Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Damico Full Year 2019 Results Conference Call. As a reminder, all participants are in listen only mode. You.
During the conference call, I would like to turn the conference over to Paulo Damico, CEO of the company. Please go ahead, sir.
Thank you. Welcome to everybody. Hello. Today for us is So the bill, conversations because we are without our CFO, is in the in Morocco and myself, I am in remedial in Italy in as you can imagine close room. But anyhow, we we are here to to do our job and we are going to do it the best way we can.
So let's go to the executive summary first. As you remember in 2019, the share capital increase. The subscription have been busy subscribed by 97.3 percent of the light. And the remain part is being private placed. And the capital is amounting at 1,000,000.
Now net results. This posted a loss of 27,500,000 in full year 'nineteen, and this is versus $51,000,000 in full year 'eighteen. Good. On Q4 twenty nineteen, this made a profit of 4,900,000 versus a loss $13,900,000 in Q4. Here, again, if we exclude the nonrecurring items from both years, and the effects of the IFRS 16 from 'nineteen.
This net result would be a good amount to use US100 $100,000,000 for the full year loss for the full year 'nineteen compared to 7,400,000 full year 'eighteen. And the result of Q4 twenty nineteen would have been $7,400,000 profit. Versus 13,000,000 loss in Q4 'eighteen.
So the trend,
the trend is very in evidence. The Q4 'nineteen represents the 1st profitable quarter since Q1 of 2017. The vessel disposal and and sale and leaseback This raised around $441,000,002 100,000 in liquidity to such a transaction in full year 2019. It also adds amendment to our financial covenants on all bank loans, And, because the application of the IFRS 16 from January 1, 2019, had a negative effect of 4.3% on our network to total asset ratio. So we add the reduction of the minimum ratio to 25% from 35% as it used to be before.
On our governance. I'm charter equivalent. This daily spot rate was in full year 'nineteen, thirteen thousand six hundred, a little bit more than that. Again, 10,798 achieved in full year 'eighteen. So in quarter, the time charter, the time charter equivalent has been 17,000 242 and 42 against 11,617 in Q4 Please achieve a total total daily average rate of US dollars 14,230 in full year 2019 versus 12,184 in full year 2018.
Now market outlook and time charter coverage, 54.9% of our available vessel days in 2020 are covered. The 30 rate of 6200 which is a profitable level for our country. We are, having other Thanks after renewals coming in due for a year and we will to proceed. I see that every time that we have been as far as that is up to now, It's actually always a better rate. Of course, what's going on today a big question.
Mike, I don't want to quote on this because he's I think he's out of, anybody capability. Certainly, what we can say is this strong reduction of oil price should let's say, to use traders and all companies to and buy at least 2 store, not only crude but also products. We also expect, I mean, it's been declared, strong stimulus from various studies, starting China, but also from U. S. And the United States.
Save that. The these 3 containers are being extremely young. We We, took deliveries of, of the last rebuilding in, September. And, we will, keep looking for, opportunities to sell the older vessels and the way to leverage the company. Said that, I would like to leave a word to talk to Carlos.
He can go more in the numbers. Thanks.
Yes. Hello to good afternoon to everyone. I don't want to page 8. This is a slide that we, concerned regularly, our CapEx commitments, as we, stated several times, we we didn't we invested a lot during your fleet. We we ordered, and took delivery of 22 new buildings.
We terminated our new building program in October last year. Therefore, from 2012, be, we are much lighter in terms of, CapEx commitments, which are only linked to maintenance CapEx. And, 2020 is actually quite a big year in terms of maintenance. It's just a coincidence the data deliveries of the vessels. We we own, a lot of vessels It's not the coincidence that 2015 also was a big year in terms of CapEx.
So that from 2021, this number falls further to around 4,000,000 and the same applies to 2022. The CapEx number, but the inflated relative to usual because it also of the water ballast treatment systems. If we go on to the following page, once again, we have a big improvement relative to 2019 in 2020. We are much likely in terms of loan repayment. We fall from 1,000,000 to 34.4.
