ZIM Integrated Shipping Services Ltd. Q3 FY2024 Earnings Call

Ladies and gentlemen, thank you for standing by. My name is Christa and I will be your conference operator today. At this time, I would like to welcome everyone to ZIM Integrated Shipping Service Third Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks, there will be a question-and-answer session. Thank you. And I would now like to turn the conference over to Elana Holzman, Head of Investor Relations. You may begin.

Thank you, operator, and welcome to ZIM's Third 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 and cautionary language described in the documents the company filed with the Securities and Exchange Commission, including our 2023 Annual Report on 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. We are proud of ZIM's strong performance in the third quarter, in which we again delivered record carried volume as well as exceptional profitability, which underline our strong financial results. We generated net income of $1.1 billion and revenue of $2.8 billion in the third quarter, as you can see in Slide Number 4. Adjusted EBITDA was $1.5 billion and adjusted EBIT was $1.2 billion, with adjusted EBITDA margin of 55% and adjusted EBIT margin of 45%, indicative of our continued strong financial position. We maintain total liquidity of $3.1 billion at quarter-end. Our nine-month results are better than expected with a recently improved outlook for Q4 '24. We are raising our '24 guidance ranges. We now anticipate full year adjusted EBITDA between $3.3 billion to $3.6 billion and adjusted EBIT between $2.15 billion to $2.45 billion. Additionally, thanks to our improved cash generation to date and strong balance sheet, our Board of Directors has declared a special dividend of $100 million on top of the regular dividend of $340 million or 30% of Q3 net income per our dividend policy. On a per share basis, we will distribute a total of $3.65 per share, which consists of $2.81 per share on account of Q3 results plus $0.84 per share as a special dividend. Returning capital to shareholders has always been a priority and we are pleased to share our success with shareholders today with this substantial dividend. This quarter's results were the highest we have delivered since Q3 2022 and higher than any period prior to the extraordinary COVID market. While this quarter's results were driven by elevated freight rates, we have undertaken important strategic and commercial initiatives to maximize our earning power. We believe that these actions have improved our competitive position and will continue to benefit us going forward regardless of prevailing market conditions. First and foremost is, of course, our fleet renewal program. In 2021 and 2022, we engaged in a series of long-term charter agreements to secure 46 newbuild vessels, including 28 LNG-powered container ships to be delivered over the course of '23 and '24. The benefits of our fleet transformation are already evident in '24, driving our strong results this year. Entering '25 and once we receive all 46 new vessels and redeliver some older capacity as planned, 50% of our fleet capacity will be newbuild, resulting in more fuel-efficient and cost-efficient capacity. Our average vessel size has grown, making our fleet better suited to the trades in which we operate and improving our cost structure. Moreover, about 40% of our capacity will be LNG-powered. ZIM was an early adopter of LNG, enabling us to be the first and only carriers currently operating two services on the Asia to US East Coast trade with LNG vessels. This has been an important commercial differential for us, supporting our efforts to capture additional volume as we grow our operated capacity on this trade. In addition to reducing the environmental impact of ZIM operations, we have also seen financial benefit from our utilization of LNG. LNG is 25% more efficient compared to LSFO and has been consistently cheaper since we had our first 15,000 TEU LNG vessels delivered to us in early '23. Importantly, we ensure reliable access to LNG by reaching strategic supply agreements with Shell. Recently, we entered into an additional agreement