Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the and shipping First Quarter 2019 Results Conference Call. After the presentation, there will be an opportunity At this time, I would like to turn the conference over to Mr. Paulo Damico, CEO.
Please go ahead sir.
Good afternoon to everybody. Let's go straight to the main points and then we'll go through the presentation. As you know, he said the share capital increase, which basically has been subscribed at up to 97% of the authorized capital. And in private placement, it's been finally subscribed to 100%. The net result of Q1 'nineteen is a net loss of 5,500,000, brings a technicality due to the IFRS 16, but later on, our CFO, Carlos Barrester Demotra will explain you better.
Vessel disposal and sale and leaseback. In January 2019, we finalized Japanese operating lease at Joroco which has been one of the first transaction done on a European owner with a net 1, and it has been generating around $10,200,000 in net cash proceeds. In April 19, EM shipping, which is a joint venture that we have with the Mitsubishi Group, We finalized the sale of 1 of the vessels, our 2 vessels in joint venture. We sold 1. Generating approximately $12,300,000 in net cash proceeds.
And in March 'nineteen, these agreed the sale and leaseback of 1 MR vessel built in 2014, generating advance of delivery every April 25, net cash proceeds of 9,600,000. We have an amendment of financial comments on World Bank loans guaranteed by his because the application of IFRS 16 from January 2019, had a negative effect of 4.3 percent on DIS net worth total asset ratio And so to offset this impact of this new accounting standard, all of this bank agreed to amend the financial covenant on loans guaranteed by BIS with the reduction of a minimum fee. So for this ratio from 25 from the 225 from the 35 previously. Talking about the achieved rates, but the spot rate has been 13.58 in Q1 'nineteen, which is is being 7% higher relative to the first quarter of last year, $8.58 per day and 26% better when we are 18 as a whole average, which means $2785 per day. This had 46.4 of its total employment days in Q11 2019 covered through time charter contracts at an average daily rate of 14.6.
And, this achieved a total daily average rate of 14057 in Q 1.19. Let's go back and go to the fleet. There is no change here on the first quarter. We have to because the sale of the JV should happen in the second one. So these these numbers, let's say, Alpha shipped better than what it is today in the sense that we are 49.5 ships on the street as per first quarter.
We sold the point 5, a little bit later on. The as you already know, because these numbers are, I mean, I repeat I've been repeated many times. We have a 22 new building program, which is coming to one end, The last ship in LR1 is due to September. This year, I have to add the fact that this ARR 1 is probably the only ARR 1 scrubber sheet that positioned for delivery in September, which should be very extremely competitive for the market. And we, as usual, maintain a top quality Time chapter covers book with the maximum the triple a or majors around.
And given now, we are negotiating other contracts with 1st class, charters. Saying that I give the floor to Carlos Berestra, and I will be back to you with a market session.
Yes. Hello to everyone. As Paolo just described, we are arriving at the end of our new building program. Which I would say is a good news from a cash generation perspective going forward. It was a crucial, a very important new building program for us.
We have a very happy to have these new building vessels, which were mostly acquired at attractive prices. But they did drain a lot of cash over the last few years, which Unfortunately, we're also not excellent years from a market perspective. The CapEx to take delivery of this last vessel corresponds to around $32,000,000 of which the equity we will have to invest is $11,000,000. The vessel is expected to deliver be delivered in September. And we are having very interesting conversations with chart very keen to take the vessel on time charter.
I must say there is a lot of interest. There are not that many LR1s with scrubbers. I remind you, this is the only vessel we have that will have a scrubber that are going to be delivered in September this year in the last few months of this year. So it's a very good timing in this respect. CapEx falls there for drastically for 2020.
The figure 2020 for the maintenance CapEx is it's quite high relative to our usual investments for maintenance of vessels and that's because to the coincidence. We have a lot of vessels which turned ten years old in 2020. Presumably in the stronger market in which we expect from the second half of this year some of these vessels will be, will be sold. And therefore, the investments will be smaller than we indicate here, which is a steady state scenario, which we are showing, not assuming any further vessel disposal. Going on to the following page, we also showed the drop in repayments.
