Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Diamico Second Quarter And First Half Twenty Twenty Results Conference Call. Are in listen only mode. At this time, I would the conference over to Mr.
Paulo Damico, Chairman and CEO of Damico. Please go ahead, sir.
Hello to everybody and thank you for joining us to our usual call. Let's go straight to the results. On the first half twenty twenty, Our company posted a profit and net profit of $17,100,000. This is versus $24,300,000 loss in first half twenty nineteen. And adjusted net result, excluding nonrecurring, non cash items from both periods, we had $26,400,000 in first half twenty twenty versus a loss of $9,200,000 as of the south of 2019.
So we have an increase of $35,600,000 year on year. In Q2 2020, The company posted its best quarterly result since Q2 2015 with a net profit of $15,600,000 versus a loss of $18,800,000 last year. Year, again, excluding nonrecurring items from both Q2 2020 and Q2 2019, The net result would have been $20,100,000 profit this year against a loss of 4.8 last year. The daily spot rate on, on the first half of twenty twenty, it's been $21,238 per day. Against 13,386 achieved last year.
So it's a 59.4 percent improvement or if you prefer a $7900 per day
improvement.
In Q2 2020, it generated this generated its best quarterly spot result Since Q3 'eight, we have a daily spot average rate of 25,118. So 92.1% higher than the 13,000 that is on Q2 of twenty nineteen. 63% of the company days on its first half twenty twenty were covered through time charter contract at an average daily rate of 16,042. Against the coverage on the first half of twenty nineteen of forty 7.3% coverage at 14,496. So the company achieved a total daily average rate of 17,930 on the first half of twenty twenty versus 13,817 for last year and 19,555 on Q2 2020 against $13,007.10 on Q2 2019.
The net financial position excluding IFRS 16 to reflect market value ratio was 62% at the end of June 2020, versus 64% at the end of 2019 and compared with a 72.9% at the end of 2018. In April 2020, this announced that Glenda International Shipping, a fifty-fifty joint venture with Grenco, signed a memorandum of agreement for the sale of the MR vessel to Land Emeritus. In Q22 2020. This transaction allowed Glenda to generate around $18,800,000 in cash net of commission. In May 2020, this announced that Damico Tanker signed a memorandum of agreement for the sale of the Endysize vessels allowed Amico Tankers to generate $8,800,000 in cash, net of commissions.
Both of these vessels were delivered to their new owners before the end of the 1st semester. In July 2020, this announced that Damico Tankers signed an memorandum of agreement for the sale of 2 MRs, high progress and high performance This server transaction will allow the Micro Tankers to generate a total net cash around 16.3 $1,000,000 in the second half of twenty twenty. Talking about the market Beginning of the year, the general idea and outlook was quite positive based on the fundamentals due to the implementation on IMO 2020. So we were expecting a very good period Unfortunately, the sentiment achieved rapidly at the end of January when COVID arrived in China, COVID 19. Basically killing the demand and refining activity under the biggest importer of crude oil in the world.
In Masks, the OPEC members and Russia. They didn't agree on price and we took basically, the oil market to a price war, which killed the level of a barrel at very low levels. And this spike rush from many traders, an oil company, to try to, to stock as much oil as we could. As you know, the storage on, on shore is being rapidly filled up. And when we start moving at sea, which has been, taking in a lot of crude oil tankers and also product bankers went on early.
But storage moved also a lot on products. Anyhow, after this wall, OPEC plus, we agreed to reduce, to reduce the production In 2 tranches, one in June and another one should be now in July, and this is already improving the price of the barrel. Certainly, for us today, we are very much in a different market since the last 3, 4 months. But we look at the end of the year in a very positive way because we think that fundamentals are still there. Of course, We must see how COVID will, let's say, behave if we are going to have a second wave If we are going to have a lock down again, I don't think so.
And how all this will fall on our system. Say that, I leave the word to Carlos.
Yes. Good afternoon to everyone. The quick look at our fleet, which is at the June 30th was composed of 42 vessels. Fortunately, thanks to the strong markets over the last year or so, or at least strengthening markets over the last year or so and very strong markets over the last 6 months. We had the opportunity to sell some of our older vessels, which we have intended to do for some time now.
