Ardmore Shipping Corporation announced results for the three months ended March 31, 2021, reports Ardmore Shipping.
Highlights and Recent Activity
Reported a net loss of $8.5 million for the three months ended March 31, 2021, or $0.26 loss per basic and diluted share, which includes unrealized gains on derivatives; losses adjusted for these gains (see Adjusted (loss) / earnings in the Non-GAAP Measures section) are $8.6 million, or $0.26 Adjusted loss per basic and diluted share.This compares to net income and adjusted earnings of $6.5 million, or $0.20 earnings per basic and diluted share for the three months ended March 31, 2020.
Reported EBITDA (see Non-GAAP Measures section) of $4.5 million for the three months ended March 31, 2021, as compared to $21.0 million for the three months ended March 31, 2020.
Eco-design MR tankers earned $11,540 per day overall for the three months ended March 31, 2021, while chemical tankers earned $11,944 per day for the period.
As part of its Energy Transition Plan, on March 15, 2021, Ardmore announced that it signed a letter of intent for: the establishment of e1 Marine, a joint venture to apply the technology of Element 1 Corp., a leading developer of advanced hydrogen generation systems used to power fuel cells, to the marine industry; an investment in Ardmore preferred stock by Maritime Partners of up to $40 million; and a strategic investment of 10% in Element 1 Corp. The transactions are expected to close in the second quarter of 2021.
On March 1, 2021, Ardmore announced a new partnership with shipping company Carl Büttner GmbH & Co. KG by taking on the commercial management of four of Carl Büttner’s chemical tankers which doubles the number of similar sized chemical tankers under Ardmore’s management.
The CEO comments
On January 14, 2021, Ardmore completed the previously announced sale of the Ardmore Seamariner, a 2006-built 45,726 Dwt Eco-mod MR tanker, which was sold for $10.0 million.
Anthony Gurnee, the Company’s Chief Executive Officer, commented:
“The product tanker market in the opening months of 2021 has moved up from trough levels seen late in the fourth quarter; the rate improvements are modest and only the first step toward a full recovery, but the increased market activity is significant and reflects a return of consumer spending and continued global economic growth. Oil demand remains below pre-pandemic levels, largely due to reduced air travel, and given that the timing of a full oil demand recovery is uncertain, we remain focused on risk management and financial strength.
Looking beyond the pandemic, we believe the prospects for the product and chemical tanker markets are very positive. While oil demand growth eventually will slow in the coming years, the transition away from fossil fuels will take time and, meanwhile, product tanker tonne-mile demand growth will be supported by new routes and more complex trading patterns.
The current product and chemical tanker supply outlook is bullish, with the orderbook near historical lows and the recent ordering boom by other sectors such as containers, gas and dry bulk taking up available newbuilding berths and driving up pricing. This means that tanker orders will likely be increasingly more expensive and delivering further into the future, thus further curtailing supply growth.
Even while looking forward to a full recovery from the pandemic, as an industry we continue to grapple with the operational and human impact of COVID-19, illustrated most recently and distressingly by the spike in cases in India. Our thoughts are with our Indian colleagues and their families, and our efforts both collectively as an industry and at the individual company level are focused on what we can do to offer assistance and support.”
Summary of Recent and First Quarter 2021 Events
Fleet
Fleet Operations and Employment
As at March 31, 2021, the Company had 26 vessels in operation, including 20 MR tankers ranging from 45,000 deadweight tonnes (Dwt) to 49,999 Dwt (15 Eco-Design and five Eco-Mod) and six Eco-Design IMO 2 product / chemical tankers ranging from 25,000 Dwt to 37,800 Dwt.
MR Tankers (45,000 Dwt – 49,999 Dwt)
At the end of the first quarter of 2021, the Company had 20 MR tankers trading in the spot market or on short-term time charters. The MR tankers earned an average TCE rate of $10,842 per day in the first quarter of 2021. In the first quarter of 2021, the Company’s 15 Eco-Design MR tankers earned an average TCE rate of $11,540 and the Company’s five Eco-Mod MR tankers earned an average TCE rate of $10,096 per day.
In the second quarter of 2021, the Company expects to have 27% of its revenue days for its MR Eco-Design tankers on time charter. The remaining 73% of days for its MR Eco-Design and all of its MR Eco-Mod tankers are expected to be employed in the spot market. As of May 5, 2021, the Company had fixed approximately 50% of its total MR revenue days for the second quarter of 2021 at an average TCE rate of approximately $11,000 per day.