We have the facility with Intesa, which entails $15,000,000 in reimbursements every year, which we will finalize reimbursement of in December 2019. Therefore, from 2020, our cash NLP and Elbreakeven would be pretty much aligned. And that also will help cash generation and deleveraging of our balance sheet. Page 9, we show, recent many of these were closed at the end of last year in the last 2 months of last year. We took advantage of spike in the market to fix a number of that.
So some of them on shorter disease because we were a bit concerned about potential weakness in the end of Q1 and Q2 this year. Associated with refinery maintenance. And some of them on longer contracts, and we fixed another vessel, more recently, the vessel 6 year on this list on a 29 last quarter. Plus 6 months option at $16,000 per day for the firm period and 16.8 for the optional period. This is a this was only closed recently as a contract, but it actually negotiation began at the end of last year.
So it was quite a lengthy negotiation. And, I believe these rates today are lower than what would be, what we could achieve. And so because there is still very strong interest from charters to take vessels, for for for similar periods. And the market is firming for these for rates for the for such periods. So, going on to page 10, we show that, how our coverage evolved since our last presentation of the year end results and It increased slightly for 2019.
We are now 40% covered from Q2 to Q4. On the bottom right, we show on a quarterly basis, the coverage, it It is falling as it was before in the last part of the year. I would say it increased a bit more in Q3 and Q2 is still quite low at 31%. And so it's still quite falls to the spot market, which is intentional because we expect a stronger market in the second half of the year in a special Q4 and we want to be open, have a quite a number of open days to be able to benefit from the upswing in the spot freight rates. On page 11, we show, the fleet evolution are also on not assuming any renewals of DTC in vessels and the short term DTC in vessels, And if that were the case, then the fleet would fall, the average fleet controlled by us from 49 vessels in the last 3 quarters of 2019 to 41 vessels in 2021.
Nonetheless, our exposure to the spot market and the average number of vessels in one market would rise from around 29 to 37 and at the bottom we show our sensitivity for every $1000 per day to change in the TC equivalent earnings given our exposure to the spot market. And in 2020, we show that if the market were to $3000 $3000 per day increase in the spot rates would translate into an increase in the profits of 38,000,000. Our we don't have that many days covered today, 2020. They are slightly above our P and L breakeven for 2020. It's a 153 P and L breakeven in Q1 this year was around 549 for the year, we assume that excluding non recurring items, this should actually be slightly lower than 49 2020 pretty much at the same levels, I would say.
So that's an easy back of the envelope calculation assuming no contribution, positive contribution from the existing time charters, which is, let's say, a conservative assumption if we were to earn around $18,000 per day on our spot that in 2020, we would be generating $38,000,000 in process So that is a way of also looking at this, interpreting this graph. Going on to the following page, we show, our net financial position as at 31st March and our net financial position relative to the fleet market value. We show the ratio is at 76.4%. So it's might be better than in December last year, but only marginally so that is because of the rising asset values, especially for the younger vessels, and pro form a for the proceeds of the capital increase. So assuming the proceeds from the capital increase had come into the company on the 31st March, we show that this ratio falls to 66.5% and that our gross debt falls from $6650 to $6.19 and our cash and equivalents rises from 29 $1,000,000 to $46,000,000.
So it is much healthier. Position also because the advance ratio on our new buildings usually is around that level 65%, 66%. So this is a much healthier indebtedness ratio. Going on to page 13, we give a bit more information here, a bit more detailed information on the components of obviously that result for the quarter and the comparison with previous periods. And as Paolo was mentioning, the net loss for the period was $5,500,000, which is higher than the net loss of $18 of $3,600,000 in the net.
If we exclude the Nonrecurring items, in particular, nonrecurring financial items, which had a big impact in 2018 2019, the net results would have been of minus 4.4 in this quarter, minus 6.8 in the same quarter of last year. So an improvement of 2,400,000. IFRS 16 has a negative in impact on our results in this quarter. Nonetheless, this was mitigated by the fact that of our IFRS 16 led also to the reversal of some onerous contracts with a positive impact of $700,000. So the net negative impact from IFRS 16 was only $100,000.
