The Board of Directors of d’Amico International Shipping S.A., a leading international marine transportation company focusing on the product tanker market, today approved the half-yearly and second quarter 2010 financial report MANAGEMENT COMMENTARY
Marco Fiori, Chief Executive Officer of d’Amico International Shipping commented:
‘Following the collapse in Oil product demand in 2009, the 2010 market is showing signs of recovery. The steady freight rates and market conditions experienced since February this year reflect a products tanker market environment, which left the lows of Q3 and Q4 2009 behind, but it is still characterized by a level of demand that cannot yet support much stronger spot rates Over the first half of the current year DIS, thanks to its strong market positioning and the well balanced business model, returned to operating profit, generated a positive operating cash flow and confirmed its strong financial position. This is highlighted by the low loan to value ratio (38%) of the owned fleet, which has been kept at historical low levels also in this volatile environment. The market remains challenging in the near term and d’Amico International Shipping maintains a cautious approach going into the next quarter.‘
SUMMARY OF THE RESULTS IN THE SECOND QUARTER AND FIRST HALF OF 2010
The steady freight rates and market conditions experienced since February this year, resulted in 2010 Time charter equivalent (TCE) earnings of US$ 48.1 million in Q2 and US$ 99.2 million in H1. The daily average TCE Earnings for Q2 and H1 2010 were respectively of US$ 15,260 and US$ 15,582, reflecting a products tanker market environment, which left the lows of Q3 and Q4 2009 behind, but still characterized by a level of demand that, apart from the cold winter season, cannot yet support strong spot rates yet. The Q2 and H1 2010 EBITDA were respectively of US$ 9.4 million and US$ 16.6 million, while the Net Loss for the Q2 was of US$ 5.5 million and of US$ 8.9 million in the first Half of 2010, both significantly influenced by the unrealised exchange rate losses on Japanese Yen.
OPERATING PERFORMANCE
Time charter equivalent earnings amounted to US$ 48.1 million in Q2 2010 (US$ 44.3 million in Q2 2009), while the amount in H1 this year was of US$ 99.2 million (US$ 98.5 million in H1 2009). The 2010 ‘year to date’ balance is in line with the previous year, but the small variance (0.7% for the six months period) has been the outcome of the combination of different aspects: the fleet increase which occurred in 2010 on one side and, on the other side, the softer product tanker demand in H1 2010 compared to the strong beginning (Q1) of the previous year.
The first half of 2010, has been characterized by the broader economic recovery. The generally improved economic scenario resulted in the following positive DIS freight rates trend with respect to 2009.
Following the relatively strong beginning of the current year (January), due to the cold winter season, the DIS spot freight rates have remained stable, in the range of US$ 12,000 per day for all the following months. Further confirming its strong market positioning and strategic partnerships, DIS out-performed the spot market rates trend in the same period.
The portion of revenue arising from fixed contracts, as per the d’Amico policy, has remained significant over the current year (47.4% average in the first six months of 2010 compared to 60.15% in the same period last year) at the profitable level of US$ 18,719 over H1.
The Gross operating profit (EBITDA) for Q2 2010 was of US$ 9.4 million, slightly better than the amount of US$ 9.0 million realized in Q2 2009. The positive variance represented a turnaround compared with the last quarters. The result has been driven by the steady if not yet strong, freight rates and by the DIS positive performance on operating and other costs controlling. The EBITDA margin in Q2 2010 returned to the acceptable level of 19.5% (20.4% in Q2 2009). In the first half of the current year the EBITDA was of US$ 16.6 million (16.7% of margin in TC Earnings), lower than last year H1 performance (US$ 24.5 million, 24.5% of margin), when the still favourable operating environment was supporting the rates.
The Operating result (EBIT) for Q2 2010 resulted in the positive amount of US$ 1.3 million (US$ 0.1 million in Q2 2009). The H1 2010 EBIT was of US$ 0.5 million (US$ 6.9 million in H1 2009). The reduced pressure on the freight rates thanks to the better market conditions and the effective costs monitoring, allowed DIS to return to the EBIT level higher that the ‘water level’.
The Net loss of Q2 2010 was of US$ 5.5 million, compared to a net loss of US$ 1.4 million in Q2 last year 2009. In the first six months of 2010 the net loss was of US$ 8.9 million (net profit of US$ 7.3 million). Due to the significant effect of exchange rate translation and the higher charge for income taxes, the turnaround realized in 2010 performances at Operating results level has not yet reached the bottom line.
CASH FLOW AND FINANCIAL POSITION
The net cash flow for the six months ended on 30 June 2010 does not show relevant variance in the Company’s strong and steady cash position. The negative net balance of US$ 1.8 million, slightly decreasing cash and cash equivalents to US$ 90.3 million as at 30 June 2010 from US$ 92.2 million as at 31 December 2009.
Cash flow from operating activities for Q2 2010 was of US$ 2.5 million (US$ 7.0 million in Q2 2009), while the figure for the first half of 2010 was of US$ 4.5 million (US$ 28.5 million in H1 2009). Over the first half of 2010 DIS, in a more stabilized, but not fully recovered market environment, confirmed its capacity to generate a positive free cash flow (following the operating cash burn in the second half of 2009).
Net debt as at 30 June 2010 amounted to US$ 182.7 million. The minor increase, compared with the balance of US$ 171.4 million at the end of the previous year, was mainly due to the vessels under construction instalment payments. The ratio of net debt to shareholder’s equity was of 0.53, in line with the ratio of 0.48 at 31 December 2009.