That's in excluding balloons. So, the facility of 17a half, which would, which encaled sorry, reimbursement of 15,000,000 per annum principal repayments that we fully reimbursed by the end of 'nineteen. So that was a facility that was on top of the traditional bank, bank financing that we pay yeah, what about our vessels. So we we need the flexibility and, we have in terms of debt repayments from 2020 onwards, which means more cash that is being generated for our shareholders. On page 10, we show the purchase options on the on the lease vessels.
And our all in the money. Last time we looked at this, there was one which was out of the money, but the surprise has moved. Continue moving up in the last quarter of the year. That's not implied we are going to be exercising soon these options because the LTVs, if we were to exercise, would still be quite high and not consistent with traditional bank debt financing, which can take you up to a degree of around 65%. Therefore, since these are also in terms of cost, quite competitive structures and quite flexible and the long term money.
Usually banks, tell us, do not exceed 5 years, but a lot of new facilities when they were, when they started, they had the capability. We and they're also gonna most of them without any financial covenant. So we we've we'll keep them until, we we we can put out the refinance, with like that without putting a all equity for, it's intended to, exercise the options, but that is not the case. Down to the part of the younger vessels, echo vessels that we want for time still. Paolo mentioned, instead of the art and all the vessels that we, we plan to sell over a few into the stronger market that we are starting to experience.
Go on to the following page for just a bit more detail on the on the fixtures that I will do. We continued fixing vessels at increasing rates throughout 2019. For example, the last fixed share on an Ecoma was at $18,000 per day. Ecoma 2 for 1 year. We fixed MR1.
So that's a hand to 1 year, this year, at 17,007.50 per day. So that's almost $20,000 per day for an MR2 equivalent. So that's also an Equinoxor. So that's a very strong rate. And I'm afraid it's rate was not that aligned with the market when it was done.
It it is a reflection of also relationship, a very strong relationship with the specific debts of at that point in time in that location. So but nonetheless, it it does confirm the trend and the strengthening market, also on the period contracts. And going on to the following page, if we, get more on the average rates for our period contracts and the percentage of the available vessel days that that covers such complex. And, we show that in Q2. We have, 61% covered.
In Q1 2020, we had 67% covered. If you look at 20 as a whole, our coverage is around 55%. So it does decline quite fast. Throughout 2021 for Anthony, however, is 19% covered in 2021. The good thing also is that the average rate at which these contracts for these contracts rise, throughout the year.
So the rise from 59 in Q1, which is already significantly higher than said before 2000 and almost 168 in Q4 2020. So that should definitely help us going forward. Especially if we also supported by the spot markets. And in this respect, also the fact that we have an increasing proportion of our fleet, which is equal, that is also going to be helping us going forward. Because these vessels do warrant a premium, which took was to pay to lower oil price 3 slightly smaller, but we saw this premium not long ago, arrive at around $2000 per day.
With today's oil price, maybe the premium of the Eco vessels is probably around $11,250 per day, but it's still significant. Going forward on page 13, we show the fleet evolution the average number of vessels we control, and how that changes over the next 3 years. Our fleet falls slightly as we But, yeah, our exposure to, the spot market actually rises. So it doesn't have sensitivity for every $1000, but they change in TC equivalent earnings, and it increases from 6,500,000 102211.5000000 in 2022. And the following page, the operating costs, they confirming the trend that we have been seeing throughout 2019.
Also on a full year basis, we, did a bit an important decrease in the up the operating costs relative to 2018, which as previously mentioned is attributable to, a younger fleet, the deliveries of all the new buildings over the last few years. A more homogeneous fleet and also to technology adoption of a condition based maintenance system. Which, through equipment allows us to monitor the actual state of the spare parts critical spare parts and increasing the average significantly and also reducing off hires. So when necessary, we can replace earlier and avoid the breakdown, but on average, we can keep these, parts going for much longer. And also, the strongest dollar in 'nineteen, relative to 'eighteen also helped the same applies and even more so to G And A because of 75% However costs, unit costs, and currency currencies, which are different from the US dollar and mostly, the euro.
So we could benefit from that. On page 15, we show our ratio of the methodology for free. It fell from 7% to 64%, in 2019. So 64% which is the figure at year end 2019. It's a one which we are not happy with, but we want to reduced this further going forward.
