以星航運 (ZIM) 2021 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. I am Emma, your Chorus Call operator. Welcome, and thank you for joining the ZIM Q1 2021 Financial Results Conference Call. (Operator Instructions)

I would now like to turn the conference over to Elana Holzman, Head of Investor Relations. Please go ahead.

Thank you, Emma, and welcome to ZIM's First Quarter 2021 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 2020 Annual Report filed on Form 20-F on March 22, 2021. We undertake no obligation to update these forward-looking statements.

At this time, I would like to turn the call over to Eli Glickman. Eli?

Thank you, Elana, and welcome to today's call. It is truly a momentous time in ZIM's 75-year history. I'm excited to share with you our impressive year-to-date accomplishments as well as the important steps we've taken to unlock significant shareholder value.

Following our successful IPO to become the first global container liner to list in the United States, we've continued our strong trajectory, which we outlined on Slide #4. First, our differentiated approach and a proactive strategy we implemented to capitalize on the highly attractive market have once again produced record results. For the second consecutive quarter, we generated all-time record EBITDA and net profit, with net profit for Q1 2021 higher than for the full year of 2020. Again, net profit for Q1 2021 higher than for the full year of 2020.

We are pleased to report that our consistent earning growth position ZIM as one of the leading carriers in terms of profitability. We also delivered our highest operating cash flow ever of $777 million. Notably, our Q1 2021 EBIT and EBITDA result were well above the implied guidance range that we provided in March 2021.

Importantly, we continued to deliver industry-leading margins, and once again, outperformed the liner industry average. Our adjusted EBITDA margin was our highest ever, 47%, again, 47%; and adjusted EBIT margin was also our highest ever, 39%, again, 39%. We remain committed to our goal of consistently performing as one of the top 3 carriers in terms of EBIT margin. We also significantly strengthened our balance sheet. And today, our shareholder equity is more than $1 billion.

Based on our strong first quarter performance, the robust market environment and the full completion of our freight contracts at higher rates, which we will discuss later, we are raising our 2021 guidance. Specifically, we now expect to generate 2021 EBITDA between $2.5 billion to $2.8 billion and EBIT between $1.85 billion to $2.15 billion. This is up from our March '21 exceptional of EBITDA in the range of $1.4 billion to $1.6 billion and EBIT in the range of $850 million to $1.05 billion.

Our record result in the first quarter enabled us to achieve another important milestone for the shareholders. Based on our strong cash flow in Q1, we will redeem the entire $340 million principal amount outstanding on our Series 1 and 2 notes, eliminating the restriction we faced on paying a dividend on account of 2020 profit. We are proud to achieve this important accomplishment sooner than expected and earlier than the stated maturity by 2 whole years, further strengthen our balance sheet and enhancing ZIM's position to take advantage of favorable fundamentals for the benefit of shareholders.

As a result, and taking into consideration our improved outlook that is even better than we previously anticipated as well as our success capitalizing on the attractive market, we are pleased to announce that our Board of Directors approved the distribution of a special dividend of approximately $240 million or $2 per share in 2021. Importantly, this special dividend come on top of our previously communicated 2021 annual dividend guidance, whereby we are expecting to be distributing between 30% to 50% of 2021 net income in 2022. Our first quarter financial results reflect our consistent earnings growth, and as I already mentioned, are well above the implied guidance we provided last quarter.

As you can see, on Slide #5, our leverage continued to trend downward. ZIM's net leverage improved from 5-point -- excuse me, from 5.3x to 0.5x over the previous 9 quarters, positioning us in the top tier of the industry. Sustainable growth remains a top priority for ZIM, and we remain focused on being one of the top 3 players in terms of EBIT margin among the global carriers.

Moving to the next slide, Slide #6. We made significant progress year-to-date advancing major initiatives, with notable achievement related to our 4 strategic pillars: operational and commercial agility, operational excellence, and leading innovation and digitalization in shipping industry. First, for ZIM, our exceptional operational agilities allow us to successfully compete with global shipping giant as we implement our differentiated asset-light and global niche model.

The benefits of this approach were demonstrated as we adapted our vessel deployment to address dramatic change in the demand since early 2020, in response to the COVID and the subsequent recovery in demand. Prior to COVID, our fleet includes 68 vessels, which will come down to 59 in May of 2020. As global trade resumes and caught up to pre-pandemic levels, we're identifying new opportunities and expanded our capacity, growing our fleet to 98 vessels at mid March.