Marco Fiori, Chief Executive Officer of d’Amico International Shipping commented:
‘Following the collapse in Oil product demand in 2009, the 2010 market is showing signs of recovery. The steady freight rates and market conditions experienced since February this year reflect a products tanker market environment, which left the lows of Q3 and Q4 2009 behind, but it is still characterized by a level of demand that cannot yet support much stronger spot rates Over the first half of the current year DIS, thanks to its strong market positioning and the well balanced business model, returned to operating profit, generated a positive operating cash flow and confirmed its strong financial position. This is highlighted by the low loan to value ratio (38%) of the owned fleet, which has been kept at historical low levels also in this volatile environment. The market remains challenging in the near term and d’Amico International Shipping maintains a cautious approach going into the next quarter.‘
SUMMARY OF THE RESULTS IN THE SECOND QUARTER AND FIRST HALF OF 2010
The steady freight rates and market conditions experienced since February this year, resulted in 2010 Time charter equivalent (TCE) earnings of US$ 48.1 million in Q2 and US$ 99.2 million in H1. The daily average TCE Earnings for Q2 and H1 2010 were respectively of US$ 15,260 and US$ 15,582, reflecting a products tanker market environment, which left the lows of Q3 and Q4 2009 behind, but still characterized by a level of demand that, apart from the cold winter season, cannot yet support strong spot rates yet. The Q2 and H1 2010 EBITDA were respectively of US$ 9.4 million and US$ 16.6 million, while the Net Loss for the Q2 was of US$ 5.5 million and of US$ 8.9 million in the first Half of 2010, both significantly influenced by the unrealised exchange rate losses on Japanese Yen.
OPERATING PERFORMANCE
Time charter equivalent earnings amounted to US$ 48.1 million in Q2 2010 (US$ 44.3 million in Q2 2009), while the amount in H1 this year was of US$ 99.2 million (US$ 98.5 million in H1 2009). The 2010 ‘year to date’ balance is in line with the previous year, but the small variance (0.7% for the six months period) has been the outcome of the combination of different aspects: the fleet increase which occurred in 2010 on one side and, on the other side, the softer product tanker demand in H1 2010 compared to the strong beginning (Q1) of the previous year.
The first half of 2010, has been characterized by the broader economic recovery. The generally improved economic scenario resulted in the following positive DIS freight rates trend with respect to 2009.
Following the relatively strong beginning of the current year (January), due to the cold winter season, the DIS spot freight rates have remained stable, in the range of US$ 12,000 per day for all the following months. Further confirming its strong market positioning and strategic partnerships, DIS out-performed the spot market rates trend in the same period.
The portion of revenue arising from fixed contracts, as per the d’Amico policy, has remained significant over the current year (47.4% average in the first six months of 2010 compared to 60.15% in the same period last year) at the profitable level of US$ 18,719 over H1.
The Gross operating profit (EBITDA) for Q2 2010 was of US$ 9.4 million, slightly better than the amount of US$ 9.0 million realized in Q2 2009. The positive variance represented a turnaround compared with the last quarters. The result has been driven by the steady if not yet strong, freight rates and by the DIS positive performance on operating and other costs controlling. The EBITDA margin in Q2 2010 returned to the acceptable level of 19.5% (20.4% in Q2 2009). In the first half of the current year the EBITDA was of US$ 16.6 million (16.7% of margin in TC Earnings), lower than last year H1 performance (US$ 24.5 million, 24.5% of margin), when the still favourable operating environment was supporting the rates.
The Operating result (EBIT) for Q2 2010 resulted in the positive amount of US$ 1.3 million (US$ 0.1 million in Q2 2009). The H1 2010 EBIT was of US$ 0.5 million (US$ 6.9 million in H1 2009). The reduced pressure on the freight rates thanks to the better market conditions and the effective costs monitoring, allowed DIS to return to the EBIT level higher that the ‘water level’.
The Net loss of Q2 2010 was of US$ 5.5 million, compared to a net loss of US$ 1.4 million in Q2 last year 2009. In the first six months of 2010 the net loss was of US$ 8.9 million (net profit of US$ 7.3 million). Due to the significant effect of exchange rate translation and the higher charge for income taxes, the turnaround realized in 2010 performances at Operating results level has not yet reached the bottom line.
CASH FLOW AND FINANCIAL POSITION
The net cash flow for the six months ended on 30 June 2010 does not show relevant variance in the Company’s strong and steady cash position. The negative net balance of US$ 1.8 million, slightly decreasing cash and cash equivalents to US$ 90.3 million as at 30 June 2010 from US$ 92.2 million as at 31 December 2009.
Cash flow from operating activities for Q2 2010 was of US$ 2.5 million (US$ 7.0 million in Q2 2009), while the figure for the first half of 2010 was of US$ 4.5 million (US$ 28.5 million in H1 2009). Over the first half of 2010 DIS, in a more stabilized, but not fully recovered market environment, confirmed its capacity to generate a positive free cash flow (following the operating cash burn in the second half of 2009).
Net debt as at 30 June 2010 amounted to US$ 182.7 million. The minor increase, compared with the balance of US$ 171.4 million at the end of the previous year, was mainly due to the vessels under construction instalment payments. The ratio of net debt to shareholder’s equity was of 0.53, in line with the ratio of 0.48 at 31 December 2009.