Earnings Call: Q2 2021

Aug 18, 2021

Ladies and gentlemen, thank you for standing by. I'm Haley, your Chorus' conference operator. Welcome and thank you for joining the Zim Integrated Shipping Services Ltd. Q2 2021 Earnings Call. Throughout today's recorded presentation, all participants will be in a listen only mode. Conference Call. The presentation will be followed by a question and answer session. And I would now like to turn the conference over to Elena Holzman, Head of Investor Relations. Please go ahead. Thank you, operator, and welcome to ZIM's Q2 2021 Financial Results Conference Call. Expectations of future capital results. We believe that our expectations and assumptions are remarkable. Investor, including the Securities. We are planning to look forward to consider the risk factors and cautionary language results described in the documents the company filed with the Securities and Exchange Commission, including our 2020 Annual Report Fund on Form 20, March 22, 2021. We undertake no obligation to update these forward looking statements. Thank you, Lana, and welcome to today's call. We are excited to discuss Our record results and several notable second quarter year to date accomplishment In the Q2, once again, we generated all time record quarterly results We suggest EBITDA of $1,300,000,000 and net profit of $888,000,000 both are higher than for the full year of 2020. These results are based on the proactive strategies we continue to implement to capitalize on both the highly attractive market and the ZIM differentiated approach. For the Q2, we also generated our highest ever operating cash flow of $1,200,000,000 and significantly strengthened our balance sheet, growing shareholder equity to $1,720,000,000 Importantly, we continue to deliver industry leading margins, outperforming the liner industry average. Our Q2 2021 adjusted EBITDA margin was 56%, and adjusted EBIT margin was 49%. We remain committed to our goal of consistently platform. Based on our strong second quarter performance, The sustainable boost market environment and the contribution of our threat contract secure at higher rates, We are once again raising our 2021 guidance. Specifically, We now expect to generate in 2021 adjusted EBITDA between $4,800,000,000 to $5,200,000,000 and adjusted EBIT between $4,000,000,000 to $4,400,000,000 Based on the midpoint of today's guidance Versus the guidance provided in May, our new forecast represents almost a 90% increase in our EBITDA guidance and more than double our EBIT guidance. Our strong results have also enabled us to make important investments to position Zim for long term success. In July, We announced a second strategic agreement with Syspa for the long term charter of 10 7000 TEULMG dual fuel container vessels to serve across Zimbaou's global niche trades. This vessel, Ideally, size to be employed in multiple trades in which we operate. We also hold and option until the end of August 2021 for the long term charter of 5 additional such vessels. This transition follows our initial agreement with Syspan in February 2021 for the long term charter 10,000,000 TEU LNG Fueled Vessels to serve our Asia to U. S. East Coast trade. With these two agreements, we secure high quality green tonnage In Q2, we also redeemed the entire $349,000,000 principal amount As we mentioned last quarter, we achieved this important accomplishment Sooner than expected and earlier than the stated maturity by 2 rolliers, further strengthening our balance sheet and enhancing ZIM position to take advantage You can see that over the last 9 quarters, our earnings have consistently increased, and we deliver consecutive record quarters. At the same time, our leverage continued to trend downward. Zim's net leverage decreased from 5.3% in Q1 2019 to 0.3% this quarter, positioning us in the top tier of the industry. Moving to the next slide, Slide number 6. We continue to advance major initiatives Related to our strategic pillars. First, for Zim, our exceptional operational agility is a testament to our differentiated asset light and global niche model. Today, our fleet includes approximately 1 113 vessels, reflecting our ability to quickly adapt our vessel deployment strategy and grow our fleet based on changing demand fundamentals. As you can see, We proactively adjusted our vessel capacity over the past 18 months as we effectively did with the initial negative effect from the COVID and then quickly grew our capacity Notably, we accomplished this important objective despite the increasingly tight charter in market. In addition to successfully increasing our capacity for the benefit of customers and shareholders, we continue to draw on commercial agility to identify market opportunities and develop new grow engines. During the Q2, we launched 9 new lines, including premium high speed services Importantly, this new high speed lines and the others that we added during the quarter Since launching ZTE X, our initial high speed premium line between China and Los Angeles, We have opened additional high speed lines, including ones between Asia and Australia and between Australia to New Zealand. The other lines opened during the quarter fall within our various trade lines, including a new service from Asia to East Africa. In addition, we continue to take steps to further strengthen our transpacific presence, Which remains a key trade for us. Through our partnership with the 2 airlines, we launched our 8 Joint East excuse me, Joint Asia East Coastline Service, which commenced in June. We also continue to leverage our partnership with other leading players, expanding our service network and meeting increased customer demand. Additionally, during the Q2, we announced the extension of our cooperation with Alibaba as we continue to grow our presence in new markets and further capitalize on positive e commerce trends. Next, our operational excellence continue to position us well for the future. 