Ardmore Shipping Corporation announced results for the three and six months ended June 30, 2024.

Highlights and Recent Activity

• Reported net income of $61.8 million for the three months ended June 30, 2024, or $1.48 earnings per basic share and $1.47 earnings per diluted share, compared to net income of $23.7 million, or $0.57 earnings per basic and diluted share for the three months ended June 30, 2023. We reported Adjusted earnings of $47.6 million for the three months ended June 30, 2024, or $1.14 Adjusted earnings per basic share and $1.13 Adjusted earnings per diluted share, compared to Adjusted earnings of $23.7 million for the three months ended June 30, 2023, or $0.57 Adjusted earnings per basic and diluted share. (See reconciliation of net income to Adjusted earnings in the Non-GAAP Measures section with the main driver of the variance being the gain on the sale of the Ardmore Seafarer of $12.3 million.)
• Reported net income of $100.2 million for the six months ended June 30, 2024, or $2.41 earnings per basic share and $2.39 earnings per diluted share, compared to net income of $66.9 million, or $1.63 earnings per basic and $1.60 earnings per diluted share, for the six months ended June 30, 2023. We reported Adjusted earnings of $86.0 million for the six months ended June 30, 2024, or $2.07 Adjusted earnings per basic share and $2.05 Adjusted earnings per diluted share, compared to Adjusted earnings of $66.9 million for the six months ended June 30, 2023, or $1.63 Adjusted earnings per basic share and $1.60 Adjusted earnings per diluted share. (See reconciliation of net income to Adjusted earnings in the Non-GAAP Measures section with the main driver of the variance being the gain on the sale of the Ardmore Seafarer of $12.3 million.)
• 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 July 31, 2024, of $0.38 per common share for the quarter ended June 30, 2024. The dividend will be paid on September 13, 2024, to all shareholders of record on August 30, 2024.
• MR Eco-Design tankers earned an average spot TCE rate of $41,385 per day for the three months ended June 30, 2024. Chemical tankers earned an average TCE rate of $30,330 per day for the three months ended June 30, 2024. Based on approximately 45% total revenue days currently fixed for the third quarter of 2024, the average spot TCE rate is approximately $33,700 per day for MR Eco-Design tankers; based on approximately 50% of revenue days fixed for the third quarter of 2024, the average TCE rate for chemical tankers is approximately $26,400 per day.
• On July 8, 2024, the Company announced that Founder and CEO Anthony Gurnee has informed the Board of Directors (the “Board”) of his intention to retire from his executive and board positions later this year. Following a comprehensive succession process, the Board appointed current executive and Chief Commercial Officer Gernot Ruppelt as the Company’s new CEO, and expanded current CFO Bart Kelleher’s position to take on the additional role of President, with the leadership transition to take effect from September 16, 2024 at the Company’s upcoming quarterly Board meeting. This transition represents the culmination of leadership succession planning that has been long-established and extensively discussed at the board and management levels. Following his retirement from the Company, current CEO Anthony Gurnee will remain available to Ardmore as an advisor during the transition period. In connection with their promotions, both Ruppelt and Kelleher will be joining the Board of Directors of the Company.
• In June 2024, the Company exercised its purchase options for both the Ardmore Seawolf and Ardmore Seahawk, which were under sale-leaseback arrangements.

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

“Market conditions and charter rates continue to be exceptionally robust during an otherwise seasonally slow point in the year, a result of limited newbuildings delivering, an aging fleet, and steady oil demand growth providing a robust baseline. In addition, a number of geopolitical factors, most notably the re-routing related to the Russia-Ukraine conflict, is further supporting these strong market conditions.

Ardmore’s high-quality, recently upgraded, and spot-exposed fleet is enabling the Company to fully exploit these conditions. Following our significant drydocking and upgrade program last year and early this year, our fleet is now enjoying increased revenue days and enhanced earnings potential. In addition to which, our proactive balance sheet management and comprehensive cost controls have reduced our breakevens, thus further enhancing cash flow, earnings and our dividend payout.

As I work closely with my Board and Company colleagues to ensure a seamless leadership transition at Ardmore, I take great pride in the extraordinary quality of the team we have assembled at all levels of the organization, as well as a shared vision for the future and an unwavering commitment to performance and progress. It is a testament to the Board’s dedication to good governance and professional development that we have within our ranks the best possible leaders for the years ahead. With Gernot and Bart providing proven leadership and continuity, I believe that Ardmore has never been better positioned to succeed than it is now.”

Summary of Recent and Second Quarter 2024 Events

Fleet

Fleet Operations and Employment

As of June 30, 2024, 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 (16 Eco-Design and four Eco-Mod) and six Eco-Design IMO 2 product/chemical tankers ranging from 25,000 dwt to 37,800 dwt.

MR Tankers (45,000 dwt – 49,999 dwt)

At the end of the second quarter of 2024, the Company had 20 MR tankers in operation, all of which were trading in either the spot market or on time charters. The MR tankers earned an average TCE rate of $40,652 per day in the second quarter of 2024. In the second quarter of 2024, the Company’s 16 MR Eco-Design tankers earned an average TCE rate of $41,385 and the Company’s four MR Eco-Mod tankers earned an average TCE rate of $36,987 per day.