with Shell, and now our services to the US East Coast are covered by long-term LNG supply agreements. This has enabled us to operate our dual fuel LNG vessels on LNG and capture these cost benefits. Our improved competitive position on the Asia to US East Coast trade also helped us reach our new operational collaboration agreement with MSC, replacing the agreement with the 2M. More recently, we also agreed to a new operational collaboration with Hapag-Lloyd, covering the Atlantic trade. These and other operational collaboration agreements allow us to improve network efficiency by promoting greater utilization of larger vessels as well as enhance our product offering to customers with better port coverage. While ZIM secured cost-competitive newbuild capacity to support its commercial strategy and was prepared to operate independently, these operational collaborations mitigate the significant capacity growth we have undertaken in '23 and '24. We have also been proactive in securing the necessary equipment to support our planned volume growth this year. A key factor contributing to our strong Q3 results has been volume growth, reaching 970,000 TEU, which represents another record high for ZIM. This 12% year-over-year growth significantly outpaced global container market growth. We are incredibly pleased with our progress in gaining market share, owing to our strategic investment in ZIM fleet, particularly on the Asia to US East Coast trade. We have also delivered significant growth in Latin America, a newer focus area for ZIM. Identifying potential growth opportunities and demonstrating commercial agility have been and continue to be a core strength at ZIM. Identifying the car carrier opportunity and expanding our capacity to 16 carriers is one example. Two more recent examples are our expanded focus on Latin America, which I just mentioned, and the expedited services we relaunched in '24 from Asia to the US West Coast to capitalize on the strong volume growth on this trade. Another commercial decision we made this year that contributed to our strong Q3 results was our strategy to increase ZIM exposure to spot volume. Earlier in the year, ZIM chose to deviate from our previous approach of a 50-50 split between spot and contract volume and instead increased our spot exposure in the Transpacific trade to about 65%. This enables ZIM to benefit more significantly from the upward pressure we saw on spot rates in the third quarter. Looking ahead, market dynamics still point to supply growth outpacing demand in '25 and '26, setting up for a version following a period of strong rates that has extended for most of '24. However, the rate environment can be volatile and unpredictable, dictated by macro conditions and factors external to the shipping industry. As such, our focus has been and will continue to be on improving our cost structure and operational and commercial resilience. It is important to highlight that our position today is fundamentally better compared to a year ago. The transition period of '23 and '24 is concluding and we are on track to complete our fleet transformation as planned. The benefits of our strategic investment in our fleet have already begun to materialize this year as I have detailed today. Our position in '25 and beyond will improve further as we are regaining flexibility in terms of the size of our operated capacity, with a total of 57 vessels up for renewal in '25 and '26, which we could redeliver to owners. We can choose to continue operating in similar capacity or scale back depending on the market environment. As market conditions continue to evolve, we intend to remain agile and build on our track record of taking advantage of attractive opportunities that benefit ZIM both operationally and financially. We are confident that the steps we have taken have solidified our position as an agile container shipping player with a competitive cost and fuel-efficient modern fleet. On this note, I will turn the call over to Xavier, our CFO, for a more detailed discussion of our financial results, our updated '24 guidance as well as additional comments on the market environment. Xavier, please go ahead.