1st, Consistent with our focus on sustainability and reducing our carbon footprint, we enter into long term charter agreement for Green LNG Fuel Vessels. Once delivered, together with the first 10,000 TEU vessels, Approximately 50% of our operating capacity will be green. In doing so, With this charter agreement, Zim secured the cleanest technology currently available. This will help us address increasing regulation on carbon emission and meet customer demand to have the carbon transported on more eco friendly vessels. We also maintain flexibility to transition to new technology as they become commercially viable. 2nd, Since the beginning of the year, we've entered into agreement for the purchase of equipment, mostly new big container. Given our higher than expected growth this year, combined with the current congested market and limited availability of containers, our substantial investment in new equipment support our ability to provide To further advance our growth objective, we also established and strengthened our local presence in various new existing markets during the Q2. We launched operation in countries where we were not present in recent years, including Australia, New Zealand, certain African countries, East Russia. We also strengthened our infrastructure and presence in other countries, such as Mexico, where we replaced a third party agent results on. We remain committed to our customer centric approach, which is key to our long term success. Finally, we continue to invest in tools that help us prioritize profitability over volume all market share and to employ forward thinking and disruptive digital strategy. In embracing big data and Artificial Intelligence. We recently launched a partnership with an Israeli startup to develop innovative artificial intelligence tool implementation in ZIM operational environment. The joint teams are tasked to develop advanced model to focus demand, planned shipping routes, automate logistic process and more as we continue to focus on profit optimization. We also continue to see broader industry adoption of way electronic wheel of leading technology, We are pleased to see the growing acceptance of Wave's technology by other global carriers as well. I will now turn the call over to our CFO, Xavier, for his comments on our financial results and market development. Thank you, Eli. And again, welcome, everyone, to our quarterly update. As Eli mentioned, during the Q2, our differentiated approach and proactive strategies served us well as we generated another consecutive record performance. I will now briefly discuss our KPIs specific to Q2 and H1 figures and also our robust cash position. Slide 7 highlights several KPIs demonstrating our exceptional financial performance, including outstanding earnings and further improved cash position, resulting in our lowest leverage ratio in ZIM's entire history. In Q2, we benefited from the new annual contract with Trans Pacific customers, which went into effect on May 1 as well as strong momentum in the spot market. ZIM capitalized on industry tailwinds that pushed freight rates higher, Moreover, our prioritization of a better paying cargo mix and initiatives to capitalize on the e commerce boom were a key differentiator That allowed us to earn even higher rates. Specifically, our average rate freight rates per TEU rose by 119 percent in the Q2 of 2021 to $2,341 compared to $10.71 in the comparable quarter in 2020 and 22% higher than the average freight rate For the 6 months of the year, our average freight rate per TEU was $2,145 almost double Now our leverage ratio continued to decline to 0.3x. Total net debt in the 2nd quarter decreased by $132,000,000 resulting from a net decrease in financial debt, mainly related to the early redemption of our Series 1 and 2 notes in June and an increase in cash position, offset by a net increase of $523,000,000 related to lease liabilities, almost entirely reflecting us successfully fixing additional charters in the quarter despite a very tight market. Our free cash flow in the 2nd quarter totaled $867,000,000 compared to $115,000,000 in the comparable quarter in 2020. That is an increase of over 6 50%. Turning to Slide 8. As we look at our remarkably strong quarterly revenue, EBIT and EBITDA and net profit growth sequentially and year over year. It is clear that our unique approach continues to yield positive results. Total revenues in the Q2 were up $2,400,000,000 compared to $795,000,000 in Q2 last year. That is a 200% increase, 3x more. More importantly and consistent with our primary objective to grow profitably, 2nd quarter net profit was a record $188,000,000 compared to $25,000,000 in Q2 