The Board of Directors of d’Amico International Shipping S.A., a leading international marine transportation company operating in the product tanker market, today examined and approved the Company’s 2022 Third Interim Management Statements as at September 30th, 2022 (Q3 and 9M 2022 Financial Results).

MANAGEMENT COMMENTARY

Paolo d’Amico, Chairman and Chief Executive Officer of d’Amico International Shipping commented:

‘I am pleased to report DIS’ financial results for the third quarter and the first 9 months of 2022. Our Company posted a Net profit of US$ 43.6 million in Q3 2022 vs. a Net loss of US$ (13.8) million in Q3 2021 and a Net Profit of US$ 62.8 million in the first nine months of 2022 vs. a Net loss of US$ (28.9) million in the same period of last year.

This improvement relative to the previous year is the result of the very strong product tanker market we have been benefiting from since the end of the first quarter. In fact, DIS achieved a daily spot rate of US$ 37,159 in Q3 2022 (US$ 9,248 in Q3 2021) and of US$ 26,963 in the first 9 months of 2022 (US$ 10,635 in the first 9 months of 2021). At the same time, DIS had 38.8% of its employment days covered at an average daily rate of US$ 15,251 in the first nine months of the year. Thus, we achieved a total blended daily TCE (spot and time-charter) of US$ 30,230 in Q3 2022 (US$ 12,113 in Q3 2021) and of US$ 22,421 in the first 9 months of 2022 (US$ 12,939 in first 9 months of 2021).

After a rather weak start of the year, due to a temporary increase in Covid cases and the consequent restrictions to mobility implemented by several countries around the world, the product tanker market began to rapidly improve towards the end of Q1, as economies gradually reopened following the lifting of such restrictions. In addition, starting from the end of the first quarter, the outbreak of the war in Ukraine has been having a significant impact on the tanker markets, mostly due to inefficiencies, due to suboptimal trading patterns and an increase in activities such as transhipments, as well as increase in average distances sailed, as Europe sources from further away oil and refined products previously imported from Russia, which in turn finds buyers in more distant locations in Asia, mainly China and India. According to the IEA, EU liftings of Russian oil have declined by 1.1 million b/d since the outbreak of the war, and the European share of Russian oil exports decreased from approximately 49% at the beginning of the year to 37% in August, whilst Russian diesel shipments to the EU and the UK decreased by approximately 10% in the same period. This shift in trade flows could accelerate in the coming months, as the EU embargo on Russian crude oil and product imports comes into effect respectively in Dec’22 and Feb’23, forcing an additional 1 mb/d of products and 1.4 mb/d of crude to find new homes and leading to higher ton-mile demand. At the same time, exports of Russian crude and DPP to China, India and Turkey increased sharply since the onset of the war in Ukraine. According to some recent statistics, in the last months Russia accounted for close to 20%, 22% and 60%, respectively of China’s, India’s and Turkey’s crude imports.

Following OPEC+’s larger than expected 2 million b/d cut of its quotas relative to the August baseline, from November 2022 to December 2023, the oil market is now expected to be in deficit in 2023, leading potentially to further stock drawdowns at a time when OECD industry inventories of clean refined products are already well below their 5-year average. This situation could eventually create a pent-up demand for transportation as inventories will have to be replenished.

Despite the weakening macroeconomic scenario and the current recessionary risks, especially in Europe and the US, the product tanker market is expected to remain strong in the following months and quarters. In fact, any potential decrease in demand in these regions should be more than outweighed by an increase in consumption in Asia and especially in China, as it reopens its economy, and an increase in jet fuel consumption, which is rising fast and still needs to reach pre-pandemic levels. Furthermore, trading inefficiencies and the ongoing shift of trade patterns, with the associated lengthening of trade routes I mentioned above, will provide an additional significant support to freight rates.

We remain very positive also on the longer-term outlook for our industry, as we see very positive fundamentals both on the demand and the supply side. The secular dislocation of refinery capacity further away from key consuming centres (Europe, USA, Australia) to mainly the Far East and the Middle East, will be extremely beneficial for product tankers’ ton-mile demand. In addition, tonnage supply growth is expected to be very limited in the coming years and currently estimated at only 1.2% for 2022 and 0.5% for 2023, amongst the lowest levels ever recorded. The orderbook to fleet ratio of the vessel segments we operate in (MRs and LR1s) currently stands at 3.1% and more than 33% of the existing tonnage is older than 15 years. However, there is very limited ordering activity today, as market players are extremely reluctant to order given high newbuilding costs, emissions-regulation uncertainty, and limited yard availability for deliveries over the next two years (orders placed now would be delivered only in 2025). In addition, the increasing number and scope of environmental regulations imposed by international bodies, such as the IMO and the EU, will lead to a further acceleration in the scrapping of old, less efficient tankers and might force some of these vessels to slow-steam to reduce emissions.

