Danaos Corporation (DAC)
Q4 2012 Earnings Call
February 12, 2013 9:00 am ET
John Coustas - President & CEO
Evangelos Chatzis - CFO
Gregory Lewis - Credit Suisse
Urs Dur - Clarkson Capital
Thank you for standing by, ladies and gentlemen, and welcome to the Danaos Corporation Conference Call on the Fourth Quarter and Year End 2012 Financial Results. We have with us Dr. John Coustas, President and Chief Executive Officer; and Mr. Evangelos Chatzis, Chief Financial Officer of the company. At this time all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions) I must advice you the conference is being recorded today Tuesday, February 12, 2013.
We now pass the floor to one of your speakers today Mr. Chatzis. Please go ahead sir.
Thank you, operator. Good morning everyone and thank you for joining us this morning. Before we begin I quickly want to remind everyone that management remarks this morning may contain certain forward-looking statements, and that actual results could differ materially from those projected today. These forward-looking statements speak as of today and we undertake no obligation to update them. Factors that might affect future results are discussed in our filings with the SEC and we encourage you to review these detailed Safe Harbor and Risk Factor disclosures.
Please also note but where we feel appropriate we will continue to refer to non-GAAP financial measures such as EBITDA, adjusted EBITDA, and adjusted net income to evaluate our business. Reconciliations of non-GAAP financial measures to GAAP financial measures are included in our earnings release and the accompanying materials.
Now let me turn the call over to Dr. Coustas who will provide the broader review of the quarter.
Thank you, Evangelos. Good morning everyone and thank you for joining our today's call to discuss for fourth quarter '12 and whole year 2012. Despite the challenging container market environment, in 2012 we managed to maintain the Company's profitability at the 2011 levels.
The adjusted net income for 2012 came in at $60.5 million or $0.55 per share, compared to $61.2 million or $0.56 per share for 2011, effectively remaining stable, while adjusted EBITDA increased by 35.5% to $431.7 million for 2012 compared to $318.6 million in 2011 as a result of our fleet expansion program that was concluded this year.
Demand and supply fundamentals for 2012 confirm that this has been a sluggish year, with supply outpacing demand by almost 3%. Although there are signs that this disparity may be somehow moderated in the coming quarters, we still expect supply to outpace demand in 2013.
Mainlane trade volumes in 2012 expanded by a mere 1% on average, while the Asia - Europe trade contracted by almost 3.5%, mainly due to the ongoing weakness in European consumer demand. At the same time, this is the route that has faced the biggest inflow of new tonnage with deliveries of the large post 10,000 TEU containerships. We expect this trend will continue in 2013 as vessels ordered during the early 2011 mini-boom are being delivered.
On the other hand, it was non-mainlane trade growth that to a certain extent saved the day expanding by around 6.5% mainly on the back of strong intra-Asia and North-South trade growth. This growth facilitated cascading that helped ease the supply pressure in the mainlane trades, but at the expense of the charter market as liner operators have been increasingly utilizing their own tonnage and are generally less inclined to renew expiring charters. It has to be noted that almost 85% of idle capacity, which currently stands at 5% of the world fleet is now charter owned tonnage. This of course also reflects on us, as we currently have seven vessels on cold lay-up.
In summary, the combined effect of the above is that the weakness of growth on the longer haul mainlanes has resulted in global TEU-mile growth increasing by just 4% in 2012, with supply increasing by almost 7% for the same period, while this imbalance has mostly affected asset values, time-charter earnings and employment potential of mid-size vessels. In this context we are currently investigating to make selective acquisitions within 2013 to renew part of our older fleet.
The good news is that liner operators have so far managed the situation effectively with a variety of cost reduction initiatives, as well as supply control strategies such as service rationalization, idling of tonnage, scrapping and extra slow steaming, through which they have managed to maintain freight rates at decent levels. This is positive, as the financial health of the liner companies is important for containership lessors like us, since the majority of our tonnage is deployed under long-term time charters.
With a strong 97% contract coverage and only 3% of our current revenue stream at stake through re-chartering over the next 12 months, we are largely insulated from the effects of the weak charter market, while expect our EBITDA and free cash flow generation to be safeguarded.
At the same time, we continue to be one of the most cost competitive operators in the market. Our daily vessel operating expenses actually came down by 5.4% year-on-year to $5,907 per day for 2012 from $6,246 per day in 2011.
With a resilient business model both from an operating and financial standpoint, we will continue to manage our fleet efficiently, while in 2013 we will focus on rapidly de-leveraging the company and creating value for our shareholders.
Copyright 2013 Seeking Alpha
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.