And we found a much greater liquidity in the market over this period. And so we managed to execute on this plan. Therefore, we, have now a very young fleet 6.8 years, of course, also young because of the important yield building program, that we that we executed between 2012 2019, and which entailed the delivery of 20 to new buildings to us. And, over $750,000,000 in investments are just in terms of payments to the yards. We, yeah, we have basically an MR player, with a presence also most recently in the LR1 segment that we built all echo vessels in the Handysize segment too.
Going on to the following page, the new building, the CapEx commitments, important to highlight that they now don't comprise any more investments for new buildings. So we are much lighter in that respect and that's only maintenance CapEx over the next over the foreseeable future. And also the second half of the year in terms of maintenance CapEx is much lighter than the first half. It's only around $3,000,000 in investments against $7,000,000 in the first half of the year. The CapEx commitments fall further in 2021, where we only have $5,000,000 in commitment in 2020.
To conscious around $4,000,000. Going on to the next page, the bank debt prepayments also, going to be lighter from this year, following the reimbursement of the Intesa facility, which we had, which entailed $15,000,000 in repayments every year. And that was in addition to the traditional bank financing we use. And that's been fully reimbursed in December 2019. In terms of, refinancing needs, balloons, upcoming balloons, we still have some here that we show in 2020, and those are relating to our vessels, which are in joint venture with Glencore to Glenda International Shipping.
And we are in advanced discussions already working on the loan documentation for the refinancing of these vessels. And for those, for the balloons, which are here shown in 20.21 of $26,000,000, We are in advanced discussions with some banks to refinance these and we hope to finalize these in Q3 this year.
And
so then it would only have if we manage to execute on this plan, the $65,000,000 to be refinanced in 22. So we believe we are in a very strong position also in terms of a bank debt repayment. In terms of purchase options, all the purchase options that we have on the 9 sale leaseback deals we closed on are theoretically in the money and 6 of these are already exercisable today. Another 3 will become so soon, well, one in September this year, another one in April, 21. The fact that they are in the money doesn't mean we won't be sizing them because they would, in any case, entail quite high LTV laws, which cannot be obtained today with traditional bags.
And therefore, they would require additional equity, which we right now prefer not to invest for this purpose given the uncertainty regarding the timing of the recovery because of COVID. But at the later stage, when we have more visibility and firming markets, that is that could be a potential use of funds for the cash that we have been generating this year, both operationally and through vessel disposals. Going on to the following page, the coverage, we benefited from the, very strong markets in the Q2 this year and for a lesser extent also in Q1. And but we nonetheless kept our feet firmly on the ground. We realized that the strong markets were was based on imbalances.
Paolo was mentioning, we entered the year with a very strong fundamentals and a very positive outlook for completely different reasons. But things changed fast with COVID. And so we continued coverage throughout Q2 when the markets were booming and we managed to increase our contract coverage for the second half of the year to 57%. At an average rate of 16.4. So this positions us very well to confront the weak markets we have right now.
Particularly in Q3, we are 62% covered. So it's almost twothree at 16.3. And hopefully this soft patch will not last that long. Echo vessels in our fleet has been increasing as we have been selling the older vessels that's previously mentioned. Going on to the following page, We showed the fleet evolution.
This is, let's say, the organic fleet evolution, if we don't do anything. And and the fleet decreases naturally as the TCN, some of these TCNs terminate. And the sensitivity to every $1000 that they change into the equipment earnings we showed at the bottom right, of the page and it is actually quite low today for 2020. It's only $3,000,000 but it rises considerably in 2021 to $10,000,000 because we are still, very exposed to the spot market in 2021, although we've slightly smaller fleet. Going on to the following page, the daily operating costs, They have been falling quarter.
