Danaos Corp, a major Greek container ship owner, acknowledged a marked slowdown in its business but said it has more to gain than to lose from it in the long term.
“I’m certain that the market softening will produce great opportunities,” chief financial officer Evangelos Chatzis told the Marine Money conference in Athens on Thursday.
He said slower economic growth will unleash a chain reaction of falling demand, freight rates and charter rates, and ultimately lead to lower ship prices, suggesting that this could pave the way to potential buying opportunities.
“We’ll be there to take advantage of deals when they come along,” he told a panel discussion.
To back up his view, Chatzis cited the company’s policy of “building a fortress balance sheet” bolstered by its $2.3bn contract backlog with major liner companies.
“Our leverage will soon be net debt zero in a few months,” he said.
However, another comment made by Chatzis suggests that the company is not about to move just yet.
“With all the geopolitical uncertainty in the equation, I think it’s best to be patient to see where things are headed,” he said.
Nowhere to hide
Speaking later at the same conference, Danaos founder and chief executive John Coustas said shipping has become “complacent” about debt, having enjoyed extremely low interest rates for a long time.
With inflation at about 10% and no way of predicting when central banks will stop raising interest rates, Coustas argued that the carrying cost of assets is becoming expensive, suggesting that this will force some owners to sell in an unfavourable economic environment.
“If demand goes down, then there is nowhere to hide,” he said.
Coustas is familiar with financial upheaval. In 2018, Danaos stood on the verge of bankruptcy, squeezed between its debt load and the woes of major clients.
It was saved by a financial restructuring that many in the industry doubted Coustas could pull off.
Two years later, supply chain woes in the wake of the pandemic catapulted Danaos’ profitability to previously unimaginable heights.
It clocked up $1.05bn in net income last year, adding a further $340m in the first half of 2022.
Danaos owns 71 container ships and has six more under construction.
Its biggest customer is CMA CGM, which accounted for 22% of the company’s contract charter backlog as of the end of June. The next biggest clients are Mediterranean Shipping Corp and HMM with 15% each.
