Ardmore Shipping Corporation announced results for the three months ended March 31, 2023.

Highlights and Recent Activity

Reported net income of $43.3 million for the three months ended March 31, 2023, or $1.06 earnings per basic share and $1.04 earnings per diluted share, compared to a net loss of $7.9 million, or $0.23 loss per basic and diluted share, for the three months ended March 31, 2022. Adjusted for certain costs (see Adjusted earnings / (loss) in the Non-GAAP Measures section), we reported Adjusted earnings of $43.3 million, or $1.06 Adjusted earnings per basic share and $1.04 Adjusted earnings per diluted share, for the three months ended March 31, 2023, compared to an Adjusted loss of $0.9 million, or $0.03 Adjusted loss per basic and diluted share, for the three months ended March 31, 2022.

MR Eco-Design tankers earned an average spot TCE rate of $37,506 per day for the three months ended March 31, 2023. Chemical tankers earned an average TCE rate of $27,984 per day for the three months ended March 31, 2023. Based on approximately 50% total revenue days currently fixed for the second quarter of 2023, the average spot TCE rate is approximately $34,000 per day for MR Eco-Design tankers; based on approximately 50% of revenue days fixed for the second quarter of 2023, the average TCE rate for chemical tankers is approximately $33,600 per day.

Consistent with the Company’s capital allocation policy, the Board of Directors declared a cash dividend on May 9, 2023, of $0.35 per common share for the quarter ended March 31, 2023, based on Ardmore’s current policy of paying out dividends on its shares of common stock equal to a third of Adjusted Earnings. The dividend will be paid on June 15, 2023, to all shareholders of record on May 31, 2023.

On March 3, 2023, the Company announced that its Board of Directors has formed a Sustainability Committee to oversee and advise on matters related to corporate sustainability, including environmental, social and energy transition matters. The Sustainability Committee is chaired by Dr. Kirsi Tikka, and also includes Mats Berglund and Helen Tveitan de Jong.

Anthony Gurnee, the Company’s Chief Executive Officer, commented:

“The very positive trends that drove product tanker strength in late 2022 have been sustained, with the charter market remaining very firm throughout the first quarter and up to the present. The combination of supportive underlying fundamentals and the substantial increase in tonne-mile demand resulting from the re-ordering of refined product trade flows has created pronounced market tightness and volatility that Ardmore continues to benefit from.

With our robust balance sheet, low breakeven levels, and high operating leverage to this strong charter market, we are generating a materially heightened level of free cash flow, enabling us to simultaneously pursue all of our capital allocation priorities: continued investment in performance-enhancing technology across our fleet; ongoing debt reduction; maintaining our capacity for well-timed, accretive growth; and the payment of an attractive quarterly dividend with an annualized yield of approximately 10%.

Additionally, in keeping with our long-term focus on progress and performance, our Board of Directors has recently formed a Sustainability Committee to oversee and advise on environmental, social, and energy transition matters, thus ensuring that the Company benefits from our Board’s expertise in this critical area with regard to our long-term strategy.”

Summary of Recent and First Quarter 2023 Events

Fleet

Fleet Operations and Employment

As of March 31, 2023, the Company had 26 vessels in operation (including four chartered-in vessels), including 20 MR tankers ranging from 45,000 deadweight tonnes (Dwt) to 49,999 Dwt (15 Eco-Design and five Eco-Mod) and six Eco-Design IMO 2 product/chemical tankers ranging from 25,000 Dwt to 37,800 Dwt. The Company also commercially manages one of Carl Büttner’s 24,000 Dwt chemical tankers.

MR Tankers (45,000 Dwt – 49,999 Dwt)

At the end of the first quarter of 2023, the Company had 20 MR tankers in operation, all of which were trading in the spot market. The MR tankers earned an average TCE rate of $35,685 per day in the first quarter of 2023. In the first quarter of 2023, the Company’s 15 MR Eco-Design tankers earned an average TCE rate of $37,506 and the Company’s six MR Eco-Mod tankers earned an average TCE rate of $30,932 per day.

