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l pany .(CLCO) - 2024 Q4 - Earnings Call Transcript
CLCOl pany .(CLCO)2025-02-27 21:20
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Financial Data and Key Metrics Changes - Revenue for Q4 2024 increased to 84.6million,primarilyduetofewerdrydockdays,comparedto84.6 million, primarily due to fewer drydock days, compared to 77.7 million in Q3 2024 [8][31] - Adjusted EBITDA rose to 55.3millionfrom55.3 million from 53.7 million in Q3 2024, reflecting the increase in operating revenues [8][33] - Net income for Q4 was 29.4million,significantlyupfrom29.4 million, significantly up from 8.1 million in Q3, driven by a 23.5millionswinginnetunrealizedgainsoninterestrateswaps[34]BusinessLineDataandKeyMetricsChanges−TimeandvoyagecharterrevenuesgeneratedanaverageTCErateof23.5 million swing in net unrealized gains on interest rate swaps [34] Business Line Data and Key Metrics Changes - Time and voyage charter revenues generated an average TCE rate of 73,900 per day across the fleet in Q4, down from 81,600inQ3[31]−Theoperatingmarginremainedstrongat4681,600 in Q3 [31] - The operating margin remained strong at 46% of operating revenues, with operating income slightly lower at 38.5 million compared to 38.9millioninQ3[34][42]MarketDataandKeyMetricsChanges−Thecharteringmarketisexperiencingthelowestrateseverseenontwospotmarketvessels,withrateswellbelowbreakeven[3][10]−Fleetutilizationwas9238.9 million in Q3 [34][42] Market Data and Key Metrics Changes - The chartering market is experiencing the lowest rates ever seen on two spot market vessels, with rates well below breakeven [3][10] - Fleet utilization was 92% in Q4, with expectations to exceed this in Q1 2025 [10] - The backlog remains strong at 1.7 billion, with over 1billioninfirmcontracts[9][35]CompanyStrategyandDevelopmentDirection−Thecompanyhasdecidednottodeclareadividendtomaintainfinancialflexibilityandcapacityforopportunisticgrowthamidlowmarketrates[4][29]−Thestrategyincludesacombinationofspot,short−term,andfloatingratedealstonavigatethecurrentmarketconditions[12]−Thecompanyiswell−positionedtotakeoverbusinessassteamturbinevesselsleavethefleet,withafocusonupgradingexistingvessels[22][43]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthatthelackofawintermarkethasputsignificantdownwardpressureonthecharteringmarket,buttheyexpectconditionstonormalizeeventually[10][18]−ThecompanyanticipatesasignificantincreaseinLNGdemandby2030,presentingalong−termopportunity[18]−Managementemphasizedtheimportanceofmaintainingarobustbalancesheetandliquiditytoweathercurrentmarketchallenges[39][42]OtherImportantInformation−Thecompanyhas1 billion in firm contracts [9][35] Company Strategy and Development Direction - The company has decided not to declare a dividend to maintain financial flexibility and capacity for opportunistic growth amid low market rates [4][29] - The strategy includes a combination of spot, short-term, and floating rate deals to navigate the current market conditions [12] - The company is well-positioned to take over business as steam turbine vessels leave the fleet, with a focus on upgrading existing vessels [22][43] Management's Comments on Operating Environment and Future Outlook - Management noted that the lack of a winter market has put significant downward pressure on the chartering market, but they expect conditions to normalize eventually [10][18] - The company anticipates a significant increase in LNG demand by 2030, presenting a long-term opportunity [18] - Management emphasized the importance of maintaining a robust balance sheet and liquidity to weather current market challenges [39][42] Other Important Information - The company has 288 million in liquidity at the end of 2024 and no refinancing needs until mid-2029 [30][39] - The average TCE rate of the firm backlog is above 82,000 per day, indicating strong near-term revenue coverage [35] Q&A Session Summary Question: On the dividend and runway considerations - Management explained that the decision to cut the dividend was made from a position of strength, allowing for a longer runway in case of market delays [49][51] Question: CapEx and upgrades - Management indicated that upgrades have been yielding significant upside, with one upgraded vessel generating over 10,000 a day in total upside [52][54] Question: Layup costs and decisions - Management discussed the costs associated with laying up vessels, noting that cold stacking incurs significant expenses, making it a less attractive option [56][59] Question: Long-term charter discussions - Management noted that the current bid-ask spread is large, causing charters to hesitate in committing to long-term deals despite anticipated supply tightness in 2027 [68][70] Question: Asset acquisition and market conditions - Management acknowledged the need to balance attractive asset values with the unpredictability of the market, indicating a cautious approach to acquisitions [72][74] Question: Trade-offs between growth and repurchases - Management highlighted the importance of considering growth opportunities against share repurchases and dividends, maintaining flexibility for future value creation [79][80] Question: Drivers for lower vessel storage usage - Management attributed lower vessel storage usage to a flat forward curve and the refilling of storage in Europe, impacting trading dynamics [82][84]