2020, growing by more than 3,400 percent. Adjusted EBITDA in the 2nd quarter also significantly increased to $1,300,000,000 in the Q2 compared to $73,000,000 in the comparable quarter of 2020. ZIM Q2 2021 adjusted EBITDA and adjusted EBIT margin of 56% 49%, respectively, company. I would like to point out that our Q2 2021 results Securities and Exchange Commission. As I explained last quarter, considering Our current and expected full year 2021 performance, we reassessed our entire carry forward tax losses, and we now do expect to utilize all of them for the tax year of 2021. Next, we'll review our significant improvements across all financial metrics during the first half of twenty twenty one. Revenue for the 6 months period were up $4,130,000,000 compared to $1,520,000,000 last year, already exceeding full year 2020 revenue. This 155% increase was driven by the improved freight rates as well as carried volume growth, which I will discuss very shortly. Again, consistent with our focus on profitable growth, net income for the first half of the year was $1,480,000,000 compared to $13,400,000 for the first half of last year. Adjusted EBITDA was $2,160,000,000 for the first half of twenty twenty one compared to $242,000,000 Q1 for the first half of twenty twenty, representing a growth of 791%. Our 6 month adjusted EBITDA and EBIT margin also improved to 52% 45%, respectively, this year versus 15% and 6%, respectively, last year. Turning to the next slide, Slide 10. Our increased current volume is a direct result of our proactive efforts to launch new expedited and other services as a response to identified growth in demand and our enhanced position in the Pacific trade and in intra Asia. While global volume growth in the Q2 was approximately 15% year over year, ZIM's carried volume increased by 44% from 641,000 TEU in the Q2 of last year to 921,000 TEUs in the Q2 of this year. Though it should be noted that Q2 of last Q1. Our volume increased by 13% with intra Asia and the Pacific trade growth contributing most significantly to the increase. For the full year, we continue to anticipate carried volume growth of CRTR 30% as compared to 2020. Consequently, as already mentioned by Eli, given our higher than expected volume growth in 2021, Combined with current congestion impacting the availability of containers, we contracted $763,000,000 new equipment in 2021, growing our container fleet by approximately 265,000 TEU equivalent. This is about $175,000,000 more than we previously guided last quarter. Containers at a cost of $406,000,000 have We have yet to increase our investments in container to take further advantage of our significant cash position, and we made the prudent capital allocation decision to purchase these containers and rely on more expensive business solutions. Turning to cash flow, Slide 11. We ended Q1 twenty Q1 with a consolidated cash position of $1,200,000,000 During the Q2, our adjusted EBITDA was of $1,300,000,000 Taking into account the decrease of EUR 154,000,000 related to working capital and other, EUR 314,000,000 of investing cash flow and $544,000,000 of debt service, we finished the quarter with a cash position of $1,500,000,000 Now I will review the strong market fundamentals that we continue to see in the liner sector and share our positive view going forward. On Slide 12, market supply demand fundamentals remain positive with expectations that global demand growth The order book to fleet ratio recently increased from historical low levels in an attempt to renew the fleet and meet demand growth. Specifically, while newbuildings on order have risen to slightly above 20% of the total deployed capacity, We continue to view fundamentals as favorable, considering the need for replacement tonnage and current forecast for demand growth. Moreover, we view the threat of overcapacity as low, even in the less immediate term. When additional capacity is delivered in 20 2023 and onwards due to 2 unrelated factors. 1, forthcoming environmental regulation That will likely go into effect in 2023 will promote slow steaming, necessitating additional capacity to keep on carrying the same volume. And 2, congestion or subpar land infrastructure, particularly in the U. S, will continue to adversely impact port efficiencies. In other words, while COVID exacerbated this phenomena as demand continues to grow, operational constraints in the U. S. Are likely to persist. As such, landside bottlenecks and slown steaming as part of decarbonization efforts Turning to the next slide. As you know, freight rates continue to rise well above the past decade average, driven by supply chain bottlenecks, equipment shortages and port congestions. We expect these market conditions to continue for the remainder of 2021 and very positively into 2022, supporting these historically high frequencies. On the cost side, rising charter higher trends are completed with demand as is reflected by higher charter renewal rates. You will also note the changing phase of the charter market impacting availability of charter tonnage. First, Most of the features concluded in the past 6 months have been for multiyear charters. And second, the large number of small and medium sized vessels sold by tonnage providers to carriers in the last year, causing the non operating owner fleet