As Paolo mentioned, so profit. We expect to generate, in 2020 with the test vessels we intend to sell we believe we can bring this, ratio down significantly. The the fact that which contributed to the reduction in Malaysia in 'nineteen are mainly the increasing vessel values and the capital increase that we closed in April of 1,000,000. In terms of vessel sales, this was already covered in the effective summary in Matalo, we did raise around $41,000,000 to sale the same effect transactions that we closed soon. Selling these transactions in the beginning of the year.
Then we sold 4 vessels that we had in JVs, they're all JVs vessels, so one owned by Eco Tankers, on which we had a 33% participation. 2 vessels owned by the end shipping, on which we had 50, once upon participation and one vessel are owned by, Glenda International Shipping in which we instit participation. So that, of course, helped our liquidity position throughout the year. Going forward, on page 16, we show our key line items of our P and L, in 'eighteen, sorry, 2019, we lost 27.5000000 much better than the $55,000,000 in the last minute that it excludes on recurring items than The result is even better. We we lost only $7,700,000 in 'nineteen against a loss of $57,400,000 in 'eighteen.
And,
if we look at only Q4 'nineteen, and the other profit was of a almost $5,000,000 with a loss of almost $14,000,000 last year. And excluding non recurring items, the profit was at 7.4 $1,000,000 in 20.18, a loss of $13,000,000 in 2018. So the the profit in 2 4 19 is, almost a full year loss for 'nineteen. And we are locked in for today per vessel per day basis is equivalent to around $400 only. So it really gives an idea of, how close we were to our breakeven in, in, in 'nineteen.
Going on to the following page, yeah, or just a small comment of the EBITDA. So even excluding the IFRS effects, sixteen effects, which improved the EBITDA in 'nineteen. The EBITDA in 'nineteen' is four times higher than in the previous year. The following page, we have a closer look at the, daily tcp event earnings of our vessels, both the spots and the cover and the and the blinded results. And, for the the average for the year was 37, which is not a great result, but the important thing is that Q4 4, 19 was, the average of 72, which is, which is already not more satisfactory results.
It's a very possible level for us. The 2019, we had contracts at an average rate of 14, 7, 60. So the blended result was 142. Which is, as previously mentioned, not very far from our P and L bacteria. And, if you look at only Q4, 19 plan, the result including the contracts at 15,100 was almost $16,000.
So, going on, just a comparison of our results. Only looking at the MR2 this year and not not all our vessels. We also have some handlies on the spot. All the ones that said are employed through the contracts. I see the MR tools on the spot.
An average of 42, relative to 37, for the class targets if we look at only at vessels then the outperformance is bigger. It's 14% we earn 157 relative to 30 7 for the class and coverage. And, yeah, the plan that we're able to offer all MR tools, including the period context was 43. And that is it for the financial highlights. So pass it over to Paulo again, for the
Now, page 20, you can see that we're still a very strong potential upside, but only on rates, but on rates and asset values. I mean, uh-uh, since the last peak, on a 1 year time charter, we are, especially, 49% 65% below the last cycle peak, which as far as 1 year time charter rate, and then as far as values, five year old, and respectively, 34 percent and 33% below the cycle. So, I mean, this doesn't mean that we are going back to the peak again. It's still, very long and we still have a lot of potential in both in early and the virus. And you can see it in page 21, when we started, with a very low $12,000 excess of $12,000 rate.
In the 16, we have to on excess of $15,000 for 1 year tax charges means the market is, as you certainly know, improving very well. And so are values. The demand growth now, this is, of course, it grows on whatever coronavirus is going to leave us with, but Let's say, the fundamental, still our demand grow even if today, there are a lot of corrections which are to be taken on, on the expectations that are very agencies and brokers, indeed at the beginning of the year. But one thing is important. The release is not going to change because of the virus is the participation of the refinance products trade to the total coin tray.
So refinery products are becoming more and more after in the oil trade because from 25% as they were, in 2000 today, they are basically at 35. So we are increasing the This is due to the displacement of the of the refineries from the actual consumption market. The recovery has been so far driven by factors that you're setting in very well, which are supply driven. We had various factors from the banker in which has been a huge problem on the beginning of 2020. But already on the end of 2019, you had a run of refineries for me, then these delays, you are maybe even too, too much, but from there, And when, 1st January went in, we had a lot of logistical problems also because suppliers were with all their storage for a very low sulfur fuel and with, of course, efficiency on the fleet, ships in Singapore, which is the biggest bunkering hub in the world.