In the third quarter of 2024, the Company expects to have 95% of its revenue days for its MR tankers employed in the spot market with the remaining 5% of revenue days subject to time charters. As of July 31, 2024, the Company had fixed approximately 45% of its total spot MR revenue days for the third quarter of 2024 at an average spot TCE rate of approximately $34,300 per day, which includes MR Eco-Design tankers at $33,700 per day and MR Eco-Mod tankers at $38,600 per day.

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

At the end of the second quarter of 2024, 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 2024, the Company’s six Eco-Design product / chemical vessels earned an average TCE rate of $30,330 per day.

In the third quarter of 2024, the Company expects to have all revenue days for its Eco-Design IMO 2 product / chemical tankers employed in the spot market. As of July 31, 2024, the Company had fixed approximately 50% of its Eco-Design IMO 2 product / chemical tankers revenue days for the third quarter of 2024 at an average TCE rate of approximately $26,400 per day.

Drydocking

The Company had 54 drydocking days in the second quarter of 2024. The Company is currently scheduled to have no drydocking days in the third quarter of 2024.

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 July 31, 2024 of $0.38 per common share for the quarter ended June 30, 2024. The dividend will be paid on September 13, 2024, to all shareholders of record on August 30, 2024.

Leadership Transition

On July 8, 2024, Ardmore announced that Founder and CEO Anthony Gurnee had informed the Board of his intention to retire from his executive and board positions later this year. Following a comprehensive succession process, the Board appointed current executive and Chief Commercial Officer Gernot Ruppelt as the Company’s new CEO, and expanded current CFO Bart Kelleher’s position to take on the additional role of President, with the leadership transition to take effect from September 16, 2024 at the Company’s upcoming quarterly Board meeting.

This transition represents the culmination of leadership succession planning that has been long-established and extensively discussed at the board and management levels. Following his retirement from the Company, current CEO Anthony Gurnee will remain available to Ardmore as an advisor during the transition period. In connection with their promotions, both Ruppelt and Kelleher will be joining the Board of Directors of the Company.

Sale of stake in e1 Marine

In May 2024, Ardmore sold its stake in e1 Marine for $1.65 million and realized a modest gain of $0.5 million after investing in the company three years ago. e1 Marine has advanced the development and marketing of methanol-to-hydrogen reformer technology for marine applications, and as a result, needs further capital to scale its business. With our focus as a product and chemical tanker company, and guided by our capital allocation policy, we believe it is prudent to take this course of action and let other investors in e1 Marine, who have an aligned strategy and access to capital for this type of investment, drive this next stage of the company’s growth.

Separately, as Ardmore remains an investor in Element 1 Corp., it continues to have exposure to any future growth of e1 Marine’s business.

Fleet

In April 2024, Ardmore delivered the 2010-built Ardmore Seafarer to its buyer and, in a separate transaction, took delivery of the previously announced acquisition of a 2017 Korean-built MR product tanker, the Ardmore Gibraltar.

In June 2024, Ardmore exercised its purchase options for both the Ardmore Seawolf and Ardmore Seahawk, which were under sale-leaseback arrangements.

Publication of 2023 Sustainability Report

On June 13, 2024, the Company published its 2023 Sustainability Report, highlighting its progress towards a more sustainable future. In 2023, 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/

Geopolitical Conflicts

The ongoing Russia-Ukraine war 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.

Geopolitical tensions have increased since commencement of the Israel-Hamas war in October 2023. Since mid-December 2023, Houthi rebels in Yemen have carried out numerous attacks on vessels in the Red Sea area. As a result of these attacks, many shipping companies have routed their vessels away from the Red Sea, which has affected trading patterns, rates and expenses. Further escalation or expansion of hostilities of such crisis could continue to affect the price of crude oil and the oil industry, the tanker industry and demand for the Company’s services.

Results for the Three Months Ended June 30, 2024 and 2023

The Company reported net income of $61.8 million for the three months ended June 30, 2024, or $1.48 earnings per basic share and $1.47 earnings per diluted share, as compared to net income of $23.7 million, or $0.57 earnings per basic and diluted share for the three months ended June 30, 2023.

Results for the Six Months Ended June 30, 2024 and 2023

The Company reported net income of $100.2 million for the six months ended June 30, 2024, or $2.41 earnings per basic share and $2.39 earnings per diluted share, as compared to net income of $66.9 million, or $1.63 earnings per basic share and $1.60 earnings per diluted share for the six months ended June 30, 2023.

Management’s Discussion and Analysis of Financial Results for the Three Months Ended June 30, 2024 and 2023

Revenue. Revenue for the three months ended June 30, 2024 was $121.3 million, an increase of $29.4 million from $91.9 million for the three months ended June 30, 2023.
The Company’s average number of operating vessels was 26.0 for the three months ended June 30, 2024, consistent with 26.0 for the three months ended June 30, 2023.

