Danaos Reports 2012 Financials, German Containership Owner Shoots Par

Danaos Corporation, a Athens-based containership owner announced their 2012 year end financial results today.

It was a challenging year for the global container ship market as supply outpaced demand by almost 3 percent, however through effective cost-cutting measures, Danaos maintained profits at almost exactly the same levels seen in 2011.

Danaos’ CEO Dr. John Coustas commented however, that similar supply/demand metrics will likely continue over the next 12 months.

“Mainlane trade volumes in 2012 expanded by a mere 1% on average, while the Asia – Europe trade contracted by almost 3.5%, mainly due to the ongoing weakness in European consumer demand. At the same time, this is the route that has faced the biggest inflow of new tonnage with deliveries of the large post 10,000 TEU containerships.

We expect this trend will continue in 2013 as vessels ordered during the early 2011 “mini-boom” are being delivered.”

Non-mainlane trade volumes “save the day” however.

Volumes on non-mainlane trades expanded by around 6.5% primarily due to strong intra-Asia and North-South trade growth. Coustas notes that this growth had a negative affect on the charter market as liner operators have increased the utilization of their own tonnage and are generally less inclined to renew expiring charters.

“It has to be noted that almost 85% of idle capacity, which currently stands at around 5% of the world fleet is now charter-owned tonnage. This of course also reflects on us, as we currently have 7 vessels on cold lay-up.”

Danaos also notes that they sold they sold the Independence, a 26 year old, 2571-TEU containership to an undisclosed buyer for a total consideration of USD $7 million in January 2013.  This vessel has been on cold lay-up since November 13, 2011.  “We are currently investigating to make selective acquisitions within 2013 to renew part of our older fleet,” added Coustas.

The supply/demand imbalance which has depressed freight rates across the board, Coustas notes, has been managed effectively by a number of cost-reduction initiatives as well as other measures such as service rationalization, idling of tonnage, scrapping and extra slow steaming.

With 97 percent of Danaos’ fleet currently on long term charter and only 3 percent up for re-charter over the next year, Costas comments, “we are largely insulated from the effects of the weak charter market while expect our EBITDA and free cash flow generation to be safeguarded.”

Through effective cost-cutting measures, Danaos also reports their daily vessel operating expenses came down by 5.4% year-on-year to $5,907 per day for 2012 from $6,246 per day in 2011.

Financials

“Adjusted Net Income for 2012 came in at $60.5 million or 55 cents per share, compared to $61.2 million or 56 cents per share for 2011, effectively remaining stable, while Adjusted EBITDA increased by 35.5% to $431.7 million for 2012 compared to $318.6 million in 2011 as a result of our fleet expansion program that was concluded this year.”

Danaos reports they will have a charter coverage of 81% for the next 12 months in terms of contracted operating days and 97% in terms of operating revenues.

Fleet Additions/Deletions in 2012:

• Two 3,400 TEU containerships (the Hanjin Algeciras and the Hanjin Constantza)
• Three 10,100 TEU containerships (the Hanjin Germany, the Hanjin Italy and the Hanjin Greece
• Four 8,530 TEU containerships (the CMA CGM Attila, the CMA CGM Tancredi, the CMA CGM Bianca and the CMA CGM Samson)
• Sale of one 2,130 TEU containership, the Montreal