ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) Q3 2022 Earnings Call Transcript

ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) Q3 2022 Earnings Call Transcript November 16, 2022

ZIM Integrated Shipping Services Ltd. beats earnings expectations. Reported EPS is $9.66, expectations were $9.54.

Operator: Ladies and gentlemen, thank you for standing by. I am Irene, your chorus call operator. Welcome and thank you for joining the ZIM Integrated Shipping Services Q3 2022 Earnings Conference Call. Throughout today’s recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. I would now like to turn the conference over to Elana Holzman, Head of Investor Relations. Please go ahead.

Elana Holzman: Thank you, Irene. And welcome to ZIM’s third quarter 2022 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 and cautionary language described in the documents the company files with the Securities and Exchange Commission, including our 2021 annual report filed on Form 20-F on March 9, 2022.

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?

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Eli Glickman: Thank you, Elana, and welcome everyone to today’s call. ZIM’s third quarter and nine months’ performance reflects continued solid execution and strengths in our financial results and profitability. These results consistent with our expectation for market normalization beginning in the second half of 2022 following an extended period of solid profit. However, over the past several weeks, we have seen a steeper decline in freight rates than we previously assumed. As consumer demand in the US and elsewhere has softened, the pace of normalization has accelerated. And based on this evolving marketing environment, we’ve revised our full year 2022 focus. For 2022, we now expect to generate adjusted EBITDA between $7.4 billion to $7.7 billion, compared to our previous guidance of $7.8 billion to $8.2 billion and adjusted EBIT between $6 billion to $6.3 billion compared to the previous projection of $6.3 billion to $6.7 billion.

I note that based on our current guidance, 2022 adjusted EBITDA and adjusted EBIT are expected to be once again all-time records. Current market conditions illustrate the volatile and fast-paced nature of our market. The outlook for the global economy is very uncertain as we see various macroeconomic and geopolitical risk, rising inflation and interest rates, energy crisis in Europe, the extended war in Ukraine just remain a few. External spending is down, and now when consumer spending on services have returned to normal, demand for durable goods may be held even healthy. All this challenging outlook for container shipping, particularly given the scheduled vessel deliveries planned for next year in 2021. Xavier, our CFO, will further discuss our guidance and the current market environment in greater detail later on the call and the potential impact of different factors, including IMO 2023 on our business.

In accordance with our dividend policy to pay 30% of quarterly net income, our board declared a Q3 dividend of approximately $354 million or $2.95 per share. We continue to return substantial capital to shareholders, which remains a priority as we seek to create long-term value and enable shareholders to directly benefit from our strong results. So far, on account of 2022 results and including this quarter, we have returned over $1.26 billion or $10.55 per share in dividends. During the first nine months of the year, as you can see in slide number four, revenue grew by 43% to $10.4 billion as compared to the same period in 2021, driven by elevated freight rates and differentiated strategy, our adjusted EBITDA increased 55% and net income increased 43% compared to the nine months period in 2021.

Most importantly, while market conditions remain dynamic, we continue to deliver strong EBITDA and EBIT margins, highlighting our focus on profitability. Nine months 2022 adjusted EBITDA margin improved from 58% to 63% and adjusted EBIT margin improved from 51% to 54%. Notably, our balance sheet also continues to be very strong with total shareholders’ equity of $5.8 billion at the end of the quarter. In the third quarter of 2022, our revenues grew 3% year-over-year to $3.2 billion, and we generated adjusted EBITDA and net income of $1.9 billion and $1.2 billion, respectively. Adjusted EBITDA and EBIT margin for the quarter were 60% and 48%, respectively, though lower than in Q3 2021. Going to slide five. In light of the fundamental changes in market conditions, it is important to highlight key elements of ZIM strategy, our commercial and operational agility.

We believe this differentiate us, enhance our position to operate in a more normalized freight rate environment. Over the past two years, we’ve been proactive to best position ZIM for long-term success as we continue to focus on optimizing profitability for the benefit of our shareholders. On slide five, we list several initiatives that we have previously discussed. Example on the commercial side includes our network of e-commerce lines to Australia and New Zealand and the US East Coast. Our focus on the interest rate, which is a very dynamic threat in the world’s largest trading volume terms and the expansion of our car carrier activity, which we intend to grow even further. We have demonstrated our ability to adapt to prevailing market conditions and capture commercial opportunities.

