With an average contract duration of over 10 years, Greek containership owner, Danaos Corporation (NYSE: DAC) is largely protected from the fluctuations found within the spot containership market. Cautious optimism seemed to be the message within their Q2 financial report released yesterday.
“The container market experienced a stagnation during this quarter and now, although demand for larger vessels in excess of 6,000 TEU remains reasonable, we have a standstill on smaller tonnage.” commented CEO Dr. John Coustas. “During the second quarter of 2012, we completed our extensive new-building program that has established Danaos as one of the largest and most reliable containership operating lessors in the world with a 64 vessel fleet and a 363,049 TEU carrying capacity.
Since going public in 2006, we have more than tripled our TEU carrying capacity, which has been growing at a 21% compounded annual growth rate. Today, Danaos has one of the most modern fleets in the industry that includes some of the largest containerships in the world. Now, we will concentrate on the successful deployment of our fleet and the rapid deleveraging of the company.”
Having new ships is important, however, tripling TEU carrying capacity is a significant issue facing the global containership market. With high capacity compounded with high bunker prices, the situation is financially “unsustainable“, remarked Danish shipper Maersk Line yesterday.
Danaos hopes for positive results as the 2nd half of 2012 continues.
The good news is that capacity management in the liner sector resulted in a stability of box rates and this fact in combination with the significant reduction in fuel oil costs will drive liner companies solidly in the black for the 2nd and 3rd quarters. We need to see a resumption of growth in Europe to have the Europe Far East trade pick up again. We hope this growth can resume in 2013 as during that year we have the deliveries of the 2011 ordering mini boom. Fortunately, the medium term picture remains positive as virtually no new ordering has taken place.
Financial Performance, Q2 2012
Revenues in the second quarter of 2012 and the six months of 2012 were $147 million and $281 million, respectively, with an adjusted EBITDA $107 million and $203 million and adjusted net income $0.15 and $0.30, respectively. The average vessel daily operating cost in 2Q 2012 compared to 2Q 2011 fell to $5,995, from $6,166, due to ship-management efficiency increases.
We will continue our efforts to charter profitably the vessels coming off charter, however, we are fortunate as we are largely insulated from spot market variations.
Danaos had an average of 62.2 containerships compared to 54.4 containerships for the same period in 2011. During the second quarter of 2012, Danaos took delivery of three vessels, the Hyundai Smart, Hyundai Speed, and the Hyundai Ambition. Fleet utilization declined to 94.5% in the three months ended June 30, 2012 compared to 97.4% in the same period of 2011, mainly due to the 260 days for which three of their vessels were off-charter and laid-up in the second quarter of 2012.
During the three months ended June 30, 2012, fleet utilization for the fleet under employment was 99.1% (excluding the vessels on lay up).
Additional financial details can be found HERE.