Ardmore Shipping Corporation Announces Financial Results For The Three Months Ended March 31, 2020

HAMILTON, Bermuda, May 5, 2020 /PRNewswire/ -- Ardmore Shipping Corporation (NYSE: ASC) ("Ardmore", the "Company" or "we") today announced results for the three months ended March 31, 2020.

Highlights and Recent Activity

• Reported net income of $6.5 million for the three months ended March 31, 2020, or $0.20 earnings per basic and diluted share, as compared to a net loss of $9.2 million, or $0.28 loss per basic and diluted share, for the three months ended March 31, 2019. Net loss for the three months ended March 31, 2019 includes the loss on sale of the Ardmore Seamaster of $6.6 million. The Company reported EBITDA (see Non-GAAP Measures section) of $21.0 million for the three months ended March 31, 2020, as compared to $7.0 million for the three months ended March 31, 2019.

• Reported Adjusted earnings (see Non–GAAP Measures section) of $6.5 million for the three months ended March 31, 2020, or $0.20 Adjusted earnings per basic and diluted share, as compared to Adjusted loss of $2.6 million, or $0.08 Adjusted loss per basic and diluted share, for the three months ended March 31, 2019. The Company reported Adjusted EBITDA (see Non-GAAP Measures section) of $21.0 million for the three months ended March 31, 2020, as compared to $13.5 million for the three months ended March 31, 2019. 

• MR tankers earned an average TCE rate of $19,307 per day and chemical tankers earned an average TCE rate of $19,707 per day for the three months ended March 31, 2020.

• Announced a new capital allocation policy on March 9, 2020, which sets out the Company's priorities among fleet maintenance, financial strength, accretive growth and returning capital to shareholders. Consistent with this policy, the Company is not declaring a dividend for the first quarter of 2020.

• On March 11, 2020, the World Health Organization declared the outbreak of a coronavirus (COVID-19) a pandemic. As COVID-19 continues to spread globally, the Company's business, financial condition and results of operations could be adversely affected. The extent of the impact of the COVID-19 pandemic on the Company will depend, among other things, the duration and spread of the outbreak, all of which are highly uncertain and cannot be predicted.

Anthony Gurnee, the Company's Chief Executive Officer, commented:

"That the tanker market is achieving record-high charter rates is no source of satisfaction given the cause: the coronavirus pandemic, with its human toll and economic impact.  Our principal concern is for the well-being of our staff ashore and afloat; in particular we want to thank all seafarers regardless of company or sector for their dedication and professionalism during these difficult times.

Much attention has been on the crude tanker market, in particular on the impact of higher cargo volumes, floating storage, and the resulting extraordinarily high rates achieved.  More recently those conditions have arrived for the product tanker market and we believe they may be more persistent, potentially for many months, as the physical oil market continues its extreme gyrations around demand and supply. 

In particular, if and when the oil market reaches max capacity for shore oil storage, we may enter a new and potentially more volatile phase of the tanker market, and if and when oil demand rebounds with an economic recovery sometime in the third quarter as the IEA are forecasting, we would expect more demand-driven volatility, potentially carrying into the winter.

To fully explain the impact of these events, we have to describe our recent chartering activity: last week we fixed a 55-day voyage at $72,000 per day, equivalent to a VLCC at $200,000+ per day. Our MR voyages in progress, representing roughly the last three weeks' fixtures, now stands at $28,200 per day; lower than brokerage reports or the above fixture, but higher than anything we achieved before. If rates for our fleet averaged $28,200 per day for a full year, taking 1Q20 as a base, we estimate that our annual earnings would be $110 million or $3.30 per share; we are not forecasting any future results, but rather just contextualizing what is happening.

The fact the tanker market is soaring at a time when virtually every other industry is suffering is not illogical: shipping rates typically strengthen with volatility and disruption.  We are saddened by the widespread suffering from the pandemic, but it should be understood that as an industry we respond to demand shifts through a market mechanism whose function is to optimally allocate transport (and storage) resources, often in surplus, sometimes in scarcity."