Today, our fleet includes over 110 vessels as we continue to quickly align our capacity in the past few months to make continued growth in demand despite the very tight chartering market. Related to our success, increasing our capacity, we drew on our commercial agility to identify market opportunities and develop new growth engines. Importantly, we expand in our strategic Pacific and intra-Asia trades, opening new services to address profitable underserved routes.

In 2020, we identified the opportunity for premium high-speed services to meet growing e-commerce trends and provide viable shipping alternative to airfreight. In the first quarter of 2021, we launched additional lines to meet growing acceptance of this offering. This e-commerce services, including 3 from Asia to the U.S. West Coast, are instrumental in driving our record Q1 results and positive forward outlook.

Through our partnership with the 2M Alliance, Maersk and MSC, we will further strengthen our transpacific presence, a key trade for us; launching a joint Asia-U.S. East Coast lane service to commence this month. In addition, we have worked with our partners to upgrade our Asia to the U.S. Gulf coastline service by upsizing vessel capacity.

Another of ZIM's primary strengths is our operational excellence. A key component of this sustainability, we are committed to responsible corporate citizenship with a particular focus on implementing policies and initiatives that help mitigate the impact of our operations on our planet. Consistent with this critical objective, we moved quickly, as promised in our IPO roadshow and 2 weeks after pricing, we announced the conclusion of a strategic long-term charter agreement with Seaspan. In February, we announced for 10 green 15,000 TEU LNG dual-fuel vessels. We are proud that this transaction will position ZIM as a leader in terms of carbon intensity among global liners.

Other key features of our operational excellence include our continued emphasis on effectively managing costs and our equipment needs. Given our significant growth, combined with the current congested market and limited availability of containers, we have made substantial investment in new equipment, already starting in 2020, to best position ZIM for the future.

Since January 1, we have entered into agreement for the purchase of containers, mostly new built units, for a total of approximately $588 million and we will grow our container fleet from approximately 640,000 TEU as of the end of March 2020 to exceed 900,000 TEU to at year-end to both meet our growing business and address challenges caused by port congestion.

Finally, we have continued to invest in disruptive technology, further establishing ZIM as a leading digital shipping company. In March, we announced our participation in Series B financing round of WAVE BL, a developer of groundbreaking blockchain-based platform, supporting paperless trend in the shipping industry. We view our early investment in WAVE BL in 2017 as a major win, as our objective since inception was for suborder industry adoption. We are delighted to see the growing acceptance of WAVE technology, including by other global carriers.

Most recently, we established ZIMARK, a tech company that we expect will revolutionize scanning base on its colorful market, long-range scanning capabilities and ability to scan multiple items simultaneously. We are excited about ZIMARK's potential to impact shipping and broader logistics sectors, consistent with landmark innovation that will transform other industry.

We are proud of the progress we have made renovating ZIM as a resilient and robust digital shipping company that utilizes sophisticated digital strategies to power new services and build opportunities for our customers.

I will now turn the call over to Xavier, our CFO, for his comments on our financial results and market development. Please.

Thank you. Thank you, Eli, and again, welcome, everyone, to our quarterly update. I will now briefly discuss our KPI-specific Q1 figures and our strong cash position. Additionally, I would like to first reiterate Eli's comments on our success during the quarter, drawing on our differentiated model and proactive strategies to generate record results.

On Slide 7, I would like to highlight several KPIs that are reflective of our outstanding financial performance, including strong cash generation and the continued deleveraging of our balance sheet. We continued to benefit from our asset-light model as well as our prioritization of a better paying cargo mix and initiatives to capitalize on the e-commerce boom, while providing our customers with the best service, which allowed us to earn premium rates compared to the average of the market. This was critical to drive our record results as the average freight rate per TEU rose by 76% in Q1 2021 to $1,925 per TEU compared to $1,091 in the comparable quarter in 2020, and 27% higher than the average freight rates of $1,518 in Q4 2020.

Regarding our balance sheet, we significantly increased our cash position, which I will discuss shortly. Our shareholder equity today is of $1.1 billion. Total outstanding debt in the first quarter increased by $302 million, resulting from a net increase of $389 million related to lease liabilities, almost entirely reflecting us successfully fixing additional long-term charters in the quarter, a very tight market. That is partially offset by a net decrease in financial debt, mainly related to the early repayment of tranche C that we already made in March.