Since I've been waiting 15 minutes to We have a which is $50. We have to say we we had very heavy weather in the in the Mexican gulf, and we still have very, very heavy weather in the in the Mediterranean. Scrubber installation. This is on through old shipping. I mean, a lot of shifts are being send it to the, to recipients to retrofit scrubbers.
And I would say I would have to list two things. Number 1, installation of this scrapper is being totally by the shipyards. So the time consuming is by far longer than what was folk. And to this, you have to have now coronavirus because a lot of this activity was happening in China. And China, as you know, declared for smelter for many of done, not only on, on new buildings, but also on retrofitting and another another dry dock issues.
Then we have the the which, of course, he to be through the crude market. But at the end, if cascade comes down to us also on the Queen, is being the sanction on the Costco fleet in October end of September, beginning of October, which, as you know, took off the fleet of the FCC, which closed to 40.44 ships. Leaving, pushing the market. I would say this has been the first element to turn around the market when many others came in. Flouting storage, which we supposed is going to increase the low price of a barrel.
Is already in that, you understand that so the company is looking for something like 18 VLCCs. Hello. I don't have a have a coronavirus, which The only, I would say, positive effect is the fact that he's in the shipyard. So is keeping down the supply side of the of the thing. If we move on 34.
The effect that coronavirus said on product tank is is being not only not always negative. Cause I have to say you had Of course, Chinese refinery, they start slowing down their throughput because they're already on surplus of product. But we had, a market which was not following this, this, refining slowdown. In fact, we had a rising the cargoes from China to the U. S.
Coast of the United States and not only China also Also, Korea, with just fewer, where U. S. Was invested. Refining activities coming back from the Middle East that are coming out. Some refiners are coming out of maintenance period.
We have the continuous strong exports of products from the U. S. To South America, which really affected by coronavirus at all. And we have a lower vessel deliveries. I remember you, but normally, the the big part of the of the of the of the new building delivery happens in January, February, March, because whatever is ready in November, December, is postponed to January in way of gaining, gaining 1 year.
These deliveries have been delayed by, by coronavirus because, of course, the Chinese yard, they couldn't they couldn't, deliver. And this, of course, adds to the ships, which are there to retrofit the scrubbers. It's also after all this. It's been in the Fred that China certainly is going to come in with a huge stimulus program, something which is equivalent at 4% of a huge GBP, the numbers, but with the Fed already is the monetary policy and we are still coming out with something more. And something certainly has to be expected from Europe.
So if we sum up all these things and if coronavirus, let's say, is not going to be too long that we can have, a big, a big counter effect due to all these inter banks. Of course, refining volumes I've been, in 20. I didn't start very well because as we say, China had to had to had to slow down his production. We expect, so this is in 2020 from whatever it was always forecast at the end of last year. I'm asking Frank and nobody knows because it all depends really how long do you think it's going to go?
I mean, today now is America stopped both flights from Europe to the United States. Is another hit, of course. I mean, you have we're going to have another issue to store. Which can easily end up in also in floating storage. Talking about the growth in the refinery capacity of 2019 has been a record year.
We has been estimated solid the growth of 2,000,000 barrels per day. But if we look at the period of 2019 to 2023, The growth looks like something like $6,400,000. Now this numbers is going to happen between Greece and China and Torecto Farris. So here again, far away from Europe. And this, we go to page 28 is a change in the refining landscape and we are not planning capacity is certainly our trend.
And, this would create an increase of demand for shipping for simple interest. The other cuts, reversal of the cuts, So the fact that the Saudi's and Russia didn't agree, basically, will benefit my tankers initially, but can be a threat to to US crude export because as you know, Saudi Arabia is by far trends than America. And, this is less ton miles if China will start rebuy from So they already have studied United States. Page 31. We have a slow in feed group looking at MRs and LR1, very, we expect a group on only 2% in 2020 and 08% in 2021.
This, this sums up, I would say, today, a a a slowdown in a in, in ordering, is due to the fact that supporters also are afraid of building shifts with technology and loan. And is, and reason there is not too much equity as well to do it. The big guys of of, of, the big investors are not moved that much anymore. On new buildings, at least up to now. So we can think that the supplies will stay the way it is for a while.