Summary of Recent and First Quarter 2020 Events

Fleet

Fleet Operations and Employment

As at March 31, 2020, the Company had 25 vessels in operation, including 19 Eco MR tankers ranging from 45,000 deadweight tonnes (Dwt) to 49,999 Dwt (15 Eco-Design and four Eco-Mod) and six Eco-Design IMO 2 product / chemical tankers ranging from 25,000 Dwt to 37,800 Dwt.

MR Tankers (45,000 Dwt – 49,999 Dwt)

At the end of the first quarter of 2020, the Company had 19 Eco MR tankers trading in the spot market. The Eco MR tankers earned an average TCE rate of $19,307 per day in the first quarter of 2020. The Company's 15 Eco-Design MR tankers earned an average TCE rate of $19,564 per day in the first quarter of 2020, and the Company's four Eco-Mod MR tankers earned an average TCE rate of $18,341 per day.

In the second quarter of 2020, the Company expects to have all revenue days for its MR Eco-Design and MR Eco-Mod tankers employed in the spot market or on short-term time charter. As of May 5, 2020, the Company had fixed approximately 55% of its total MR revenue days for the second quarter of 2020 at an average TCE rate of approximately $24,000 per day.

Product / Chemical Tankers (IMO 2: 25,000 Dwt – 37,800 Dwt)

At the end of the first quarter of 2020, the Company had six Eco-Design IMO 2 product / chemical tankers in operation, all of which were trading in the spot market. During the first quarter of 2020, the Company's six Eco-Design product / chemical vessels earned an average TCE rate of $19,707 per day.

In the second quarter of 2020, the Company expects to have all revenue days for its Eco-Design IMO 2 product / chemical tankers employed in the spot market. As of May 5, 2020, the Company had fixed approximately 45% of its Eco-Design IMO 2 product / chemical tankers spot revenue days for the second quarter of 2020 at an average TCE rate of approximately $16,000 per day.

Drydocking

The Company had 91 drydock days, including repositioning days, in the first quarter of 2020, in respect of three drydockings. The Company does not expect to have any drydock days in the second quarter of 2020.

Capital Allocation Policy

The Company announced a new capital allocation policy on March 9, 2020, which sets out the Company's priorities among fleet maintenance, financial strength, accretive growth and returning capital to shareholders. Consistent with this policy, the Company is not declaring a dividend for the first quarter of 2020.

Financing

The Company drew down an additional $10.9 million from its revolving credit facilities in the first quarter, in order to maintain a strong liquidity position and financial flexibility.

Results for the Three Months Ended March 31, 2020 and 2019

The Company reported net income of $6.5 million for the three months ended March 31, 2020, or $0.20 earnings per basic and diluted share, as compared to a net loss of $9.2 million, or $0.28 loss per basic and diluted share, for the three months ended March 31, 2019. Net loss for the three months ended March 31, 2019 includes the loss on sale of the Ardmore Seamaster of $6.6 million. The Company reported EBITDA (see Non-GAAP Measures section) of $21.0 million for the three months ended March 31, 2020, as compared to $7.0 million for the three months ended March 31, 2019.

The Company reported Adjusted earnings (see Non–GAAP Measures section) of $6.5 million for the three months ended March 31, 2020, or $0.20 Adjusted earnings per basic and diluted share, as compared to an Adjusted loss of $2.6 million, or $0.08 Adjusted loss per basic and diluted share, for the three months ended March 31, 2019. The Company reported Adjusted EBITDA (see Non-GAAP Measures section) of $21.0 million for the three months ended March 31, 2020, as compared to $13.5 million for the three months ended March 31, 2019. 

Management's Discussion and Analysis of Financial Results for the Three Months Ended March 31, 2020 and 2019

Revenue. Revenue for the three months ended March 31, 2020 was $65.2 million, an increase of $2.9 million from $62.3 million for the three months ended March 31, 2019.

