Ardmore Shipping Corporation announced results for the three and nine months ended September 30, 2022.

Highlights and Recent Activity

• Reported a net profit of $61.0 million for the three months ended September 30, 2022, or $1.57 earnings per basic share and $1.52 earnings per diluted share, compared to a net loss of $12.8 million, or $0.37 loss per basic and diluted share, for the three months ended September 30, 2021. Adjusted for certain costs (see Adjusted earnings / (loss) in the Non-GAAP Measures section), we reported Adjusted earnings of $61.6 million, or $1.59 Adjusted earnings per basic share and $1.54 Adjusted earnings per diluted share, for the three months ended September 30, 2022, compared to an Adjusted loss of $12.8 million, or $0.37 Adjusted loss per basic and diluted share, for the three months ended September 30, 2021.
• Reported a net profit of $82.0 million for the nine months ended September 30, 2022 or $2.27 earnings per basic share and $2.22 earnings per diluted share, compared to a net loss of $29.5 million, or $0.88 loss per basic and diluted share, for the nine months ended September 30, 2021. Adjusted for certain costs (see Adjusted earnings / (loss) in the Non-GAAP Measures section), we reported Adjusted earnings of $89.6 million, or $2.48 Adjusted earnings per basic and $2.43 Adjusted earnings per diluted share for the nine months ended September 30, 2022, compared to an Adjusted loss of $29.0 million or $0.86 Adjusted loss per basic and diluted share, for the nine months ended September 30, 2021.
• MR Eco-Design tankers earned an average spot TCE rate of $47,026 per day for the three months ended September 30, 2022. Chemical tankers earned an average TCE rate of $31,536 per day for the three months ended September 30, 2022. Based on approximately 40% total revenue days currently fixed for the fourth quarter of 2022, the average spot TCE rate is approximately $45,000 per day for MR Eco-Design tankers; based on approximately 50% of revenue days fixed for the fourth quarter, the average TCE rate for chemical tankers is approximately $31,500 per day.
• Completed the refinancing of 19 vessels into our new sustainability-linked senior loan facilities, including five vessels previously financed under lease arrangements for which we exercised purchase options in October 2022. We expect this will substantially reduce our interest cost, provide for significant flexibility and it has extended maturities through to mid-2027. As a result of the refinancing, as of November 2, 2022, 20 of our 22 owned vessels are financed in senior loan facilities with two vessels remaining under finance lease arrangements.
• Ardmore is announcing today that Helen Tveitan de Jong has been appointed as Audit Committee Chair and that director Mats Berglund is joining the Audit Committee, as replacement for Brian Dunne, who has chosen to step down from the Board for personal reasons.
• As announced separately today, commencing with Ardmore’s performance for the quarter ending December 31, 2022, Ardmore intends to pay a quarterly cash dividend. The declaration and payment of dividends is subject to the discretion of our Board of Directors.
• As previously announced, effective September 28, 2022, Bart Kelleher became our new Chief Financial Officer.

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

“We are pleased to report record earnings for the third quarter of 2022, with adjusted earnings of $61.6 million or $1.59 earnings per share, driven primarily by MR spot TCE performance for our Eco-Design tankers of approximately $47,000 per day. This performance has continued into the fourth quarter, with 40% of Ardmore’s MR Eco-Design ship-days for the fourth quarter already booked at $45,000 per day, establishing a solid foundation in advance of what we expect will be a strengthening winter period.

The product tanker market overall is being underpinned by very supportive supply / demand fundamentals, on top of which is the re-ordering of global refined product trades resulting from the Russia-Ukraine conflict, and exacerbated by very low refined product inventories. The next phase of this global re-ordering is expected to take place with the EU ban on Russian refined products from February 5, 2023, which should begin to have an impact in the fourth quarter. As a consequence of the ban, industry analysts are estimating a potential rise in tonne-mile demand of up to 7% to 8%, which would have a profound impact on our markets.

As a result of the improving markets and our continued profitable operating performance, we have significantly reduced our financial leverage, have refinanced the majority of our debt on improved terms in sustainability-linked facilities, prepaying 12 higher-cost capital leases in the process, and thus Ardmore’s strong balance sheet is able to support our further strategic goals. Accordingly, in line with our Capital Allocation Policy, we are initiating a quarterly cash dividend comprising one-third of adjusted income (as defined for dividend determinations), commencing with our performance for the fourth quarter of this year.

