Danaos reports improved adjusted earnings in Q2, H1

Coustas

Danaos, one of the world’s largest independent owners of containerships, reported unaudited results for the period ended June 30, 2020.

Highlights for the Second Quarter and Half Year Ended June 30, 2020:

  • Adjusted net income of $42.5 million, or $1.71 per share, for the three months ended June 30, 2020 compared to $34.3 million, or $2.24 per share, for the three months ended June 30, 2019, an increase of 23.9%. Adjusted net income of $75.8 million, or $3.06 per share, for the six months ended June 30, 2020 compared to $72.8 million, or $4.77 per share, for the six months ended June 30, 2019, an increase of 4.1%.
  • Operating revenues of $116.8 million for the three months ended June 30, 2020 compared to $112.3 million for the three months ended June 30, 2019, an increase of 4.0%. Operating revenues of $223.0 million for the six months ended June 30, 2020 compared to $225.2 million for the six months ended June 30, 2019, a decrease of 1.0%.
  • Adjusted EBITDA of $80.1 million for the three months ended June 30, 2020 compared to $75.6 million for the three months ended June 30, 2019, an increase of 6.0%. Adjusted EBITDA of $152.0 million for the six months ended June 30, 2020 compared to $153.1 million for the six months ended June 30, 2019, a decrease of 0.7%.
  • Total contracted operating revenues were $1.2 billion as of June 30, 2020, with charters extending through 2028 and remaining average contracted charter duration of 3.7 years, weighted by aggregate contracted charter hire.
  • Charter coverage of 85% for the next 12 months based on current operating revenues and 62% in terms of contracted operating days.
  • Common stock repurchase program of up to $10 million approved.

Danaos’ CEO Dr. John Coustas commented:

“We are pleased to report improved adjusted earnings for both the second quarter of 2020 and the first six months of the year. The Company’s adjusted net income of $42.5 million for the second quarter of 2020 increased by $8.2 million, or 23.9% when compared to adjusted net income of $34.3 million for the second quarter of 2019. Adjusted EBITDA also improved by $4.5 million, or 6%, to $80.1 million for the second quarter of 2020 compared to $75.6 million for the second quarter of 2019.
 
Although economic activity has been subdued since the start of the coronavirus pandemic, we have seen increasing signs of confidence with liner companies in recent weeks as a number of previously blanked sailings have been reinstated, implying that demand is gradually improving. This has also translated into improving charter rates for vessels greater than 4,000 TEU in size. Recently reported financial results of the liner companies have also been encouraging since, as we had anticipated, prudent capacity management, reduced bunker prices and falling interest rates have more than compensated for the drop in volumes caused by the pandemic.

We are also cautiously optimistic about the medium-term market outlook. The orderbook is currently in single digits as a percentage of the world fleet for the first time in 20 years. Combined with an anticipated reduction in speeds due to the various environmental initiatives, the supply side outlook is healthy. Tighter supply will help to accelerate the recovery in the container market.
 
We continue to execute our strategy and we are well insulated from near-term volatility due to our high charter coverage of 85% in terms of operating revenues and 62% in terms of operating days over the next 12 months. This provides significant visibility into our cash flows during this period. We have now concluded all the scrubber installation investments and took delivery of two 8,500 TEU vessels during the second quarter. Finally, we have ample liquidity and a $1.2 billion charter backlog, which provides us with flexibility to both manage our business and react to growth opportunities that may present themselves. Given continued uncertainty about the duration of the coronavirus pandemic and the ensuing economic recovery, we are focused on maintaining a conservative financial profile and making thoughtful capital allocation decisions that align with our strategy and market expectations.
 
We also remain committed to operational excellence and technological innovation, which allows us to continually deliver a high quality service to our customers. Our commitment has enabled us to maintain our leadership position in the container shipping industry throughout multiple market cycles and during the current challenging environment. We believe that our focus and strategy will ultimately enhance shareholder value far and above the steel value of our fleet.”

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