Ardmore Shipping Corporation announced results for the three and six months ended June 30, 2023.

Highlights and Recent Activity

Reported net income and Adjusted earnings (see Adjusted earnings in the Non-GAAP Measures section) of $23.7 million for the three months ended June 30, 2023, or $0.57 earnings and Adjusted earnings per basic and diluted share, compared to net income of $28.8 million, or $0.82 earnings and Adjusted earnings per basic share and $0.81 earnings and Adjusted earnings per diluted share, for the three months ended June 30, 2022.

Reported net income of $66.9 million for the six months ended June 30, 2023, or $1.63 earnings per basic share and $1.60 earnings per diluted share, compared to net income of $21.0 million, or $0.60 earnings per basic and diluted share, for the six months ended June 30, 2022. Adjusted for certain costs (see Adjusted earnings in the Non-GAAP Measures section), we reported Adjusted earnings of $66.9 million, or $1.63 Adjusted earnings per basic share and $1.60 Adjusted earnings per diluted share, for the six months ended June 30, 2023, compared to Adjusted earnings of $28.0 million, or $0.81 Adjusted earnings per basic share and $0.80 Adjusted earnings per diluted share, for the six months ended June 30, 2022.

Consistent with the Company’s variable dividend policy of paying out dividends on its shares of common stock equal to one-third of Adjusted earnings, the Board of Directors declared a cash dividend on August 1, 2023, of $0.19 per common share for the quarter ended June 30, 2023. The dividend will be paid on September 15, 2023, to all shareholders of record on August 31, 2023.

MR Eco-Design tankers earned an average spot TCE rate of $27,460 per day for the three months ended June 30, 2023. Chemical tankers earned an average TCE rate of $24,555 per day for the three months ended June 30, 2023. Based on approximately 45% total revenue days currently fixed for the third quarter of 2023, the average spot TCE rate is approximately $26,100 per day for MR Eco-Design tankers; based on approximately 63% of revenue days fixed for the third quarter of 2023, the average TCE rate for chemical tankers is approximately $20,400 per day.

On June 15, 2023, the Company amended its term loan agreement with ABN AMRO Bank NV and Credit Agricole Investment Bank. The amendment converted 50% of the outstanding balance under the facility into a revolving credit facility with the remaining 50% of the outstanding balance continuing as a term loan facility.

On June 15, 2023, the Company published its 2022 Sustainability Report, highlighting its progress towards a more sustainable future. In 2022, the Company reached new heights in both operating performance and sustainability. Ardmore continues to believe that consistent superior operating performance is a key driver of long-term value in its business, and Ardmore is committed to driving its sustainability agenda forward. The Sustainability Report is available on the Ardmore website at www.ardmoreshipping.com/about/progress/

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

“While rates have moderated over the past quarter consistent with a well-established seasonal pattern and some incremental weakness in the global economy, we are very pleased with the resilience of the MR and chemical tanker markets, with overall rates holding in the mid-$20,000’s per day, roughly $10,000 above our breakeven rate and supporting continued strong earnings. Even more encouraging is the fact that our key regional markets are experiencing short-duration spikes, which if these were to happen simultaneously, would result in a significant increase in the global average from already strong levels.

We have remained disciplined and focused during this period of heightened charter rates, successfully executing on initiatives to benefit Ardmore over the long term: reducing our net leverage to 18%, improving our breakeven levels, and deploying innovative technologies and processes to maximize fleet efficiency and minimize our emissions footprint. We will continue focusing on progress and performance in all of Ardmore’s activities, paying our shareholders an attractive quarterly dividend, and assessing potential growth opportunities, to maximize shareholder value for the long term.”

Summary of Recent and Second Quarter 2023 Events

Fleet

Fleet Operations and Employment

As of June 30, 2023, the Company had 26 vessels in operation (including four chartered-in vessels), consisting of 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 second 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 $27,180 per day in the second quarter of 2023. In the second quarter of 2023, the Company’s 15 MR Eco-Design tankers earned an average TCE rate of $27,460 and the Company’s five MR Eco-Mod tankers earned an average TCE rate of $26,240 per day.

In the third quarter of 2023, the Company expects to have all revenue days for its MR tankers employed in the spot market. As of August 1, 2023, the Company had fixed approximately 45% of its total MR revenue days for the third quarter of 2023 at an average TCE rate of approximately $26,800 per day, which includes MR Eco-Design tankers at $26,100 per day and MR Eco-Mod tankers at $28,400 per day.

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

At the end of the second 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 second quarter of 2023, the Company’s six Eco-Design product / chemical vessels earned an average TCE rate of $24,555 per day.

In the third 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 August 1, 2023, the Company had fixed approximately 63% of its Eco-Design IMO 2 product / chemical tankers revenue days for the third quarter of 2023 at an average TCE rate of approximately $20,400 per day.

Drydocking

The Company had 12 drydock days in the second quarter of 2023. The Company expects to have 89 drydock days in the third quarter of 2023.

Dividend on Common Shares

Consistent with the Company’s variable dividend 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 Board of Directors declared a cash dividend on August 1, 2023, of $0.19 per common share for the quarter ended June 30, 2023. The dividend will be paid on September 15, 2023, to all shareholders of record on August 31, 2023.

Financing

On June 15, 2023, the Company amended its term loan agreement with ABN AMRO Bank NV and Credit Agricole Investment Bank. The amendment converted 50% of the outstanding balance of the facility into a revolving credit facility with the remaining 50% of the outstanding balance continuing as a term loan facility.