Today, our commercial presence is more diversified, allowing us to benefit from and balance between variant trade dynamics, yet, we remain committed to our global niche strategy and operating trades we find the most attractive and where we can establish a competitive position. We believe this agility will provide us with significant resilience in this new market environment. Operationally, we remain very focused on securing the most competitive and efficient fleet possible to support our commercial strategy. As a reminder, we entered into our first agreement for the long-term charter of 10,000, 15,000 TEU vessels in February 2021. These vessels are ideally suited to serve on our core Asia to US East Coast service. This charter agreement will have a positive impact on our cost structure next year, as we take delivery of the vessels throughout 2020.

We also expect to be the first liner to operate LNG vessels on this trend, offering ZIM an important commercial differentiating and enabling us to immediately reduce the carbon footprint of ZIM and its customers. Most recently, we entered into an important agreement with Shell to secure the supply of LNG and efficiently banker this vessel. From our digital investment, I would highlight the progress of Ship4wd, our digital freight forwarder, which we launched about a year ago. As a reminder, Ship4wd is pure digital solution on the front and back-end targeting SMEs from the US and Canada shipping from China and Vietnam. This capability offers them important efficiency compared to other industry players. While Ship4wd still has very modest revenue at this time, its technology has proven itself and the potential in this multi-billion market is clear.

On that note, I will turn the call over to our CFO, Xavier for his remarks on our financial results and additional comments on the market.

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Xavier Destriau: Thank you, Eli. And again, welcome, everyone. On slide six, we present key financial and operational highlights. Our third quarter results reflect continued strong execution and the benefits of our differentiated approach, combined with higher freight rates. Specifically, our average freight rate per TEU of $3,253 in the third quarter was 4% higher compared to the third quarter of 2021. During the first nine months of the year, our freight rate was 43% higher than in the 2021 nine months period. Our carried volume in the third quarter declined 5%, compared to the same period last year. Lower volumes during the third quarter resulted primarily from continued congestion as well as a more normalized level of consumer demand.

Over the nine months period, our carried volume was down 3%, compared to approximately 2.5% decline in the market in the first nine months of 2022. We now anticipate our carried volume will be slightly down in 2022 on a full-year basis as compared to 2021, and that is due to softer demand and continued congestion. Our free cash flow in the third quarter totaled $1.6 billion, compared to $1.7 billion in the third quarter of 2021. Our cash conversion rate in a strong at 84%, as compared to last year’s Q3 cash conversion rate of 83%. Turning now to our balance sheet. Total debt increased by 1.4 million since prior year-end. As in recent quarters, this was mainly driven by the increased number of vessel fixtures, long-term charter duration, as well as higher daily charter rate.

The first nine months of 2022, our cash bank deposits and investments increased by $600 million. Updating on our fleet, the number of vessels recently operate hasn’t changed from our last report and currently set at 149 vessels, of which 10 are top liners. The average remaining duration of our current charter capacity is 27.4 months, down from the 28.6 months in August 2022 and bridging our current operating capacity to the scheduled delivery of our chartered newbuild vessels throughout 2023 and 2024. In 2023, 25 vessels were out for renewal, with 37 up for renewal now in 2024. This means we have a total of 62 upcoming vessels up for renewal compared to the expected delivery of 46 chartered newbuild vessels during this time period. Moving on to Slide 7.

You can see that we delivered very strong results over the last two-plus years. And our net leverage ratio as a result has trended downwards at the same time and is at zero time as of September 30. On Slide 8, turning to our three and nine months financial performance, our differentiated and proactive approach has continued to yield profitable results. Revenue for the third quarter was $3.2 billion, up 3% as compared to Q3 2021. While net income was $1.2 billion, compared to $1.5 billion in the comparable quarter. Adjusted EBITDA was $1.9 billion for the quarter compared to $2.1 billion last year, reflecting more normalized carried volumes and average freight rate. While market dynamics have shifted, ZIM continues to generate strong EBITDA and EBIT margin.