After several tough years in which we have worked hard to preserve liquidity, control costs, and maintain and even increase earnings upside for shareholders, we are very pleased to now deliver significant value through our operating results, a return of capital in the form of dividends, and strong total returns from a rising share price reflecting current and anticipated future performance.”

Summary of Recent and Third Quarter 2022 Events

Fleet

Fleet Operations and Employment

As at September 30, 2022, the Company had 27 vessels in operation (including five chartered-in vessels), including 21 MR tankers ranging from 45,000 deadweight tonnes (Dwt) to 49,999 Dwt (15 Eco-Design and six Eco-Mod) and six Eco-Design IMO 2 product/chemical tankers ranging from 25,000 Dwt to 37,800 Dwt. The Company has also been commercially managing three of Carl Büttner’s 24,000 Dwt chemical tankers since March 1, 2021.

MR Tankers (45,000 Dwt – 49,999 Dwt)

At the end of the third quarter of 2022, the Company had 21 MR tankers trading in the spot market or on time charters. The MR tankers earned an average TCE rate of $42,835 per day in the third quarter of 2022. In the third quarter of 2022, the Company’s 15 MR Eco-Design tankers earned an average TCE rate of $44,897 and the Company’s six MR Eco-Mod tankers earned an average TCE rate of $37,607 per day.

In the fourth quarter of 2022, the Company expects to have approximately 4% of all revenue days for its MR Eco-Design tankers on time charter. The remaining 96% of revenue days for its MR Eco-Design and all of its MR Eco-Mod tankers are expected to be employed in the spot market. As of November 2, 2022, the Company had fixed approximately 40% of its total MR revenue days for the fourth quarter of 2022 at an average TCE rate of approximately $43,000 per day.

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

At the end of the third quarter of 2022, the Company had six Eco-Design IMO 2 product / chemical tankers in operation, all of which were trading in the spot market. During the third quarter of 2022, the Company’s six Eco-Design product / chemical vessels earned an average TCE rate of $31,536 per day.

In the fourth quarter of 2022, the Company expects to have all revenue days for its Eco-Design IMO 2 product / chemical tankers employed in the spot market.

As of November 2, 2022, the Company had fixed approximately 50% of its Eco-Design IMO 2 product / chemical tankers spot revenue days for the fourth quarter of 2022 at an average TCE rate of approximately $31,500 per day.

Drydocking

The Company had no drydock or repositioning days in the third quarter of 2022. The Company expects to have approximately 30 drydock days in the fourth quarter of 2022.

Capital Allocation Policy

As announced separately today, commencing with the Company’s performance for the quarter ending December 31, 2022, the Company intends to pay a quarterly cash dividend. The declaration and payment of dividends is subject to the discretion of the Company’s Board of Directors.

Financing

The Company completed the refinancing of 19 vessels into its new sustainability-linked senior loan facilities, including five vessels previously financed under lease arrangements for which the Company exercised purchase options in October 2022. The Company expects this will substantially reduce its interest cost, provide for significant flexibility and it has extended maturities through to mid-2027. As a result of the refinancing, as of November 2, 2022, 20 of the Company’s 22 owned vessels are now financed in senior loan facilities with two vessels remaining under finance lease arrangements.

The Company issued 2.0 million shares of its common stock, raising $18.7 million in net proceeds under our “at-the-market” offering from July 29, 2022 to September 12, 2022, the proceeds of which were used for general corporate purposes including debt reduction.

Audit Committee Changes

The Company is announcing today that director Helen Tveitan de Jong has been appointed as Audit Committee Chair, being joined by new Audit Committee member, director Mats Berglund, and standing member Curtis Mc Williams. Helen has extensive financial and accounting experience over her 30-year career in shipping, has been a member of the Audit Committee since September 2018, and is replacing Brian Dunne, who has chosen to step down from the Board for personal reasons. The Company has benefited greatly from Brian’s skills and expertise and the Board expresses its sincere thanks to him for his many years of exemplary service and collegiality on the Board and as the Audit Committee Chair.

Vessel Sale and Time-Charter Back

On July 14, and July 29, 2022, the Company completed the previously announced sales of the Ardmore Sealifter and Ardmore Sealancer to Leonhardt & Blumberg, respectively. Both vessels were subsequently time-chartered back by the Company for a period of 24 months at attractive hire rates, plus one-year extension options.