Thank you, Eli, and again, welcome, everyone. On Slide 8, we present key financial and operational highlights. ZIM's third quarter financial results reflect continued momentum based on strong demand and elevated freight rates. Our third quarter average freight rate per TEU was $2,480, a 118% year-over-year increase and a 48% increase from the prior quarter. During the first nine months of the year, our average freight rate per TEU of $1,889 was 53% higher than in the first nine months of 2023. At the same time, ZIM's increased carrier volumes have had a positive impact on earnings given the strong rate environment. As Eli mentioned, our Q3 carried quantity of 970,000 TEUs was a record and 12% higher year-over-year. ZIM's growth compared favorably to market growth of 5%. Revenues from non-containerized cargo, which reflects mostly our car carrier services, totaled $145 million for the quarter compared to $153 million in the third quarter of last year. Total revenues in the first nine months of 2024 of $6.3 billion were up $2.3 billion or 58% year-over-year. Our free cash flow in the third quarter totaled $1.5 billion compared to $328 million in the third quarter of 2023. Turning now to the balance sheet. Total debt increased by $828 million since prior year-end, mainly due to the net effect of incoming larger vessels with longer-term charter durations attached. I'd like to remind you that the newbuild capacity we have received, especially the LNG vessels are chartered for a period of 8 to 12 years, creating predictability in our cost structure with respect to this core capacity. Furthermore, we hold options to extend the charter period on the 25 Seaspan LNG vessels as well as purchase options, giving us full control over the destiny of these ships, very much as if we were the actual vessel owner. Turning to our fleet, we currently operate 145 vessels, including 129 container ships with total capacity of approximately 773,000 TEUs as well as 16 car carriers. This compares to an overall fleet of 148 vessels as of our prior earnings call in August. The change from three months ago resulted from the delivery of four newbuilds and the redelivery of seven smaller vessels. I'd like to reiterate that while we may continue to operate a similar number of vessels, our operating capacity continues to grow. In fact, today, the average vessel size we operate is about 50% larger compared to our fleet two years ago. With our fleet transformation program, we are replacing smaller, less cost-effective tonnage with larger, more cost-efficient newbuild capacity. As of today's call, 42 of the 46 newbuild vessels ZIM had committed to have joined our fleet, including all 10 15,000 TEU LNG vessels, the 4 12,000 TEU vessels, 15 of the 18 8,000 TEU LNG vessels, and 13 of the 14 smaller wide beam, 5,500 and 5,300 TEU ships. Excluding the newbuild capacity, the average remaining duration of our chartered tonnage continues to trend down and is now 17 months compared to 18 months in late August. We have still a total of seven vessels up for charter renewal in the remainder of 2024 compared to the expected delivery of four newbuilds during the same period. As we approach 2025, we have another 35 vessels up for renewal next year and 22 vessels up for renewal in 2026, which, as Eli mentioned, provides us optionality to better align our operating capacity with the market opportunities. Next, now on Slide 10, we present ZIM Q3 and nine months 2024 financial results compared to last year's Q3 and first nine months. Adjusted EBITDA in this year's third quarter was $1.5 billion and adjusted EBIT was $1.2 billion. Adjusted EBITDA and EBIT margins for the third quarter were 55% and 45%, respectively, compared to 17% and an EBIT loss in the third quarter of last year. For the first nine months of 2024, adjusted EBITDA margin was 44% and adjusted EBIT margin was 30%. This is compared to 22% and an EBIT loss in 2023. Net income in the third quarter was at $1.1 billion compared to a net loss of $2.3 billion in Q3 2023. As a reminder, the net loss in Q3 last year was primarily driven by a non-cash impairment charge of $2.1 billion. Turning now to Slide 11. We present here our carried volume broken down by trade zone. As you can see, we saw significant growth in the Transpacific, Latin America, and Atlantic trades in the third quarter, attributable to our larger capacity vessels and new lines. Transpacific and Latin America volume grew 24% and 59% respectively year-over-year. We expect to see continued volume growth during the remainder of 2024 as we continue to upsize our capacity and remain on track to achieve our double-digit volume growth target this year. On Slide 12 is our cash flow bridge. For the quarter, our adjusted EBITDA of $1.5 billion converted into $1.5 billion of cash flow generated from operating activities. Other significant cash flow items for the quarter include $595 million of debt service, mostly related to our lease liability repayments and a dividend of $112 million. In Q3, we paid $60 million as a down payment on the delivery of three of our LNG vessels. Moving now to our 2024 guidance. As you already heard from Eli, our outlook for the remainder of 2024 is stronger than previously assumed. As such, we are raising our full year 2024 guidance and now expect to generate adjusted EBITDA between $3.3 billion and $3.6 billion and adjusted EBIT between $2.15 billion and $2.45 billion. Our assumptions for double-digit volume growth and bunker cost haven't changed since we provided our prior guidance in August. However, the expected decline in freight rates from their peak in early summer was slower than we had initially anticipated, resulting in a stronger overall expected performance for the year. Before we open the call to questions, a few comments on the market. Looking back at 2024, this year developed very differently than what was initially anticipated. From an expectation of significant oversupply, causing potentially freight rates to drop to loss-making levels, we saw a relative equilibrium develop due to the significant capacity absorbed by the Red Sea diversion, which coupled with better-than-expected demand, drove rates upwards. Looking forward to 2025 and beyond, in addition to uncertainties stemming from geopolitical matters such as the duration of the Red Sea crisis or the impact of the recent US elections, the risk of oversupply continues to exist, especially with the recent growth in the order book to fleet ratio at 25.5%, though to a lesser extent than the gap between the supply and demand growth of 2024. Yet it's also important to note that the delivery schedule of the current order book is longer than the typical two-year period. Rather, it is stretched out to 2027, 2028, and even 2029, easing the absorption of this additional capacity. Moreover, over the next several years, the decarbonization agenda of the industry will require carriers to modernize their fleet so they can meet IMO mandates as well as customer expectations on reducing carbon emissions. The decarbonization agenda of our industry will also likely drive scrapping to more meaningful levels. Scrapping almost did not happen since 2021, and at some point, it should begin to catch up, especially as more stringent regulations on carbon emissions are enforced, making it uneconomical to operate certain older vessels. In the short-term, industry players can also utilize slow steaming or idling to continue to manage capacity. On that note, we will now open the call to questions. Thank you.