This is for the half year twenty twenty compared to the half year twenty nineteen and twenty eighteen. So there was a slight improvement also relative to the first half of of 2019. Of course, the biggest improvement was between the first half of twenty eighteen and the first half of twenty nineteen. But overall, we have an 11% decrease since the first half of twenty eighteen. And it is due to the fact that we are managing a younger fleet, more efficient fleet to changes in our purchasing strategy and, to the stronger dollar to a small extent and also that we experienced during this period.
Mostly, I would say, to investments also in technology and the adoption of condition based maintenance. Which allows us to considerably lengthen the life of spare parts and bringing, generating important savings for us in this respect. On the G And A, we reorganized some of our activities and we managed to achieve some savings. We also benefited to some extent of the strong dollar and we achieved the saving relative to the first half of twenty eighteen there's an increase relative to the first half of twenty nineteen. And this is these are daily figures.
So, the increase is mostly attributable to the fact that we are managing in the first half of twenty twenty, a slightly smaller fleet than we did in the first half of twenty nineteen. But I can assure you, our G and A is a very competitive on a daily basis still today in the first half of twenty twenty relative to most of our or if not all of our listed peers. Going on to the following page, on the ratio of net position to fleet market value. This is also a key indicator we follow and we we aim to keep within certain levels. And, it has been falling since December 2018 when it was at 73%.
It fell to 64% by the end of 'nineteen. Also thanks to the capital increase that we pursued that year. And it fell further to 62 in terms of 30th June. It's benefited from the, in addition to the capital I mentioned, of course, from the strong operating cash flow generation, in the first half of the year. We finished the half, the first half with over $50,000,000 in cash.
Which is quite a comfortable position to be and given that our minimum liquidity covenants in our bank financings is of 25,000,000 And as I mentioned, the sensitivity for every $1000 per day change in that is equivalent to earnings is only $3,000,000, around $3,000,000 for the second half of twenty twenty. So, and in addition to that, as Paolo mentioned in the beginning of the presentation, in July, we signed MOAs for the sale of 2 additional vessels, which should bring in another $16,000,000 to our coffers. So very much stronger financial position and liquidity position generally. And looking at the key line items of the P and L. As Paolo mentioned, in Q220, the profit of $15,600,000 and excluding nonrecurring items of 20,000,000 this figure is the strongest since Q2 2015.
And the, and of course, it was driven mostly by the very, very strong markets. In the second quarter of the year. On the on the, if we look at the first half, the bottom line figure of $17,000,000. And excluding our recurring items, we are at 26 If we look in detail at the daily results of the assets trading on the spot market and employed through PC contracts on Page 16, we see that the average rate for the vessels operating in the spot market was of $25,000 in Q2. And that is the highest since Q3 2008.
So it is a very, very strong result. And even if we look at the first half, we are above 20,000, we are 21,200 coupled with the TC contracts, which were around 60 just over 60% for Q2 and the first half. We had an average or blended average of $19,500,000 for Q2 and $17,900,000 for the first half twenty twenty. When I pass it over to Paulo again for the market overview.
Thank you, Carlos. So going back to the market, as I said, we started the year with a very positive note. And of course, and of course, I mean, unfortunately, at the end of the 1st month, the outlook changed immediately with COVID in China. Of course, the world has been in a lockdown. Our solar plant has been closed.
So demand destruction of crude oil and refined products has been extremely poor. It's been devastating. Operating class. They didn't agree on the price. We took them to a sort of price war And this started the market because it's been a big rush to storing oil and storing product.
Now Tony, the crude oil market was so strong that many product carriers got dirty way of taking better rates. So also the product market fleet, Frank, and so we've got very good rates for a certain period of time. Of course, this demand was driven by by the storage factor, it's agreed because the final demand, as we say, was not there. And once that the Russians and the Saudis agreed again, On the cuts of production, things went went worse for us because the market group went back where it It's really where the fundamental of the mill is. We've seen a large drop in oil demand of course, in the refining fruits.
So it looks like according to IEA, Global Oil demand is expected to fall by 7,900,000 barrels per day, which means 92.1 1,000,000 barrels per day in 2020. This relative to last year when when we were close to $100,000,000. And we think that we will recover 5.3 in 2021. The global refinery runs are forecast to fall by 6,400,000 barrels per day in 2020. To 75,100,000 barrels.