In the second quarter of 2023, the Company expects to have all revenue days for its MR tankers employed in the spot market. As of May 9, 2023, the Company had fixed approximately 50% of its total MR revenue days for the second quarter of 2023 at an average TCE rate of approximately $32,700 per day which includes MR Eco-Design tankers at $34,000 per day and MR Eco-Mod tankers at $30,000 per day.

Product / Chemical Tankers (IMO 2: 25,000 Dwt – 37,800 Dwt)

At the end of the first quarter of 2023, the Company had six Eco-Design IMO 2 product / chemical tankers in operation, all of which were trading in the spot market. During the first quarter of 2023, the Company’s six Eco-Design product / chemical vessels earned an average TCE rate of $27,984 per day.

In the second quarter of 2023, the Company expects to have all revenue days for its Eco-Design IMO 2 product / chemical tankers employed in the spot market. As of May 9, 2023, the Company had fixed approximately 50% of its Eco-Design IMO 2 product / chemical tankers revenue days for the second quarter of 2023 at an average TCE rate of approximately $33,600 per day.

Drydocking

The Company had eight drydock days in the first quarter of 2023. The Company expects to have eight drydock days in the second quarter of 2023.

Dividend

Consistent with the Company’s capital allocation policy, the Board of Directors declared a cash dividend on May 9, 2023, of $0.35 per common share for the quarter ended March 31, 2023, based on the Company’s current policy of paying out dividends on its shares of common stock equal to one-third of Adjusted Earnings, as calculated for dividends (see Adjusted Earnings (for purposes of dividend calculations) in the Non-GAAP Measures section). The dividend will be paid on June 15, 2023, to all shareholders of record on May 31, 2023.

Formation of Sustainability Committee

On March 3, 2023, the Company announced that its Board of Directors has formed a Sustainability Committee to oversee and advise on matters related to corporate sustainability, including environmental, social and energy transition matters. The Sustainability Committee is chaired by Dr. Kirsi Tikka, and also includes Mats Berglund and Helen Tveitan de Jong.

The formation of the Sustainability Committee is aimed at ensuring that the Company’s business strategies and activities prioritize critical ESG matters that are expected to have significant, long-term impacts on the Company’s performance and on the product and chemical tanker industry as a whole.

COVID-19 and Conflict in Ukraine

Please see “Item 3. Key Information–Risk Factors” in the Company’s Annual Report on Form 20-F for information about risks to the Company relating to the Covid-19 pandemic and the conflict in Ukraine. The extent to which the pandemic may impact Ardmore’s results of operations and financial condition, including possible impairments, depends on future developments, which are uncertain and cannot be predicted. The conflict in Ukraine has disrupted energy supply chains, caused instability and significant volatility in the global economy and resulted in economic sanctions by several nations. The ongoing conflict has contributed significantly to related increases in spot tanker rates.

Results for the Three Months Ended March 31, 2023 and 2022

The Company reported net income of $43.3 million for the three months ended March 31, 2023, or $1.06 earnings per basic share and $1.04 earnings per diluted share, as compared to a net loss of $7.9 million, or $0.23 loss per basic and diluted share for the three months ended March 31, 2022.

Management’s Discussion and Analysis of Financial Results for the Three Months Ended March 31, 2023 and 2022

Revenue. Revenue for the three months ended March 31, 2023 was $118.2 million, an increase of $54.8 million from $63.4 million for the three months ended March 31, 2022.

The Company’s average number of operating vessels was 26.7 for the three months ended March 31, 2023, generally consistent with 27.0 for the three months ended March 31, 2022.

The Company had 2,386 spot revenue days for the three months ended March 31, 2023, as compared to 2,126 for the three months ended March 31, 2022. The Company had 26 vessels employed directly in the spot market as of March 31, 2023 and 2022. The increase in spot revenue days resulted in an increase in revenue of $7.3 million, while changes in spot rates resulted in an increase in revenue of $51.6 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

The Company had no product tankers employed under time charter as of March 31, 2023, as compared to four as of March 31, 2022. There were no revenue days derived from time charters for the three months ended March 31, 2023, as compared to 262 for the three months ended March 31, 2022. The decrease in revenue days for time-chartered vessels resulted in a decrease in revenue of $4.1 million.