As I look with optimism at the fundamentals of our industry, I think DIS is very well positioned to take full advantage of this market cycle. I am proud of the long-term investment decisions we have taken in recent years, which allow us today to own and operate a very young, top-quality, and fuel-efficient fleet, boosting our earnings potential whilst significantly reducing our carbon emissions, a key strategic objective of our Company. In the third quarter of the year, we have been very active also in the sale and purchase market, through a timely acquisition of the full control of Glenda International Shipping (a 50/50 JV with the Glencore Group) at a very attractive price and also through the exercise of a purchase option on one of our modern and ‘eco’ TC-in MR vessels, which was well in the money. We have also a well-balanced commercial strategy, based on an efficient mix of spot exposure and time-charter coverage, which we adapt opportunistically depending on the market outlook. Given the market’s very strong outlook at the beginning of the year we intentionally decided to reduce our coverage, waiting for period rates to rise to more attractive levels. In fact, for the last quarter of 2022, we have a contract coverage of only approximately 20% at US$ 20,544 and we have already fixed on the spot market around 46% of DIS’ available vessel days for the period at approximately $ 37,500/day, resulting in a total blended daily TCE (spot and time-charter) of US$ 32,440/day for around 65% of DIS’ total available vessel days.

I am proud of the excellent results we have been achieving so far this year, and thanks to the positive market fundamentals, the strategic positioning of our Company, and our very solid financial structure, I am confident we will continue to generate attractive returns for our Shareholders for many more quarters.’

Carlos Balestra di Mottola, Chief Financial Officer of d’Amico International Shipping commented:

‘DIS’ posted a Net profit of US$ 43.6 million in Q3 2022 and a Net profit of US$ 62.8 million in the first nine months of the year, compared with a loss US$ (13.8) million in Q3 2021 and a loss of US$ (28.9) million in the first nine months of 2021. Such strong year-on-year improvement is due to the buoyant product tanker market we have been experiencing since the end of Q1 2022. In fact, DIS achieved a daily spot rate of US$ 37,159 in Q3 2022 vs. US$ 9,248 in Q3 2021 and of US$ 26,963 in the first 9 months of 2022 vs. US$ 10,635 in the same period of last year. In addition, we had contract coverage of 38.8% at a daily average rate of US$ 15,251 in the first 9 months of 2022. Therefore, our total daily average rate (which includes both spot and time-charter contracts) was of US$ 30,230 in Q3 2022 vs. US$ 12,113 in Q3 2021, and of US$ 22,421 in the first 9 months of 2022 vs. US$ 12,939 in the first 9 months of last year.

DIS’ EBITDA amounted to US$ 69.1 million in Q3 2022 vs. US$ 14.9 million achieved in Q3 2021, and to US$ 135.3 million in the first 9 months of 2022 vs. US$ 47.9 million in the same period of last year, representing a 182% increase y-o-y. In the first 9 months of 2022, we have been very active in the sale and purchase market:

-In the first half of 2022, DIS finalized the sale of the oldest vessels in our fleet (M/T High Valor and M/T High Priority, both built in 2005), generating cash for around US$ 14.8 million in total, net of commissions and of the reimbursement of the vessels’ existing bank loans. In addition to improving DIS’ liquidity position, the sale of these vessels, was also in line with DIS’ strategic goal of owning and operating a very modern and ‘eco’ fleet.

-In Q3 2022, DIS exercised its purchase option on M/T High Adventurer, an ‘eco’ MR vessel built by a top Japanese yard in November 2017 and time-chartered-in by d’Amico Tankers ever since, for a consideration of JPY 4.1 billion (equivalent to approximately US$ 30.4 million) and with delivery expected in November 2022.

-In Q3 2022, DIS gained control of 100% of Glenda International Shipping d.a.c., through the redemption of the shares owned by Topley Corporation (part of the Glencore Group) in the JV for a consideration of US$ 27.4 million. Prior to the transaction Topley owned a participation of 50% in Glenda International Shipping, which owned four MR vessels built between 2010 and 2011 by Huyndai Mipo, South Korea.