to shrink. This has also impacted our approach to secure longer term commitments. Now looking at demand expectations in the U. S, the extremely high demand It's being supported by the largest restocking cycle in the U. S. Ever. Bain's U. S. Retail trade inventory to sales ratio We expect retailers to target the same inventories to sales ratio they had prior to the pandemic, which will continue to support the restocking trend, strong demand for container shipping for the remainder of the year through the Chinese New Year. Turning to the right hand side of the slide. The price of oil has Recently increased, and accordingly, we have assumed slightly higher bunker prices when providing our current guidance as compared to our assumptions last quarter. So turning to our full year outlook. Based on the strong second quarter performance, The sustained, robust market environment and the contribution of our freight contracts secured at higher rates, We now project to deliver in 2021 adjusted EBITDA within a range from $4,800,000,000 to $5,200,000,000 and adjusted EBIT within a range of $4,000,000,000 to $4,400,000,000 The underlying assumptions driving this improved outlook include, as we mentioned, expected higher average freight rates and also higher charter costs as well as slightly higher bunker rates Q1 to be approximately 30% higher compared to 2020. Turning to next slide. Our dividend guidance remains unchanged. And based on our strong and improving earnings outlook, we are well positioned to return substantial capital to shareholders. In September, in a few weeks from now, we will distribute a special dividend declared in May of $2 per share. And separately, 2022, we will distribute, subject to Board approval, 30% to 50% results of our 2021 net income. Now I will turn it back over to Eli for his concluding remarks. I'm very proud to our team's solid executions since going public in January 2021. Zim today is an innovative digital leader of Cebron Transportation and Logistics Services We delivered record earnings and profitability in the first half of the year. As Saviyar described in his prepared comments, we expect this exceptional market condition will persist through the second half of twenty twenty one and possibly even longer into 2022. Therefore, we hold a very positive outlook for the second half of twenty Q1 and expect it to be even stronger than the first half of the year. Our strong performance and cash generation has allowed us to pay down debt and plan to return a significant amount of capital to shareholders. In addition, we continue to prudently allocate capital for future growth, including strategically investing We are excited about Zim Prosper and look forward to taking advantage of our unique model to continue to profitability grow and create enduring shareholders' value. We'll now open the call Securities. And the first question is from the line of Randy Bivens of Jefferies. Please go ahead. Thank you. Good morning to you, Randy. Good morning. Congrats obviously on the epic quarter here. Pretty dramatic increase in EBITDA and EBIT guidance. We thought we were relatively bullish, but clearly not enough, I guess, considering the $5,000,000,000 midpoint. So with that, you mentioned volume growth of 30% year over year. So I guess that means 3Q and 4Q volumes We'll both be close to around 1,000,000 TEUs, is that correct? And then what are you using for expected quarterly TEU rates in the 3rd Q4 to get to that midpoint guidance. So to your first question, indeed, our volume is going up as We now get the full benefit of the new lines that we've opened over the past few quarters. So yes, on the quarter early basis, Q3, Q4, We should be expecting a bit less than 1,000,000 TEU per quarter, but very close to those numbers. And as we put together our forecast for the full year and especially relevant for the second half when we think about the guidance. We are still very much Industry, which is supplydemand driven, as you know. And we continue to see the congestion issues having and putting pressure on the supply side. And we also continue to see on the demand side a very strong support in terms of demand, especially relevant in the U. S, Which is indeed driving continue to drive the freight rates up. Okay. I'll let you leave it there. And then you mentioned you operate 113, I believe, vessels today. What is the size of your fleet currently in terms of TEU capacity for those 113? And then following those 9 new lines, Are there additional lines you're looking at acquiring or M and A opportunities for smaller liners? The answer is, in general, yes. We opened this line, this new 9 lines and we are checking and all the Talking about the M and A and it goes along with our capital allocation, we are looking at options to potentially acquire smaller shipping lines that would operate in the regions where, first of all, we already have a very strong footprint And where we also potentially see a potential for growth that is significant. So that is relevant on the intra Asia trade and And especially focusing on the Vietnam, Thailand that are areas and countries that are growing very fast, and we anticipate growth opportunity on those 2 countries in this market to be strong. And so same goes also for South America. To your first question on the overall