The Company had 2,093 spot revenue days for the three months ended June 30, 2024, as compared to 2,295 for the three months ended June 30, 2023. The Company had 24 vessels employed directly in the spot market as of June 30, 2024 compared with 26 vessels as of June 30, 2023. Increases in spot rates during the three months ended June 30, 2024 resulted in an increase in revenue of $30.0 million, while the decrease in spot revenue days resulted in a decrease in revenue of $7.9 million for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.

The Company had two product tankers employed under time charters as of June 30, 2024 as compared to none as of June 30, 2023. There were 186 revenue days derived from time charters for the three months ended June 30, 2024, as compared to none for the three months ended June 30, 2023. The increase in revenue days for time-chartered vessels resulted in an increase in revenue of $7.3 million for the three months ended June 30, 2024.

Voyage Expenses. Voyage expenses were $34.7 million for the three months ended June 30, 2024, an increase of $3.2 million from $31.5 million for the three months ended June 30, 2023. The net increase is primarily due to a $4.1 million increase in port and agency expenses plus commission costs, partially offset by a $0.9 million decrease from lower bunker prices.

TCE Rate. The average TCE rate for the Company’s fleet was $37,762 per day for the three months ended June 30, 2024, an increase of $11,221 per day from $26,541 per day for the three months ended June 30, 2023. 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 the Company records revenue under U.S. GAAP.

Vessel Operating Expenses. Vessel operating expenses were $16.2 million for the three months ended June 30, 2024, an increase of $0.9 million from $15.3 million for the three months ended June 30, 2023. The increase 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 $5.6 million for the three months ended June 30, 2024, an increase of $1.3 million from $4.3 million for the three months ended June 30, 2023. This increase is as a result of higher charter hire rates during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Total charter hire expense for the three months ended June 30, 2024 was comprised of an operating expense component of $2.9 million and a vessel lease expense component of $2.7 million.

Depreciation. Depreciation expense for the three months ended June 30, 2024 was $7.6 million, an increase of $0.8 million from $6.8 million for the three months ended June 30, 2023. This increase is primarily attributable to the purchase of the Ardmore Gibraltar in April 2024 and the Ardmore Seafarer being classified as held for sale in February 2024 and subsequently sold in April 2024.

Amortization of Deferred Drydock Expenditures. Amortization of deferred drydock expenditures for the three months ended June 30, 2024 was $0.9 million, consistent with $0.9 million for the three months ended June 30, 2023. Deferred drydocking costs 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, 2024 were $5.3 million, an increase of $0.5 million from $4.8 million for the three months ended June 30, 2023. This increase is primarily due to the timing of recognizing variable-based compensation expense.

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, 2024 were $1.0 million, generally consistent with $1.1 million for the three months ended June 30, 2023.

Gain on Vessel Sold. Gain on vessel sold for the three months ended June 30, 2024 was $12.3 million, compared to $0 for the three months ended June 30, 2023. This relates to the sale of the Ardmore Seafarer in April 2024.

Interest Expense and Finance Costs. Interest expense and finance costs for the three months ended June 30, 2024 were $2.0 million, a decrease of $0.8 million from $2.8 million for the three months ended June 30, 2023. The decrease in costs was primarily due to the conversion of the Company’s term loan into a fully revolving facility with 50% of the term loan being converted to a revolving facility during the three months ended June 30, 2023 and the remaining 50% being converted during the three months ended March 31, 2024. The current flexibility of the Company’s revolving facilities, with only $44.2 million drawn down as of June 30, 2024, has minimized the impact on the Company of the elevated interest rate environment. Amortization of deferred finance fees for the three months ended June 30, 2024 was $0.3 million, consistent with $0.3 million for the three months ended June 30, 2023.

Gain on Extinguishment. Gain on extinguishment for the three months ended June 30, 2024 was $1.4 million, an increase of $1.4 million from $0 for the three months ended June 30, 2023. As a result of the early prepayment of the finance lease related to the exercises of the vessel purchase options for the Ardmore Seawolf and Ardmore Seahawk, the Company recorded a gain on extinguishment of $1.4 million for the three months ended June 30, 2024. The Company recorded no corresponding gain or loss on extinguishment for the three months ended June 30, 2023.

Liquidity

As of June 30, 2024, the Company had $254.8 million in liquidity available, with cash and cash equivalents of $47.4 million (December 31, 2023: $46.8 million) and amounts available and undrawn under its revolving credit facilities of $207.4 million (December 31, 2023: $221.2 million). In April 2024, the Company paid the remaining $34.4 million for the purchase of the Ardmore Gibraltar, in addition to $8.4 million which it previously paid as a deposit. In April 2024, the Company received $27.1 million for the sale of the Ardmore Seafarer. In June 2024, the Company paid $41.0 million to complete the purchases of the Ardmore Seawolf and Ardmore Seahawk, which were under sale-leaseback arrangements.

Source: Ardmore Shipping Corporation