DIS said that the one year perceived timecharter rate was always the best indicator of spot market expectations and in 3Q16, the MR rate fell to $13,500 per day from $14,500 per day.
DIS’ daily average spot rate was $14,528 in the first nine months of 2016 as against $19,739 per day achieved in the same period last year, whilst 3Q16 average spot rate was $10,101, compared with $21,219 in 3Q15.
At the same time, 47.3% of DIS’ total employment days in the first nine months were covered through timecharter contracts at an average daily rate of $15,959, a higher percentage and average rate compared with the same period last year of $15,129.
Such high 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.
Despite the weak spot market in 2016 and in particular in 3Q16, DIS achieved an EBITDA of $48.1 mill in the first nine months of the year, compared to $74.8 mill at the same period last year.
A good level of EBITDA together with a good trend in working capital led to a positive operating cash flow of $57.9 mill for the period.
In the first nine months of this year, DIS reported $106.6 mill in ‘capital expenditures’, mainly in relation to newbuilding plans. Since 2012, DIS has ordered 22 ‘Eco design’ product tankers - 10 MRs, six Handysize and six LR1s.
This corresponds to an overall investment plan of around $755 mill and DIS has already fixed 14 newbuildings on long-term timecharter contracts with three oil majors and a leading refining company, all at profitable levels.
TCE earnings were $58.5 mill in 3Q16 ($85 mill in 3Q15) and $203 mill in the first nine months ($243.1 mill in nine months of 2015). The drop compared with last year was primarily due to the softer product tanker market of the first nine months of this year and partially due to the lower number of vessels operated in 2016.
Net cash flow for the first nine months of 2016 was a negative $10.7 mill, mainly due to $106.6 mill gross capital expenditures, partially compensated by $57.9 mill positive operating cash flow and $38 mill positive financing cash flow.
Cash flow from operating activities was $17.9 mill in 3Q16 ($9.3 mill in 3Q15) and $57.9 mill in the first nine months of this year ($39.5 mill in 2015).
DIS’ net debt as of 30th September, 2016 amounted to $485.6 mill versus $422.5 mill at the end of 2015. The increase was mainly due to the implementation of DIS’ $755 mill newbuilding plan, with total investments of $106.6 mill in the first nine months of 2016.
Marco Fiori, DIS CEO, commented: “I am rather satisfied about the $6.1 mill net profit posted by DIS in the first nine months of the year, considering the very challenging market scenario experienced in the third quarter. In fact, following a strong 1Q16, the spot market softened in the second quarter and hit historically low levels in the following three months.
“The relative oil price stability has been putting pressure on refinery margins with the consequent decline in their throughput and has been leading to a greater utilisation of petroleum product inventories. In addition to this, a large number of newbuildings has hit the market in the first nine months of the current year, increasing the global tonnage supply.
“DIS has somewhat limited the negative impacts of this market correction, thanks in particular to its traditionally high level of timecharter-out coverage (47% of its available vessel days at a daily average fixed rate of $15,959) which allow us to mitigate the effects of spot market volatility, securing a certain level of earnings and cash generation.
“Despite this short-term market volatility, I believe the product tanker market has still strong underlying fundamentals. I refer in particular to the trend of refineries moving away from main consuming regions, which will increase the tonne/mile demand, and to a historically low fleet growth expected for the years to come, with virtually no new ordering activity.
“Meanwhile, we are also expecting a gradual improvement in market conditions already in the following two quarters, which should benefit from a cold winter season expected in the Western hemisphere”, he said.