Thank you. And we will now begin the question-and-answer session. Your first question comes from Omar Nokta with Jefferies. Please go ahead.

Thank you. Hi, Eli and Xavier. Thanks for the update. Obviously, exceptionally strong quarter, big guidance bump. First, maybe just on the dividend. Your cash position has jumped here to above $3 billion here at quarter-end. It seems that you just hear the commentary and by your actions that you've got a good level of confidence on the outlook. I guess for ZIM in particular. But maybe if you wouldn't mind just giving us a sense of how you are thinking about ZIM and how it's positioned as we go into an uncertain perhaps 2025? And then also in terms of the dividend, the $100 million payout, of the special payout, does that factor into the Board's decision on whether or not to true up to the full 50%?

Okay. Thank you. Good morning, Omar. Maybe addressing the second part of your question. We are indeed very pleased to be able to top up our regular dividend this quarter, and this is us being true to our commitment to our shareholders to return capital as much as we can when the situation allows. As you rightly pointed out, the third quarter order and the outlook for the remainder of the year is somewhat stronger than what we initially planned for. Hence why we have decided to top up our regular dividend with a special dividend. Just to give some context, if we look at what has happened and how much capital we returned since we became a public company in 2021, we've returned $5.2 billion to our shareholders or $43.26 per share over this four-year period, including this quarter's dividend in those numbers. So it is us delivering on our commitment that we are doing this quarter. Now when it comes to the question of what will or what may happen in March, our current dividend policy stands and the Board will review in March what to do in terms of potentially topping up our dividend between 30% to 50% of the net income we will have generated over the full year period. So that decision will this discussion will take place in March. The dividend policy remains in place and unchanged. Now going back to looking at what the market may look like in 2025. Clearly, we are pointing towards a good performance towards the end of 2024. So a good Q4 and certainly a better Q4 than what we anticipated in August. Now looking into 2025, there are a lot of potential elements of volatility ahead of us. One thing is for sure, the company is very well prepared and very well equipped to navigate the uncertainties that lie ahead. So we don't control what the geopolitical situation will be, but what we control is our ability to react fast to changing market conditions. We have demonstrated in this quarter and in the prior quarter our ability to move and redeploy our capacity to trades where they are more contributive than others. Eli mentioned us reopening very swiftly and rapidly our trade serving the Pacific Southwest, moving vessels from Pacific Northwest to Pacific Southwest and again capturing the extra profit that those trades were generating. We are also very strongly positioning ourselves into a market where we believe there are potential for significant growth in the future. You've seen our volume growth quarter-over-quarter, year-over-year on Latin America trade, which we believe is an area that will benefit in future years from growth. And last but not least, looking at our vessel strategy, we are now getting into 2025, completing our fleet transformation. So having our core fleet, which is now extremely cost-efficient, remembering that we ordered those vessels in 2021, '22, before a significant surge in newbuild prices and also before the inflationary environment that led to elevated capital costs thereafter. So we got a very good deal compared to what similar types of costs would be if we were placing those orders today.

