Release Date: November 07, 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) has a young fleet with an average age of nine years, significantly lower than the industry average.
- The company has a strong cash position with cash and cash equivalents of $228.7 million at the end of September 2024.
- The net financial position improved significantly, with a ratio of 6.2% between net financial position and fleet market value.
- The company generated a strong operating cash flow of $228.4 million in the first nine months of 2024.
- d'Amico International Shipping SA (DMCOF) declared an interim dividend of $30 million and has been actively buying back shares, indicating strong shareholder returns.
Negative Points
- The spot market was weaker in Q3 2024 compared to the same quarter last year, impacting profitability.
- There is a potential for market softening in the second half of 2025 and 2026 due to increased vessel deliveries.
- The company faces inflationary pressures, particularly on manning costs, which increased operational expenses.
- The current freight rate environment is soft, with lower rates impacting the company's ability to secure favorable time charter contracts.
- The geopolitical situation, including potential tariffs and sanctions, could negatively impact the market and demand for oil imports.
Q & A Highlights
Q: What is your outlook for the tanker market, considering the recent sharp correction in rates and the stock prices reflecting a potential prolonged weakness?
A: Carlos Balestra di Mottola, CEO: We expect the market to improve this winter, although the recovery might be delayed due to high product stocks in Europe and mild weather. We anticipate a strong crude market next year, which should benefit the clean markets indirectly. The fundamentals remain strong, and we expect a good first half of 2025, with potential softening in the second half.
Q: Are you seeing any signs of the unwinding of the cannibalization effect from uncoated vessels cleaning up to transport clean petroleum products?
A: Carlos Balestra di Mottola, CEO: October was weak due to seasonal refinery maintenance, but we expect a rebound in November and December. The high stocks in Europe might delay recovery, but we anticipate benefiting from improved rates in Q1 next year.
Q: Can you update on your commercial strategy and negotiations for securing more time charter contracts?
A: Carlos Balestra di Mottola, CEO: We recently secured a two-year time charter at attractive levels. While the environment is tougher, we are working to increase coverage at satisfactory levels and expect opportunities to arise as the market strengthens.
Q: What are your thoughts on shareholder remuneration, considering the widened discount to NAV and the potential recovery in spot prices?
A: Carlos Balestra di Mottola, CEO: We aim to balance buybacks and dividends, targeting 40% of net profits for shareholder returns. We may pursue more buybacks if the market conditions are favorable, but we also want to maintain sufficient free float. If the market recovers, the window for buybacks may close as share prices rise.
Q: Can you elaborate on the working capital management and expectations for operating cash flow before CapEx for the rest of the year?
A: Federico Rosen, CFO: The positive working capital effect in Q3 was due to timing, with freight from peak market voyages impacting cash flow. We generally assume a neutral working capital effect over the year. Increasing coverage can positively impact working capital, as time charter hires are paid monthly in advance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