So this is the let's say, yesterday's story, this has been the impact of COVID on, on, on our system. But still looking at tomorrow and the day after tomorrow, we think that the fundamentals are there. We think that we see that the participation, for instance, of products on the total oil seaborne trade, increased from a year 2000 was 25% today is 34. And there is a long term growth on refining capacity we are talking about something like between 20,000,000 dollars, $22,000,000 or $6,000,000. And 75 percent of its $6,000,000 are, let's say, far away from Europe and this is substantially Europe, which is the main diesel market.
So the ton mile elements should be more than positive should increase, giving a better outlook for the product carriers the industry. Against all this, we have a very low growth of a fleet. The supply is number 1, it's been postponed because during the lockdowns, ships are not being delivered, basically. And now we are carrying back And even with very low scrapping, the fleet growth is expected to be only 2% in 2020. And 1.2% in 2021.
And we should even expect a reduction on the fleet grow already on the second half of this year. Due to many reasons, One of these, we answer plenty of the future fuels. And let's say worries about from the ship owners in general, but it's very limited new building order. So putting all these together, we think that the fundamentals will play on our favor in the future. Of course, the big question mark is how big, how strong is going to be the 2nd wave of COVID if it's ever counted.
Thank you very much.
Yeah. Just, final look at the NAV evolution. We are on a deeper share is of $0.25 on page 32. So there's a small decrease relative to March 21, it was at 0.26 per share and the overall NAV after peaking in March 20 at 3 20 is at 3:13. Despite the process, despite the cash generation, because of a softening in vessel values, in the second quarter of the year, reflecting the much weaker market in June endroom this year after the April May peaks we experienced.
Basically, that's it. Share the trading at a huge discount to NAV, nonetheless. And, we are in a I believe very strong financial and liquidity position. And therefore, the risks of dilutive capital increases, I believe, are very, very limited. For, I believe also this discount is, is excessive.
It's not justified by the fundamentals, which as Paulo falls, although there's a lot of uncertainty around the short term. And there's, of course, a period of adjustment to digest these excess inventories, which had built up as a result of the imbalances related to COVID and to the flooding of oil in March by OPEC plus, we believe that, this process should not which should not be very long. Half of the excess or half of the, let's say, increase in floating storage since December was apparently already reabsorbed in a few months since the OPEC cut production. So that is a very positive sign and medium and longer term, we are very we are very positive on the fundamentals. And therefore, we don't feel this discount is just side.
Thank you very much, and I pass it over to you for the questions.
Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer session. You. Please.
The first question is from Matteo Vonitzoni with Kepler. Please go ahead.
Good afternoon. I have some questions one is, what are you seeing on the, asset values? So are you seeing some deflation in the transaction value yes or no? And what are your expectations going forward? Then I would like to know, as regards the next financial position, we have seen a nice deleverage over the last couple of quarters, driven by low cost Ex, and also, I think, the asset disposal, if you can clarify how much was included already in, for start and how much of the recently announced feed disposer should be included there in terms of cash in the second half.
So should we expect, net financial debt excluding the IFRS 16 to be somewhat below in the region of 500,000,000 at the end of the year? Thanks.
Regarding the I'll start with the second question, and regarding the CapEx and the vessel, the vessel disposals, the cash from the sale of the Chenode Guanzo and the Glenda Meredith already part of our first half financials, but the cash that we would receive on the sales of high progress and high performance. So the around $16,000,000 will come in in the second half of the year. And it is possible that we might be another vessel before the end of the year. So, and then in regarding asset values, they they have come down, but not in a considerable way. And, so we are still able to sell, vessels at quite attractive values.
Let's remember that they had increased, they had increased considerably. We have a slide in the presentation where we look at this. You can go back to that. Specifically applies. On page 18.
And then we show the five year old and ten year old asset value And we see that there is this decrease for the ten year old asset values from 20,000,000 to 18,000,000. So it's a 10% decrease. And we see the similar decrease also for the, five year old vessels from 31,000,000 peak around February to $27,500,000. But $27,500,000, it's still considerably higher than the 22,000,000 than we that we had in October $16,000,000 $18,000,000 is also considerably higher than the $15,500,000 we had in October 16, So yes, there was a correction. It reflects the weaker spot markets, the uncertain outlook over the next 12 months.
