Capital Product Partners has joined the queue of containership companies warning investors of negative implications of the coronavirus on its bottom line.
Similar to Costamare and Songa Container before it, the Evangelos Marinakis-led outfit said that the Covid-19 epidemic will likely lead to lower chartering income, higher costs and operational delays until markets return to normal.
At the same time, however, Capital Product maintained its dividend policy and said it was in good shape to deal with the aftermath, given the limited number of ships coming off charters over the next few months and the staying power of the liner companies it is working with.
“It is clear that the container charter market has been adversely affected by Covid-19, but the extent and duration of the impact is very difficult to predict at this stage,” Capital's chief executive officer Jerry Kalogiratos said in Capital Product's latest earnings statement.
The pandemic did not affect the US-listed partnership’s first-quarter results, which came in at a net income of $6.7m compared with $7.2m in the same period last year.
The company maintained its cash distribution to $0.35 per common unit, in line with a guidance for increased dividend payments unveiled in February.
Capital Product has been paying out dividends for 52 consecutive quarters since its listing back in 2007. It used to be predominantly a tanker player before spinning off its oil carrier fleet last year and merging it with Diamond S Shipping.
'No reason' to expect liners to go belly-up
The liners employing CPLP's fleet of 13 containerships on long-term charters have been "performing without problems or delays" so far, according to Kalogiratos.
"We do not have for the moment any reason to believe that any of our counterparties will not be in a position to survive the current market conditions," he told analysts in a conference call after the publication of results.
CPLP's clients include Hapag-Lloyd, HMM, CMA CGM and Mediterranean Shipping Co (MSC).
Negative implications from Covid-19 have so far been rather felt in “significant delays and increased costs” in scrubber retrofitting of two of its ships in China, the company said.
Higher-than-expected operation costs were the reason why analysts at Stifel said CPLP's net income fell short of the $7.8m they expected the company to earn in the first quarter. Stifel has a "buy" rating on CPLP.
The installation of two scrubbers now being complete, CPLP has no more such projects ongoing at the moment. According to a recent presentation, the company expected to have seven scrubber-fitted boxships by the end of March 2020.
Scrubbers help the company earn higher revenues. The 8,300-teu Archimidis (built 2006), one of the delayed ships, resumed its long-term time charter with MSC at an increased day-rate, as initially planned.
Ten of Capital Product's 13 containerships are on similarly long-term charters expiring in 2024 and 2025 and earning between $27,000 and $34,250 per day.
“We only have a limited amount of vessels coming off charter in the next twelve months and as they come off their employment in a staggered manner, we should be in a position to capitalize from a gradual recovery going forward,” Kalogiratos said.
Only three boxships currently with CMA CGM come off charter by January 2021. One of them, the 9,300-teu CMA CGM Amazon (built 2015), is due to be redelivered next month, as is the company's sole bulker, the 179,200-dwt Cape Agamemnon (built 2010).
“In addition, our low leverage compared to our peers and the expected completion of the ICBC Lease that is expected to generate additional liquidity, should provide us with added flexibility in this environment,” Kalogiratos added.
The company’s sale-and-lease back agreement with ICBC Financial Leasing concerns the refinancing of three company vessels for an amount of up to $155m. It has been delayed by Covid-19 as well, but not cancelled.
The transaction, which is expected to generate an additional liquidity of up to $38.8m for the company, was initially expected to be completed in the first quarter of 2020. CPLP has now said it expected to close it within May.
(This article was updated since its original publication to add analysts' comments on the earnings and comments made by management in a conference call with analysts)