The Company's average number of owned vessels decreased to 25.0 for the three months ended March 31, 2020, from 26.7 for the three months ended March 31, 2019, resulting in revenue days of 2,180 for the three months ended March 31, 2020, as compared to 2,260 for the three months ended March 31, 2019. The Company had 25 and 26 vessels employed directly in the spot market as at March 31, 2020 and 2019, respectively. The decrease in revenue days resulted in a decrease in revenue of $2.2 million, while changes in spot rates resulted in an increase in revenue of $5.1 million for the three months ended March 31, 2020.

Voyage Expenses. Voyage expenses were $23.7 million for the three months ended March 31, 2020, a decrease of $3.6 million from $27.3 million for the three months ended March 31, 2019. Voyage expenses decreased primarily due to the decrease in the average number of owned vessels to 25.0 for the three months ended March 31, 2020, compared to 26.7 for the three months ended March 31, 2019.

TCE Rate. The average TCE rate for the Company's fleet was $19,390 per day for the three months ended March 31, 2020, an increase of $4,385 per day from $15,005 per day for the three months ended March 31, 2019. The increase in average TCE rate was the result of higher spot rates and lower voyage expenses for the three months ended March 31, 2020. TCE rates represent net revenues (or revenue less voyage expenses) divided by revenue days.

Vessel Operating Expenses. Vessel operating expenses were $15.7 million for the three months ended March 31, 2020, a decrease of $1.1 million from $16.8 million for the three months ended March 31, 2019. This decrease is due to a decrease in the average number of vessels in operation for the three months ended March 31, 2020, and the timing of vessel operating expenses between quarters. Vessel operating expenses, by their nature, are prone to fluctuations between periods. Average fleet operating expenses per day, including technical management fees, were $6,484 per vessel for the three months ended March 31, 2020, as compared to $6,941 per vessel for the three months ended March 31, 2019.

Depreciation. Depreciation expense for the three months ended March 31, 2020 was $7.9 million, a decrease of $0.3 million from $8.2 million for the three months ended March 31, 2019. This decrease is primarily due to a decrease in the average number of owned vessels for the three months ended March 31, 2020.

Amortization of Deferred Drydock Expenditures. Amortization of deferred drydock expenditures for the three months ended March 31, 2020 was $1.3 million, an increase of $0.2 million from $1.1 million for the three months ended March 31, 2019. The increase is primarily due to an increased number of drydockings as the Company's fleet ages. The deferred costs of drydockings for a given vessel are amortized on a straight-line basis to the next scheduled drydocking of the vessel.

General and Administrative Expenses: Corporate. Corporate-related general and administrative expenses for the three months ended March 31, 2020 were $4.0 million, an increase of $0.4 million from $3.6 million for the three months ended March 31, 2019. The increase is primarily due to the issuance of stock appreciation rights and restricted stock units in the first quarter of 2020.

General and Administrative Expenses: Commercial and Chartering. Commercial and chartering expenses are the expenses attributable to the Company's chartering and commercial operations departments in connection with the Company's spot trading activities. Commercial and chartering expenses for the three months ended March 31, 2020 were $0.9 million, a decrease of $0.2 million from $1.1 million for the three months ended March 31, 2019. This decrease is as a result of lower headcount and less travel in the first quarter of 2020.

Loss on Sale of Vessel. There was no loss on sale of vessel for the three months ended March 31, 2020, compared to $6.6 million for the three months ended March 31, 2019 in relation to the sale of the Ardmore Seamaster.

Interest Expense and Finance Costs. Interest expense and finance costs include loan interest, finance lease interest, and amortization of deferred finance fees. Interest expense and finance costs for the three months ended March 31, 2020 were $5.4 million, a decrease of $1.6 million from $7.0 million for the three months ended March 31, 2019. Cash interest expense decreased by $1.5 million to $5.0 million for the three months ended March 31, 2020, from $6.5 million for the three months ended March 31, 2019, primarily due to a decreased average LIBOR during the three months ended March 31, 2020, compared to the three months ended March 31, 2019. Amortization of deferred finance fees for the three months ended March 31, 2020 was $0.4 million, a decrease of $0.1 million from $0.5 million for the three months ended March 31, 2019.

