Q4 2024 Danaos Corp Earnings Call
Speaker Change: Chats 2 Chats 3 Chats 4 Chats 5 Chats 6 Chats 7 Chats 8 Chats 9 Chats 10 Chats 11 Chats 12 Chats 13 Chats 14 Chats 15 Chats 16
Speaker Change: Good day and welcome to the Denounce Corporation conference call to discuss financial results for the three months ended December 31st, 2024. As a reminder today's call is being recorded. Hosting the call today is Dr. John Coustas
Evangelos Chatzis: Chief Executive Officer at Denaos Corporation and Mr. Evangelos Chatzis Chief Financial Officer at Denaos Corporation
Speaker Change: Dr. Coustas and Mr. Chatzis will be making some introductory comments and then we will open the call to a question and answer session. Gentlemen, the floor is yours.
Speaker Change: Thank you, Operator. Good morning to everyone, and thank you for joining us this morning.
Speaker Change: Before we begin, I quickly want to remind everyone that managers' remarks this morning may contain certain forward-looking statements and that actual results could differ materially from those projected today.
Speaker Change: These forward looking statements are made as of today and we undertake no obligation to update them.
Speaker Change: Factors that might affect future results are discussed in our filing with the SEC and we encourage you to review these detailed safe harbor and risk factor disclosures.
Speaker Change: Please also note that where we feel appropriate, we will continue to refer to non-GAP.
Speaker Change: financial measures such as EBITDA, Adjusted EBITDA, Adjusted Net Income, Time Chartered Equivalent Revenues and Time Chartered Equivalent Dollars per Day to evaluate our business.
Speaker Change: Reconciliations of non-GAAP financial measures to GAAP financial measures are included in our earnings release and the accompanying materials.
Speaker Change: With that, let me now turn the call over to Dr. John Coustas, who will provide the broad overview of the quarter. John?
John Coustas: Thank you, Evangelos. Good morning and thank you all for joining today's call to discuss our results for the fourth quarter of 2024.
John Coustas: The world is entering uncharted territory and any near-term predictions about the direction of shipping markets are inherently unreliable.
The Tariq War is bound to generate disruptions.
John Coustas: which have historically benefited shipping. However, an economic slowdown might negate these benefits.
John Coustas: The dry bulk market continues to suffer from ongoing malaise due to the pace of the recovery of the Chinese economy, which has not shown signs of accelerating.
John Coustas: The delivery of new tonnage starting this year will add to this weakness, particularly in the Panamax and smaller segments where the order book is concentrated.
John Coustas: The Cape side segment where our fleet is concentrated continues to have an order book that remains at historically low levels.
John Coustas: Albight liners are exhibiting more caution, particularly with respect to forward dates.
John Coustas: While Vox rates are weakening, they are still much higher than pre-pandemic levels.
John Coustas: The analysis is highly insulated from near-term market uncertainty, with 97% capital risk for 2025 and 79% for 2026 at healthy rates, shielding out from market volatility.
John Coustas: Our charted backlog of $3.4 billion provides us with a certainty of income and firepower to explore accretive investments.
John Coustas: We've chartered 13 out of our 15 new buildings for 5 years and have arranged a new 850 million facility from a bank syndicate to fully cover the financing of all vessels on order.
John Coustas: Our profitability remains consistent, and we're using our strong balance sheet to increase dividends, continue the share buyback, and source opportunities to grow our company for the benefit of our shareholders.
John Coustas: Our strategic focus remains on maintaining a robust financial position, securing long-term contracts for vessels coming off charter, and investing in modern fuel-efficient container vessels to enhance our competitive position in the market.
John Coustas: We are committed to delivering value to our shareholders through prudent financial management and strategic growth initiatives.
Evangelos Chatzis: With that, I'll hand the call back to Evangelos, who will take you through the site management for the quarter. Evangelos?
Evangelos Chatzis: Thank you, John, and good morning again to everyone. I will briefly review the results for the quarter and then open the call to Q&A.
Evangelos Chatzis: We are reporting adjusted EPS for the fourth quarter of 2024 of $6.93 per share, or adjusted at income of $133.3 million.
