Danaos Corporation has reported a drop in net profit for the first quarter.
The company posted a first quarter profit of $18.44m, down 58.2% from the profit of $44.12m in the same period of 2016.
Revenue for the first three months also dropped by 19.9% year-on-year to $110.09m due mainly to loss of revenue from cancelled charters with Hanjin Shipping for eight of its vessels, and re-chartering of certain vessels at lower rates.
“The results of Danaos for the first quarter of 2017 continue to reflect the impact of the Hanjin bankruptcy on the company’s financial performance,” said John Coustas, CEO of Danaos.
Highlights for the First Quarter Ended March 31, 2017:
- Adjusted net income1 of $24.5 million, or $0.22 per share, for the three months ended March 31, 2017 compared to $47.2 million, or $0.43 per share, for the three months ended March 31, 2016, a decrease of 48.1%.
- Operating revenues of $110.1 million for the three months ended March 31, 2017 compared to $137.5 million for the three months ended March 31, 2016, a decrease of 19.9%.
- Adjusted EBITDA1of $72.5 million for the three months ended March 31, 2017 compared to $99.4 million for the three months ended March 31, 2016, a decrease of 27.0%.
- Total contracted operating revenues were $2.0 billion as of March 31, 2017, with charters extending through 2028 and remaining average contracted charter duration of 6.4 years, weighted by aggregate contracted charter hire.
- Charter coverage of 90.0% for the next 12 months based on current operating revenues and 73.0% in terms of contracted operating days.
Danaos’ CEO Dr. John Coustas commented:
“The results of Danaos for the first quarter of 2017 continue to reflect the impact of the Hanjin bankruptcy on the Company’s financial performance. The $22.7 million decrease in our adjusted net income was primarily attributable to $22 million of operating revenues lost from Hanjin. Excluding the off-hire days related to three 10,100 TEU vessels that were previously chartered by Hanjin and were delivered to their new charterers in April 2017, our fleet utilization increased to 98.1% compared to 94.6% in the first quarter of 2016. Including those vessels, our fleet utilization was 92.7%.
As previously reported, the Company is in breach of certain financial covenants as a result of the Hanjin bankruptcy. We had obtained a waiver for these breaches until April 1, 2017. We have asked our lenders for an extension of this waiver until July 1, 2017 and are engaged in constructive conversations to resolve this matter. In the meantime, we continue to generate positive cash flows from our operations and currently are in a position to service all our operational obligations as well as all scheduled principal and interest payments under the original terms of our debt agreements.
Charter rates increased during the month of April. These increases were considerable on a percentage basis, but still low in absolute terms at levels that may be slightly above operating expenses, but still not enough to service investment returns. This market improvement is mainly due to the commencement of the new alliances between liner companies. While we do not expect the market to return to the lows of 2016, we also see signs of the charter market tailing off. Nonetheless, the more disciplined capacity utilization strategy by the liner companies in the context of the new alliances has led to an improvement in box rates which has in turn improved the performance of our customers and reduced our counterparty credit risks.
Danaos continues to have low near term exposure to the weak spot market with charter coverage of 90% for the next 12 months based on current operating revenues and 73% in terms of contracted operating days.
During this extended period of market weakness which has presented many challenges, we remain focused on taking necessary actions to preserve the value of our company by managing our fleet efficiently and taking prudent measures to manage and ultimately deleverage our balance sheet.”