Container lines poised to post highest quarterly profits since pandemic
Asian carrier disclosures imply 3Q24 consensus on US-listed Zim is too low
Listed liner companies are set to report their best quarterly results in two years, courtesy of the ongoing Red Sea crisis and the pull-forward of cargo ahead of the US port strike. But 3Q24 will likely mark the peak of the current cycle, with lower results ahead
THERE are two big takeaways from new financial disclosures by Asian carriers: The third quarter will be much better than the second — it will be the strongest reporting period since the Covid boom — and 3Q24 will likely be the high point of the current cycle, as the quarter ended much weaker than it began.
Monthly operating revenues are disclosed by listed Taiwanese carriers. Wan Hai and Yang Ming reported September revenues on Wednesday, Evergreen on Tuesday.
Evergreen’s 3Q24 operating revenues surged sequentially by 44% in 3Q24 versus 2Q24, to 152.8bn New Taiwan dollars ($4.7bn), its highest quarterly figure since 3Q22 during the supply chain crisis.
The other Taiwanese carriers reported similar gains: Yang Ming’s 3Q24 operating revenues rose 39% versus the preceding quarter to the highest level since 3Q22. Wan Hai’s rose 43%, also to the highest level since 3Q22.
Jefferies analyst Omar Nokta highlighted what the Taiwanese carrier disclosures could mean for US-listed Zim.
“Zim has tended to see revenues shift similarly to the Taiwanese players given their relatively high spot exposure,” he wrote in a client note.
“Zim generated $1.93bn of revenue during 2Q24, while consensus revenue estimates for 3Q24 stand at $2.31bn, up 20% quarter over quarter. Assuming a 44% jump [as in the case of Evergreen], Zim’s revenues would be close $2.78bn, or about $470m above consensus estimates, equal to $3.90 per share.”
Revenues declined as quarter progressed
That’s the good news. The bad news is that monthly revenues of Taiwanese carriers were much lower in September than in July.
The pullback in spot rates that began in early July negatively impacted the carriers’ revenues as the quarter progressed, a downward trend that should persist in the fourth quarter as spot rates continue to ebb.
Evergreen’s September operating revenues were 18% below July’s. Yang Ming’s fell 15% over the same period. Wan Hai suffered the sharpest fall, down 26%.
Revenue per feu data highlights transpacific strength
Further colour on 3Q24 liner performance was disclosed by Hong Kong-listed OOCL on Monday.
Revenue numbers posted by Taiwanese carriers are affected by changes in fleet size, including newbuilding deliveries. OOCL provides a purer barometer: data on revenue segregated by trade lane as well as throughput by trade lane, allowing for a calculation of revenue per feu by geographical market.
As with the Taiwanese carrier data, the OOCL numbers suggest the current consensus on Zim’s sequential revenue growth is too low.
OOCL averaged $3,162 in revenue per feu globally in 3Q24, a 31% sequential jump versus 2Q24. It was the highest quarterly average since 4Q22 and double OOCL’s average revenue per feu in 3Q19, prior to the pandemic.
The transpacific lane was the star performer for OOCL in 3Q24, with average revenue of $4,546 per feu, up 29% quarter on quarter as rates rose faster than throughput. It was OOCL’s highest average for the transpacific lane since 4Q22.
The read-through for Zim is highly positive as the transpacific is Zim’s most important trade.
OOCL’s Asia-Europe revenue per feu surged 51% quarter on quarter to $4,481 per feu. Throughput was flat (down 1%) versus the second quarter, with the sequential gain per feu driven by rate strength. The 3Q24 quarterly average for the Asia-Europe lane was the highest since 3Q22.
OOCL’s revenue per feu in the transatlantic was relatively unchanged, up 2% to $2,577, while in the intra-Asia trade, revenue per feu averaged $1,909, up 26% quarter on quarter.