We also continued to improve our leverage ratio, which decreased to 0.5x. Our free cash flow totaled $643 million compared to $390 million in Q4 2020. That represents a 64% increase.

Moving on to Slide 8. Our ability to take advantage of changing market conditions continues to prove effective and is clearly evidenced by the year-over-year improvement in our financial metrics. Looking at our top line, total revenues in the first quarter were $1.7 billion compared to $823 million in Q1 2020, a 112% increase. Even more importantly, we grew profitably, successfully promoting better paying cargo as we continuously seek to prioritize profitability over mere additional volume and market share.

Net profit was a record $590 million in the first quarter compared to a $12 million loss in Q1 2020. Adjusted EBITDA in the first quarter also significantly increased to $821 million compared to $97 million in Q1 2020. Adjusted EBIT increased to $688 million in the first quarter compared to $27 million in the comparable quarter in 2020.

As Eli already mentioned, these results were an all-time high and well above the implied guidance range that we provided in March. Importantly, consistent with our strategic focus and asset-light approach, ZIM's adjusted EBITDA and EBIT margins continued to position us among the top performers of the industry. Q1 2021 EBITDA and EBIT margins stood at 47% and 39%, respectively.

Our first quarter 2021 results also include increased tax expenses, totaling $54 million. Out of this amount, $34 million related to deferred tax expenses, i.e., noncash, mostly related to carryforward losses previously recognized as assets. Furthermore, in light of our current and expected performance for the full year, we reassessed our entire carryforward tax losses, and we now expect to utilize all of them in 2021.

Turning to Slide 9. Our increased carried volume is a direct result of our proactive efforts to launch new expedited services as a response to identify growth in demand and our enhanced position in the Pacific trade. It is especially noticeable given the seasonality traditionally associated with Q1 volume due to the Chinese New Year. You can see that our carried volume year-over-year increased by 28% from 638,000 TEUs in the first quarter of last year to 818,000 TEUs in the current quarter, though it should be noted that Q1 2020 volumes were already negatively impacted by the then emerging pandemic. This was driven primarily by growth in the intra-Asia and Pacific trades.

Compared to the fourth quarter of 2020, our volume increased by 2%, with our expanded presence in intra-Asia contributing most significantly to the increase. For the full year, we now anticipate current volume growth of circa 30% as compared to 2020, whereas the industry is expected to grow by 4% to 5%.

Consequently, given our growth expectations and in light of the current congested market and limited availability of containers, we contracted for $588 million of equipment to be delivered during the year. Containers in the amount of $104 million were already delivered in the first quarter. Based on our robust cash flow, we made the prudent capital allocation decision to purchase this equipment out of cash rather than rely on more expensive leasing solutions.

Moving on to Slide 10. Regarding our cash generation, we started 2021 with a consolidated cash position of $570 million. During the quarter, our adjusted EBITDA stood at $821 million. Taking into account the decrease of $50 million of working capital and other, $134 million of investing cash flow, $224 million of debt service, we finished the quarter with $983 million of cash, excluding IPO proceeds, and including IPO proceeds we ended the quarter with $1.2 billion.

Now I will review the strong market fundamentals that we continue to see in the liner sector and our positive view going forward.

Moving to Slide 11. On this slide, we show that market supply-demand fundamentals remain very positive. In terms of supply, even taking into account the recent ordering, the order book is still historically low. Combined with strong demand, these dynamics have elevated both charter hire and freight rates.

Specifically, while newbuildings on order, including those recently placed by carriers, have risen to 17% of the total deployed capacity, this is still a significantly lower level versus prior years. Due to the lead time for vessels newbuilding, we have quite a firm outlook on the supply forecast moving forward. Though the order book grew from its lowest level of 8% back in October 2020, we do continue to view supply-demand fundamentals as favorable, particularly given demand growth expectations.

Based on an upwardly revised forecast in April, the IMF now projects that the global economy will grow by 6% in 2021. The low order book, combined with robust demand, has resulted in higher freight rates, which in turn have also allowed for increased charter higher rates as shipping companies are seeking to secure (inaudible).

Moving on to Slide 12. Supporting our sustained market strengths, demand is expected to surpass supply growth during 2021, according to Drewry. The port handling forecast suggests 8.7% and 4.7% growth for 2021 and 2022, respectively. This translates into a positive supply-demand picture, as seen in the chart on the right side of Slide 12. Drewry expects its supply-demand index to strengthen to 104.8 in 2021 due to increased port congestion and an expected demand bounce in excess of nominal fleet capacity growth. This reflects GDP forecasts that are more optimistic than 3 months ago, with the exception that consumer demand -- sorry, with the expectation that consumer demand for durable goods will remain strong.