The expectation and the expectation is we're not going to get that to after you revise is the expectation on, due to coronavirus, expect an expansion of the product tanker demand of 3.7%. Which, as you, as I said before, will exceed totally the supply, the supply of new building. On page 35, we have, the opinions of various brokers that I leave it to you to read and why invest in this and this, I, I, I leave a floor to Carlos to do it. Thank you.
No. Just quickly to to look at our NAB, and So if you look at the net asset value in, absolute terms, not on a per share basis, after reaching a button in the 16, uh-uh, and then we we touched a similar level in December. It happened, in the last, we also talked to, the custom increase that we issue in 2019. But, but the large extent, the the improvement also reflects the the the increase in asset values that we have been experiencing throughout the 2018. So from a bottom of 218,000,000 in December 118, the, the, the, of the company if we have a 1,000,000 per share basis in US dollars or NAV dollars at think the end of December was at 0.50.25 dollars per share.
And we, so that means that, at the end of December, we were trading at almost 30% discount to to NAB. As you can imagine, now this discount is actually significantly higher, the residents in the market and the world surrounding the the coronavirus. We did the share of our company as well as the days of, many of our, of our peers. But, as we saw, from the results that we are publishing today, And, from the market insights we provided relating to, Q1, this year, the, the, the, to be, largely, then, of course, we don't have, a crystal ball, and he that the transmission is a very serious one. Firstly, from a human perspective, but of course, also from an economic perspective, we don't underestimate it in any way.
And in that respect, I just want to mention that we, as a company, have taken many of our employees not only those which have been mandated by governments, but also often going beyond that. And in countries which are a bit slower to, to the boxes, Italy, which is at the forefront today in terms of intervention. So, I said that as Paolo mentioned, of the OPEC, reversal of the OPEC cuts, are important for our sector. We saw that already in 2016, which was a very good year for us. Earned over $50,000,000, and, the same by now make seen now to be at play again.
And also at the time, the world economy was slowing. This time, it's probably going to be more serious, because of this coronavirus, but, a big, it's a big question, Mike, if they are able to deal with it in a short, relatively short period of time because governments are dealing with it aggressively, then there's a very good chance of a of a a recovery already in the second half of this year. Otherwise, we might, for an economic recovery, I mean, otherwise, we might helped to wait for next year. But we down secretly, in 2015, although the mobile economy was slowing with it very well. So it is not, it's the same could happen in 2020 because the the world could be flooded with oil the the resort that went into contango.
This Cortaro is stippling. Today, oil is down again another 6%. The front end of the curve. The also, besides the 20 products, for curves and Contano, So there's a big incentive to, and a growing incentive to store all also on boats. And take, capacity out of the system, and, buy, cheaper today, process it, and sell it in the for sale in the future at a higher price.
So, so it it could really pay out, in our favor and, surprisingly, so give and the the very complicated and delicate economic scenario that we that we are facing today. So I believe that's it. And I pass it over to you. Please let us know if you have any questions?
This is the Chorus Call conference operator, and we begin the question and answer session. We kindly ask to use handsets. On asking questions. The first question is from Matyoboni with Kepler. Please go ahead.
Good afternoon. I have two questions. First one, in your presentation, you show that the demand growth would be 3.75% while the fleet, growth should be in the 2%. Can you provide me with is 3.75%, uh-uh, in other words, is it a recent estimate that already includes the potential impact of, the epidemics or, or not. So do you think we could be materially below this 3.75 percent demand growth?
The second question is about the discounted ratio stock is in versus now. So the net value is increased to $0.25 per share. And the stock is trading now, or I would say in the region of 70% discount, so that's a CRM and I mean, a part that we are in a very fixed euro market condition, but I think that the asset values could for example, uh-uh, that go down from this level. So we do see risk of, deflation, the asset value for your ships. Thanks.
On the on the client's number, I'll just quickly answer the, the, the the the value is from the March update of Clark. Okay, but it's not our estimates, it's the estimates. And I'm not 100% sure what kind of consideration, they may arrive at the figure. But if it is a March estimate, as, as I'm saying, it is, And of course, there is some estimation of the impact of the coronavirus, but this is developing very fast. And, so I don't know what scenarios they developed, then they, they've us.