Liquidity

As at March 31, 2020, the Company had $64.5 million (December 31, 2019: $51.7 million) available in cash and cash equivalents. The following debt and lease liabilities (net of deferred finance fees) were outstanding as at the dates indicated:

Conference Call                      

The Company plans to have a conference call on May 5, 2020 at 11:00 a.m. Eastern Time to discuss its results for the quarter ended March 31, 2020. All interested parties are invited to listen to the live conference call and slide presentation by choosing from the following options:

1. By dialing 844-492-3728 (U.S.) or 412-542-4189 (International) and referencing "Ardmore Shipping."
2. By accessing the live webcast at Ardmore Shipping's website at www.ardmoreshipping.com.

Participants should dial into the call 10 minutes before the scheduled time.

If you are unable to participate at this time, an audio replay of the call will be available through May 12, 2020 at 877-344-7529 or 412-317-0088. Enter the passcode 10143555 to access the audio replay. A recording of the webcast, with associated slides, will also be available on the Company's website. The information provided on the teleconference is only accurate at the time of the conference call, and the Company will take no responsibility for providing updated information.

About Ardmore Shipping Corporation

Ardmore owns and operates a fleet of MR product and chemical tankers ranging from 25,000 to 50,000 deadweight tonnes. Ardmore provides seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies, with its modern, fuel-efficient fleet of mid-size product and chemical tankers.

We are strategically focused on modern, fuel-efficient, mid-size product and chemical tankers. We actively pursue opportunities to exploit the overlap we believe exists between the clean petroleum product ("CPP") and chemical sectors in order to enhance earnings, and also seek to engage in more complex CPP trades, such as multi-grade and multi-port loading and discharging operations, where our knowledge of chemical operations is beneficial to our CPP customers. Our fuel-efficient operations are designed to enhance our investment returns and provide value-added service to our customers. We believe we are at the forefront of fuel efficiency and emissions reduction trends and are well positioned to capitalize on these developments with our fleet of Eco-design and Eco-mod vessels. Our acquisition strategy is to continue to build our fleet with Eco-design newbuildings and modern second-hand vessels that can be upgraded to Eco-mod. We have a resolute focus on both high-quality service and efficient operations, and we believe that our corporate overhead and operating expenses are among the lowest of our peers.

CO₂ Emissions Reporting ⁽¹⁾

In April 2018, the International Maritime Organization's ("IMO") Marine Environment Protection Committee ("MEPC") adopted an initial strategy for the reduction of greenhouse gas ("GHG") emissions from ships, setting out a vision to reduce GHG emissions from international shipping and phase them out as soon as possible.

Ardmore is committed to transparency and contributing to the reduction of CO₂ emissions in the Company's industry.  Effective July 1, 2019, the Company commenced reporting of carbon emissions data for its fleet. Ardmore's reporting methodology is in line with the framework set out within the IMO's Data Collection System ("DCS") initiated in January 2019.

It is expected that the shipping industry will continue to refine the performance measures for emissions and efficiency over time.  AER and EEOI metrics are impacted by external factors such as charter speed, vessel orders and weather, in conjunction with overall market factors such as cargo load sizes and fleet utilization rate. As such, variance in performance can be found in the reported emissions between two periods for the same vessel and between vessels of a similar size and type. Furthermore, other companies may report slight variations in methodology⁽⁴⁾ and consequently it is not always practical to directly compare emissions from different companies. The figures reported above represent Ardmore's initial findings; the Company is committed to improving the methodology and transparency of its emissions reporting in line with industry best practices. Accordingly, the above results may vary as the methodology and performance measures set out by the industry evolve.

Non-GAAP Measures

This press release describes EBITDA, Adjusted EBITDA and Adjusted earnings / (loss), which are not measures prepared in accordance with U.S. GAAP and are defined and reconciled below. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before certain items that Ardmore believes are not representative of its operating performance, including gain or loss on sale of vessels. Adjusted earnings / (loss) excludes certain items from net income / (loss), including gain or loss on sale of vessels and write-off of deferred finance fees, because they are considered to be not representative of its operating performance.

