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D’Amico Improves Its Results Relative To The Previous Quarter And Maintains A Solid Financial Structure Despite A Challenging Market

The Board of Directors of d’Amico International Shipping S.A., a leading international marine transportation company operating in the product tanker market, today examined and approved the Company’s half-year and second quarter 2021 consolidated financial results.

MANAGEMENT COMMENTARY

Paolo d’Amico, Chairman and Chief Executive Officer of d’Amico International Shipping commented:

‘In the first six months of 2021 we confronted a challenging product tanker market and this explains DIS’ Net loss of US$ (15.2) million in the period and the variance relative to the first half of last year (profit of US$ 17.1 million). However, we were able to significantly improve our results in Q2 relative to the previous quarter of the year, mainly thanks to a sound chartering strategy, which consisted both of a good level of time-charter coverage and favourable positioning of our spot trading vessels. In fact, DIS’ Net result was of US$ (5.4) million in Q2 2021, compared with US$ (9.8) million in the first quarter of the year.

Looking at our TCE performance, DIS achieved a daily spot rate of US$ 11,355 in H1 2021 (US$ 21,238 in H1 2020) and of US$ 12,720 in Q2 2021, 28.2% (or US$ 2,796/day) higher than the average obtained in the previous quarter. As usual, we maintained a high level of time-charter coverage throughout the period and we even extended it when possible. In fact, 48.1% of DIS’ total employment days in H1 2021 were fixed through ‘time-charter’ contracts at an average daily rate of US$ 15,546. Thus, we managed to achieve a total blended daily TCE (spot and time-charter) of US$ 13,371 in H1 2021, significantly outperforming the current weak market.

Despite some concerns related to the spread of the Covid-19 Delta variant, the outlook for the second part of the year looks brighter for our industry, with an even stronger recovery expected next year. In fact, robust global economic growth, rising vaccination rates, steadily increasing mobility levels and the easing of social distancing measures should benefit oil demand, which is now expected to rise by 5.9 mb/d in the current year to 96.4 mb/d. OPEC+ has been responsive to the increases in demand and on April 1 they agreed to raise crude oil production by 2.1 mb/d over three months from May to July. In addition, on July 18 OPEC+ reached an agreement to boost output monthly by 400,000 b/d starting in August and continuing until the remaining 5.8 mb/d of last year’s cuts are unwound.

Longer term we maintain a very positive outlook, supported by strong demand and supply fundamentals. The pandemic put unprecedented pressure on refinery margins, pushing older and less competitive refineries out of the market. In fact, we expect several of the older refineries located in Europe, in the US, in Australia and New Zealand will be replaced with modern units located mainly in Asia and the Middle East. Approximately 1.9 mb/d of confirmed capacity closures/conversions have already been announced, of which around 60% are expected to occur in FY’21. As we stated several times, we expect this to be extremely beneficial for product tankers’ ton-mile demand.

On the supply side, newbuilding activity in our sector is expected to be limited, due to capital constraints, significant uncertainties regarding technological developments to meet the IMO’s and the EU’s stringent emission reductions targets, rising newbuilding costs and limited yard availability for deliveries over the next two years. Demolitions are also accelerating, contributing to even slower fleet growth. According to Clarksons, 10 vessels (MR and LR1) were scrapped in 2020 vs. 26 ships in the first six months of 2021, of which 17 in the second quarter. The new technical and operational standards required by the IMO (Energy Efficiency Existing Ship Index-EEXI and Annual operational carbon intensity indicator-CII) and by the EU (Emissions Trading Scheme-ETS and Fuel EU Maritime), will lead to a further acceleration in the scrapping of old, less efficient tankers and will force part of the world fleet to slow-steam to reduce emissions.

Today DIS can face the short-term challenging markets and the regulatory headwinds with a very young and mainly Eco fleet, a top-quality technical management, a solid financial structure, and a proven commercial strategy, with a good level of near-term contract coverage. I am confident our current strong position and our long-term strategy, will prove successful, allowing us to generate substantial value for our Shareholders.’ Carlos Balestra di Mottola, Chief Financial Officer of d’Amico International Shipping commented: ‘Due to the challenging markets, DIS’ posted a Net loss of US$ (15.2) million in H1 2021 vs. a Net profit of US$ 17.1 million in the first six months of the previous year. However, in Q2 we managed to improve our results relative to the previous quarter, achieving a Net result of US$ (5.4) million, compared with US$ (9.8) million in the first quarter of the year. DIS’ daily spot rate was of US$ 11,355 in H1 2021 vs. US$ 21,238 in the same period of last year. However, our daily spot rate was of US$ 12,720 in Q2 2021, 28.2% (US$ 2,796/day) higher than the average obtained in the previous quarter. In addition, we could count on a good level of time-charter coverage of 48.1% in the first six months of the year, at a daily average of US$ 15,546, which allowed us to achieve a total daily average rate (which includes both spot and time-charter contracts) of US$ 13,371 in H1 2021, outperforming the prevailing market.

In H1 2021, DIS’ EBITDA amounted to US$ 33.0 million vs. US$ 79.5 million achieved in H1 2020 and our operating cash flow was positive, amounting to US$ 18.5 million, compared with US$ 59.1 million in the same period of last year. Despite the challenging market of the first six months of the year, DIS’ market net asset value at the end of June increased relative to the previous quarter, also as a result of the upward pressure on newbuilding and demolition prices, and highlighting the positive long-term outlook for the industry. In Q1’21, DIS exercised its purchase option on the M/T High Priority, an MR vessel, which had been sold and leased back by d’Amico Tankers in 2017, for a 5-year period, with purchase options starting from the 2nd anniversary and a purchase obligation at the end of the 5th year. This transaction was fully in line with DIS’ strategy of reducing its financial leverage and break-even. In fact, the previous lease was substituted with a bank-loan financing at a much lower leverage and at a substantially lower cost of debt.

Thanks to our deleveraging plan and the liquidity generated over the last few years through vessel disposals and equity capital increases, DIS can count today on a very strong financial structure and this remains a key strategic objective for our Company. As at the end of June 2021, we had Cash and cash equivalents of US$ 48.7 million and the ratio between DIS’ Net financial position (excluding IFRS 16) and its fleet market value was of 64.9% vs. 68.5% at the end of March 2021, 65.9% at the end of December 2020, 64.0% as at the end of 2019 and 72.9% at the end as at the end of 2018. I believe DIS is ideally positioned to confront the near-term soft patch in the market, whilst retaining the strategic and operational flexibility deriving from its strong balance sheet, which coupled with a very effective commercial strategy will allow us to fully benefit from the upcoming positive market cycle.’
Source: d’Amico International Shipping

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