We have significantly reduced our refinancing risk up to 2024. In fact, between the end of last year and the very beginning of 2022, we refinanced in full all the bank debt which was due to mature in 2022, and between July and October 2022 we refinanced all our bank debt maturing in 2023, at very competitive terms.
Today, DIS benefits from the strategic and operational flexibility deriving from a solid financial structure and from a very modern fleet. In fact, thanks to the strong freight markets of the first half of 2020 and of the first nine months of 2022, as well as to the deleveraging plan implemented in the last few years, through vessel disposals and equity capital increases, we can count today on a very solid balance sheet and a very comfortable liquidity position. In addition, given the strong market conditions and the positive medium-term outlook for our industry, vessel values have been rising in the last 12 months. In fact, DIS’ fleet market value increased by ~16% in Q3’22 alone and according to the valuation report provided by a primary broker, the estimated market value of DIS’ owned and bareboat fleet as at 30 September 2022 was of US$ 951.5 million. As at the end of September 2022, DIS had Cash and cash equivalent of US$ 85.1 million and a leverage ratio (‘net financial position (excluding IFRS 16)’ to ‘fleet market value’) of 42.0% vs. 60.4% at the end of ‘21 (65.9% at the end of ‘20, 64.0% at the end of ‘19 and 72.9% at the end of ‘18).

The key investment, financing, and commercial decisions we have taken in recent years allow us today to fully benefit from the current strong product tanker market. In the coming months, we intend to take the opportunity arising from such a strong cycle to further strengthen our balance sheet and lower our breakeven costs, so as increase our Company’s future competitiveness, allowing us to generate attractive returns for our Shareholders not only in the near term but also for many more years to come.’

FINANCIAL REVIEW

SUMMARY OF THE RESULTS IN THE THIRD QUARTER AND NINE MONTHS OF 2022

The product tanker market has strengthened significantly since the onset of the war in Ukraine in February ‘22, remaining very firm throughout the third quarter of the year. Product tanker earnings remain at historically high levels, whilst recently also the market for crude tankers and, in particular, VLCCs, whose performance has lagged this year, strengthened significantly. Strong conditions have been driven by a range of supportive demand factors, including a sharp increase in oil production, as well as in oil demand and refined volumes, coupled with shifts to longer-haul trades, arising from both the Ukraine conflict and from shifts in the refining landscape. Very high refining margins for most of this year, in particular for gasoil, have also contributed to the market’s strength. Fleet growth has also been muted and should remain subdued in the coming quarters as the sector benefits from an orderbook to fleet ratio which is currently at historical lows.

The US is now a major exporter of diesel, particularly to South America and the Caribbean and increased shipments through Q3 2022, following strengthening domestic refinery runs, amid firm global demand. Preliminary US EIA data shows that distillate exports peaked at 1.54 million b/d in the middle of Q3, the highest level since August 2019. United States distillate stocks are now at historical lows and there is mounting political pressure for US refiners to replenish domestic inventories ahead of the winter season, particularly in regions such as the East Coast where stocks are particularly low.

The one-year time-charter rate is always the best indicator of spot market expectations and as at the end of September 2022 was assessed at around US$ 27,000 per day for a conventional MR2, with an Eco MR2 assessed at a premium of around US$ 3,000 per day.

In the first 9 months of 2022, DIS recorded a Net profit of US$ 62.8 million vs. a Net loss of US$ (28.9) million posted in the same period of 2021. Such positive variance is attributable to a much stronger product tanker market relative to the same period of last year. Excluding results on disposal and non- recurring financial items, as well as the asset impairment and the effects of IFRS 16, DIS’ Net result would have amounted to US$ 68.1 million in the first 9 months of 2022 compared with US$ (22.6) million recorded in the same period of 2021. In Q3 2022, DIS posted a Net profit of US$ 43.6 million vs. a Net loss of US$ (13.8) million registered in the third quarter of last year. Excluding results on disposal and non- recurring financial items, as well as the asset impairment and the effects of IFRS 16, DIS’ Net result would have amounted to US$ 45.7 million in Q3 2022 compared with US$ (8.2) million recorded in Q3 2021.

