspective, you remember maybe that as per the accounting rules, we recognize revenue based on the pro rata temporaries, so over the duration of the voyage. So the surge in the in the rates that we experienced towards the second half of of the second quarter, At the end of the day, we're only partially recorded in our second quarter, and and some of that those voyages and the and the bill of ladings will find their way in our financial statements into the third quarter. Hence why maybe if you look at our q two performance and you also put that in parallel with the guidance that we just re communicated, there might be a calendarization of that peak effect that we saw in terms of a spot market happening in q two over a very short time frame. It went up and down quite quite fast.

Speaker 3

So, yes, there is bit a of a of a time lag that will point to into q three on the on that front. When it comes to when it comes to the capacity that we will deploy in the second half of this year, I think when compared to last year, I wouldn't say that there is going to be or we should expect a significant difference in terms of operated TEU, you know, via by the time in you know, over December 2024, we had received most of our or most all but one of the 46 ships that we had on order. If I remember well, we closed 2024 operating 782,000 TEUs of capacity. We operate today 760,000 TEUs. So I think it's gonna be pretty much like for like.

Speaker 3

And with respect to your last question of clarification when it comes to the TEUs, you're maybe maybe I wasn't clear. We have 250,000 TEUs that are, you know, subject to a short term charter. We define short term charter by less than five years in a way. And what you have, 140, is what relates to to 2025 and 2026 expiration date. The rest is beyond 2026 to go back to your February.

Speaker 5

Thank you, Javier. And can I just ask one more if I may? In terms of the cost structure of the whole industry, we've heard from Hapag Lloyd, Merck that unit costs are materially above pre pandemic levels. Can you give us an indication of your breakeven unit cost level? And I guess if we think about the 2Q, did you incur any operating losses at the start of the quarter versus the end of the quarter?

Speaker 5

Thanks.

Speaker 3

Look. I think when we are when we are considering our cost structure, it is clear that cost went up in terms of moving a box today compared to what was the prevailing cost structure. And I think maybe pre COVID, you were you were asking, Alexia. I mean, if if we if we look at, you know, pre COVID, for example, we were bunkering the ships on the HFO. Then since then, we we transitioned to LSFO in itself.

Speaker 3

This is a this is a cost increase. If we look at the new building price as I'm I'm sure you've seen as well, they went up. And as a result, as well, the chartering rates went up. So the cost of securing a tonnage has also gone up compared to a prior period. I think also when we look on the variable component of aspect of things, the cargo handling charge also went up.

Speaker 3

If we look at The US and, you know, stranger to the discussions and the and the the agreement that was reached between the various terminals in The US East Coast and first in the West Coast and then in the East Coast with the with the unions. So that triggered an increase in salaries that is reflected then at the end of the day in an increase passed on to the carriers when it comes to paying for loading or discharging discharging a box. So all those elements of additional costs found their way in a in, I think, our cost structure, which, yes, do contribute to increasing the the overall cost that you carry. And then you add to that something that is maybe more linked to the congestion that, you know, we've we are experiencing today compared to what was the situation maybe, again, pre pre COVID. There there are more and more ships on the water.

Speaker 3

Maybe the terminal capacity did not grow at the same pace. We need to put more ships in order to in order to, you know, to maintain weekly service. To give you an example, our main Asia to The US East Coast where our ZCP line, we used to operate that line on a weekly basis with 10 ships pre pre COVID. Now we need 12 in order to maintain the the weekly schedule. So, yes, I would say that, overall, the cost structure of the industry and of Zoom has gone up when compared to pre COVID levels.

Operator

Your next question comes from the line of Chloe Foo from Citi. Your line is open.

Speaker 6

Hi, thank you for your presentation and thank you for taking my questions. My first question is also on the cost. So you have mentioned that you have an improved cost structure in Q2 and you aim for a sustainable growth in this highly uncertain market. Can you elaborate on what have you done in terms of cost in Q2? And what are some further cost improvement plans?

