Danaos Corp reported a revenue surge that pushed its adjusted earnings higher, but the New York-listed container ship owner saw its bottom line slump as its investment in Zim lost value.
The Greek tonnage provider reported net income of $8.22m during the second quarter, down from $373m in the same period of last year.
Its bottom line was hit by a $152m plunge in the value of Danaos’ shares in liner operator Zim, while the profit in the second quarter of 2021 had been helped by a $196m gain in that same investment, in addition to other financial items.
With items typically not tracked by analysts stripped out, the company delivered $157m in adjusted profit, up from $68.9m a year earlier.
The company reported adjusted earnings per share of $7.59, which Faernleys Securities said was in line with analysts estimates.
“Danaos’ business model continued to generate strong results in the second quarter, more than doubling our adjusted net income compared with a year ago,” said chief executive John Coustas.
“Given our fixed charter coverage over the next 12 months, we expect these metrics to improve further. At the same time, however, we are closely following macroeconomic conditions and the potential impacts to our industry.”
The second-quarter beat was driven by a surge in operating revenue, which rose to nearly $251m for the period, up 71.4% from the second quarter of 2021.
The company kept its dividend at $0.75 per share for the quarter.
Danaos was standing on cash and marketable securities worth $588m at the end of the quarter, with contracted operating revenue standing at $2.3bn and 91.7% of its operating days covered by charters in the next 12 months.
And the company made early prepayments of $434m in debt and lease financing during the three months ending 30 June.
Danaos pointed to is liquidity position and balance sheet as a strength in the face of a container shipping market that is poised to weaken.
“A confluence of factors, including high energy prices, inflation, and the effects of the war in Ukraine, will likely result in slowing economic growth and negatively impact trade volumes,” Coustas said.
“On the other hand, persistent inefficiencies on the shore side of the supply chain and Covid resurgence in China are keeping the vessel utilisation high with increased waiting times in port.”
He said increasing fuel costs and upcoming carbon regulations will likely lead liner companies — Danaos’ customers — to reduce sailing speeds sharing in the second quarter of next year.
“These mitigating factors point to a weakening, rather than a collapse, of the market that we expect will result in rates much higher than pre-pandemic levels,” he said. “For the time being, charter rates are holding firm as the available tonnage is very scarce.”
The quarter’s result brought bottom-line net income for the first half of the year to nearly $340m, down from $670m in the same period of 2021.
But adjusted profit rose to $392m for the first six months of this year, up from $127m a year earlier.
