Kenon Holdings (KEN) Swings to Q1 Loss; Provides Business Update

Kenon Holdings (NYSE: KEN) reported Q1 EPS of ($0.67), versus $0.06 reported last year. Revenue for the quarter came in at $422 million, versus $322 million reported last year.

Business Updates

Car Sales In the first three months of 2016 (which includes the Chinese new year, a traditionally slower time for car sales), Qoros' sales increased by approximately 97% to approximately 4,900 vehicles, as compared to approximately 2,500 vehicles in Q1 2015.

In April 2016, Qoros' sales increased by approximately 29% to approximately 1,680 vehicles, as compared to approximately 1,300 vehicles in April 2015.

SUV and New Model Launches In March 2016, Qoros launched the Qoros 5 SUV, a mid-sized SUV designed and produced with international standards of quality, safety and performance for the fast-growing SUV market in China.

Qoros has also launched the new 2016 model year versions of the Qoros 3 Sedan and the Qoros 3 Hatch. In addition, Qoros introduced two additional trims for each of the Qoros 3 Sedan and the Qoros 3 Hatch.

Dealerships As of March 31, 2016, Qoros' dealerships included 86 fully operational points of sales, 7 additional points of sales under construction, and Memorandums of Understanding with respect to the potential development of 9 additional points of sales.

China Vehicle Market Conditions According to China Passenger Car Association, cumulative passenger vehicle wholesales in Q1 2016 increased by 6% YoY, as compared to 11% YoY in Q1 2015. The SUV segment continued to be a high-growth segment, as sales increased by approximately 49% YoY in Q1 2016, as compared to 48% YoY in Q1 2015, while sedan sales decreased by approximately 12% YoY in Q1 2016.

The decline in the industry's overall growth rate that occurred in 2015 in connection with volatility in the Chinese financial markets and a slowdown in the Chinese economy resulted in increased competition in China's automotive market through price reductions. It is expected that dealers, OEMs, Qoros, and many of Qoros' competitors will continue to reduce prices and offer further inducements to purchase vehicles in 2016.

ZIM ZIM carried approximately 577 thousand TEUs in Q1 2016, representing 3% growth as compared to Q1 2015, in which ZIM carried approximately 560 thousand TEUs. In Q1 2016, ZIM's revenues were approximately $630 million, as compared to approximately $792 million in Q1 2015, reflecting an approximately 25% decline in ZIM's average revenue per TEU as a result of a decline in industry container freight rates. ZIM's net loss attributable to ZIM's owners in Q1 2016 was $58 million, compared to net income of $11 million in Q1 2015.

The container shipping industry has continued to experience an imbalance of supply and demand. Since the second half of 2015, freight rates have fallen sharply in most of the trade zones – reaching historical lows across major trades in Q1 2016 – mainly as a result of excess capacity. The impact to net income from the decline in freight rates has been offset, in part, by the current relatively low price of bunker, one of ZIM's significant costs, which also decreased during this period.

ZIM publishes its results on its website. For more information, see www.ZIM.com. This website, and any information referenced therein, is not incorporated by reference herein.

Kenon (Unconsolidated) Liquidity and Capital Resources As of March 31, 2016, cash, gross debt, and net debt (a non-IFRS financial measure, which is defined as gross debt minus cash) at Kenon were $7 million, $162 million and $155 million, respectively.

As of March 31, 2016, the total drawings outstanding under Kenon's $200 million credit facility from Israel Corporation Ltd. amounted to $150 million. In April 2016, Kenon drew down the remaining $50 million under the credit facility, and as a result, $200 million, plus interest and fees of $14 million, is currently outstanding. The April drawing was intended to provide Kenon with additional cash resources in light of its liquidity position and its obligations under its indirect guarantees of Qoros' indebtedness.

Kenon has provided back-to-back guarantees to Chery in respect of Chery's guarantees of certain Qoros' indebtedness. Set forth below is an overview of the guarantees provided by Kenon in respect of Qoros' indebtedness:

1. In the event that Chery's liability under its guarantee exceeds RMB1.5 billion, Kenon has committed to negotiate with Chery in good faith to find a solution so that Kenon's and Chery's liabilities for the indebtedness of Qoros under this credit facility are equal in proportion.

2. In the event that Chery is obligated under its guarantee of the EXIM Bank loan facility to make payments that exceed Kenon's obligations under the guarantee, Kenon and Chery have agreed to try to find an acceptable solution, but without any obligation on Kenon to be liable for more than the amounts set forth in the table above.

For earnings history and earnings-related data on Kenon Holdings (KEN) click here.

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