COVID-19

In response to the COVID-19 pandemic, many countries, ports and organizations, including those where Ardmore conducts a large part of its operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions. Such measures have caused severe trade disruptions. In addition, the pandemic has resulted and may continue to result in a significant decline in global demand for refined oil products. As Ardmore’s business is the transportation of refined oil products on behalf of oil majors, oil traders and other customers, any significant decrease in demand for the cargo Ardmore transports could adversely affect demand for its vessels and services. The extent to which the pandemic may impact Ardmore’s results of operations and financial condition, including possible impairments, will depend on future developments, which are highly uncertain and cannot be predicted, including, among others, new information which may emerge concerning the virus and of its variants and the level of the effectiveness and delivery of vaccines and other actions to contain or treat its impact.

Conflict in Ukraine

Russia’s invasion of Ukraine in February 2022 has disrupted supply chains and caused instability and significant volatility in the global economy.

Much uncertainty remains regarding the global impact of the conflict in Ukraine, and it is possible that such instability, uncertainty and resulting volatility could significantly increase our costs and adversely affect our business, including our ability to secure charters and financing on attractive terms.

As a result of Russia’s invasion of Ukraine, the United States, several European Union nations, the United Kingdom and other countries have announced unprecedented sanctions and other measures against Russia, Belarus and certain Russian and Belarussian entities and nationals.

The sanctions announced by the U.S. and other countries against Russia and, in some instances, Belarus include, among others, restrictions on selling or importing goods, services or technology in or from affected regions, travel bans and asset freezes impacting connected individuals and political, military, business and financial organizations in Russia, severing large Russian banks from U.S. and/or other financial systems, and barring some Russian enterprises from raising money in the U.S. market. The U.S. has also banned the import of certain Russian energy products into the U.S., including crude oil, petroleum, petroleum fuels, oils, liquefied natural gas and coal. The U.S., EU nations and other countries could impose wider sanctions and take other actions. While it is difficult to anticipate the impact the sanctions announced to date may have on our business and us, these and any further sanctions imposed or actions taken by the U.S., EU nations or other countries, and any retaliatory measures by Russia in response, could lead to increased volatility in global oil demand which could have a material impact on our business, results of operations and financial condition. In addition, it is possible that third parties with which we do business may be impacted by events in Russia and Ukraine, which could adversely affect us.

Results for the Three Months Ended September 30, 2022 and 2021

The Company reported a net profit of $61.0 million for the three months ended September 30, 2022, or $1.57 earnings per basic share and $1.52 earnings per diluted share, as compared to a net loss of $12.8 million, or $0.37 loss per basic and diluted share for the three months ended September 30, 2021.

Results for the Nine Months Ended September 30, 2022 and 2021

The Company reported a net profit of $82.0 million for the nine months ended September 30, 2022, or $2.27 earnings per basic share and $2.22 earnings per diluted share, as compared to a net loss of $29.5 million, or $0.88 loss per basic and diluted share, for the nine months ended September 30, 2021.

Management’s Discussion and Analysis of Financial Results for the three months ended September 30, 2022 and 2021

Revenue. Revenue for the three months ended September 30, 2022 was $142.4 million, an increase of $95.2 million from $47.2 million for the three months ended September 30, 2021.

The Company’s average number of operating vessels was 27.0 for the three months ended September 30, 2022, consistent with 27.0 for the three months ended September 30, 2021.

The Company had one product tanker employed under time charter as at September 30, 2022, as compared to four as at September 30, 2021. Revenue days derived from time charters were 92 for the three months ended September 30, 2022, as compared to 362 for the three months ended September 30, 2021. The decrease in revenue days for time-chartered vessels resulted in a decrease in revenue of $3.6 million.

The Company had 2,374 spot revenue days for the three months ended September 30, 2022, as compared to 2,024 for the three months ended September 30, 2021. The Company had 26 and 23 vessels employed directly in the spot market as of September 30, 2022 and 2021, respectively. 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 $91.4 million for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021. Although the Company managed three third-party chemical tankers employed under spot trading both at September 30, 2022, and September 30, 2021, management revenue increased by $0.1 million due to spot rate increases.

