d’Amico Widens Loss in Second Quarter

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The Board of Directors of d’Amico International Shipping, a leading international marine transportation company operating in the product tanker market, examined and approved the half-year and second quarter 2019 financial results.

FIRST HALF 2019 RESULTS

  • Time charter equivalent earnings (TCE) of US$ 126.3 million (US$ 125.6 million in H1’18)
  • Gross Operating Profit/EBITDA of US$ 47.9 million (37.9% on TCE) (US$ 10.1 million in H1’18)
  • Net Result of US$ (24.3) million (US$ (20.2) million in H1’18)
  • Adjusted Net Result (excluding IFRS 16 and non-recurring) of US$ (9.2) million (US$ (23.6) million in H1’18)
  • Cash Flow from Operating Activities of US$ 19.5 million (US$ 0.9 million in H1’18)
  • Net Debt of US$ 698.5 million (US$560.7 million excluding IFRS16) (US$ 588.7 million as at 31 December 2018)

SECOND QUARTER 2019 RESULTS

  • Time charter equivalent earnings (TCE) of US$ 62.4 million (US$ 59.3 million in Q2’18)
  • Gross Operating Profit/EBITDA of US$ 25.5 million (US$ (17) thousand in Q2’18)
  • Net Result of US$ (18.8) million (US$ (16.6) million in Q2’18)
  • Adjusted Net Result (excluding IFRS 16 and non-recurring) of US$ (4.3) million (US$ (16.7) million in Q2’18

MANAGEMENT COMMENTARY

Paolo d’Amico, Chairman and Chief Executive Officer of d’Amico International Shipping commented:

‘In the first half of 2019, DIS posted a Net result of US$ (24.3) million vs. US$ (20.2) million recorded in the same period of last year. However, excluding results on vessel disposals and non-recurring financial items from H1 2019 and H1 2018, as well as the asset impairment and the effects of IFRS 16 from H1 2019, DIS’ Net result would have amounted to US$ (9.2) million in the first half of the current year compared with US$ (23.6) million in the same period of 2018, a difference of US$ 14.4 million.

DIS realized a daily average spot rate of US$ 13,326 in H1 2019, which is US$ 1,800/day higher than the level achieved in H1 2018. During the first half of the year, we also benefited from 47.3% time-charter coverage at an average daily rate of US$ 14,496 and our total blended daily TCE (spot and time-charter) was US$ 13,879 in H1 2019 vs. US$ 12,625 in H1 2018.

The spot market in the first-half of the year suffered from the prolonged refinery maintenance season in anticipation of IMO 2020, which resulted in very low growth in refining volumes of only 0.55 million b/d year-onyear. Despite the subdued freight market, period rates as well as asset values have been gradually improving year-to-date. At the end of Q2, the assessed one-year TC rate was US$ 14,500/day for conventional MRs and US$ 16,500/day for Eco MRs. This clearly demonstrates the leading charterers’ strong belief in the market’s recovery prospects. DIS took advantage of this growing interest from oil-majors and leading trading houses and fixed some of its MR and LR1 vessels at profitable levels.

Looking at the prospects for our industry, we maintain a very positive outlook. In fact, fundamentals are strong, with a favourable supply-demand balance for product tankers. Demand for seaborne transportation of refined products is expected to be strong in the second half of the year, thanks to a rebound in oil demand growth and an acceleration in refined volumes growth, driven by the new IMO regulations, which limit the sulphur content in bunker fuels to 0.5% from January 2020, contributing to higher refining margins, in particular for diesel and gasoline. In addition, the supply side is also very supportive, with limited net fleet growth expected over the next two years.

Our Company is very well positioned to fully benefit from the next positive cycle, thanks to a strong and experienced management and a very young fleet, following the large US$ 755 million investment program we started in 2012 and that we have almost finalized. I would like to thank once more our shareholders for their continued support and trust, which I am confident we will be able to adequately reward soon.”

Carlos Balestra di Mottola, Chief Financial Officer of d’Amico International Shipping S.A. commented:

‘In the first six months of the year, we continued to pursue our strategic goal of strengthening our balance sheet and liquidity position. Including our share of the cash generated by some of our joint-ventures, in the first half of 2019 DIS raised around US$80 million in liquidity, with a further US$6.7 incoming in September 2019. In detail:

i) In January, we finalized our first Japanese Operating lease (JOLCO) through the sale and lease back of one of our LR1 vessels, generating net cash proceeds of US$ 10.2 million, relative to financing the vessel though the previously committed loan facility;

ii) In April, we successfully concluded DIS’ equity capital increase of around € 44 million. The rights issue was initially 97.3% subscribed, with the remaining shares sold through a private placement a few days later, resulting in a fully subscribed offering and allowing the Company to strengthen substantially its equity and liquidity position;

iii) In April, we finalized the sale of one MR vessel owned by DM Shipping (a JV in which DIS has an indirect interest of 51%), generating approximately US$ 12.3 million in net cash for the JV company;

iv) In April, we finalized the sale and lease back of one of our MR ships, generating an additional US$ 9.6 million in net cash;

v) In June, Eco Tankers (a JV in which DIS has a direct interest of 33%) finalized the sale of its 2014-built MR vessel, generating approximately US$ 12.8m in net cash proceeds for the JV.

vi) In June, DM Shipping agreed to sell its remaining vessel, generating at vessel’s delivery (planned in Sep’19) approximately US$ 13.2m in net cash proceeds for the JV.

At the same time, we have been actively working on achieving a more efficient cost structure, obtaining some positive results in 2019, with lower overhead costs and operating expenses relative to the previous year. We managed to achieve these results without in any way compromising the quality and safety of our vessels and of our seagoing personnel, which have always been and will always be one of the priorities of our Group, as our clients appreciate and are well aware of.

A lower cost structure coupled with an improving market, allowed DIS to triple its EBITDA (even excluding the positive effects arising from the application of IFRS 16 to the 2019 accounts) relative to the prior year. An effect that we can clearly see also on the Operating cash flow. In fact, DIS generated US$ 20.0 million cash flow from operating activities in H1 2019 vs. US$ 0.9 million in H1 2018.

We have almost finalised our substantial investment plan of US$ 755 million started in 2012, with our last newbuilding expected to be delivered this month, entailing a residual CAPEX of approximately US$ 31.4 million, of which only US$ 11.1 million should be financed with own funds and the rest with committed bank debt. After the delivery of this last LR1, DIS’ estimated CAPEX for the coming years will be only related the maintenance of our ships and will therefore be substantially lower than in the previous years. This, coupled with lower debt repayments starting from 2020, and a rising freight market should contribute to a significant improvement in our free cash-flow generation, as well as to a rapid deleveraging of our balance sheet.

Asset values have also been rising and should continue doing so as the market strengthens, contributing to an increase in DIS’ net asset value, and a reduction in its net debt to fleet market value ratio, which stood at 66.3% as at the end of June 2019 compared with 72.9% as at the end of 2018.

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