In Q2 twenty nineteen, the negative impact should be closer to 800,000 because we now have already reversed all these other contracts in this quarter. So, of course, this is only an accounting, let's say, adjustment and this impact of IFRS 16 over the life of the contracts which are being capitalized is equal to 0 on a P and L basis. But it is it has an initially negative impact and then a positive impact towards the end of the contract. So The IFRS 16, of course, had also a very big impact on our EBITDA, EBIT figures, which are not comparable anymore with those of Q1 'eighteen unfortunately. So, they have complicated the life of the investors and analysts I would say in analyzing our financials, the key advantage of the application of this new standard is that it probably gives a fair, a more mature picture of the financial risk of these contracts which were previously off balance sheet and now we have to recognize them as assets and liabilities.
It led to an increase in our assets of an increase in our assets of 144,000,000 and a similar increase in our liabilities of 146,000,000 and there was an on opening adjustments to the shareholders' equity a negative $2,000,000, which accounts for corresponds to the effect which we would have had if we had applied the IFRS 16 from the 1st January 18. So it's the cumulative effect. So, going on to page 14, we have a bit more detail here on the daily results of our of our vessels on a TC equivalent basis, once again, 13 5, 36, almost was the result of our vessels trading on the spot market. So it must be, height important to take into account that we have mostly conventional vessels trading on the spot market because our eco vessels are mostly fixed on time charter contracts. And that is why our results that is one of the reasons why our results for the vessels for the spot vessels looks weaker than some of our competitors, which you might have.
So we benefit on the TC coverage rates which are at more attractive levels, but we have penalized on the spot market because we only had 5.5 vessels on average which are Ecopetrol trading on the spot market in Q1 2019. If we look only at the MRs which are equal, in Q1 twenty nineteen, their result was actually 15.2000 and it that is much more aligned with the results of our peers. So, and on page 15, we show we provide this detail. We look also taking into account that the 15.6 includes also the results of Handy vessels. And we have a number of any vessels and that also depressed a bit the average.
So on page 15, we show the average only for the MRs. And so the MRs trading spot conventional and echo of our fleet earned 13.9. Only the echo earned 15.2 And the blended average for including the TCs only for the MR vessels also was 14.1. And the clock on the average was 13.6 for MR vessels. So there's a slight outperformance relative to the clock average, usually it's much more pronounced.
It must also be taking into account that that was in this quarter, a number of misfortunate factors from a slightly higher number of vessels stopping for dry docks with associated deviations, from maybe a not very fortunate positioning of the vessels and also adjustments to estimates on voyages, which, started in 2018. Which led to a which had a negative effect of $3.30 per day on the results of our spot of our spot vessels in this quarter. So the results would have been stronger without, without, let's say, these unfortunate events, which impacted the results of our vessels in this quarter. And now we're pass it on to Paulo for the market section.
Going to the market overview, we still have a large potential upside to rates and and asset value. If you looked at look it up on the left, see if it was 1 year time charter and spot rate are respectively 5472 percent below the last cycle peak And looking at asset value, new building and second NAND are respectively 32% and 48% below the last cycle, please. We have been improving on asset value and time charter rates the 1 year time charter conventional non echo rate in 2016 was 12,000, some just few dollars over $12,000. Today, we are well over $14,000. And the value of five year old MR in 2016 was 22,000,000 and today we are talking 28.
There is a demand growth. Overall, 3.6. It's 3.6%. Since 2000. But what is an extremely interesting, I think, but for sure, of the total oil seaborne tree.
So products, the product share in the total oil seaborne trade, it grew up from 25% in year 2000 to 35% in the 2020. So the products are slowly growing more and more as a percentage of the total oil traded. The stocks which have been built in between 2014 2015 they have been absorbed. So inventories are down significantly. We are an expected surge in refining volume in the last part of 'nineteen, We see a ramp up of the refineries going up to August.
One thing I would like to stress is whatever it is going to happen in terms of growth and consequently has positive results for us and for the industry. As you know, is very much linked on the second half of the year. We have a record growth of refinance in 2019, we are close to 3,000,000 barrels per day, increased capacity, but even here, this increased capacity is coming in force in the second half of the year. And we are changing of refining landscape, which will be driving demand. This, increase of refining capacity, 70.5% will happen between Middle East and Far East.