Most margins were 63% for adjusted EBITDA and 54% for adjusted EBIT. This compares to 58% and 51%, respectively, in the same period last year. I would like also to note that our lower margins in the third quarter were driven by higher slot costs, resulting from higher vessel costs due to the transition to our own operating capacity following the termination of the slot purchase agreement we had with the 2M as of April 1. Coupled of is on top, higher LPSO bulk rates. Turning to Slide 9. We carried 842,000 TEUs in the third quarter compared to 884,000 TEUs during the same period last year. As you can see illustrated in the slide, lower volume on the transpacific caused by softening demand and continued effects from congestion in East Coast ports was partially offset by growth in Intra-Asia, Latin America and Cross-Suez.

Intra-Asia, in particular, is a key focus for us, and we do believe increasing presence to this growing trade will provide us with significant resilience as market conditions normalize. Next represents our cash flow bridge. We ended the Q3 2022 with a total cash position of $4.4 billion, which includes cash and cash equivalents and also investments in bank deposits and other investments instruments. During the first nine months of the year, our adjusted EBITDA of $6.6 billion converted into $5 billion cash flow from operations. Other cash flow items included $293 million of net CapEx, $1.1 billion of debt service mostly lease liabilities and dividend distribution of $2.9 billion. Moving to our guidance. As already mentioned, with the pace of normalization accelerating, we have revised our full year 2022 forecast.

We now expect to generate in 2022 adjusted EBITDA between $7.4 billion to $7.7 billion and adjusted EBIT between $6 million to $6.3 million. That is approximately 5% lower from an EBIT perspective than our previous guidance based on the midpoint of the range. Our underlying assumptions for our revised 2022 guidance reflects a steeper decline in spot freight rates and softer demand as discussed, in addition to adjusted contract rates. Again, we now expect our carried volume to be slightly lower than 2021. On the cost side, we assume a slightly more favorable charter rate environment, though the impact marginal given the limited number of charter renew. With that said, it is worth highlighting that this figure still do reflect full year record high positive.

Turning to our view on the market environment. The supply/demand balance forecast shown here reflects lower demand growth assumptions for 2022 and 2023 in light of the worsening macroeconomic environment. With the order book to fleet ratio current at approximately 27%, of which 2.3 million TEUs are scheduled for delivery in 2023 and another 4.7 million TEUs scheduled for delivery. The following years supply growth is expected to be considerably greater versus demand growth than previously projected. The combination of weaker demand, falling freight risk and risk of oversupply creates a challenging business environment for container shipping. Yes, I will discuss why various market dynamics may impact the effective supply and create a more stable business environment in the coming quarters.

Next with supply , mirror image of the decline in freight rate is the cooling off of the chartering market. The charter market is also indeed returning to more normalized conditions. As you can see here, charter rates have significantly dropped and although supply type options to secure charters for shorter term duration are gradually coming back. The idle fleet has also slightly increased. As we have indicated in the past, our view is that effective supply growth may be smaller than is implied by the tariff order book due to the various factors that are being detailed here on slide 14. In 2023, port congestion, limited terminal capacity and lacking lesser infrastructure will continue to partially offset the expected supply growth as well as possible slow steaming resulting from IMO 2023 regulation, which are expected going to effect in January next year.

IMO 2023 and the decarbonization agenda made also liners to retire older vessels, resulting in greater scrapping and offsetting top of the newbuild capacity. Slippage may also result in lower supply growth. ZIM currently suggesting that only approximately 60% of the deliveries will be on time in 2023 and 65% in 2024, as both carriers and shipyard may want to postpone delivery as the former are facing weaker demand and the latter are facing higher costs. Liner adaptive deployed capacity to demand, signs of which we have seen in recent weeks, they also support industry efficiency. On this note, we will open the call for questions.

Q&A Session

Operator: Ladies and gentlemen, at this time, we will begin the question-and-answer session. Our first question is from Omar Nokta of Jefferies. Please go ahead.

Omar Nokta: Hi. Thank you. Hi Eli and Xavier and Elana. Good afternoon. I just wanted to ask about liquidity and your cash position today. You’ve obviously got a pretty sizable amount with $4.4 billion at the end of the quarter, which is over $35 a share, and it’s sort of in line with the amount of debt and liabilities you have. But just in general, I wanted to ask, how do you view your current cash position? Is that a comfortable amount that you’re carrying now with all the uncertainty out there in terms of the outlook for the container market? And are there any levers to pull or you’re thinking of pulling in order to be raising more cash? Just if you could comment as well your cash position?