There is also the possibility of further demand growth as widespread vaccine rollouts continue globally. And in this upside scenario, Drewry anticipates a possible stronger boost to the consumer and company's confidence and its world port handling forecast for 2021 would then rise to a 10% growth.

Turning to the next slide. Freight rates are well above the past decade average with little indication of a reversal in the near term. Rising charter hire trends are correlated with demand, as is also reflected in the high spot rates. Our long-term contract negotiations highlight elevated demand for capacity and the particular strength we saw in rates more recently. Even as we expanded our presence in the transpacific with the launch of new lines, we had to limit volume commitments due to the higher demand despite our higher volume offering.

The long-term contracts, which took effect starting May 1, reflect an average rate increase of slightly above 50% when compared to 2020. With equipment shortages and port congestion persistence, we see freight rates remaining elevated through 2021. While vaccine rollouts should ease labor and productivity issues at ports, we expect, nevertheless, continued challenges related to handling more volume.

On the next slide, Slide 14, we address inventory and bunker prices. Retailers' inventory levels remain at the lowest in 20 years -- 28 years. We expect retailers to target the same inventory-to-sales ratio they had prior to the pandemic. Inventory levels have not yet been rebuilt despite the booming demand.

In terms of the impact on container demand, we continue to expect import growth for the entirety of 2021 to remain elevated compared to 2020, simply to rebuild inventories. The typical development in sales in the United States could, through inventory replenishment, sustain strong import container growth for the whole of 2021.

Turning to the right side of the slide, the price of oil increased with expectations of a fuel demand recovery in the U.S. and Europe as lockdowns ease and economic activity picks back up. And we assumed slightly higher bunker prices when providing our current guidance as compared to our assumptions earlier this year.

Turning to our full year outlook on Slide 15. As previously mentioned, based on our strong results, positive market view and the execution of our long-term contracts with customers under improved terms comparing to 2020, we now expect to deliver adjusted EBITDA within a range of between $2.5 billion to $2.8 billion and adjusted EBIT within the range of $1.85 billion to $2.15 billion. The underlying assumptions driving this improved outlook include expected higher average freight rates and charter costs as well as slightly higher volume and bunker rates as compared to our expectations and assumptions that prevailed when we provided our initial guidance in March.

We already updated that our Board approved a $2 per share special dividend, and we are also reconfirming our intention to distribute between 30% to 50% of 2021 net profits to shareholders in 2022, subject to Board approval.

And now I will hand over back to Eli for concluding remarks.

Thank you, Xavier. Turning to Slide 17. We continue our path forward, enjoying significant momentum. I am extremely proud of our strong execution and significant accomplishment in just a few months since going public. As we continue to steam ahead, we'll further position ZIM as an innovative digital leader of seaborne transportation and logistics services. We'll advance our differentiated model and grow on our strong foundation of standard and professionals, our culture of innovation and our sustainability value to successfully operate in the 21st century. We will also maintain a relentless focus on fueling ZIM's goals, maximizing profitability into the future and creating long-term value.

We will now open the call to your questions.

(Operator Instructions) The first question is from the line of Randy Giveans with Jefferies.

Congrats, obviously, on the record and epic quarter here. Can you talk about, first, the decision to declare the special dividend and how you decided on the $2 per share amount? And then also with the rising rates that we've been seeing, any reason why 2Q results would not exceed the results we've seen here in 1Q? And if improved, what are those additional plans for that free cash, more special dividends or more aggressive debt repayments?

Thank you, Randy. I will maybe start tackling your first question. The special dividend, you may remember that during the IPO, we communicated on our initial dividend policy, which was from 0% to 50%. And we also did mention that we were limited by the indenture by the documentation of the notes in our ability to distribute a dividend for distributable results or profits that we dated 2021.

With the very strong first quarter that we are delivering now and the further testing of the cash sweep close as part of the indenture, we announced the full repayment of tranche C and D far earlier than what we initially anticipated. And that basically freed us completely from any restrictions with respect to dividend payment.

And so also combined with not only a strong first quarter, but a revised guidance in terms of outlook for 2021, which we've increased significantly by 70% to 80% compared to last time we addressed you. And we feel comfortable that there is no reason for us not to start distributing in 2021 as opposed to waiting, as we initially said in 2020. So today, the $2 per share, we believe, represents a good remuneration to our shareholders that entrusted us (technical difficulty).