So you will see as a consequence of this displacement of the production of refinance product and as a consequence basic demand for ship transportation. The rebound in ENT to to drive, surge in, in nonoperating supply. And we have re rapid growth in the US crude exports. And here again, second half of nineteen, You have a increased, a strong increase in the pipeline capacity, which are going to connect Cushing down to the Gulf of Mexico or Texas, how we preserve. Mexico and Brazil will continue to be responder driving imports.
And then we have IMO 2020. I think IMO 2020 doesn't need to be resented too much because everybody who has been related to our industry at least for the last 6 months has been bummed about what it's all about. But here again, just to say it in a few words, We burn between 3,000,000 to 4,000,000 barrels per day of fuel oil. This has. So as fuel for our service, and we have just to display this quantity with a fuel which should have a stop sulfur content of 0.5.
Today, we are burning fuels which are in excess of 5. To have that, Yeah, we have 2 ways. 1 is a straight run. So totally new product. And 2, the blending of existing product with marin gasoil, which is 0.1% sulfur cap.
And so we have a totally new, a totally new landscape on on the on the bunkering side, which will be, of course, an element of cost because we expect and already a few quotation of futures are telling us, we expect an increase of price. But also we expect of course an increase of demand. The increase of demand of mineral distillates due only to this fact has been forecasted between 1,000,000 to 1,100,000 barrels per day. And this should jump on, And we have that. If you look at page 28, we look to the positive brokers view on IMO 2020, And if you look, at the Viberish 1, which is Deutsche Bank, expect an 8% increased demand for product carriers in 2020 only due to IMO.
The most bullish one is more than study and is expecting something between 10% 15% of, of a global product tanker fleet. Increased demand. So we are talking of big numbers. Against these numbers, there is a slowing slip growth. Of, around in excess of 1%.
1.5. 1.4%. And, another thing, there are a lot of ships which are over getting over 15 years of age. Which have been sold for local trade where let's say the world fleet is not is not trading today. So, basically, for us, it's like, demolitions, fleet because the the coastal trade of Africa Coastal trade of of India, is absorbing a number of old ships but we are we never trade there.
So for us, it's like like shit lost. Limited new building orders, but liquidity is not. Thanks god on the new building who are keeping per price rather high, but we are very much concentrated on a ship built between 2009 and 2010. Because these are those ones who are making more sense with today's rate. So we expect, of course, tighter, tighter markets.
And, here again, we see a strong improvement on the second half of twenty nineteen. Now, that's only, but also. These brokers, those brokers that we see in the presentation. I think so, I'll leave to Carlos for the final words.
The final slide here on shown NAV evolution. As usual, we measured it as at the end of the quarter, so 31st March. The red line we show our NAV of our fleet, which increased from December at $18,000,000 to $230,000,000. The NAV per share also rolls from $0.33 to $0.35. And as the end of the quarter, we were at the very deep discounts to NAV, 72% following the capital increase.
The NAB rose from $230,000,000 to $279,000,000. So that is, of course, assuming that somebody is having change between March May. And then the NAV per share as because of the diluted effect of the capital increase fell from $0.35 to $0.23 and at the share price of $0.10 that corresponds to a discount of 55% to NAV. So it is still a very important discount. And we assume, as previously mentioned, this discount tends to fall once the market, shows some convincing signs of improvement.
So we expect that once start generating profits. Again, we are not we are going to have, investors going to be able to benefit not only from an increasing NAV, but also from a reduction in the discount to our NAV. And we have had also brief periods in the past where we traded at the EM to AB. So that cannot be ruled out, again. So Thank you very much for your time and, we pass it to, please send the modules for any questions.
Excuse me. This is the Chorus Call conference operator.
You.
Please pick up the receiver when asking questions. The first question is from Mattioboditsoni of Kepler. Please go ahead.
Two questions. One is to help us accelerating the impact of IFRS 16 for the full year. So in the first quarter, you say that the on the EBITDA, the positive impact was 7,900,000. So, I would guess that in the full year, it is something in the region of $30,000,000. If you can confirm on the EBIT, you said in the press release that the impact was plus 1,500,000, but I want to ask you because if I look at the P and S statement, there is minus 8.48 depreciation of right of use.
