The Athens-based shipowner attributed a sharp decline in earnings primarily to the impact of ocean carrier Hanjin Shipping’s bankruptcy, which resulted in $22 million in lost operating revenue, as well as a weaker charter market for containerships.
The Athens-based containership charterer Danaos Corp. reported a profit of $18.4 million in the first three months of 2017, a sharp decline from $44.1 million in the same 2016 period, according to the company’s most recent financial statements.
Revenues stood at $110.1 million in the first quarter compared with $137.5 million in the same 2016 period.
“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,” John Coustas, chief executive officer of Danaos, said in a statement.
The company reported adjusted net income of $24.5 million in the first quarter of 2017 compared with adjusted net income of $47.2 million in the same 2016 period.
The decrease “was primarily attributable to $22 million of operating revenues lost from Hanjin,” said Coustas. “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 percent compared to 94.6 percent in the first quarter of 2016. Including those vessels, our fleet utilization was 92.7 percent.
“A further decline in revenues of $5.4 million as a result of weaker charter market conditions was partially offset by a $2.2 million decrease in total operating expenses, a $1.6 million decrease in net finance costs mainly due to interest rate swap expirations, and a $0.9 million improvement in the operating performance of our equity investment in Gemini Shipholdings Corporation,” he added.
“As previously reported, the company is in breach of certain financial covenants as a result of the Hanjin bankruptcy,” said Coustas. “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.”
On a brighter note, Coustas said containership charter rates have 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,” he said. “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 percent for the next 12 months based on current operating revenues and 73 percent in terms of contracted operating days,” said Coustas. “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.”
Danaos currently owns a fleet of 55 ships and Gemini Shipholding Corp., in which Danaos holds a 49 percent interest, has four ships.
Danaos reports lower Q1 profits, revenues