TEU capacity, we have by increasing our number of vessels, vessels that we deployed on the Asia U. S. East Coast are very much stable. So they are 10,000 and above. So when we are opening the new lines, the new trades where we are Entering into today. This is more a Panamax sized vessel. So if you take the 10 additional vessels that came in over the quarter, I guess the $1,000,000 question or in your case multi $1,000,000,000 question. You didn't announce another special dividend, which is understandable. You also mentioned that ZIM is at the lowest net debt leverage ratio in its history, right? So I guess what are you going to do with that cash? Is there potential for share repurchases at these discounted levels? Or how are you going to, Yes, use your free cash going forward. Yes. So there are various areas where we The first one, the obvious one, where we already have initiated quite a few actions here is us investing in containers, in equipment. We're growing our fleets. And as we grow our fleet, we also take the opportunity to rejuvenate in terms of aging our fleet of equipment. So we talked about $760,000,000 of investment in this respect. 2nd, of the transaction that we already secured with them back in February, whereby we enter into a long term charter agreement, which is a hybrid structure Where we will deposit cash upfront at delivery in order to put our cash to good use and replace Systeme's equity in the transaction itself and benefit from lower chartering rate throughout the charter period. So that is a second area of allocation of cash. We have also, to some extent, this 6 months have repaid We paid debt, but there is little more that we will do going forward in this respect. We talked about M and A, and we will also want to make sure that we can seize to capital. And lastly and very importantly for us, by the way, as we did mention it back in February When we went on to our IPO, we tend to return significant capital to our shareholders. This is why we are very pleased. We are very pleased to repay early our notes back in June, freeing ourselves of all the limitations of the indenture, allowing us to announce this $2 per share dividend payment in September. We when we look at the implied results that comes from our renewed guidance, 30% to 50% dividend distribution in 20 22 will come to a very significant dividend payout for our shareholders. And we are looking at every single potential to allocate capital between our sale of the company, the growth that we see and our shareholders dividend share buyback, everything is on the table. Got it. The next question is from the line of Omar Mukhtar at Clarkson Securities. Please go ahead. Thank you. Yes, also from us at Clarkson, congratulations on another strong quarter and obviously on the asset guidance, as Randy said, for the rest of the year. Clearly, a completely transformative year for ZYN and for the industry overall. Definitely specifically for ZYN. I guess I do have a question just maybe a bit more broadly in the market and then just had a follow-up on ZYN specifically. Obviously, freight rates are at record levels across most regions, and we've seen really a lot of discussion revolving around congestion And really equipment shortages being kind of 2 key drivers that have caused this tight supply, obviously against the backdrop of very healthy demand. And as you're investing and we've seen a lot of containers or boxes being built And they're starting to deliver in higher numbers here in the coming months. Do you see that as aiding and reducing these shortages that we're seeing at pork? And does that lead then to reduced congestion or is the issue simply the fact that basically ports worldwide are just unable to handle ships that are coming in as fully loaded as they are here, as we've seen over the past few quarters. Any sort of color you can give I will begin and Sergey will complete. First, we see You know kind of this sort of kind of anarchy in the supply chain, in the world supply chain. It began with China, This side of the supply, shortage in supply in January, February, March 2020. And the next There was a shortage of, let's say, not the supplier, but this time, the high demand for the Western country, mainly, As you know from the United States and within countries, the Shortage on the supply side, change quickly the position of the shipping company from let's call We in ZIM, we prepare. And as you know, we grew a lot from around 50 something vessels in the beginning of the crisis to around 113 on the way to 120 in these days. On the side of the container, we grew dramatically in the last 18 months from 600,000 plus TEU Containers to more than 900,000 We don't have as of today any shortage Congested, let's call it in the terminal side and you know very well what's going on in LA and other U. S. Terminals. We see it in your team, you know some of the terminals as well. Not to speak about special events such as Suez Canal and Yan Tian and other ports And the last one is NEGRO. So there is the older supply chain is very sensitive. And the fact every small change affect the supply chain in this sensitive situation. So I don't think that as of today, we can pinpoint that we can solve this issue with more vessels or more containers Because it's a complex situation in very