Xavier Destriau: Sure, Omar. The — we are very pleased that the balance sheet is strong at the time indeed where the market is entering into its normalization phase. And so having a very robust capital structure is a very good position to be as we experienced the downward trends in the market. So there’s a lot of uncertainty today as to where the rates will stabilize, when the normalization will eventually end, and we will obviously ask ourself the question when we come to that point as to whether we have, we believe that extra cash to allocate to some of the project. Today, the capital allocation priority continues to be the same as before, which is ensuring we continue to invest in growing our commercial prospects, securing capacity and renewing our equipment.

We continue to look also at options to potentially grow inorganically and look at potential M&A transactions. That is something that we continue to look into even though there is no rush for us to secure in this respect. And lastly and very importantly, we want to continue to be true to our commitment to our shareholders, which is to return significant capital back to them.

Omar Nokta: Thanks, Xavier for that color. And, yeah, maybe just on that final point you’re making about the return on capital. How do you think about that dividend policy going forward? I know the Board ultimately is going to make the decision. But how do you think about the use of cash at the moment given the softness in the market and does a true-up to the 50% payout next quarter for the full year of 2022. Does that make sense, or do you think sticking with 30% is more in line with your thinking?

Xavier Destriau: At this stage, what has been very important to the company is to say what we tend to do and execute on what we said, we’ve been consistent in that approach, I think since the Thursday as being a listed company, and we have adjusted on several occasions of delivering our dividend policy. So today, this quarter, we continue to be true to our words and announced this 30% dividend payout. I think when it comes to what may be the discussion on the decision of the company, in March when we release our full year financial statement. It’s a little bit too much premature today to opine as to where we will land the consideration that will be taken at the time will be obviously how did we close the year, but also as importantly, what do we think the outlook is ahead of us, and there is lot of unknown data at this point, which again I think make us say that it’s a little bit too early –too premature to opine on what might be the year two payment next year.

Omar Nokta: Okay. No, that’s fair. And maybe just one final one. Just regarding the cost structure at the moment, are there any levers to pull, you think, in terms of lowering run rate costs on some of the ships you have in-house today, not necessarily the new buildings, but the vessels on the water, the 149 that have roughly 27 months less of duration. Is there — are there opportunities to maybe think about approaching the shipowners and lowering the rate in exchange for added duration. Is that something that you’re thinking of? Is that a realistic measure that you guys think is worth undertaking?

Xavier Destriau: This is always something that we can consider. I mean, the shipowners are always willing to listen and engage with the charterer if we were to agree little bit for longer than we could revisit the commercial term. So maybe this is something that that might happen in the future. I think today, we are focusing on making sure that we extract as much cost as we can on the way we operate, the productivity level of each of the agencies where people are on the sea and on the ground, use and leverage our digital initiatives but also believe will allow us to increase the productivity levels, entering and negotiating with all of our suppliers, not only the vessel suppliers but all the terminals, the rates for next year.

So there is a lot for us, obviously, to work on in order to continue to try to extract as much — or limit the cost increase as much as we can in our organization going forward. So we focus on what we can control and be ready for the new normal of next year.

Omar Nokta: Okay. Very good. Thanks for the color. I’ll turn it over.

Operator: Our next question is from Alexia Dodani of Barclays. Please, go ahead.

Alexia Dodani: Yes. Good afternoon. Thank you for taking my questions. I had two to start first. And just on the implied Q4 EBITDA guide of around $1 billion. Obviously, the exit rate from Q3 has been quite strong. But, clearly, since the mid-September, we’ve seen the spot rate declined quite considerably. How should we think about the first half of Q4 versus the second half of Q4? Just to understand the exit rate as we go into the next year. Then secondly, on sort of your comments about sort of unit cost ability to change. When we look at 2023 and the current trajectory of spot rates, how can you protect profitability? What action are you able to take other than to basically reduce the capacity based on those — the delta you have between the upcoming vessels and the ones that are expiring. So, yes, those two please. Thank you.

Eli Glickman: Right. So starting with your first question, it is very true that the pace of the — maybe, should I say, the rate erosion of the — if we take the SCFI index, the decrease has accelerated over the past few weeks. So — and towards the second part of the third quarter, it’s been accentuated. So we have factored in, in our Q4 assumptions that leads to the guidance that we communicated today, a continuation of the trend to some extent. And — so we expect Q4 average freight rate to be less than what we delivered into Q3. In addition to that, from a volume perspective, we are also considering — and the two are being linked, in the way there is — on the one hand, the demand that is softening. And as a result, the company and also the — I think, largely, industry might take some actions in terms of additional blank space.