Speaker 6

And since you have also talked about what the part of cost that is more difficult to decrease, such as cargo handling, I'm just interested to know which part of cost can you improve? And my second question is on freight rates in Page two. So normal seasonality suggests that peak season is mostly done at this stage of now and freight rates should turn lower from here to end of year. Do you think that the same pattern will happen this year? Or do you believe there is something that will be different?

Speaker 6

Thank you.

Speaker 3

Thank you, Chloe. Maybe addressing your second question to start with from a rate dynamic perspective. Yes. There are, I think, no clouds on the horizon with all the element of uncertainty that that we talked before. The fact also that some of the shippers in The US did anticipate a little bit the peak season, and then we don't expect, as I think we stated, a stronger peak season ahead of us.

Speaker 3

And maybe the bulk of it is already behind us. So we don't we don't anticipate that we will not be able to utilize our capacity, but there might be a little bit of a a weaker sentiment from seasonality a perspective when it comes to volume for q three and q four. And as a result, if there is no stronger demand from a seasonality perspective, then this is not a good indicator to support the the freight rates. So we'll see what happens on that front, but it is a it is a risk that we think we we are highlighting, especially with respect to the latter part of the year q four. With respect to the cost structure, I think when when we talk about the initiatives that we are, you know, entertaining on the on quarter over quarter basis, to name a few, I think first, we continue to benefit from the scaling up of our average vessel size just to illustrate with the new build capacity that we received in '23 and in '24.

Speaker 3

And then now we are operating on a full year basis in 02/2025. The average vessel size went up by 50% when compared to the average vessel size that we were operating back in 02/2022. And as you know, by scaling up, we reduced our cost of moving a box, providing again that we can maximize the utilization. The second element for me, maybe to emphasize, is the transition that we embarked on shifting away from LSFO and and increasing our LNG conversion. So today, 40% of the capacity that we operate runs on the LNG.

Speaker 3

We have secured as well good good access to supply for the trades where we operate. And this transition from, you know, lower sulfur to lower sulfur fuel oil to LNG also contributes to reducing our cost of operation. Third, I would say that we are also continuing to leverage the partnership that we entered into with MSC in in February following the, you know, the the the change in the two m alliance, and that is also for us a continuation of maintaining the cost down, offering a a wide range of of service to to our customers. Four, I think what we are also considering is reducing the imbalance between our trades. This is a hidden cost, but trying to avoid to the maximum extent possible repositioning of entities, and that is also a commercial attention that we put on that to maximize the weak leg in terms of in terms of loading.

Speaker 3

And finally, I think I would point to our, you know, digital initiatives. We've been quite active on that front both in terms of developing tools to assist us to be better, to anticipate better, to price better, and also active in proposing to our customers an easier way to deal with to deal with us and and hopefully, potentially capturing additional, volume from the competition.

Speaker 1

That's clear. Thank you.

Operator

And that concludes our question and answer session. I will now turn the call back over to Mr. Glickman for some final closing remarks.

Speaker 2

Thank you. To conclude, while 2025 has so far been marked by significant volatility and wide swings in the freight rates, we remain confident in Xing's ability to navigate this turbulent environment. Our modern upscale fleet of cost efficient vessel as well as our agile commercial strategy positions XIM well to continue to respond quickly to changes in the market, in demand, and across our global trade lanes. As we have demonstrated time and again, we will remain proactive, relining our network, redeploying capacity, and capitalizing our growth opportunities as market conditions evolve. We believe our disciplined, nimble approach combined with the commitment to operational efficiency and strong balance sheet will enable ZIM to manage through the current period of uncertainty and emerge even stronger over the long run.

Speaker 2

Based on our performance to date, we've increased the midpoint for twenty twenty five guidance regions ranges and intend to draw on our transformed fleet and improved cost structure to continue to create value for our shareholders even in the face of challenging market dynamics. Thank you again for joining us today. We look forward to sharing our continued progress with you all. Thank you.

Operator

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

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