sensitive high demand market. So just maybe to add to what Eli says, we agree with you, Omar, that the bottlenecks issue is not a pure container shipping liner issue. We as a container liner do our utmost to keep the cargo moving. That means that every single vessel that is available is on the We source and we bring in as many containers as we can. We redirect cargo when there is an issue in a terminal to an adjacent terminal in order to do our utmost to keep cargo moving. But there is also issues that we have no control over and The potential issues at the terminals at the port or even inland are beyond our control. In terms of wider issues, this is why we really do believe that the congestion issue is here to stay And we'll take time to be fully resolved. Yes. Thanks for that. Thanks, guys, for that color. And I guess, yes, I mean, It's a very great situation. And wondering, have you seen any response yet from various key ports worldwide, you mentioned in the U. S. Are they doing anything? Is it as simple as perhaps getting past COVID restrictions? Or does there need to be some sort of infrastructure related investments on a part of some of these ports in order to be able to smooth out this congestion. I know it's a complex question, but just wanted to see if you had seen any kind of response from ports Well, I think there are quite a few initiatives, and this is especially in the U. S. To expand and to extend the terminal capacities as there is, I think, A common acknowledgment that today, the terminal capacity are not sufficient to meet expectations when it comes to demand. So there are initiatives in this respect, but obviously, This doesn't happen and it's not being sold overnight. Okay. Thanks, David. And then just two quick Follow-up, I guess, just obviously considering the amount of cash you're generating and you do have some M and A targets or some ideas and Hand. As you think about the dividend potential for or as the Board potentially thinks For next year, 30% to 50%. Does the range of 30% to 50%, is that sort of is there anything that the Board would be looking at That would make it prefer to pay off 30% versus 50%. Does it hinge on simply an M and A opportunity? Or is it are they mutually exclusive? No, I mean, I think it is without the management and the Board to make the final decision at the time We will also have additional visibility going forward in terms of how do we see the situation develop. That is one element that we do not control today, obviously. And yes, in terms of M and A transaction as well, Whether we have something in the line of sight or not, we'll also be an element of appreciation Thank you for the convenience of the Board to make his final call on what should be the percentage in terms of dividend payout. Okay. And then final one for me, David, you mentioned the tax carryforward and tax loss Forward, it's being used for 2021. Could you give maybe a perspective on what we should be thinking about as an effective tax rate for the rest of this year or for the second half of this year and then potentially what it looks like for 'twenty two and beyond. For now, the effective tax rate should be in the region of 15% to 16%. 1.5, you said 15? Yes, 15 to 16. Okay. And that's for the second half of this year onwards? That's for the full year. Okay. And then in 2022, does that change just the kind of the same range? And 22, and we will be liable normally to the tax rate that applies here in Israel, which is 23%. Quarter. Thank you, Omar. Thank you, Omar. The next question is from the line of Savish Sivammar of Citigroup. Please go ahead. Hi, there. I actually got 3 questions here. Firstly, on the freight rates and volume actually. If you On Pavin, Q2, what are you actually seeing currently in terms of rate progression as well as on the volumes? And also if you could just give any color on with the NIO network, which are the regions that are actually standing up Yes. To start with, in terms of freight rates, we see the freight rates going up. That's the trend That has been relevant. I mean, if we look at all the indexes, the SCFI, the CCFI that you are very familiar with, You see the trend is on the up, and we obviously see the same thing here at ZIM. So all the places where We operate, be it the Transpacific, be it the Atlantic Cross West trade, be it Inter Asia, be it Latin America. We see the positive momentum in terms of freight rates everywhere with, for us, We see a stronger impact on any variation that relates to the Trans Pacific rate West Coast. When it comes to the volume increase and where we have opened our new lines, There's been a few initiatives again on Asia to the U. S. On the Trans Pacific, both, by the way, to the West Coast and to the East Coast in conjunction with our partners with the 2M. And there is also some growth expected to continue on intra Asia trade. And when we mean intra Asia, We also include here Australia and New Zealand, so from Southeast Asia to Australia and New Zealand. So the growth is very much driven by the Trans Pacific and intra Asia, and I should add Asia to the East Coast of Africa as well. So when you say growth is driven by mainly by Trans Pacific, so what is the actually the current booking windows like on Trans Pacific versus the other region. What is the visibility you