Release Date: November 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MPC Container Ships ASA (MPZZF, Financial) reported strong financial and operational results for Q3 2024, with an adjusted EBITDA of USD78 million.
- The company has significantly increased its charter backlog by more than 30% since the beginning of the year, now standing at USD1.2 billion.
- MPC Container Ships ASA (MPZZF) successfully issued a heavily oversubscribed USD125 million unsecured sustainability-linked bond, enhancing investment capacity.
- The company acquired four modern 3,800 TEU eco-vessels, securing long-term charters with Hapag-Lloyd, which enhances fleet composition and charter backlog.
- MPC Container Ships ASA (MPZZF) declared its 12th consecutive dividend, reflecting a strong commitment to returning capital to shareholders, with a total of USD937 million distributed over less than three years.
Negative Points
- The long-term market outlook remains uncertain due to supply-side dynamics, despite the current strong charter market.
- Net debt increased to approximately USD60 million due to newbuild deliveries and asset acquisitions, although leverage remains low at 19%.
- Year-on-year revenue and EBITDA have declined due to lower average charter rates compared to the previous year.
- The cash position slightly reduced by USD26 million quarter-to-quarter, impacted by dividend payments and asset acquisitions.
- The company faces potential competition from smaller Chinese players entering the container tonnage provider market, although it believes it is well-positioned to handle this.
Q & A Highlights
Q: Do you believe there will be more scrapping of ships in 2025 to 2026 with the current forecast?
A: Constantin Baack, CEO: This year, around 70,000 TEU have been scrapped, which is about 50 ships. Clarksons Research estimates scrapping to increase to 240,000 TEU in 2025 and 480,000 TEU in 2026, driven by an aging fleet and market softening. However, if the market remains strong, these figures might not be reached.
Q: How do you reconcile the USD150 million in depreciation and net financials in your net profit potential?
A: Moritz Fuhrmann, CFO: This is a proxy using regular depreciation of a fully delivered fleet, including new acquisitions and retrofits. The figure accounts for vessels already delivered and those expected by the end of 2024 and 2025.
Q: What gains are assumed for Q4 relating to the sale of AS Paola?
A: Moritz Fuhrmann, CFO: Our guidance includes an assumed book gain for vessel sales. AS Paola is expected to be delivered towards the end of Q4, but specific numbers on bookings are not yet available.
Q: What do you expect will be the maintenance and upgrading, retrofitting CapEx amount in '25 and '26?
A: Moritz Fuhrmann, CFO: For 2024, we have between USD15 million and USD20 million in retrofit CapEx. For 2025, we expect less retrofitting CapEx relative to this year, and 2026 is too far out to estimate accurately.
Q: What would be the best level of leverage to secure in case of a global shipping crisis?
A: Moritz Fuhrmann, CFO: We manage leverage by ensuring long-term visibility on cash flows and maintaining a significant number of debt-free vessels. Currently, over 40 vessels are debt-free, providing flexibility in case of a crisis.
Q: Could you clarify the reason for declines in year-on-year revenues and EBITDA?
A: Constantin Baack, CEO: The decline is due to renewing charters at slightly lower rates compared to last year's high rates. Additionally, last year benefited from vessel sales, impacting EBITDA.
Q: What is your prediction for fleet speeds versus the fuel EU regulation?
A: Constantin Baack, CEO: Fleet speeds have decreased from around 14.5 knots to 13-13.5 knots due to regulations and fuel-saving measures. We expect speeds to decrease further, though there is a limit depending on trade and operation.
Q: Do you foresee competitors from China or other markets impacting MPCC?
A: Constantin Baack, CEO: The market is fragmented, with some smaller Chinese players. We are well-positioned as strategic partners to key liner operators, focusing on transparency, operational integration, and low leverage to face competition.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