Addressing your second question, when it comes to the improved guidance, we are very pleased with the market conditions. We are very pleased with us being able to increase our guidance for the full year of 2021. Nevertheless, from a dividend policy perspective, we are not changing. As of today, our dividend policy, which is still, I want to reemphasize that we intend to pay between 30% to 50% Q1 profit in 2022, and that should come in early months of next year.

Got it. Okay. And then you mentioned the improved pricing on your contracts. I think you said around 50% improvement. Can you provide an update on how much of your business is on those 1-year-or-so contracts following the contracting period in April and May? Trying to get a sense for percentage of volumes, maybe duration, if they are all for 12 months or maybe some longer. And then ideally, an average contracted TEU rate for the coming year? Clearly, the backlog has improved based on your increased and relatively tight EBITDA guidance range.

The -- yes, the percentage of long-term contract -- long-term contract very much applied, first, on the transpacific trades, not so much on the other trades. And transpacific trades account for 45% pretty much of our overall volume and contribution. So now with -- so when we are focusing on the transpacific, we continued this year just very much like last year. We like the idea to have 50% of our volume on the long-term contract and to still benefit from the spot for the remainder of the 50%. So that has not changed in terms of volume allocation year-over-year. So overall, if you apply 50% to 45% of our overall volume from a full company perspective, we are still within 20% to 25% of our volume that are subject to long-term contracts.

When it comes to the rates, indeed, we have -- and we are very pleased with the outcome of the negotiation we've had with our customers. We did mention the significant increase versus last year. If you allow me, I'm not going to say more about this. Providing an information in terms of incremental amount is something that we're happy to do, not so much to provide the detailed indication as to how much is the average revenue per TEU on our contract volume.

Okay. And then on the -- when you use the term long term, are those entirely 12 months? Or do you have some 18, 24 months?

It is mainly 12 months. It is true that we had customers that we're willing to discuss potentially -- agree with us longer-term commitment at the expense of a reduced rate. It is always the same strategy, a longer commitment for cheaper in a way. We were not so keen on pushing those discussions forward, and quite pleased to limit the commitment to 12 months as we are still optimistic for the years to come.

Perfect. And then I'll just sneak in one more here quickly. Slide 5, pretty incredible chart here showing your net cash leverage ratios coming down. Based on our cash flow projections, we could see being net debt 0, right, by some point in 2021. Is that a target? Do you have any kind of goal, leverage ratios or net cash, net debt amounts by year-end?

You're right. We are continuing the downward trend in this respect. Do we have an objective to be at net debt 0? The answer is no. The -- for us, we wanted to have -- to deleverage our balance sheet, and we more than achieved our initial expectations and targets. So there is no such thing as an objective to come down to 0 in terms of leverage. This is -- or in terms of net debt in this respect.

So we are happy where we are. This is more a consequence of the very favorable market conditions that lead to this outcome as opposed to a constant strategy to keep on pushing it down. Below 2x, to be honest with you, I think we are more than happy.

Sure. I'm glad to know you all are staying safe over there. I know I've been praying for Israel, peace in the region. So you all take care.

Thank you very much.

The next question comes from the line of Omar Nokta with Clarksons Securities.

Yes, seconding Randy's thoughts, obviously, on the crisis there. But also wanted to wish you congratulations on another very, very strong quarter, and it sounds like we're going to be repeating the same message here in 3 months' time.

I wanted to ask about the guidance. And obviously, the $2.5 billion to $2.8 billion is a huge jump from where you were just a couple of months ago. And obviously, since then, we've seen a surge in freight rates. And I guess my question is, do you think that your EBITDA guidance for the year, just knowing what you know now, is still somewhat conservative considering you did $800 million of EBITDA already in the first quarter, which I guess indicates that you may potentially reach your guidance sometime within the third quarter? Any thoughts on that?

First of all, I would very much hope so. This is a very good situation to be, to be in a position to raise the full year guidance. This comes on the back of a few favorable elements. First of all, we have and we enjoy a significant increase in volume. When we compare ourselves to the rest of our peers, when we compare ourselves quarter-over-quarter, we are carrying more than we expect to carry, more than 30% incremental volume on the back of all the new lines that we've opened and we continue to open. So that's, I think, one very strong driver behind the improved guidance.