So we have also factored in a bit more of those in the fourth quarter, also explaining why the volume assumptions are a little bit lower than what we initially planned for. To your second question, looking at what it is that we can do on the — on our cost structure. We talked about the vessel cost. We’ve been, as you know, ZIM, has been transitioning from already over the past two years, transitioning from being very exposed to the short-term charter market, but gradually with all the contractors that we signed with other vessels owners. We have shifted towards being more exposed to long-term charter in the years to come. And we have experienced an increase in unit cost until this quarter and maybe into the next but in 2023 and beyond as we will take delivery of those newbuild capacity.

The cost per TEU will mechanically go down in terms of the vessel costs, the cost of sourcing capacity. In terms of variable cost, also with the congestion easing, we are going to incur less storage costs. The floor equipment is going to be improved as well. We are looking at how we can best optimize the usage of our fleet of containers. Today, we have close to 1 million TEUs million capacity of equipment. And it is very possible that we will deliver some of the older equipment as the flow of cargo eases into 2023. So we will be more efficient in operating of these containers.

Alexia Dodani: And can I just ask a follow-up on the first question. In terms of the kind of split between the evolution and if we look at how spot rates have accelerated, would it be fair to say the EBITDA skewed towards the first half of Q4, roughly two-third, one-third, if I just look at the kind of trajectory rate?

Eli Glickman: Alexia, I’m not so sure I understand your question. Are you talking about the three months into Q4, whether we expect a further reduction in November and then a stabilization in December?

Alexia Dodani: Yes, exactly, whether you expect most of the profitability in Q4 to come from October and November and later in December.

Eli Glickman: Today, we expect the rate to continue to go down. It depends also on the trade because we think that there are contracts that have been more exposed to the rate deterioration than others. To some extent, for example, the Atlantic is behaving better today. The US West Coast has been suffering much more than the other trade lanes. So we need to look at the mix of trade where we operate. We still take the conservative view that the rates will continue to go down. You see that the guidance in terms of rent is still $300 million. So we — obviously, we cannot be absolutely sure to what will be the prevailing rate of the remainder of the year. We know that what the rates will be in the weeks to come up until the end of the year. So what will affect also, our Q4 €“ our Q4performance, even if the boxes have not reached their final destination by the end of the year. That’s the accounting rules.

Alexia Dodani: Okay. Understood. Thank you.

Operator: Our next question is from Sathish Sivakumar from Citigroup. Please go ahead.

Sathish Sivakumar: Thanks again for the presentation. I’ve got two questions here. So firstly, on the — in your guidance, right, you did say that one of the reasons for the revisions and guidance is lower contract rates. If I understand, right, you got your contract rate exposure is mainly from transpacific, which normally resets in April, right? So, why does we are actually seeing lower contract rate versus, say, Q3 or versus your previous expectation? Any color on that? And also directionally, like how much it’s actually come down versus your previous expectation? And the second one is around the supply side flexibility on supply. You made it clear that, okay, you got about 60 vessels that are on charter that’s due for renewal versus 40 vessels you are taking in.

But that’s more like, say, in two years’ time where you get a better supply management there. But into next year, given the uncertainties and if potentially, further downturn in demand, what are the tools that you have in terms of like supply management as we go into H1 next year?

Xavier Destriau: Thank you, Sathish. The question on the contract rate, just to fact that into perspective yes, you’re absolutely right that it’s very much relevant for the transpacific region where we operate. And we normally contract 50% of our volume with a long-term contract and remain close to the spot market for the other 50%. So, clearly, what is happening with the steep decline in the spot market on some of the trades, the spot market went below the contract rate and you may remember that initially when we closed the contract season in April, we closed at elevated rates compared to the prior year. With that — so there’s a market in terms of rates went down and the cost at some point in the quarter, the average rate that we secure with our customers.

