Danaos(US:DAC)2023-08-07 16:20Financial Data and Key Metrics Changes - Adjusted net income for Q2 2023 was $143.4 million, or $7.14 per share, down from $157.1 million, or $7.59 per share, in Q2 2022, primarily due to the absence of a $13.9 million ZIM dividend recognized in the previous year [19][21] - Adjusted EBITDA decreased by 7.7% to $177.3 million from $192.1 million in the same quarter last year [21] - Interest expense decreased significantly to $5.3 million from $12.9 million in Q2 2022, attributed to a reduction in average indebtedness by nearly $700 million [20] - Net debt as of June 30, 2023, was reduced to $131 million, with a net debt to adjusted EBITDA ratio of 0.2 times [25] Business Line Data and Key Metrics Changes - Vessel operating expenses increased by $1.3 million to $41.9 million, with average daily vessel operating costs rising to $6,970 from $6,463 due to inflationary pressures [11] - The company secured $469 million in contracted revenue through new charters for 12 container ships, increasing the total charter backlog to $2.5 billion with a 3.3-year average charter duration [13][15] Market Data and Key Metrics Changes - The container market experienced a drop of over 50% compared to the previous year, yet the company managed to maintain operating revenues of $241 million, close to previous records [15] - The order book for vessels is at historically low levels, with fleet supply growth projected to decline significantly in the coming years against rebounding demand [8] Company Strategy and Development Direction - The company is committed to advancing its decarbonization strategy by retrofitting existing vessels and ordering new vessels that are methanol-ready [7] - The strategy includes opportunistic capital deployment in the dry bulk market, with a focus on acquiring assets at attractive prices [16][18] - The company aims to maintain its core business in container shipping while cautiously expanding into the dry bulk sector [34] Management's Comments on Operating Environment and Future Outlook - Management noted a stagnating world economy affecting the container market, but emphasized the resilience of the business model [6] - The company is focused on investing in green technologies and believes that those who do not adapt to the changing regulatory environment will face challenges [29] - Future capital deployment will prioritize modern tonnage and newbuildings, with dry bulk being a potential area for growth [44] Other Important Information - The company has spent $65.5 million of its $100 million buyback program, retiring over one million shares [4] - Cash as of the end of Q2 2023 was $293 million, with total liquidity of $653 million, providing flexibility for capital deployment [26] Q&A Session Summary Question: What has changed to give the company confidence to deploy capital aggressively? - Management indicated that they are deploying capital where they see interesting returns, particularly in green fuel-capable ships and the dry bulk market, which has favorable fundamentals [28][30] Question: Is the investment in dry bulk a long-term strategy or opportunistic? - Management clarified that while they see potential in dry bulk, it will not dominate the business, and they will be cautious in capital deployment [34][41] Question: What are the intentions regarding the Eagle investment? - The company expressed concerns about Eagle's corporate governance following recent board actions and is seeking clarification [17][38] Question: How will the company operate the newly acquired dry bulk vessels? - The company plans to operate the vessels in-house, potentially using hedging strategies if necessary, but will start by trading them in the spot market [40]