Great. Thanks, Xavier for that color. Very helpful. And maybe just a follow-up, maybe in terms of just the spot market, and as we referenced here, it looks like we're finishing off the year relatively strongly. Could you give some color on what you've been seeing here recently? You had the wind up going into peak season, a little bit of a wind down as peak season has started to conclude. How have things kind of been going here recently? And then in terms of the strike on the US East Coast, it only lasted three days. You're obviously very active in that market. Any lingering effect for ZIM in the fourth quarter in terms of, say, financial impact? Anything to talk about? Thank you.

Yes. I mean, the first element to consider is very quickly, after the Golden Week, which is a very important date in the seasonality of our industry, volume came back very quickly. This is why we are quite confident in our ability to deliver on the fourth quarter, also a stronger volume of carrier TEU. So the demand was strong, and there may be a few things that can explain why demand was very strong to pick up shortly after the Chinese Golden Week. Maybe the fear of the potential tariff was one driver. The fear of the potential strike that may take place from January 15 in the US and also the fact that from a timing perspective, Chinese New Year next year will come quite early towards the end of January. So that might have triggered also some sort of a cargo rush towards the end of the third quarter. We see strong volume currently being moved, especially from Asia to the US. So that is obviously supporting the rate environment. As you rightly pointed out, we did see the rates start to normalize after the peak reached in July. But over the past few weeks and post-Golden Week, what we've seen is, on most of the trading, some sort of a stabilization in the rate environment. Even on some other trades, we are seeing rates starting to pick up again. This points towards a good finish for 2024, at least up until the end of January, and then we will move towards the second half of 2025. We will need to observe the effects of the new policies and how demand will behave going forward. But today, everything points towards continued growth in demand.

Xavier, thank you. I would like to add, Omar. I think these results, higher than $1.13 billion. The decision on a special dividend of $100 million on top of the $340 million reflects our confidence in the company with the new fleet that we have, 42 new efficient LNG vessels. We see the impact and the records we've achieved. We prefer this year to take the spot rate over long-term contracts. We did not succumb to pricing adjustments from our larger customers that did not meet our breakeven. Our decision to open new lines from Asia to the West Coast of South America and to reopen the line from South China to Los Angeles demonstrates our strength and agility in decision-making, and we are highly confident. With that, the Board approved the special dividend totaling $440 million. So we believe in the company, we see strong cash flow, and we retain confidence in our future.

Excellent. Well, thank you, Eli and Xavier. I appreciate all the color. I'll turn it over.

Yes, hi, good afternoon. I had two questions. Just firstly very good to hear kind of the positive outlook that gives you the confidence to give some incremental special dividend near-term. What held you back from reversing the impairment you took last year? Because I believe that the impairment was driven by the kind of outlook of the market. Could you not reconsider that decision now that you suggest kind of things have improved more underlying? So that's my first question. And then secondly, can you just clarify, Xavier, what percent of your capacity is on these smaller, less efficient vessels that could potentially come out in '25 should the market kind of turn out weaker? And then if I actually can ask one more. What are you hearing from your customers near-term? I mean is there scope for further inventory buildup into the first half of 2025 or do kind of the duration constrain the timing benefit of arriving in the US in the next couple of weeks? Thanks.