Voyage Expenses. Voyage expenses were $46.0 million for the three months ended September 30, 2022, an increase of $22.9 million from $23.1 million for the three months ended September 30, 2021. An increase in bunker prices resulted in an increase of $18.9 million and an increase in spot revenue days resulted in an increase in port and agency expenses plus commission costs, of $4.0 million for the three months ended September 30, 2022 compared with the three months ended September 30, 2021.

TCE Rate. The average TCE rate for the Company’s fleet was $40,308 per day for the three months ended September 30, 2022, an increase of $29,989 per day from $10,319 per day for the three months ended September 30, 2021. The increase in average TCE rate was primarily the result of higher spot rates for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, which was partially offset by an increase in bunker prices. TCE rates represent net revenues (or 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 $13.3 million for the three months ended September 30, 2022, a decrease of $2.2 million from $15.5 million for the three months ended September 30, 2021. This decrease is primarily attributable to the completion of the sales of the Ardmore Sealeader, Ardmore Sealifter and Ardmore Sealancer earlier in 2022. In addition, the decrease can also be attributable to 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 $4.5 million for the three months ended September 30, 2022, an increase of $2.2 million from $2.3 million for the three months ended September 30, 2021. This increase is the result of the Company having five vessels chartered-in as at September 30, 2022, compared to two vessel chartered-in as at September 30, 2021. Total charter hire expenses in the third quarter of 2022 is comprised of an operating expense component of $2.3 million and a vessel lease expense component of $2.2 million.

Depreciation. Depreciation expense for the three months ended September 30, 2022 was $7.3 million, a decrease of $0.7 million from $8.0 million for the three months ended September 30, 2021. This decrease is a result of the sale of one vessel in June 2022, and two additional vessels in July 2022. All three vessels were classified as held for sale up to their respective disposal dates. We ceased depreciating these three vessels, when they were classified as held for sale, during the first quarter of 2022.

Amortization of Deferred Drydock Expenditures. Amortization of deferred drydock expenditures for the three months ended September 30, 2022 was $1.0 million, a decrease of $0.1 million from $1.1 million for the three months ended September 30, 2021. 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 September 30, 2022 were $5.8 million, an increase of $1.5 million from $4.3 million for the three months ended September 30, 2021. The increase in costs was primarily due to one-off costs during the three months ended September 30, 2022, that aren’t expected to reoccur, compared to the three months ended September 30, 2021.

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 September 30, 2022 were $0.9 million, an increase of $0.1 million from $0.8 million for the three months ended September 30, 2021. The increase in costs was primarily due to an increase in travel-related costs during the three months ended September 30, 2022, compared to the three months ended September 30, 2021.

Unrealized Gain / (Loss) on Derivatives: Unrealized gain on derivatives was $3.4 million for the three months ended September 30, 2022, an increase of $3.4 million from an unrealized gain of $nil for the three months ended September 30, 2021. The increase is primarily due to the accelerated reclassification of $2.1 million from other comprehensive income into earnings. This reclassification was triggered by the Company refinancing debt agreements and paying down its revolving credit facility, which resulted in forecasted transactions for which related interest rate swaps were designated to hedge being no longer probable to occur. The unrealized gain on derivatives was also impacted by the increase in the value of the interest rate swaps that have not been designated as hedging instruments because of rising interest rates during the nine months ended September 30, 2022, which was recognized directly into earnings.

Interest Expense and Finance Costs. Interest expense and finance costs for the three months ended September 30, 2022 were $5.2 million, an increase of $0.8 million from $4.4 million for the three months ended September 30, 2021. This is due to the costs incurred upon the early termination of our finance leases. Amortization of deferred finance fees for the three months ended September 30, 2022 was $1.0 million, an increase of $0.6 million from $0.4 million for the three months ended September 30, 2021 as a result of deferred finance fees of $0.6 million being written off following the prepayment of the debt related to the exercises of the purchase options.

Liquidity

As at September 30, 2022, the Company had $191.2 million in liquidity available, with cash and cash equivalents of $50.6 million (December 31, 2021: $55.4 million) and amounts available and undrawn under its revolving credit facilities of $140.6 million (December 31, 2021: $11.6 million). The following debt and lease liabilities (net of deferred finance fees) were outstanding as at the dates indicated:
Full Report

Source: Ardmore Shipping Corporation