In the first 9 months of 2022, DIS generated an EBITDA of US$ 135.3 million vs. US$ 47.9 million achieved in the same period of 2021 (US$ 69.1 million in Q3 2022 vs. US$ 14.9 million in Q3 2021), whilst its operating cash flow was positive for US$ 80.5 million compared with US$ 24.4 million generated in the same period of last year.

In terms of spot performance, DIS achieved a daily spot rate of US$ 26,963 in the first 9 months of 2022 vs. US$ 10,635 in the same period of 2021 (Q3 2022:

US$ 37,159 vs. Q3 2021: US$ 9,248), as a result of the much stronger market relative to the same period of last year.

At the same time, 38.8% of DIS’ total employment days in the first 9 months of 2022, were covered through ‘time-charter’ contracts at an average daily rate of US$ 15,251 (9 months 2021: 48.2% coverage at an average daily rate of US$ 15,414). A good level of time charter coverage is one of the pillars of DIS’ commercial strategy and allows it to mitigate the effects of the spot market volatility, securing a certain level of earnings and cash generation even throughout negative cycles. DIS’ total daily average rate (which includes both spot and time-charter contracts) was of US$ 22,421 in the first 9 months of 2022 compared with US$ 12,939 achieved in the same period of 2021 (Q3 2022: US$ 30,230 vs. Q3 2021: US$ 12,113).

OPERATING PERFORMANCE

Time charter equivalent earnings were of US$ 94.2 million in Q3 2022 vs. US$ 42.1 million in Q3 2021 and of US$ 209.8 million in the first 9 months of 2022 vs. US$ 131.0 million in the same period of 2021. In detail, DIS realized a daily average spot rate of US$ 37,159 in Q3 2022 compared with US$ 9,248 in Q3 2021 and of US$ 26,963 in the first 9 months of 2022 compared with US$ 10,635 in the same period of last year.

In the first 9 months of 2022, DIS maintained a good level of ‘coverage’1 (fixed-rate contracts), securing an average of 38.8% (9 months 2021: 48.2%) of its available vessel days at a daily average fixed rate of US$ 15,251 (9 months 2021: US$ 15,414). In addition to securing revenue and supporting the operating cash flow generation, these contracts enabled DIS to strengthen its historical relationships with the main oil majors. DIS’ total daily average TCE (Spot and Time Charter)2 was of US$ 30,230 in Q3 2022 vs. US$ 12,113 in Q3 2021, and of US$ 22,421 in the first 9 months of 2022 vs. US$ 12,939 in the first 9 months of last year.

Bareboat charter revenue was of US$ 1.2 million in Q3 2022 and US$ 3.6 million in the first 9 months of 2022, and it relates to the bareboat charter out contract started in October 2021 on one of d’Amico Tankers d.a.c.’s LR1 vessels.

EBITDA was of US$ 69.1 million in Q3 2022 (US$ 14.9 million in Q3 2021) and US$ 135.3 million in the first 9 months of 2022 (US$ 47.9 million in the first 9 months of 2021), reflecting the better freight markets experienced in the first six months of the current year.

Depreciation, impairment, and impairment reversal amounted to US$ (14.8) million in Q3 2022 (US$ (22.2) million in Q3 2021) and to US$ (47.4) million in the first 9 months of 2022 (US$ (54.8) million in the first 9 months of 2021). The amount for the first 9 months of 2022 includes an impairment of US$ (2.1) million on a MR vessel (M/T High Priority) owned by d’Amico Tankers d.a.c., whose sale was announced in Q1 2022 and finalized in Q2 2022. In accordance with IFRS 5, this vessel was classified as ‘asset held for sale’ at the end of Q1 2022, with the difference between its fair value less cost to sell and its book value charged to the Income Statement. The amount for the first 9 months of 2021 included US$ (5.8) million impairment booked on a MR vessel (M/T High Venture) owned by d’Amico Tankers d.a.c. classified as ‘asset held for sale’ (in accordance with IFRS 5) as at 30 September 2021, with the difference between its fair value less cost to sell and its book value charged to the Income Statement.

EBIT was of US$ 54.2 million in Q3 2022 (US$ (7.3) million in Q3 2021) and of US$ 88.0 million in the first 9 months of 2022 (US$ (6.9) million in the first 9 months of 2021).