Thank you. Good afternoon, Alexia. So on your first question regarding the impairment, this is a complex accounting matter, but I'll try to explain clearly. Back in September 2023, when we concluded this impairment analysis, it is always a forward-looking process that gets considered when benchmarking the value of our assets in our book against what is the potential value of the asset that will be generated in terms of future discounted cash flow. So it's always forward-looking. What has happened behind does not really assist or play a significant role in any subsequent reassessment of the impairment. That being said, this quarter, unlike prior quarters, we did indeed look and reassess the overall impairment amount remaining in our book because a significant portion of it has already been amortized over the past 12 months. When we look ahead into future years, '25, '26, and the year thereafter and compile our cash forecast, also using the updated WACC in terms of discounting rates influenced by macro conditions such as interest rates and country risks in Israel, there is a lot of data that comes into play. In concluding the overall assessment and comparing expected realizable values of the assets with the remaining book value of the same assets, we saw there was an immaterial impact of the impairment assessment, which is why we concluded no need to change anything. With respect to your second question, the 35 ships that are up for renewal in terms of chartered vessels in 2025 are indeed smaller ships than those we received over the past two years. Altogether, these 35 vessels combined represent a total TEU capacity of approximately 120,000 to 130,000. This means that, by year-end, we will operate close to 800,000 TEUs while having approximately 120,000 TEUs that we could let go next year without incurring any early penalties for exiting existing charters. However, the first vessels to leave the fleet, if any, will be the most expensive, less efficient ones we operate, ensuring the company continues to operate with core capacity that is far more cost-efficient. Third, regarding what we see in inventory levels in the US, which is our primary market, we've transitioned from a period of destocking in 2023 to restocking over the summer. The inventory-to-sales ratio suggests that levels are not abnormal compared to what is typically expected at this time of year. Demand remains strong and resilient in the US, so we do not feel alarmed about a potentially troublesome inventory buildup that might catch us off guard in subsequent quarters of 2025.

That's very helpful. And can I just ask one follow-up on the oversupply comments you gave earlier? You're talking about the risk of oversupply continuing, but to a lesser extent. What is that premise based on? Is it on the view that likely the Cape of Good Hope journeys will continue perpetually, or what is the basis for the lesser standpoint?

Look, the Cape of Good Hope situation or the Red Sea crisis is very difficult to comment on regarding when that will ultimately change. Hopefully, it will change sooner rather than later. What we refer to regarding the newbuild being delivered to the global shipping industry; 2024 was a year of significant newbuild deliveries, with 3 million TEUs of capacity delivered, representing more than 10% of the overall tonnage delivered in one year. In 2025, we know it will be significantly less, approximately 2 million TEUs of capacity. For 2026, we estimate about 1.5 million TEUs. 2024 was indeed a critical year on that front. The Red Sea situation played a key role in helping to absorb this additional capacity that came in. At some point, the Red Sea disruption will dissipate. However, we're still in an industry that is expected to grow in terms of carried quantities year-over-year, which is an important consideration. Additionally, scrapping capacity will happen, and it’s not a matter of *if* but rather *when*. This should happen fairly soon, requiring carriers to retire older tonnage due to increased regulatory scrutiny on carbon emissions. In the short term, industry players can also utilize slow steaming or idling to manage capacity effectively. So while the risk of overcapacity exists, there are also several meaningful factors that could mitigate this risk going forward.

Thanks again, Xavier and Eli Glickman, and congratulations on the good results here actually. I got four questions here, and I might start off with the guidance as such. If I look at the guidance, the top end, it actually assumes the average freight rates being flat quarter-on-quarter. Is that correct? Or do you actually see an uptick in the volume growth versus Q4 even adjusted for seasonality? And then the second question is around the contract versus the spot volume mix here. Has it changed as we went through the year? Are you still using about 35% of your volumes on Transpacific that is contracted? Any color around that? What does that split look like at the end of Q3? And then the third one is around vessel utilization. If you have any color about within your trade lanes, where are you seeing higher utilization versus where you’re still seeing some pressure on getting the vessels fully utilized, specifically for Transpacific versus Intra-Asia and LatAm trades? Finally, on the Transpacific volume growth, can you help us understand year-on-year movements there versus volumes into West Coast, which was not there last year? You launched those services this year. Can you also provide the impact of express service TAM, split between East and West Coast would be very helpful from Asia? Thank you.

