Danaos Sets Sights on Acquiring Second-Hand Post Panamaxes

Danaos Corporation, Piraeus-based containership charter owner, reported an adjusted net income of USD 43.8 million for the three months ended September 30, 2015 compared to USD 18 million reported in the same period last year.

Danaos attributed the increase of USD 25.8 million in adjusted net income to a reduction of $21.8 million in net finance costs mainly due to lower debt balances and interest rate swap expirations and an increase of USD 5 million in operating revenues.

The shipping company’s operating revenues increased by 3.6%, or USD 5 million, to USD 144.5 million in the said period when compared to corresponding figures from 2014.

During the nine months ended September 30, 2015, Danaos had an average of 56 containerships and increased fleet utilization to 99.2% from 97.3% reported last year.

The company’s adjusted net income was USD 112.3 million for the nine months ended September 30, 2015, up by USD 75.7 million from last year.

“We have adjusted our net income in the nine months ended September 30, 2015 for unrealized gains on derivatives of $11.6 million and a non-cash expense of $13.4 million for fees related to our comprehensive financing plan,” the company said.

The increase of USD 75.7 million was mainly attributed to a reduction of USD 58.4 million in net finance costs, a USD 5.3 million improvement in total operating costs and an increase of USD 13.2 million in operating revenues.

” Our financing costs will continue to decrease and, as a result, earnings will continue to increase, as we continue to execute our comprehensive debt reduction plan and benefit from the expiration of expensive interest rate swaps over the next 2 quarters,” Danaos’ CEO John Coustas commented.

During the 3rd quarter of the year, the industry witnessed a deterioration in the fundamentals of the container market both in terms of freight rates and charter rates. Idle tonnage has now surpassed the 1 million TEU mark, which represents approximately 5% of the world fleet.

“The silver lining is that newbuilding ordering has effectively come to a halt, while we also expect to see increased scrapping activity over the next 12 months. The combination of supply moderation and the eventual resumption of stronger demand growth will drive the containership sector recovery, which we see beginning in the spring of 2016 and strengthening into 2017,” Coustas said.

“Undeniably, the current market offers many attractive opportunities to acquire assets, particularly in the second-hand market for Post Panamax vessels. During the 3rd quarter we established Gemini Shipholdings Corporation, a joint venture in which Danaos Corporation holds a 49% equity interest, to act against these opportunities. Gemini has already acquired two 5,500 vessels and one 6,500 TEU vessel all built in 2001/2002 and has recently agreed to acquire on subjects another 6,500 TEU containership built in 2002.”

Coustas said that the investment in Gemini allows Danaos to resume its growth strategy as weakness in the containership market “presents compelling value.”

“Our charter coverage continues to be at a strong 95% in terms of operating revenues for the next 12 months, which insulates us from market weakness. At the same time, our USD 5,700 daily operating cost clearly positions us as one of the most efficient operators in the industry,” he added.