Net financial income was of US$ (0.2) million in Q3 2022 (US$ 1.1 million in Q3 2021) and of US$ 0.7 million in the first 9 months 2022 (US$ 2.1 million in the first 9 months 2021). The amount for the first 9 months of 2022 comprises mainly US$ 0.6 million unrealized gain in relation to the ineffective part of DIS’ interest rate swap agreements, as well as bank interest income on funds held with financial institutions on deposit and current accounts.

Net financial charges amounted to US$ (10.3) million in Q3 2022 (US$ (7.6) million in Q3 2021) and US$ (25.6) million in the first 9 months of 2022 (US$ (24.0) million in the first 9 months of 2021). The amount for the first 9 months of 2022, comprises mainly US$ (21.5) million in interest expenses and amortized financial fees due on DIS’ bank loan facilities, actual expenses on interest rate swaps and interest on lease liabilities, as well as net realised loss on derivative instruments of US$ (0.9) million (US$ (0.6) million realized loss on freight derivative instruments, US$ (0.8) million realized loss on foreign exchange derivative instruments used for hedging purposes, US$ 0.5 million realized gain arising from the closing of some interest rate swaps), US$ (0.6) million negative exchange difference, and US$ (2.5) million negative impact arising

from the termination of the lease contracts on High Fidelity and High Discovery. The amount recorded in the same period of last year included US$ (23.8) million in interest expenses and amortized financial fees due on DIS’ bank loan facilities, actual expenses on interest rate swaps and interest on lease liabilities, as well as US$ (0.1) million of unrealised losses mainly in relation to the ineffective part of DIS’ interest rate swap agreements.

DIS recorded a Profit before tax of US$ 43.7 million vs. a loss of US$ (13.8) million in Q3 2021, and a profit of US$ 63.0 million in the first 9 months of 2022 vs. a loss of US$ (28.8) million in the same period of 2021.

Income taxes amounted to US$ (0.2) million in Q3 2022 (close to zero in Q3 2021) and to US$ (0.3) million in the first 9 months of 2022 (US$ (0.2) million in the first 9 months of 2021).

DIS recorded a Net profit of US$ 43.6 million in Q3 2022 vs. a Net loss of US$ (13.8) million in Q3 2021 and a Net profit of US$ 62.8 million in the first nine months of 2022 vs. a Net loss of US$ (28.9) million in the same period of last year.

Excluding the result on disposals and non-recurring financial items from Q3 2022 (US$ (3.1) million) and from the same period of 2021 (US$ 0.3 million), as well as the asset impairment of US$ (5.8) million from Q3 2021 and the net effects of IFRS 16 from both periods (Q3 2022: US$ 0.9 million and Q3 2021: US$ US$ (0.1) million), DIS’ Net result would have amounted to US$ 45.7 million in Q3 2022 compared with US$ (8.2) million recorded in the same period of the previous year.

Excluding results on disposals and non-recurring financial items from the first 9 months of 2022 (US$ (4.5) million) and from the same period of 2021 (US$ 0.05 million), as well as the asset impairments (US$ (2.1) million in the first 9 months of 2022 and US$ (5.8) million in the same period of 2021) and the net effects of IFRS 16 from both periods (9 months 2022: US$ 1.2 million and 9 months 2021: US$ (0.6) million), DIS’ Net result would have amounted to US$ 68.1 million in the first 9 months of 2022 compared with US$ (22.6) million recorded in the same period of the previous year.

CASH FLOW AND NET INDEBTEDNESS

DIS’ net cash flow for the first 9 months of 2022 was US$ 43.5 million vs. US$ (20.9) million in the same period of 2021 (Q3 2022: US$ 40.3 million vs. Q3 2021 US$ (10.2) million).

Cash flow from operating activities was positive, amounting to US$ 61.5 million in Q3 2022 vs. US$ 5.8 million in Q3 2021, and to US$ 80.5 million in the first 9 months of 2022 vs. US$ 24.4 million in the first 9 months of 2021.

DIS’ Net debt as at 30 September 2022 amounted to US$ 453.9 million compared to US$ 520.3 million as at 31 December 2021. Due to the application of IFRS 16 these balances include from 1 January 2019 an additional lease liability amounting to US$ 54.1 million as at the end of September 2022 vs. US$ 80.5 million as at the end of 2021. The net debt (excluding the IFRS16 effect) / fleet market value ratio was of 42.0% as at 30 September 2022 vs. 60.4% as at 31 December 2021 (65.9% as at 31 December 2020, 64.0% as at the end of 2019 and 72.9% as at the end of 2018).

Source: d’Amico International Shipping