Evangelos Chatzis: compared to adjusted EPS of $6.99 per share or adjusted at the income of $136 million for the fourth quarter of 2023.
Evangelos Chatzis: mainly due to the recognition during the current quarter of voyage costs related to voyage charters of our dry-bulk cape-sized fleet.
and a 4.9 million increase in net finance costs.
Evangelos Chatzis: partially upset by an $8.9 million increase in net operating revenues, a $2.2 million net improvement on income from investments and dividends from such investments, and $2.1 million collected in relation to our Hanjin bankruptcy claim.
Vessel operating expenses increased by $5.5 million.
Evangelos Chatzis: to $45.6 million in the current quarter, from $40.1 million in the fourth quarter of 2023.
Evangelos Chatzis: as a result of the increase in the average number of vessels in our fleet.
Evangelos Chatzis: to $6,135 per vessel per day for the current quarter compared to $6,188 per vessel per day for the fourth quarter of 2023.
Evangelos Chatzis: Our operating costs continue to remain among the most competitive in the industry.
Evangelos Chatzis: G&A expenses decreased by $0.7 million to $21.7 million in the current quarter compared to $22.4 million in the fourth quarter of 2023, mainly due to a decrease in stock-based non-cash costs.
Evangelos Chatzis: interest expense, excluding amortization of finance costs, increased by $6 million to $9.1 million in the current quarter, compared to $3.1 million in the fourth quarter of 2023.
Evangelos Chatzis: The increase, this increase in interest expense is a combined result of a 5.3 million increase due to higher average indebtedness.
Evangelos Chatzis: that was partially offset by a reduction in the cost of debt service by approximately 78 basis points as a result of a decrease in software.
Evangelos Chatzis: costs between the two periods, while we also had the $0.7 million increase in interest expense due to lower capitalized interest on vessels under construction between the two periods. At the same time, interest income came in at $3.9 million.
Adjusted E-Data increased by 9.9%
Evangelos Chatzis: or by $17.1 million to $189.7 million in the current quarter compared to $172.6 million in the fourth quarter of 2023 for the reasons that have been already outlined earlier on this call.
Evangelos Chatzis: We also encourage you to review our updated investor presentation that is posted on our website, as well as subsequent event disclosures. Allow me to give you a few highlights. Since the date of our last earnings release,
Evangelos Chatzis: with a 3.7-year average charted duration, while contract coverage is at 97% for 2025 and 79% for 2026.
Evangelos Chatzis: Our investor presentation has analytical disclosure on our contracted charter book.
Evangelos Chatzis: On 7th of February 2025, we entered into a $950 million syndicated loan facility agreement to finance all of our remaining new building container vessels, including the two additional recent orders.
all of which have deliveries between 2026 and 2028.
Evangelos Chatzis: As of December 31st, 2024, our net debt stood at $291 million. In the current interest rate environment, this position changes from higher interest costs.
Evangelos Chatzis: Additionally, the company's net debt-to-adjusted EBITDA ratio stood at 0.4 times.
while 53 out of our 84 vessels are currently unencumbered.
and that's free.
Evangelos Chatzis: We continue to repurchase stock, and since the date of the last earnings release, we have repurchased an additional $45.6 million.
Evangelos Chatzis: To date, we have executed on total share repurchases of $168.8 million out of the $200 million authority that has been provided by our board.
Finally, as of the end of the fourth quarter,
Evangelos Chatzis: at $807 million, giving us ample flexibility to pursue accretive capital deployment opportunities. With that, I would like to thank you all for listening to this first part of our call. Operator, we are now ready to open the call to Q&A.
Evangelos Chatzis: Thank you. We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. And at this time, we'll pause momentarily to assemble our roster.
Speaker Change: And the first question will come from Omar Nocta with Jeff Rees. Please go ahead.
Thank you. Hi John and Evangelos. Hi Omar.