Obviously, the second one is the freight rates. And if you look and if we look at the SCFI, it is going up. When we initially thought that it would start to gradually decline, we are seeing the opposite trend, especially relevant on the trade lanes where we do operate. So this is another very strong driver that explains why we significantly upgraded our guidance.

And then lastly, there is -- and we just talked about it, the finalization of the long-term contracts. So we know that for Q3, Q4, we will benefit, even if we were to anticipate -- or to be conservative and look at the spot market going a little bit -- or softening a little bit, the long-term contract is going up and will be on the up quarter-over-quarter in Q3 and in Q4.

So we -- when we come to you, we truly think that the guidance that we are communicating now is well within reach of the company. So we are saying it loud and clear that we truly believe that we will deliver on this commitment and this guidance to you. Whether there is room for upside? We never know, and time will tell. In terms of forecasting horizon, we have clear visibility into Q2, obviously, a good visibility of Q3. Q4 is a little bit more blurry. But again, we see very strong and resilient market conditions.

That's really good color. And I guess maybe just wanted to double check on some of the figures you were talking to Randy about when it came to the spot versus contract. Just so I have it right, about half of the transpacific business is on contract. And then outside of transpacific, it's primarily spot based. And so...

Yes.

Yes. And then -- so if we look at it from just ZIM overall, if the transpacific is about 40% of the overall business, then effectively 80% of your business over the next 12 months is still open to the prevailing spot market?

That's pretty correct. With the carryout on the Asia, which represents 20% of our volumes, you have another 20% to 30% of -- we don't say long-term contract, but it's not really spot. It's quarterly pricing.

Got it. Okay. And then just, sorry, one final one for me. You mentioned the $588 million that you've invested or you're planning to invest for this year on new equipment, primarily containers? You also recently contracted those 10 dual-fuel newbuildings. What are your thoughts on -- do you feel comfortable with the existing fleet capacity? Do you see a need to go into the newbuilding market for more ships? Or are you happy with how things are at this point?

Well, from a container, from an equipment perspective, it was very important to us to continue to bring in new containers as we are growing quite significantly quarter-over-quarter. So we took the initiative to order equipment quite a while ago, and we started that into the third quarter of last year already, and we are continuing aggressively to bring in additional equipment.

When it comes to vessels, we are happy to continue to charter in capacity as opposed to go and buy the order vessels and ships. We did -- as -- we did secure the long-term charter for the large-capacity vessels that we expect to take delivery from -- in 2023 to replace the 10,000 TEU vessels that we are currently deploying under our Asia U.S. East Coast. So we are very pleased to have concluded that chartering agreement with Seaspan in February.

And then now we will continue to bring in vessels as we need in order to cater for the new lines that we are opening and/or to renew existing charter that come to a renewal date. But we are not challenging our strategy, which is to continue to rely on the charter market and then what may change and what is changing is the allocation of short-term charter versus longer-term charter due to the current market conditions, obviously.

The next question comes from the line of Alexia Dogani with Barclays.

Well done on navigating so successfully such a volatile environment. I just have 3 questions please. Just firstly, just building on a bit of the previous questions. In terms of kind of size of the business now, I mean, clearly, you've talked about 112 vessels. And do you think we will end the year at a higher number? And then what do you feel is the right number to kind of run the business with the current contracted volumes and the way the market is growing?

Then secondly, just to kind of tie up on the CapEx for the full year. Am I correct in thinking that CapEx now will be $488 million for the full year instead of $300 million previously?

And then just thirdly, when you think about following kind of this period of extreme volatility because of disruption and increased demand, what do you feel is the normalized earnings power of ZIM postpandemic? I mean do you feel you can sustain this level of margins going forward because you've built your market share? Just a bit of color to that, that would be great.

And then just finally, on the order book. Obviously, it's still quite low, but it's been moving quite a bit recently. At what point do you start worrying about supply-demand balance further out?

Thank you, Alexia. I will try to take one after the other. So starting with your first question with respect to the number of vessels, we don't have a number of vessels in mind that we think is appropriate for us. Quite the contrary, we see vessels as a means to an end. We look at the trade lanes where we think we can provide a competitive proposition and grow profitably. That's the driver. And we've been engaging very heavily and since already 3 quarters now on the e-commerce trade, starting between Asia to the U.S., doubling and tripling the trade lanes and also complementing a similar type of trade lanes between Asia to Australia. And we've been quite successful at it. And hence, we grew our fleet and continue to grow our fleet.