Product / Chemical Tankers (IMO 2: 25,000 Dwt – 37,800 Dwt)
At the end of the first quarter of 2021, the Company had six Eco-Design IMO 2 product / chemical tankers in operation, all of which were trading in the spot market. During the first quarter of 2021, the Company’s six Eco-Design product / chemical vessels earned an average TCE rate of $11,944 per day.
In the second quarter of 2021, the Company expects to have all revenue days for its Eco-Design IMO 2 product / chemical tankers employed in the spot market. As of May 5, 2021, the Company had fixed approximately 80% of its Eco-Design IMO 2 product / chemical tankers spot revenue days for the second quarter of 2021 at an average TCE rate of approximately $11,250 per day.
Drydocking
The Company had 40 drydock days, including repositioning days, in the first quarter of 2021. The Company expects to have 42 drydock days in the second quarter of 2021.
Capital Allocation Policy
Consistent with the Company’s capital allocation policy, the Company is not declaring a dividend for the first quarter of 2021.
Establishment of e1 Marine Joint Venture, Issuance of Preferred Shares and Strategic Investment in Element 1
As part of the its Energy Transition Plan, on March 15, 2021, Ardmore announced that it signed a non-binding letter of intent for (a) the establishment of “e1 Marine,” a joint venture to apply the technology of Element 1 Corp., a leading developer of advanced hydrogen generation systems used to power fuel cells, to the marine industry, with Ardmore, Element 1 and Maritime Partners each owning 33.3% of the joint venture, (b) an investment in Ardmore preferred stock by Maritime Partners of up to $40 million and (c) a strategic investment of 10% in Element 1 Corp. The transactions are expected to close simultaneously in the second quarter of 2021 and are subject to negotiation and execution of definitive agreements and the satisfaction of related closing conditions.
Commercial Management Agreement
On March 1, 2021, the Company announced a new partnership with shipping company Carl Büttner GmbH & Co. KG by taking on the commercial management of four of Carl Büttner’s chemical tankers, which doubles the number of similar sized chemical tankers under Ardmore’s management, leveraging the Company’s global platform and experience in the chemical and vegetable oil trades.
Vessel Sale
In December 2020, the Company agreed to terms for the sale of the Ardmore Seamariner and repaid all amounts outstanding under the related term loan on January 7, 2021. The price for the subsequent sale of the vessel by Ardmore was $10.0 million, which was paid upon delivery of the vessel to the buyer on January 14, 2021.
Progress Report
The Company published its first annual Progress Report on February 15, 2021, presenting what has been accomplished over the past year on matters relating to environment, social progress and governance. The report also discusses the philosophy and rationale behind Ardmore’s efforts in these areas, and importantly, lays out Ardmore’s approach to support the global energy transition and the decarbonization of the shipping industry.
COVID-19
In response to the COVID-19 pandemic, many countries, ports and organizations, including those where Ardmore conducts a large part of its operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions. Such measures have caused severe trade disruptions. In addition, the pandemic has resulted and may continue to result in a significant decline in global demand for refined oil products.
As Ardmore’s business is the transportation of refined oil products on behalf of oil majors, oil traders and other customers, any significant decrease in demand for the cargo Ardmore transports could adversely affect demand for its vessels and services. The extent to which the pandemic may impact Ardmore’s results of operations and financial condition, including possible impairments, will depend on future developments, which are highly uncertain and cannot be predicted, including, among others, new information which may emerge concerning the severity of the virus and of its variants and the level of the effectiveness and delivery of vaccines and other actions to contain or treat its impact. Accordingly, an estimate of the impact on the Company cannot be made at this time.
Results for Three Months Ended March 31, 2021 and 2020
The Company reported a net loss of $8.5 million for the three months ended March 31, 2021, or $0.26 loss per basic and diluted share, as compared to net income of $6.5 million, or $0.20 earnings per basic and diluted share, for the three months ended March 31, 2020. The Company reported EBITDA (see Non-GAAP Measures section) of $4.5 million for the three months ended March 31, 2021 as compared to $21.0 million for the three months ended March 31, 2020.
The Company reported an Adjusted loss (see Non–GAAP Measures section) of $8.6 million for the three months ended March 31, 2021, or a $0.26 Adjusted loss per basic and diluted share, as compared to Adjusted earnings of $6.5 million, or $0.20 Adjusted earnings per basic and diluted share, for the three months ended March 31, 2020.