have right now? On the Trans Pacific, today, we have a good visibility for the next 3 months, I mean, depending on the transit time. But if you look That's why the transit time, for example, on Asia to U. S. Cisco. It's 77 days rotation for us. So we and we have booking window 4, 5 weeks ahead, so we have a good visibility up until the middle of Q4, Which is less the case obviously on the shorter lines just such as the Hipra Asia. Okay, got it. So my second question is actually around the transit time on the condition. You said about 37 days, right, on the trans Pacific. And Today, what was it like, say, go back 2 years ago in 2019? What was the typical transit time on a port to port basis? And then if I could just actually understand a bit more, say, how long now it takes to ship a box, say, box of container from a manufacturing So Satish, I'm not sure I heard you well. Just want to clarify on Asia, U. S. East Coast. When I said the transit time is 77 days 77, so that's 11 weeks. This is the pro form a of the line. This is where we deploy 11 ships That's what happened to the other to guarantee weekly service. So that's the pro form a hasn't changed in this respect between Asia to the U. S. East Coast via Panama. That's still 77 days, and it was 77 days before. What we see on Asia U. S. West Where we have our expedited services shorter because the vessel also run faster, we are at 35 days. That's also on the pro form a Now when we look at what is the effect of the congestion issues and when we see the when we add to that the effect The congestion we incur a bit of delay in Asia today on average, it's maybe 4 to 5 days delayed at the area of departure. And depending on where we end up in the U. S, we also may be Slightly delayed to some extent in some ports, significantly delayed for the vessel to be able to enter and to discharge Due to the congestion we were talking about, and that can take another week or 2. So you will see altogether the Effective time that it takes to move a box port to port is maybe 20% higher in terms of duration That's what it would be if we were able to meet the pro form a. Thank you so much for your time. Okay, got it. And so just to understand, you're right, this 20% more, is it driven by just the port condition? Or is it just because The boxes don't arrive in time at the ports or the productivity levels of the port is playing a role. Well, it can be a little bit of everything. But By and large, today, we think I mean, we see it more driven by the port congestion because we've taken already all the measures that We could take in order to increase our number of containers in order to offset the fact that Indeed, sometimes the containers come back late to the terminal for us to put it back on the next rotation. So that we've addressed already. What we can't influence is obviously the productivity of the terminals and the COVID-nineteen related effects. Good product. Thank you. My third question, actually the final one. In terms of the volume exposure, if you look at some of the other liners have come out and said the contract volumes have gone up The market is much wider versus the typical $300 to $400 delta that you see. And also, your charter vessels are Now longer in duration, which also makes sense to extend your volumes more towards contract. So what is your plan around to offset your longer charter duration of your vessels. And then how are you going to bridge the gap between the spot and contract rates? The contract season for us on the Transpacific run from the 1st May to the 30th April, meeting that the discussions for the yearly contracts normally start after the TP conference early in the year and the discussions are concluded So this is ahead of us. This is discussions that we are going to have, By and large with our customers in that we will start initiate with our customers in 6 months from now. And a lot What can happen in the next 6 months in terms of the visibility of what will be the expectation for the industry into 2022 and beyond. So obviously, we will take that into consideration when we Formulate our strategy in terms of allocating spot or contract. But what you say does make sense for us to consider, obviously, In the context of the dynamics of the trades that we will continue to monitor obviously. So what is the current spread with the most important contract that you're seeing across your network? I mean, it can be depending on which line and depending on the week, it can be quite significant. But this is not the way we look at it. Obviously, we have negotiated and agreed with customers on the 30th April last year, a spare volume commitment and the space protection and agreed to rates, so we deliver on that. And then on the spot market, obviously, we're seeing the rates that are going to very high level. But it's a bit of the mix between contract that we have to honor and we do. This is important for us because this is long term relationship with our customers, and this is something that we do value and we'll make sure that we protect the single time. Okay. Yes. Thank you. Thanks very much, Ron. And this concludes the question and answer session. I hand back to Eli Glickman for any closing comments. Thank you very much to all of you for the time, and see you on the call next quarter. Thank you.