But more importantly, from our customer perspective, the demand was not there, and the volume was not there. So, we had to leave with this new reality and engage with our customers. Those customers are not customer for one year, for one season, they are recurring customers. We have a long-term relationship, and we intend to continue to have a long-term relationship. So clearly, the — as the spread between the contract rate in terms of dollar per TEU and the spot was increasing, we had to sit down and agree and revisit the pricing for those customers. In order to also protect to some extent, some of the — this is what has happened. We need to be pragmatic and make sure that we find the middle ground between the interest of our customers and ours.

To your second question with respect to the supply side and the flexibility that we have, we still believe that we said that 25 vessels are up for renewal next year. This is a significant amount that gives us some flexibility. And also when we look at which are the vessels that we are going to take delivery from next year out of the 46 that we intend to get between 2023 and 2024, we can get 18 of those in 2023. And nine of them will be the 15,000 TEUs, the large capacity vessel that we intend to deploy on the Asia-US east coast. The other nine will be 5,000 and three 7,000 TEUs. And the nine 15,000 TEUs that will be — we are eagerly waiting for those vessels, because they will be the most efficient one, they will repay capacity today at the cost, which from running the ship will be very similar, allowing us to increase the debt by 50%.

So if we manage to increase the intake, this will be an additional profit to the trade. And if we don’t, it would be a neutral what obviously may happen depending on what the market conditions are. We are also not alone in this play. As you know, we try to operate this vessel with our partners and there might be also some discussions around global network. I mean there are a lot of options for us to entertain and consider as we go along into 2023 and take those deliveries of those ships.

Sathish Sivakumar: Okay. Thank you. Thanks Xavier, and thanks Eli, and then Elana, thanks very much.

Operator: Our next question is from Sam Bland of JPMorgan. Please go ahead.

Sam Bland: Thank you. Thanks for taking the question. I two please. The first one is on have you seen — in terms of capacity across the market so far, I think Q2 2020 with blank sailings have you seen much of that yet? And if not, is that surprising? And the second question is, if we look at spot rates are, are there any lanes or regions where you say current spot rates are below the breakeven — thank you.

Eli Glickman: Sam, I hope I got your question right. You were a little bit breaking up. But from what I understand, the first question was around the land saving and whether we think that there will be more ahead of us than has been over the past few weeks. It is very likely. It’s very possible. The objective of the company as far as it goes remains the same. We intend to be profitable in the trade where we operate and we don’t wish to sell capacity at a lot. So the idea will be to make sure that we always operate our capacity and really grow capacity. We arranged the network of trade potentially or line where we operate in order to always be in a position where we avoid losing money on a given voyage. So if the rates continue to slide, the level of blanking will most probably continue to increase over the coming weeks.

And with regard to your second question, which was whether there are some trades where we think the spot rate has already across the breakeven point from a profitability perspective. I think in some trades, we are far from that and we already crossed the line. I was referring to earlier on to the trade between Asia to LA, which has been a trade that has been a very severely maybe one the most early on, severely impacted by the slide in the freight way. As you know, on those trades, we operate a specific service. We operate an expedited service, we still command a premium on the SCFI rates, but there is not much more room for further reduction in this trading. The Atlantic is still quite resilient. The US East Coast has been a bit more resilient as well.

Latin America was very resilient in the quarter is now sliding a little bit more. So, there is a difference in the pace of the normalization. But eventually, we think all the trades will find a new equilibrium at some point.

Sam Bland: Understood. Thank you very much

Operator: This concludes our Q&A session. And I hand back to Eli Glickman, President and CEO, for closing comments.

Eli Glickman: Thank you. ZIM continues to deliver outstanding execution and profitable growth reflected in our third quarter and nine months 2022 financial results. EBITDA and EBIT margins remain strong and our standing cash generation has enabled them to declare over $1.26 billion, or $10.55 per share in 2022 dividends. While the pace of market normalization has accelerated over the past several weeks, we remain on track to January 2022 adjusted EBITDA and EBIT that will represent full year report. I would like to conclude by highlighting that ZIM has been proactive over the last two years, taking a significant step to enhance and build resilience in our business to best position ZIM for the new enrollment. Commercially, we diversified our business and a multiple growth engines.

We have also secured a competitive, efficient and cost-effective new build capacity to support our commercial strategy for the benefit of customers and shareholders. Thank you very much for tuning in. We look forward to reporting on our continued progress. Have a good day.

Operator: Ladies and gentlemen, the conference has now concluded. And you may disconnect the telephone. Thank you for joining, and have a pleasant day. Good-bye.