Voyage Expenses. Voyage expenses were $36.6 million for the three months ended March 31, 2023, an increase of $9.5 million from $27.1 million for the three months ended March 31, 2022. An increase in bunker prices resulted in an increase of $5.9 million and an increase in spot revenue days resulted in an increase in bunker consumption, port and agency expenses plus commission costs of $3.6 million for the three months ended March 31, 2023 compared with the three months ended March 31, 2022.

TCE Rate. The average TCE rate for the Company’s fleet was $33,958 per day for the three months ended March 31, 2023, an increase of $18,803 per day from $15,155 per day for the three months ended March 31, 2022. The increase in average TCE rate was primarily the result of higher spot rates for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, which was partially offset by an increase in bunker prices. TCE rates represent net revenues (a non-GAAP measure representing revenue less voyage expenses) divided by revenue days. Net revenue utilized to calculate TCE is determined on a discharge-to-discharge basis, which is different from how we record revenue under U.S. GAAP.

Vessel Operating Expenses. Vessel operating expenses were $14.9 million for the three months ended March 31, 2023, a decrease of $1.7 million from $16.6 million for the three months ended March 31, 2022. This decrease was primarily attributable to the completion of the sales of the Ardmore Sealeader in the second quarter of 2022, and the Ardmore Sealifter and Ardmore Sealancer in the third quarter of 2022. In addition, the decrease also reflects the timing of vessel operating expenses between quarters. Vessel operating expenses, by their nature, are prone to fluctuations between periods.

Charter Hire Costs. Total charter hire expense was $5.5 million for the three months ended March 31, 2023, an increase of $3.4 million from $2.1 million for the three months ended March 31, 2022. This increase is the result of the Company having four vessels chartered-in as of March 31, 2023, compared to two vessels chartered-in as of March 31, 2022. Total charter hire expense for the three months ended March 31, 2023 was comprised of an operating expense component of $2.9 million and a vessel lease expense component of $2.6 million.

Depreciation. Depreciation expense for the three months ended March 31, 2023 was $6.9 million, a decrease of $0.9 million from $7.8 million for the three months ended March 31, 2022. $0.8 million of this decrease is as a result of the sale of one vessel in June 2022, and two additional vessels in July 2022, and $0.1 million is attributable to the change in the scrap value of each vessel from $300 per lightweight ton (“lwt”) to $400 per lwt during the first quarter of 2023.

Amortization of Deferred Drydock Expenditures. Amortization of deferred drydock expenditures for the three months ended March 31, 2023 was $1.0 million, a decrease of $0.2 million from $1.2 million for the three months ended March 31, 2022. The deferred costs of drydockings for a given vessel are amortized on a straight-line basis to the next scheduled drydocking of the vessel.

General and Administrative Expenses: Corporate. Corporate-related general and administrative expenses for the three months ended March 31, 2023 were $5.1 million, an increase of $0.6 million from $4.5 million for the three months ended March 31, 2022. The increase in costs was primarily due to the post lock-down increase in travel-related costs during the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

General and Administrative Expenses: Commercial and Chartering. Commercial and chartering expenses are the expenses attributable to Ardmore’s chartering and commercial operations departments in connection with its spot trading activities. Commercial and chartering expenses for the three months ended March 31, 2023 were $1.2 million, an increase of $0.3 million from $0.9 million for the three months ended March 31, 2022. The increase in costs was primarily due to the post lock-down increase in travel-related costs during the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

Unrealized (Losses) / Gains on Derivatives: We had no unrealized gains or losses on derivatives for the three months ended March 31, 2023, as compared to an unrealized gain of $0.6 million for the three months ended March 31, 2022.

Interest Expense and Finance Costs. Interest expense and finance costs for the three months ended March 31, 2023 were $2.9 million, a decrease of $1.2 million from $4.1 million for the three months ended March 31, 2022. The decrease in costs was primarily due to lower average outstanding balances on the Company’s revolving credit facility during the three months ended March 31, 2023 (with no amounts drawn as of March 31, 2023), as well as lower aggregate outstanding obligations following the refinancing of nine vessels completed during the second half of 2022. Amortization of deferred finance fees for the three months ended March 31, 2023 was $0.3 million, generally consistent with $0.4 million for the three months ended March 31, 2022.
Source: Ardmore Shipping Corporation