But the fact that the values asset values haven't increased by more a testament to the fact that most players are still very confident in the medium to longer term fundamentals of sector. And so people are not ready to just sell at any price, and, and they want to hold on to their assets, to be able to participate in the recovery when it happens would be driven by the same fundamentals which were driving the recovery until the end of last year, beginning of this year before COVID-nineteen And if anything, I think that in terms of order bookings improved further because as Paolo mentioned, there was very very little demolished, over the last 18 months, and therefore, the potential for demolition increased going forward, and we have today the proportion of the fleet that is greater than 20 years is higher than the order book, and that is a very good sign.
Thank you.
The next question is from Bonnie Massimo with Equita. Please go ahead.
Yes, good afternoon. Thank you for the presentation. A couple of questions. 1, regards to the coverage of your, spot rates, considering the increase in the coverage that you have taken thanks to the quite high prices on the market. What are the price, the level of price is that would trigger further coverage in the future in the sense that now the market seems to be, less less and stronger than before.
And the second question is, considering the deleverage of the balance that took place over the past few quarters. What is the leverage range that you would consider as, normal in your it, and maybe that could trigger some, dividend payment. Going forward, we have been talking about this in in Q1, I don't know if this has a change over the past quarter?
Talking about rates today rate for a 1 year period, it should be around 13.4 say, for a non eco ship. And, it should increase, let's say, by close to $1000 for an eco ship. And, this is a ballpark. Going longer, is it possible because there's no mark today. I mean, there have been some tentative deals for 3 years, but Of course, due to the uncertainty charters, they moved away and they are not taking position longer than in a year time.
And, as far as the second question, excuse me, can you repeat it?
In the sense that, you have been deleveraging the the the balance sheet recently. So now we have a leverage that is, quite sound considering the, the, let's say, the fleet available do you consider this leverage already a level in which you can start paying dividend going forward or let's say you wait for the deleverage to consider dividend payments?
No, we think that we are still on our de leverage mode. And that is our opinion because we want to have a very prudent approach to the
Okay, thank you.
Once
again,
The next question is from Daniela Alibrandi with MainFirst. Please go ahead. Mister Adi Brandy, maybe your line is on mute. We cannot hear you.
Can you hear me?
Yes. Now we can.
Okay. So thanks, thanks for the line. Just a question actually on how do you see, EBITDA evolving in 2020? We've seen the market is not as buoyant as in April, May, have a little bit come down. So, just probably you're seeing maybe if you can be more has been developing more visibility now that we are in early August, maybe on the EBITDA, also continue to succeed quite wide, 10104.
So do you see see maybe this level is achievable? Thank you.
Look, unfortunately, today, to look at the future market, you must be more a virologist when a shipper. So it's a is what we get at Jose. We had adjust 1, one moment in South America few weeks ago where there's been a lack of tonnage. The market moved immediately from 10,000 $20,000 a day for one ship and one trip. So there is sensitivity in the market, which is very strong means that the product has to be moved and in some cases has to be moved far enough at any cost.
So we, it is difficult to say what is going to happen tomorrow. If we going the way we are, we are seeing anyhow some improvement improvements coming in. Of course, today, take for, for instance, this month and next month, this should be the gasoline period because America should be driving his cars on the streets. Unfortunately, they are not because there are most of them locked down at all. But as you see a movement or in the state, you have more people coming out you realize immediately where it's a very strong sensitivity, you realize immediately that demand is I think it's, to me, impossible to give a serious sense as to what is going to happen from here to the end of a year.
The only thing I know that this COVID is going to finish and then our forces will come in. And and the fundamentals as we say are there and are positive.
Once again, if you for questions. Thank Amanda, no more questions registered at this time. Gentlemen, would you like to add any further comments to conclude the conference?
Thank you very much everybody. Thank you.
Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your tele