Thank you for the question, Sathish. I'll take them one by one, starting with the first. If we look at the assumptions baked into our guidance for the fourth quarter, we are indeed expecting continued slight growth in our volume as we will see the effect of the incoming new capacity. We still have four vessels that will be delivered to us between now and the end of the year while we have seven smaller ships for redelivery over the same period. Net, we continue to grow our operating tonnage. As a result, we believe we will be able to capture additional market share and fill these ships. Therefore, the net 970,000 TEUs that we've carried this quarter is expected to continue the same trend into the fourth quarter. Yes, there are volume growth assumptions compared to last year baked into our guidance for Q4. In terms of rates, we did see a decline from the highs achieved in July, but we now see some rates stabilizing. Nonetheless, on closing Q4, the average freight rates per TEU carried in Q4 will not match the average freight rates of Q3, since we were already experiencing a decline in the spot rate environment in the third quarter. Regarding the split between contract and spot, you're correct in saying that it was a crucial decision to avoid compromising on contract rates. This resulted in being more exposed to the spot market than we initially planned, and that hasn’t changed throughout the year for us. The contracts are discussed and set during the first quarter. As of the end of Q3, we were still operating on the 35% contract and 65% spot split. We will enter discussions for next year early in 2025. Regarding vessel utilization, demand surged rapidly after the Golden Week holiday, and our vessels are generally operating at optimum capacity. In fact, we anticipate robust utilization for the remainder of the year, especially as we approach Chinese New Year set for January 27th. Finally, regarding Transpacific volume growth, we have observed a strong presence there, bolstered by the effects of the Red Sea disruption. The Transpacific trade has recovered significantly from 2023 lows, and we've bolstered our capacity as we shifted from the Pacific Northwest to the Pacific Southwest to capitalize on better demand and earnings potential, as Eli pointed out.

On the express service, what type of customers are utilizing that service? Are there any verticals at play?

On this service, you have all the usual suspects very interested in services that are time-sensitive. So you have e-commerce businesses as a significant source of cargo. There are also regular cargoes booked on those ships, especially with a shortage of capacity and strong demand currently present in the US.

Got it. Maybe, just sorry, one quick follow-up on this. So the point-of-sale on that express service, how do you classify US versus Asia on that express service?

I’m sorry, I didn't quite get that question. Can you repeat, Sathish?

So if I look at the point-of-sale for that express service, what would the split look like, say, originating from Asia versus originating from US importers?

I would not be able to tell you precisely to be frank. I guess it's a split, but the precise breakdown between the two—push exports out and pull imports in—is something I wouldn't want to state with full certainty.

Okay. No problem. Thanks, Xavier. Congratulations again.

And that does conclude our question-and-answer session, and I will now turn the conference back over to Eli Glickman for closing comments.

In summary, we are proud of ZIM's strong third quarter in which we delivered record carried volumes and outstanding financial results. This performance again illustrates our continued progress, advancing ZIM's fleet transformation, enhancing our commercial agility, and executing strategic objectives to best position the company for long-term profitability. 2024 is shaping up to be the third-best year ever for container shipping, following the record years of 2021 and 2022, and we are pleased to continue to capitalize on a positive rate environment that has remained stronger for longer than anticipated. We have once again raised our full-year guidance. As we look to the future, while market dynamics are volatile, we are confident that we have built a resilient business at ZIM with a transformed fleet. Our strategic transformation has put us in a stronger position than ever, and we will continue to implement our differentiated strategy to drive the next phase of ZIM growth. Thank you again for joining us today. We look forward to sharing our continued progress with you all. Thank you.

Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.