Norway's Odfjell has benefited from more spot exposure for its chemical carriers as it returned to profit in the second quarter that marked its best result for several years.
The company said contract of affreightment (COA) renewals saw a 6% rise in rates, but fleet term coverage dropped to 35% during the three months to 30 June.
This enabled it to take advantage of a strong spot market.
However, COA coverage increasedm towards the end of the quarter and has continued to do so into the third quarter, where it is expected to stay within a range of 45% to 55%, the company said.
Net earnings were $30.9 in the quarter, turning around a loss of $10.2m a year ago and lifting the six-month profit to $26.5m.
Revenue rose to $252m from $243m in 2019.
Ebitda reached $82m, compared with $66m in the first quarter. Of the 2020 figure, $74m came from its tankers. The company also owns tank terminals.
'Agile' business model
"We are happy to report positive figures in light of the unprecedented times of the global economy. This shows the agility and resilience of our global platform and business model," said chief executive Kristian Morch.
"Covid-19 continues to cast high uncertainty about the future, but we are so far not experiencing any major negative impact overall in our markets."
The company expects the third quarter to be hit by the usual seasonality, leading to weaker earnings.
Odfjell identified a migration of swing tonnage towards the clean product market in the period.
This led to a reduction in competition for vegoil and chemical cargoes.
Disruption helps activity
The commercial impact of Covid-19 was limited to reduced nominations under its COAs and larger variations in activity levels across trade lanes that ultimately led to high trading activity and ample availability of spot volumes to mitigate reduced contract volumes.
The initial drop in COA volumes was largely caused by customers trying to manage their global inventory levels.
Net bunker costs decreased to $36m from $50m in the previous quarter.
The vessels carried 3.2m tonnes during the period, in line with the first quarter.
"The main change from the previous quarter was therefore the composition of the volumes, with more spot volumes replacing contract volumes,"the shipowner added.
Odfjell is forecasting demand growth of 2% to 4% on average until 2022, depending on the outcome of the pandemic, up from 1% over the last 18 months or so.
Strong quarter impresses analysts
Norne Research said this was "another very strong quarter from Odfjell, despite guiding for a weaker result in 2Q previously."
"While revenues were in line, margins were at record levels. Even adjusted for $12m gain related to terminal sale, the bottom line was well into the positive territory which looks even more positive in Covid-19 times."
It expects to reiterate a buy rating.
Anders Karlsen at Danske Bank said the result was Odfjell's best quarter in years.
"Q2 may have been an isolated event driven by high market activity and results are expected to come down for the next quarter(s)," he added.
"However, it is also a sign that markets may be tightening. Hence, we could see a positive share price reaction today in the range of 2% to 3%."
