Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- d'Amico International Shipping SA (DMCOF, Financial) reported a strong financial performance with a net profit of $122.9 million in the first half of 2024, up from $99.8 million in the same period last year.
- The company achieved its best quarterly spot results in history, with a spot rate of almost $45,000 per day in Q2 2024.
- The fleet is young, with an average age of 8.8 years, and 85% of the vessels feature Eco-design, which is beneficial for operational efficiency and environmental compliance.
- The company has a strong financial structure with a low leverage ratio of 9.1%, significantly reduced from 18% at the end of 2023.
- d'Amico International Shipping SA (DMCOF) has a substantial liquidity position, with cash and cash equivalents of almost $182 million, allowing for strategic flexibility and potential future investments.
Negative Points
- The company faced technical problems during the earnings call, which delayed the start of the presentation.
- There was a delay in the delivery of a vessel due to an unreliable counterparty, leading to the cancellation of the contract and potential financial implications.
- The market experienced weakness in July, particularly east of Suez, due to crude tankers cleaning up to transport refined products, impacting demand for LR2s.
- Inflationary pressures have impacted operational costs, although they seem to be stabilizing.
- The company anticipates a substantial use of funds of around $380 million for exercising purchase options and newbuilding vessels, which could impact cash flow and financial flexibility.
Q & A Highlights
Q: Can you explain the factors behind the strong spot rate performance in the second quarter compared to other product tankers?
A: Carlos Balestra di Mottola, CEO: The main contributor was our higher exposure to the LR1 sector. We intentionally kept a larger percentage of our LR1 fleet on the spot market, anticipating that longer sailing distances due to geopolitical tensions would benefit larger vessels. This strategic decision led to our strong performance in the spot market.
Q: What is causing the recent weakening in spot rates, and do you expect this to be temporary?
A: Carlos Balestra di Mottola, CEO: The weakness is mainly due to some crude tanker segments cleaning up to transport refined products, impacting the market. However, this is expected to be temporary as these vessels are unlikely to continue transporting clean cargoes after their current voyages. We anticipate the market will pick up, especially as we approach the seasonal increase in demand.
Q: What happened with the delivery of the vessel that was supposed to be delivered in July?
A: Carlos Balestra di Mottola, CEO: The delivery was delayed due to the seller's unreliability. We decided to cancel the contract after failing to reach a compensation agreement for the delay. We are seeking reimbursement for the deposit and related costs and will look for new opportunities without rushing.
Q: With the recent exercise of purchase options, where do you see your cash breakeven level by the end of this year and next year?
A: Federico Rosen, CFO: For 2024, our cash breakeven could be around $14,000 a day. The figure for 2025 and 2026 will depend on the timing of exercising further purchase options.
Q: With a loan-to-value ratio below 10%, what is your approach regarding leverage and potential net cash positions?
A: Carlos Balestra di Mottola, CEO: We plan to use funds for exercising options and newbuildings, totaling around $380 million. We also aim to distribute more cash to shareholders, targeting a payout ratio of around 40% of net profits this year, primarily through dividends.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
