TEN reported results (unaudited) for the fourth quarter and the year ended December 31, 2019.
2019 YEAR RESULTS
In 2019, TEN produced profits of $42.7 million before non-cash impairment charges and positive net income of $15.1 million, a $76 million turnaround from 2018. Such improvement in profitability was primarily due to the very strong freight market that arose in the fourth quarter of the year, and still the case today, and resulted in voyage revenues reaching $597.5 million.
Operating income reached $113.5 million compared to $37.8 million in 2018, both before non-cash impairment charges, a threefold increase.
Adjusted EBITDA totaled $257 million in 2019, $66.2 million more than in 2018, a 35% increase.
The average daily time charter equivalent rate per vessel climbed to almost $21,400 with fleet utilization again at a high 96.2% as a result of the Company’s time-charter policy and the continued excellent relationship with our first-class clients, with many of the contracts renewed in the year on attractive terms.
Excluding impairment charges, in nearly all expense categories, the numbers were almost the same as in 2018, except for depreciation which decreased due to the sale of vessels and impairments at the end of 2018. Average daily operating expenses remained stable at about $7,700. Vessel overhead costs per ship per day averaged $1,182, similar to 2018.
The outstanding loan balance decreased to $1.545 billion from $1.607 billion at the end of 2018, resulting to a $2.0 million interest and financing savings in 2019.
FOURTH QUARTER 2019 RESULTS
In the fourth quarter of 2019, TEN Ltd. generated profits of $40.7 million, before non-cash impairment charges, compared to $2.8 million before non-cash impairment charges for the equivalent quarter in 2018. Net income for the fourth quarter of 2019 was at $13.1 million compared to a net loss of $63.1 million in the same quarter of 2018.
Operating income in the fourth quarter, before non-cash impairment charges, amounted to $55.0 million, more than double the operating income generated in the 2018 fourth quarter, before non-cash impairment charges.
Adjusted EBITDA increased by 36% to $90 million and total cash balances by the end of the quarter (and year) neared $200 million.
This substantial and material improvement in fourth quarter net income results was mostly due to gross revenues increasing by $21.6 million, 14.1% up from the 2018 fourth quarter with an almost identical number of vessels in the fleet, elevating total voyage revenues to $175.4 million for the quarter.
The increase in revenue was due to a greatly improved crude tanker market during the quarter, in which 16 vessels operating in spot trades enjoyed the strongest rates seen in the last five years, as oil demand strengthened and oil supplies increased, especially from the U.S, while growth of the global fleet continued its downward trend. Moreover, vessels on time charter with profit sharing provisions began to see significant income over and above their applicable minimum rates helping the average daily TCE per vessel in the fleet to reach $25,576, a 19.3% increase from the fourth quarter of 2018.
In addition, the two LNG carriers Neo Energy and Maria Energy, again earned higher rates in the fourth quarter of 2019 than in the 2018 fourth quarter, by 45% and 58% respectively.
Our fleet of 65 operating vessels achieved again high utilization rates, averaging 98.4%, with only one vessel in dry-dock for just part of the quarter.
Expenses incurred by the Company in the fourth quarter were relatively stable in all categories compared to the 2018 fourth quarter. Voyage expenses, however, experienced a 22% reduction much due to lower bunker costs. Total operating costs remained almost the same at $46.0 million, while daily average operating costs per vessel stayed at approximately $7,800.
G&A expenses remained at $7.3 million and depreciation and amortization charges were somewhat lower due to vessels held for sale that no longer incurred depreciation.
Interest and finance costs were down by nearly half that of the 2018 fourth quarter, falling to $13.7 million from $26.2 million, mainly due to bunker hedge positive valuation movements.
Dividend (Common Shares) and Stock Buyback
The Company will pay a dividend of $0.05 per common share in June 2020 and has received authorization from the Company’s Board of Directors to commence an up to $50 million common and preferred stock buyback.
Corporate Strategy & Outlook
In hindsight, 2019 looks now a very normal year regardless of its rollercoaster market changes. In today’s turbulent environment, TEN maintains its steady course navigating unprecedented challenges with success. With oil prices collapsing the demand for inventory build-up and transportation services is booming. TEN with its flexible employment model is taking advantage of that to the full. The increasing floating storage of oil and the developing contango following the precipitous decline in the price of crude, has led to a reduction in fleet capacity which should assist in maintaining the strong rates currently in evidence.
“As the impact of the coronavirus is being felt around the globe, TEN’s business model is able not only to sustain such shocks, but also profit from them as well. Our long-established strategy of providing downside protection and upside potential is working well and we remain confident that we will continue taking advantage of the strong freight environment while offering investors healthy returns,” Mr. George Saroglou, COO of TEN commented. “With significant cash flow visibility, a healthy balance sheet and favorable industry fundamentals, like the continuously low orderbook, we remain confident that once the panic selling stops TEN will be ascribed a valuation that it merits and deserves. In the meantime, management top priority is to maintain the good health of its seafarers and onshore employees and wishes all good health in these challenging times,” Mr. Saroglou concluded.