For sure, they haven't included in this estimate of the decision which, the breakdown of the negotiations of OpEx of OpEx on Friday, on that Friday, So and that is a a short term, much more important, as we have seen because we have seen the late of our vessels, move throughout 2 days. It is more important. It's it is outweighing the the the effects of the virus. So long distance, it's it's a big question, Mike, but right now, that seems to be the case. And I I assume that they haven't included this effect in their Oh, it is a big question, Mike.
Unfortunately, it's not a perfect science forecasting, for shipping and especially for product tankers. Environment we are in right now where there are a lot of, a lot of very important variables out there that have to be, better, better forecast. So but the the if we look at the market has moved up considerably, this week, and not for not so much for Amazon, which were already very strong. They were they had been outperforming all the other product tankers this year by a big margin. They have been doing better than the l 1s and and LR2s.
But, but, it was very beneficial for the alliance. Because they are more, correlated immediately correlated with the crude penalties. And, we we have seen the outbreaks go up to, again, on certain routes, a $100,000 per day or more. Suezmax rates also go up considerably. And, and that has pulled up also the the bigger, the bigger, the bigger product tankers, which are now to to the MRs, which is about surprising.
So, so I think this is This is really something which has happened over the last 5 days only, and we have to see how this plays out throughout the rest of the year. But as we were mentioning, In 2015, we had a very similar scenario, but with a much higher fleet growth, the fleet growth was around 5%. And this year, the fixed growth is, around 2%. So we had, an 2018, despite the fee growth of 4.6 percent, you know, free growth of Finkelstad, maybe you can, you know, you can imagine what could happen this year. So, yeah, that, that I believe answers the The first question.
Okay. And on the discount,
I see on the number on the the, the, the, the, find the health for sale on our financials. So we are currently not marketing all the vessels, all those vessels. But we intend to sell them over the next 12 months. We it is because we believe they're going to be a strong enough market to do so and to try is valued. So we are positive on the 2nd hand vessel values, on the negotiations that we are now performing.
They're not any difference, any decrease in value, I would say. See because of course, there's a lot of uncertainty out there. But the rates are good, and that and so as long as the freight rates are positive, the the period rates are good. The the vessel values are recorded with that. So we don't see currently the risk of a big correction in vessel values.
Thank you
The next question is from Daniela Liberanti with MainFirst. Please go ahead.
Yes. Hello, everybody, and thanks for taking my questions. With last the production cuts and the cooperation between OPEC and OPEC pull up. Now it seems that the optic and then all the sensors are basically free to produce as much as they want and was wondering if other or downtown, how would you benefit from this situation and, maybe a concern on the demand side? My second question is if you can, we'll be in your approach and more aggressive on fixing rate, which is exploiting the spot from very much.
If I understood well, the first question is if the fair reduction on the barrel, what is the benefit for us, and the first benefit, of course, is our bunker cost. Which is going down. And as you know, is the number one cost we have. This is, of course, we're talking about our spot ships. Is, and we already we're already coming from a long along the slide because if you think that in January, the loss of receivables at $700 return, imagine we are saving today.
Our strategy has been that we have over 50% of our fleet, which is covered by term contracts. Some of them are due now, and we the rates. We, we just we just fixed 1.90 for 1 year just a slight owe $118,000 a day. And, we offered for the you, which is 11 LR1. Now, for a very, very cannot unfortunately make numbers now because it's not fixed yet, but we are extremely talking of extremely profitable rates.
And there are still people looking for ships for 3 years I'm talking about major oil companies and, that we are negotiating. So our Attitude is to take certainly the cover where the money is is good is profitable, and it is big. But in the meantime, we are playing with something less than 50% of our fleet, the spot market, and I with that service today. No. No.
I think that'll help me.
Okay.
There are no questions registered at this time. You said the Motala, I give the floor back to you.
Okay. And, I thank you very much. To our call. I hope we have been, explanatory enough. As I say, the it's a little bit surreal because, comes in once I am in another one.
So I hope we we satisfy all your your your questions. So from my my side, I say just say hello and to the next time.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.