We are also expanding, as we mentioned, with our partners with the 2M on our historical trades, Asia to the U.S. to name one. So that -- the driver for us is not the number of vessels. It's really for as long as we can go and stay in trades that are profitable. We will go in those trades, and we will stay in those trades. If not, we will potentially exit. So I guess, I hope that answers your first question. We are at 112 vessels today. We might as well finish the year at 130 or at 100. This is -- this will be driven by our analysis of profitability of each of the trades where we do operate.

Second, with -- question with regards to CapEx, you're right. We are increasing our full year cash CapEx in a way by using the excess cash that we are generating today in paying and in investing in new containers as opposed to contracting leases with [box] providers. So you should consider cash CapEx of roughly $500 million or $550 million even for the full year of 2021, largely allocated to containers.

Then your third question with respect to the volatility in our markets and what could be a normalized earnings? What do we think can be the -- or the earnings power of ZIM? I think what is very important to us, we don't know what the new normal will be. We don't know whether it's going to be drastically different from what it was before. We have views and expectations.

One, we think that the market has gained maturity, that is clear to us in terms of capacity management, and that will also resonate for your fourth question. So the market is more disciplined in this respect. So we, as an industry, have demonstrated that we could navigate certain changes in demand and in market conditions. That's one.

Second, when it comes to the supply-demand dynamics for the few years to come, the expectations and the industry experts' expectations are quite favorable for the liner operator like us. So globally, we think that, that will eventually happen. We do agree that today's circumstances are exceptional. On the back of already a very good 2020, we think that 2021 will obviously be extremely good. We think that 2022, the stars continue to be well aligned. What will be the new normal for the industry remains to be seen.

What is important for us is that in terms of positioning ZIM vis-a-vis our peers, our larger competitors, we continue to deliver superior EBIT margin. And we do that quarter after quarter, we think that the transformation, the new positioning of ZIM within our landscape is delivering results. The agility that we demonstrate is paying off.

And then lastly, your question with regards to the order book, yes, it's on the up, but it's only up from a very low number when we were talking and looking at what the situation was in October last year, not so long ago, it was 8%. It was too low. Let's be clear, it was too low to guarantee the replacement CapEx. It was too low as well to capture for the increased demand that is expected for the years to come. So now we are at 17%. If I was to commit and say, well, where do we think is the threshold above which potentially there will be a risk of overcapacity? I think below 20% we are safe, again, to cater for replacement capacity and the capture for the expected growth in our market. So 20% I think is a reasonable number.

And actually, if you don't mind, I'll ask a follow-up on just the future technologies. I mean there's a little bit of a debate at the moment whether LNG is the right fuel -- transition fuel to kind of get the industry decarbonized. I mean clearly, yourselves have voted with your feet towards kind of LNG. I guess what is your view? I mean do you feel that it's good enough and therefore, that's where you've decided to -- well, to target your future requirements? Just any color on what kind of the industry is discussing at the moment would be helpful.

Sure. No, we don't think that LNG is going to be the long-lasting technology that will allow for the industry to fully decarbonate. LNG solves and addresses a few emission issues, but doesn't address CO2 emission. It is more CO2 friendly, if I can put it that way, than the (inaudible). But it is not the long-term solution. But it is the best solution that is available today in terms of scalability, in terms of access.

When we have to make the decision to enter into this long-term agreement with Seaspan, for us, it was a no-brainer. But we didn't want to buy because we don't think that it is going to be -- the LNG technology might eventually or will most likely be replaced with an alternative technology, be it ammonia, be it hydrogen, that will solve the CO2 emission question. So we don't want to buy, and we don't want to take any residual value risk on the vessel.

Nevertheless, we're willing to commit to a long-term charter and to use the best available technology of today, which is clearly LNG. There is no better viable technology today than this. So that's our stance. We are not a vessel owner, and we are happy to remain like this predominantly. And again, when we just negotiated with Seaspan, we wanted Seaspan to make the most environmentally friendly choice when it came to serving ZIM. And in turn, allowing us to serve our customers in the most efficient manner from a carbon-intensity perspective.

This concludes our Q&A for today. I hand back to Eli Glickman, CEO, for closing comments.

Thank you, operator. I would like to thank everyone again for joining us today's call and for your interest in ZIM. We look forward to sharing an update on our progress with you in the future. Thank you very much. Goodbye.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.