Publication of 2022 Sustainability Report

On June 15, 2023, the Company published its 2022 Sustainability Report, highlighting its progress towards a more sustainable future. In 2022, the Company reached new heights in both operating performance and sustainability. Ardmore continues to believe that consistent superior operating performance is a key driver of long-term value in its business, and Ardmore is committed to driving its sustainability agenda forward. The Sustainability Report is available on the Ardmore website at www.ardmoreshipping.com/about/progress/

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 conflict in Ukraine. 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 June 30, 2023 and 2022

The Company reported net income of $23.7 million for the three months ended June 30, 2023, or $0.57 earnings per basic and diluted share, as compared to net income of $28.8 million, or $0.82 earnings per basic and $0.81 earnings per diluted share for the three months ended June 30, 2022.

Results for the Six Months Ended June 30, 2023 and 2022

The Company reported net income of $66.9 million for the six months ended June 30, 2023, or $1.63 earnings per basic share and $1.60 earnings per diluted share, as compared to net income of $21.0 million, or $0.60 earnings per basic and diluted share for the six months ended June 30, 2022.

Management’s Discussion and Analysis of Financial Results for the Three Months Ended June 30, 2023 and June 30, 2022

Revenue. Revenue for the three months ended June 30, 2023 was $91.9 million, a decrease of $15.2 million from $107.1 million for the three months ended June 30, 2022.

The Company’s average number of operating vessels was 26.0 for the three months ended June 30, 2023, as compared to 27.0 for the three months ended June 30, 2022.

The Company had 2,295 spot revenue days for the three months ended June 30, 2023, as compared to 2,348 for the three months ended June 30, 2022. The Company had 26 vessels employed directly in the spot market as of June 30, 2023 and 2022. Changes in spot rates resulted in a decrease in revenue of $11.5 million and the decrease in spot revenue days resulted in a decrease in revenue of $2.4 million for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

The Company had no product tankers employed under time charter as of June 30, 2023, as compared to one as of June 30, 2022. There were no revenue days derived from time charters for the three months ended June 30, 2023, as compared to 90 for the three months ended June 30, 2022. The decrease in revenue days for time-chartered vessels resulted in a decrease in revenue of $1.3 million.

Voyage Expenses. Voyage expenses were $31.5 million for the three months ended June 30, 2023, a decrease of $9.7 million from $41.2 million for the three months ended June 30, 2022. A decrease in bunker prices resulted in decreased voyage expenses of $6.3 million and a decrease in spot revenue days resulted in a decrease in bunker consumption, port and agency expenses plus commission costs of $3.4 million for the three months ended June 30, 2023 compared with the three months ended June 30, 2022.

TCE Rate. The average TCE rate for the Company’s fleet was $26,541 per day for the three months ended June 30, 2023, a decrease of $1,265 per day from $27,806 per day for the three months ended June 30, 2022. The decrease in average TCE rate was primarily the result of lower spot rates for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, which was partially offset by a decrease 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 $15.3 million for the three months ended June 30, 2023, a decrease of $0.6 million from $15.9 million for the three months ended June 30, 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 $4.3 million for the three months ended June 30, 2023, an increase of $1.9 million from $2.4 million for the three months ended June 30, 2022. This increase is the result of the Company having an average of 4.0 vessels chartered-in during the three months ended June 30, 2023, compared to an average of 2.3 vessels chartered-in for the three months ended June 30, 2022. Total charter hire expense for the three months ended June 30, 2023 was comprised of an operating expense component of $2.2 million and a vessel lease expense component of $2.1 million.

Depreciation. Depreciation expense for the three months ended June 30, 2023 was $6.8 million, a decrease of $0.2 million from $7.0 million for the three months ended June 30, 2022. This decrease 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 June 30, 2023 was $0.9 million, a decrease of $0.1 million from $1.0 million for the three months ended June 30, 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 June 30, 2023 were $4.8 million, an increase of $0.5 million from $4.3 million for the three months ended June 30, 2022. The increase in costs was driven by an increase in non-cash stock-based compensation expense and an increase in compensation and benefits during the three months ended June 30, 2023, compared to the three months ended June 30, 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 June 30, 2023 were $1.1 million, consistent with $1.1 million for the three months ended June 30, 2022.

Unrealized Gains / (Losses) on Derivatives: We had no unrealized gains or losses on derivatives for the three months ended June 30, 2023, as compared to an unrealized gain of $0.3 million for the three months ended June 30, 2022.

Interest Expense and Finance Costs. Interest expense and finance costs for the three months ended June 30, 2023 were $2.8 million, a decrease of $2.0 million from $4.8 million for the three months ended June 30, 2022. The decrease in costs was primarily due to lower aggregate outstanding obligations following the refinancing of 19 vessels completed during the second half of 2022. Amortization of deferred finance fees for the three months ended June 30, 2023 was $0.3 million, generally consistent with $0.4 million for the three months ended June 30, 2022.

Liquidity

As of June 30, 2023, the Company had $255.6 million in liquidity available, with cash and cash equivalents of $51.0 million (December 31, 2022: $50.6 million) and amounts available and undrawn under its revolving credit facilities of $204.6 million (December 31, 2022: $170.0 million). The following debt and lease liabilities (net of deferred finance fees) were outstanding as of the dates indicated:
Source: Ardmore Shipping Corporation