The variance was largely due to the weaker tanker market, especially in the first half of the current year. However, a slightly better market scenario in 3Q17, coupled with DIS’ continued focus on cost control, led the company to record a net loss of $7.4 mill in 3Q17, compared to a $8 mill net loss registered in the previous quarter and to a $7.5 mill net loss generated in 3Q16.
In the first nine months of this year, DIS’ daily spot rate was $12,290, compared with $14,528 achieved in the same period of last year. In 3Q17, DIS’ daily spot rate was $11,960, compared with $10,101 recorded in 3Q16. At the same time, 33.6% of DIS’ total employment days in the nine months, were covered through timecharter contracts at an average daily rate of $15,573 (9 months 2016: 47.3% coverage at $15,959).
Such good level of timecharter coverage is one of the pillars of DIS’ commercial strategy and allows it to mitigate the effects of spot market volatility, securing a certain level of earnings and cash generation, the company claimed. DIS’ total daily average rate, including both spot and timecharter contracts, was $13,392 in the first nine months of 2017, compared with $15,206 achieved in the previous year period.
Thanks to a prudent commercial strategy and to a cost efficient operating platform, DIS achieved an EBITDA of $33.7 mill in the nine month period and an EBITDA margin of 17.3% even in a relatively weak market (9 months 2016: EBITDA of $ 48.1 mill and 23.7% margin).
In the first nine months of the year, DIS reported $99.9 mill in ‘capital expenditures’. This was mainly in relation to DIS’ newbuilding plan and includes the acquisition of two leased assets for a total of $55 mill in the period, following two sale and lease back contracts, which generated a positive net cash effect of a total $21.9 mill in the period ($11.2 mill in 2Q17 and $10.7 mill in 3Q17).
Since 2012, DIS has ordered a total of 22 ‘Eco design’ product tankers (10 MRs, six Handysize and six LR1s), of which 16 have been already delivered as at the end of 3Q17. This corresponds to an overall investment of around $755 mill and is in line with the company’s strategy to modernise its fleet through newbuildings with an eco-design. DIS said that it had already fixed the majority of its newbuildings on long-term timecharter contracts with three oil-majors and a leading refining company, all at profitable levels.
TCE earnings were $65.5 mill in 3Q17 ($58.5 mill in 3Q16) and $194.2 mill in the first nine months of 2017 ($203 mill in the first nine months 2016). The year-to-date variance is due to the weaker spot market experienced in 1H17 relative to the first half of last year, partially mitigated by a better result achieved in 3Q17, compared to 3Q16.
DIS realised a daily average spot rate of $12,290 in the nine month period, compared with $14,528 in the first nine months 2016. This result was particularly affected by the soft spot market of 1H17, in which DIS achieved a daily spot rate of $12,492, compared with $16,848 for the first semester of 2016. In 3Q17, DIS’ spot performance slightly improved compared to the previous quarter, leading to a daily average spot rate of $11,960 versus $10,101 achieved in 3Q16.
EBITDA was $9 mill in 3Q17 and $33.7 mill in the first nine months of 2017, compared with $7.9 mill in 3Q16 and $48.1 mill in the first nine months of 2016. The reduction relative to last year, is mainly due to lower TCE earnings achieved in 1H17.
DIS’ net result for 3Q17 was a negative $7.4 mill (negative $7.5 mill in 3Q16) and a negative $13.6 mill for the first nine months of the year ($ 6.1 mill profit in 2016 period). The drop compared to the previous year is almost entirely due to the much weaker spot market experienced in 1H17.
CEO Marco Fiori, commented: “The product tanker market rebound that most of the industry analysts have been predicting, has not yet materialised as at the end of 3Q17. Contemporarily, we did see some initial signs of improvement in Q3, when DIS achieved a daily spot average TCE of almost $12,000, which is more than 18% above the level achieved in the same quarter of 2016.
“We believe we will see a much healthier spot market in the following months and this is the reason why we are not taking additional timecharter coverage at the moment, as we want to maximise our returns in a growing product tanker market. I think there are clear signs of market improvement driven by both supply and demand. On the one side, the high level of product inventories, which has been depressing demand for the last two years seems to be finally coming to a more balanced level. At the same time, the growth in global economic activity expected for next year should provide further benefit to the demand for seaborne transportation of refined products.
On the supply side, the estimated deliveries of new vessels is expected to reach an historical low level by the end of 2017. Thanks to our investment strategy together with the sale of some of our oldest ships, DIS will enter next year with one of the youngest and most versatile product tanker fleet in the world and a higher spot exposure, due also to the addition of our LR1s. This will allow us to meet the requirements of our top-quality customer base, thus maximising our company’s returns,” he said.
CFO Carlos Balestra di Mottola, added: “After launching a $755 mill newbuilding plan in 2012, which is due for completion in 2018, we are now focusing on strengthening our balance sheet. With this objective, we finalised a share capital increase in 2Q17, which was fully subscribed and generated proceeds of $37.9 mill, we sold and timechartered back two vessels in 1Q17, generating net cash upfront of $5.2 mill, and we sold and bareboat chartered back two additional MR vessels in 2Q and 3Q17, generating over $21.9 mill in net cash upon disposal. Between September and October, we announced the sale and bareboat back and the sale and timecharter back of two additional MRs, which should further increase our liquidity position by $13.4 mill in 4Q17.
Most of these deals are flexible, with purchase options, and were made at a competitive cost of funds, helping us to finance the equity portion for our remaining CAPEX plan. As at the end of September, 2017, DIS had remaining CAPEX of $183.1 mill ($61.2 mill in 4Q17 and $121.9 mill in FY’18), 69% of which will be covered with bank debt, already secured as of today,” he said.