Danaos(US:DAC)2022-05-17 14:26Financial Data and Key Metrics Changes - The company reported adjusted EPS of $11.36 per share or adjusted net income of $235.3 million for Q1 2022, compared to adjusted EPS of $2.83 per share or $58 million for Q1 2021, reflecting a significant increase of $177.3 million in adjusted net income [13] - Operating revenues increased by $97.8 million to $229.9 million in Q1 2022 from $132.1 million in Q1 2021, driven by higher charter rates and vessel additions [14] - Adjusted EBITDA rose by almost 180% or $173.2 million to $269.5 million in Q1 2022 from $96.3 million in Q1 2021 [18] Business Line Data and Key Metrics Changes - The increase in operating revenues was attributed to a $48.9 million rise from higher charter rates and an additional $20.8 million from vessel additions [14] - Vessel operating expenses increased by $8.1 million to $39.2 million due to the larger fleet size, while average daily vessel operating costs rose to $6,300 from $5,954 [15] Market Data and Key Metrics Changes - The broader market has been impacted by geopolitical events, high energy prices, inflation, and China's zero COVID policy, leading to a more conservative short-term attitude among market participants [8] - Despite these challenges, box freight rates and charter rates have not significantly declined, although there is a noted reluctance from charterers to engage in long-term discussions [24] Company Strategy and Development Direction - The company is focused on fleet growth, returning value to shareholders, and enhancing its balance sheet, with a recent acceleration in deleveraging to mitigate rising interest rates [10] - The company has ordered six vessels to be delivered between March and September 2024, which will be converted to run on green methanol when available [7] Management's Comments on Operating Environment and Future Outlook - Management noted that supply chain inefficiencies are expected to persist, contributing to record profits for liner companies and higher contract levels [9] - The company is well-positioned to execute its strategy amid an uncertain backdrop, with a strong balance sheet and significant liquidity of $708 million in cash and marketable securities at the end of Q1 2022 [12] Other Important Information - The company has reduced leverage significantly, repaying $437 million in debt and lease obligations, resulting in 13 unencumbered vessels by the end of Q2 2022 [19] - The contracted revenue backlog stood at $2.7 billion, with nearly 100% contract coverage for 2022 and 78% for 2023 [21] Q&A Session Summary Question: What does the conservative short-term attitude mean for charter renewals? - Management indicated that charterers are hesitant to engage in long-term discussions due to current global uncertainties, with discussions expected to pick up in the next quarter [24][27] Question: What is the right leverage level going forward? - Management stated that leverage is context-dependent and typically aims for a ratio of 3 to 4 at the bottom of the cycle, with current leverage expected to be close to 1 [28][29] Question: What is the outlook for drydocking in Q3 and Q4? - Management mentioned that only three or four ships are scheduled for drydocking this year, with more significant capital expenditures related to new builds [31] Question: What are the current charter rates for upcoming contracts? - Management noted that while short-term extensions have high rates, liner companies generally prefer longer contracts at lower rates [35] Question: What is the strategy regarding share repurchases? - Management emphasized that the priority is on securing growth and deleveraging, with share buybacks remaining a consideration but not a current focus [41][42] Question: What is the strategy for ZIM shares? - Management indicated that while ZIM shares are not a long-term holding, there is no immediate intention to divest, as they expect strong results and dividends from ZIM in 2022 [45]