Management’s Discussion and Analysis of Financial Results for the Three Months Ended March 31, 2021 and 2020
Revenue
Revenue for the three months ended March 31, 2021 was $45.6 million, a decrease of $19.6 million from $65.2 million for the three months ended March 31, 2020.
The Company’s average number of operating vessels increased to 25.2 for the three months ended March 31, 2021, from 25.0 for the three months ended March 31, 2020.
The Company had four product tankers employed under time charters as at March 31, 2021 compared with none as at March 31, 2020. Revenue days derived from time charters were 169 for the three months ended March 31, 2021, as compared to none for the three months ended March 31, 2020. The increase in revenue days for time-chartered vessels resulted in an increase in revenue of $2.2 million.
The Company had 2,096 spot revenue days for the three months ended March 31, 2021, as compared to 2,180 for the three months ended March 31, 2020. The Company had 22 and 25 vessels employed directly in the spot market as at March 31, 2021 and 2020, respectively. The decrease in spot revenue days resulted in a decrease in revenue of $2.5 million, while changes in spot rates resulted in a decrease in revenue of $19.4 million for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.
Voyage Expenses
Voyage expenses were $20.4 million for the three months ended March 31, 2021, a decrease of $3.3 million from $23.7 million for the three months ended March 31, 2020. Voyage expenses decreased primarily due to the decrease in bunker prices and spot days for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020.
TCE Rate
The average TCE rate for the Company’s fleet was $11,349 per day for the three months ended March 31, 2021, a decrease of $8,041 per day from $19,390 per day for the three months ended March 31, 2020. The decrease in average TCE rate was the result of lower spot rates for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. TCE rates represent net revenues (or revenue less voyage expenses) divided by revenue days.
Vessel Operating Expenses
Vessel operating expenses were $14.5 million for the three months ended March 31, 2021, a decrease of $1.2 million from $15.7 million for the three months ended March 31, 2020. This decrease is due to the timing of vessel operating expenses between quarters. Vessel operating expenses, by their nature, are prone to fluctuations between periods. Average fleet operating expenses per day, including technical management fees, were $6,340 per vessel for the three months ended March 31, 2021, as compared to $6,484 per vessel for the three months ended March 31, 2020.
Charter Hire Costs
Charter hire costs were $1.2 million for the three months ended March 31, 2021. There were no charter hire costs incurred in the three months ended March 31, 2020. Ardmore chartered-in one vessel in September 2020.
Depreciation
Depreciation expense for the three months ended March 31, 2021 was $7.8 million, consistent with $7.9 million for the three months ended March 31, 2020.
Amortization of Deferred Drydock Expenditures
Amortization of deferred drydock expenditures for the three months ended March 31, 2021 was $1.5 million, an increase of $0.2 million from $1.3 million for the three months ended March 31, 2020. The increase is primarily due to an increased number of drydockings as the Company’s fleet ages. The deferred costs of drydockings for a given vessel are amortized on a straight-line basis to the next scheduled drydocking of the vessel.
General and Administrative Expenses
Corporate
Corporate-related general and administrative expenses for the three months ended March 31, 2021 were $4.2 million, consistent with $4.0 million for the three months ended March 31, 2020.
General and Administrative Expenses
Commercial and Chartering
Commercial and chartering expenses are the expenses attributable to Ardmore’s chartering and commercial operations departments in connection with its spot trading activities. Commercial and chartering expenses for the three months ended March 31, 2021 were $0.8 million, consistent with $0.9 million for the three months ended March 31, 2020.
Unrealized Gains on Derivatives
Unrealized gains on derivatives for the three months ended March 31, 2021 was $0.1 million compared to no unrealized gains for the three months ended March 31, 2020. The gain for the three months ended March 31, 2021 relates to derivatives entered into in May 2020 that are not designated as hedging instruments.
Interest Expense and Finance Costs
Interest expense and finance costs include loan interest, finance lease interest, and amortization of deferred finance fees. Interest expense and finance costs for the three months ended March 31, 2021 were $3.8 million, a decrease of $1.6 million from $5.4 million for the three months ended March 31, 2020.
Cash interest expense decreased by $1.7 million to $3.3 million for the three months ended March 31, 2021, from $5.0 million for the three months ended March 31, 2020, primarily due to a decreased average LIBOR during the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, as well as the Company entering into three-year floating-to-fixed interest rate swap agreements during the second quarter of 2020 with an average fixed interest rate of 0.32%.
Amortization of deferred finance fees for the three months ended March 31, 2021 was $0.4 million, consistent with $0.4 million for the three months ended December 31, 2020.
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Source: Ardmore Shipping