Omar Nocta: Hi, hi, just another strong quarter with some real free cash flow generation and as you note in the presentation You know, you generated $30 a share in free cash flow in 24 looks at that
Omar Nocta: can pretty much be repeated in 2025. I guess a couple things. It looks like you're back to being on pace to getting into that net cash position again sometime during 2025. I guess, do you agree?
Speaker Change: Do you agree with that, that you're on pace to get to the net cash position yet again? And then also, do you want to be in a net cash position or do you prefer to keep more leverage in place?
Speaker Change: As you saw, we have arranged a $150 million facility which covers all the financing of our new building program at 60%.
Speaker Change: Of course, we are generating and we are keeping substantial amounts of cash for opportunities.
at present with all our new building program.
We don't even, you know, going forward manage...
to go to a negative net cash position.
**snoring**
Speaker Change: So, we're still, let's say, in surplus and this is also one of the reasons that we've continued and expanded our new building program.
Speaker Change: with ships that we believe are going to be required in the market.
Speaker Change: The next question will come from Clement Mullins with Value Investors Edge. Please go ahead.
Hi, good afternoon. Thank you for taking my questions.
Speaker Change: I wanted to start by asking about the utilization of dry bauxite.
Speaker Change: This was mostly attributable to scheduled off-guard days, and I was wondering could you talk a bit about what that includes and how many dry dockings were conducted during the quarter? And secondly, how many dry dockings do you have planned on that side of the fleet throughout 2025?
Speaker Change: Are you talking about just the dry bulk fleet or are you talking about the whole fleet?
about dry bulk feed.
Apart from one, all the rest...
Speaker Change: have completed their dry docking in the last six months where we've installed appendages and paints.
which are extremely efficient.
Speaker Change: So, we even, we've managed, for example, vessels that were lightship E-rated, we move them up to a C-plus rating.
Speaker Change: So, we've done a lot of investment on these ships and we believe that when the dry bulk market picks up, we're going to enjoy that. We will not have dry dockings of the dry bulk fleet over the next at least two to three years.
That's helpful. Thank you.
Speaker Change: Railroad rates have been quite soft recently, and asset values have declined a tad from the highs. Is there any appetite to potentially add additional vessels going forward?
Speaker Change: And if so, would you still focus on capesizers, or would you be willing to add cancer maxes or ultramaxes as well?
Speaker Change: No, we are concentrating on cage sizes. Yes, if prices are attractive.
Speaker Change: We've already said we're going to increase our presence in the sector.
Speaker Change: Thanks for the cover. I'll turn it over. Thank you for taking my questions and congratulations for the quarter.
Thank you.
Speaker Change: The next question is a follow-up from Omar Nocta with Jeffreys. Please go ahead.
Omar Nocta: Thank you. Sorry. Thanks for letting me back on. Just a couple of quick ones, or maybe not so much this first one, but, you know, you mentioned, John, in your presentation or in the press release and in your opening comments,
Omar Nocta: You know, you ordered the two new ships after a bit of a pause, just wanted to ask, you know, what gave you confidence to kind of jump back in to the new building side of things?
Well, first of all, we believe that...
Omar Nocta: You know, the sector needs modern efficiencies, especially in this size bracket.
And secondly, you know, we have...
arranged financing charter for everything else so
Omar Nocta: And there is very little, let's say, risk, if any, you know, by...
our investment.
Speaker Change: Okay, and then just separately, obviously you stepped up the share of purchases pretty meaningfully here the past few months. I just wanted to ask, are you able to give us a snapshot of what the share account looks like today?
Evangelos is...
in Antioch.
Speaker Change: Can you repeat, Omar, are you referring to the share count?
Yeah, just a share account post the latest repurchases.
It's just a tad below 19 million shares.
Something like 18.8, 18.9 at this point, yeah.
Got it. Okay. Well, thank you. Thanks, John. Thanks, Evangelos.
Thank you.
Speaker Change: It appears we have no further questions at this time. I would like to turn the call back over to Dr. Coustas for any closing remarks. Please go ahead, sir.
John Coustas: Yes, thank you for your continued interest in our story. We will continue to implement our program to the benefit of our shareholders. Thank you.