These non-GAAP measures are presented in this press release as the Company believes that they provide investors with a means of evaluating and understanding how Ardmore's management evaluates operating performance. EBITDA and Adjusted EBITDA increase the comparability of the Company's fundamental performance from period to period. This increased comparability is achieved by excluding the potentially disparate effects between periods of interest expense, taxes, depreciation or amortization, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods.  The Company believes that including EBITDA, Adjusted EBITDA and Adjusted earnings / (loss) as financial and operating measures assists investors in making investment decisions regarding the Company and its common stock.

These non-GAAP measures should not be considered in isolation from, as a substitute for, or superior to, financial measures prepared in accordance with U.S. GAAP. In addition, these non-GAAP measures may not have a standardized meaning and therefore may not be comparable to similar measures presented by other companies. All amounts in the tables below are expressed in U.S. dollars, unless otherwise stated.

Forward Looking Statements

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. In some cases, you can identify the forward-looking statements by the use of words such as "believe", "anticipate", "intends", "estimate", "forecast", "plan", "potential", "may", "expect", and similar expressions.

Forward looking statements in this press release include, among others, the following statements: future operating or financial results; global and regional economic conditions and trends; shipping market trends and market fundamentals, including expected tanker demand and scrapping levels, the use of tankers for storage purposes and the sustainability of current market improvement; the Company's liquidity, financial flexibility and strength; the Company's capital allocation policy and intended actions; the effect of the novel coronavirus pandemic on the Company's business, financial condition and the results of operation; the effect on tanker demand of the IMO 2020 regulations; expected global oil consumption and refinery capacity growth; the effects and expected duration of regulatory uncertainty on the global maritime industry regarding greenhouse gas emissions; the time it will take for new technologies addressing greenhouse gas emissions to emerge; expected employment of the Company's vessels during the second quarter of 2020; expected drydocking days in the second quarter of 2020; management's estimate of the value of the Company's commercial management and pooling business; the benefits of the Company's commitment to transparency regarding emissions; and expected continuation of refinement by the shipping industry of performance measures for emissions and efficiency. The forward-looking statements in this press release are based upon various assumptions, including, without limitation, Ardmore management's examination of historical operating trends, data contained in the Company's records and other data available from third parties. Although the Company believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond the Company's control, the Company cannot assure you that it will achieve or accomplish these expectations, beliefs or projections. The Company cautions readers of this release not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to update or revise any forward-looking statements. These forward-looking statements are not guarantees of the Company's future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements.

In addition to these important factors, other important factors that, in the Company's view, could cause actual results to differ materially from those discussed in the forward-looking statements include: the amount of the world tanker fleet used for storage purposes; current expected spot rates compared with current and expected charter rates; the failure of counterparties to fully perform their contracts with the Company; the strength of world economies and currencies; general market conditions, including fluctuations in charter rates and vessel values; changes in demand for and the supply of tanker vessel capacity; changes in the projections of spot and time charter or pool trading of the Company's vessels; the effect of the novel coronavirus pandemic on, among others, oil demand, the Company's business, financial condition and results of operation, including our liquidity; changes in the Company's operating expenses, including bunker prices, drydocking and insurance costs; general domestic and international political conditions; potential disruption of shipping routes due to accidents, piracy or political events; the market for the Company's vessels; competition in the tanker industry; availability of financing and refinancing; charter counterparty performance; changes in governmental rules and regulations or actions taken by regulatory authorities; the Company's ability to charter vessels for all remaining revenue days during the second quarter of 2020 in the spot market; vessels breakdowns and instances of off-hire; and other factors. Please see the Company's filings with the U.S. Securities and Exchange Commission, including the Company's Form 20-F for the year ended December 31, 2019, for a more complete discussion of these and other risks and uncertainties.

SOURCE Ardmore Shipping Corporation

Related Links

http://www.ardmoreshipping.com

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