Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Danaos Corp (DAC, Financial) secured charter extensions for several existing ships, enhancing revenue visibility.
- The company extended its newbuilding program to a total of 20 vessels, with three delivered in the second quarter.
- Total contracted cash operating revenues reached $3.2 billion, with high charter coverage of 99% for 2024 and 80% for 2025.
- Revenues from the dry bulk sector have been steadily increasing, contributing to revenue diversification.
- Danaos Corp (DAC) maintains a strong balance sheet with low net debt and significant liquidity, providing financial flexibility.
Negative Points
- Adjusted EPS for Q2 2024 decreased to $6.78 per share from $7.14 per share in Q2 2023.
- Total operating expenses increased by $19.9 million, primarily due to voyage costs related to the Capesize fleet.
- Vessel operating expenses rose by $5.2 million due to an increase in the average number of vessels in the fleet.
- G&A expenses increased by $4.1 million, mainly due to higher stock-based noncash costs.
- Interest expense increased by $1.2 million due to higher average indebtedness and increased cost of debt service.
Q & A Highlights
Q: You have expanded the backlog nicely since the last update. How did the extension of the 78,250 TEU newbuildings from three-year charters to five years come about? Was it an option at the charter exercise or a renegotiation? And was there any change in day rates?
A: The charter had an option to be declared between three and five years, and they chose the five-year option at a slightly lower charter rate. The other ships were fixed to three to five years from the beginning. - John Coustas, CEO
Q: You added a fifth 9,200 TEU newbuilding, now having 20 newbuildings with three delivered in the second quarter. What is your appetite for more orders in this market setup?
A: We are currently looking at deliveries for 2028 and beyond. We will pause for now to see how the world situation evolves. We are well-covered and practically without debt, so we will keep an eye out for future opportunities. - John Coustas, CEO
Q: Given your low leverage and ample cash, what kind of financing are you expecting to put on the newbuildings?
A: We already have financing for the first eight ships out of the 20, totaling $450 million, which is close to 60% loan-to-value (LTV). We anticipate similar financing for the remaining 12 ships, bringing the total to around $1.2 billion. - Evangelos Chatzis, CFO
Q: Can you provide more details on the financial performance for the quarter?
A: We reported adjusted EPS of $6.78 per share and adjusted net income of $132.3 million for Q2 2024, compared to $7.14 per share and $143.4 million for Q2 2023. The decrease is mainly due to a $19.9 million increase in total operating expenses. - Evangelos Chatzis, CFO
Q: How are you managing the increased operating expenses and what impact does it have on your financials?
A: Vessel operating expenses increased by $5.2 million due to the rise in the average number of vessels in our fleet. However, our daily operating costs remained stable. G&A expenses increased by $4.1 million mainly due to stock-based noncash costs. - Evangelos Chatzis, CFO
Q: What is the current status of your contracted revenue backlog and fleet coverage?
A: Our contracted revenue backlog is very strong at $3.2 billion with a 3.4-year average charter duration. Contract coverage is at 99% for 2024 and 80% for 2025. - Evangelos Chatzis, CFO
Q: Can you elaborate on your activities in the dry bulk sector?
A: We have taken delivery of all 10 capesize vessels and are integrating them within our fleet. Revenues from the dry bulk sector have been steadily increasing, and we look forward to further diversifying our revenues through spot market exposure. - John Coustas, CEO
Q: How is your balance sheet positioned given the recent fleet growth and diversification activities?
A: Despite recent fleet growth, our balance sheet remains very strong with a low net debt position. As of June 30, 2024, our net debt stood at $205 million, and total liquidity, including availability under our revolving credit facility and marketable securities, was $787 million. - Evangelos Chatzis, CFO
Q: What are your future plans for capital deployment?
A: We have ample flexibility to pursue accretive capital deployment opportunities, and we will continue to work tirelessly to ensure accretive performance of our assets and deliver industry-leading returns to our shareholders over the long term. - John Coustas, CEO
Q: What are your thoughts on the current market conditions and future outlook?
A: Market conditions have led liner companies to reassess their capacity requirements and secure tonnage, including newbuildings. We are well-positioned with multiyear charters and a strong contracted revenue backlog, providing excellent revenue visibility for the future. - John Coustas, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