So if on the EBITDA is plus 7.9 and the depreciation of the right of use is minus 0.48. I would calculate slightly negative impact. So if you can add a pass, and on the net profit, I would, you have said that if I'm right, if I incorrect the minus 0.8000000. And on the net debt on the financial liabilities around 145. If you can elaborate on the 3 line of the P and L, so EBITDA, EBIT, and the financial position.
And the second question is just on the outlook and on the current market situation. So clearly, you have a say that for several reasons you expect the strengthening of the market in the as of the second half of this year. Currently, we are experiencing if I'm right, some softness in the rate because, we are probably slightly below $10,000 per day compared to stronger rates, between end of 2018 beginning of the year. What what can you elaborate on the reason why currently the rates are experiencing, renew the weakness? Thank you very much.
If you don't mind, I'll I'll start from our chemicals start from the second question and then Carlos will be back to you on the first one. What is happening today and the reason why in the second and in the first half of this year, things are by far softer from what we expect to be in the second half is due to the fact that all the refining industry is passing through Now we have America slowly coming back on force, and we have a Far East going into maintenance. And the the maintenance this year for all the refiners is going to be a very special one. It's not to be the usual spring and full maintenance, which is what happened since the refiners are around. This year, due to IMO 2020, understanding that refiners have to go on full run on the late part of of the year.
Both the refiners are trying to maximize the maintenance on the first half of this year. So maintenance period are longer, are more complicated, and this, of course, as a direct consequence, it ends up in a lower demand for us. Because we have less cargo movements around. And this is what basically is affecting the market today. Of course, this on the second half, it should slowly start recuperate and as we said, with the next fall, they should be in full force.
I offered this to explain you, I mean, satisfy you as an
Yes. Thanks.
Yes. So on your more technical question relating to the to the impact of IFRS 16. You should look at our financial statements, page 32 for the notes, we have actually published for both the balance sheet and the P and L for the main line items, what they would have looked like in Q1 2019, if we had not slide 16. So you can see there for the EBITDA, for example, in Q1 2019, it's an to $22,400,000 without the application of IFRS 16, it would have applied to it would have amounted to 14 point 5,000,000 and in Q1 2018, it amounted to 10,100,000. So we are we are already adjusting there for the impact of IFRS 16.
On the bottom line, so you can see line by line the time charter hire costs, what was the impact, what was the impact on the either direct operating costs, and on the depreciation that we had to recognize because of the IFRS 16. So, on the bottom line, what you have to take into account is that there was this reversal of the onerous cortex. Part of this reversal, we would have had anyway because in the first quarter. And part of it is an additional reversal, because of the application of IFRS 6 team, the accounting principle, which forced us to recognize these onerous contracts doesn't apply anymore. And therefore, we have to reverse the provisions previously made for these contracts fully reverse the provisions.
So there was an additional reversal. So net of of the reversal of all the Honors contracts, the impact was negative by 100,000 in the quarter and it would have been negative 0.8000000. Net of the additional reversal that had to make, the impact was a negative 0 point trip around 300,000 only. So that that is that explains in detail the differences.
Okay. Thanks.
The next question is from Regite Bailis of Equita. Please go ahead.
One, what do you see, in terms of spot rate in second quarter? And, if you can elaborate, for NDR separately, And second question, could you elaborate on the price trend of the vessels both new building and second hand? Thank you.
On the on the, as far as the rate, April is being substantially very much in line with the first quarter. We are seeing some improvements of course now in May because the refineries are coming in in, I'm talking now about America mostly. So the Gulf, Gulf of Texas, And, we we are start seeing volumes increasing from that to put a number on it. It will be I mean, not very prudent because there are still a number of ships around. So there's a little bit of supply to be Absolutely.
And as far as, a differential between an Indian and an Emma, average of the average because also in 90s, you have vehicles once and and then conventional ones. But I would put historically around $4000 a day.
Thank
you.
I'll turn the conference back to you.
Thank you very much, and We'll go for the next meeting and the next conference call. And thank you for participating. And, I hope we satisfy the audio. Your questions. Thank you.