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Ardmore Shipping Corporation Announces Financial Results For The Three Months Ended March 31, 2018

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Ardmore Shipping Corporation Announces Financial Results For The Three Months Ended March 31, 2018

PR Newswire

HAMILTON, Bermuda, May 2, 2018 /PRNewswire/ -- Ardmore Shipping Corporation (NYSE:ASC) ("Ardmore" or the "Company" or "we") today announced results for the three months ended March 31, 2018.

Highlights and Recent Activity

  • Reported a net loss of $5.2 million for the three months ended March 31, 2018, or $0.16 basic and diluted loss per share, as compared to a net loss of $2.2 million, or $0.06 basic and diluted loss per share, for the three months ended March 31, 2017. The Company reported EBITDA (see Non-GAAP Measures section below) of $9.9 million for the three months ended March 31, 2018, as compared to $11.7 million for the three months ended March 31, 2017. 
  • Took delivery of the Ardmore Sealancer on January 23, 2018, a high-quality 47,500 Dwt MR product tanker constructed at Onomichi Dockyard Co. Ltd, in Japan in 2008. Completed a sale and leaseback of the vessel under a Japanese operating lease arrangement on January 30, 2018.
  • Agreed terms for refinancing of two 2013-built Eco-design MR product tankers under a sale and leaseback arrangement on April 25, 2018. The transaction is on attractive pricing and terms and is expected to be completed in May 2018 with net proceeds, after repayment of existing debt, of approximately $8.5 million.
  • Spot and pool MR tankers earned an average of $12,721 per day, and Eco-Design chemical tankers earned an average of $13,504 per day, for the three months ended March 31, 2018.
  • Maintaining our dividend policy of paying 60% of earnings from continuing operations. Consistent with this policy, the Company is not declaring a dividend for the first quarter of 2018.

Anthony Gurnee, the Company's Chief Executive Officer, commented:

"Ardmore continues to execute on its strategy in the face of soft charter market conditions. We remain focused on operating performance, cost efficiency and effective capital allocation to build value for shareholders through improvements to ROIC. In January, we took delivery of the Ardmore Sealancer and completed financing for the vessel under a Japanese operating lease arrangement. The vessel is a highly efficient 2008 Japanese-built MR that we acquired at an attractive price, providing low break-evens and high earnings power. We have also agreed terms for the refinancing of two 2013-built Eco-design MRs under a sale and leaseback arrangement on highly attractive pricing and terms with a top-tier Asian financier, further improving our financial flexibility. 

Following a subdued start to the year that was impacted by various short-term factors, we believe that the positive underlying fundamentals are set to take hold in 2018. Global economic growth is at its firmest level since 2010, driving oil demand growth and pushing oil inventories back below their five-year average. Additionally, we believe elevated geopolitical and oil supply risks are increasing oil price volatility. As a result, we expect elevated trading activity to resume over the coming months, re-introducing an additional layer of tonne-mile demand for MRs on top of strong underlying product demand. Meanwhile, tanker supply trends continue to look attractive, with net MR supply growth of well below 1% in 2018.

We believe shifting oil market dynamics, coupled with underlying strong demand growth and very low supply growth, is setting the stage for a cyclical rebound in the MR market. Ardmore's strong balance sheet, modern fleet, and low-cost structure put us in a strong position to take advantage of a cyclical charter market recovery and to generate highly attractive returns for our shareholders."

Summary of Recent and First Quarter 2018 Events

Fleet

Fleet Operations and Employment

The Company has 28 vessels currently in operation, including the Ardmore Sealancer, comprising 22 Eco MR tankers ranging from 45,000 Dwt to 49,999 Dwt (15 Eco-Design and seven Eco-Mod) and six Eco-Design IMO 2 product / chemical tankers ranging from 25,000 Dwt to 37,800 Dwt.

MR Tankers (45,000 Dwt – 49,999 Dwt)

At the end of the first quarter of 2018, the Company had 22 Eco MR tankers trading in the spot market or in pools. The Eco MR tankers, earned an average of $12,721 per day in the first quarter of 2018. Overall for the quarter, our 15 Eco-Design MR tankers earned $13,146 per day, and our seven Eco-Mod MR tankers earned $11,806 per day.

In the second quarter of 2018, the Company expects to have all revenue days for its MR Eco-Design and MR Eco-Mod tankers employed in the spot market or in pools. As of May 2, 2018, the Company has fixed approximately 45% of its total MR spot and pool revenue days for the second quarter of 2018 at an average rate of approximately $13,000 per day.

Product / Chemical Tankers (IMO 2: 25,000 Dwt – 37,800 Dwt)

At the end of the first quarter of 2018, the Company had six Eco-Design IMO 2 product / chemical tankers in operation, all of which were trading in the spot market or in pools. During the first quarter of 2018, across all employment types, the Company's six Eco-Design product / chemical vessels earned an average daily rate of $13,504 per day in the quarter.

In the second quarter of 2018, the Company expects to have all of its revenue days for its Eco-Design IMO 2 product / chemical tankers employed in the spot market or in pools. As of May 2, 2018, the Company has fixed approximately 50% of its Eco-Design IMO 2 product / chemical tankers spot and pool revenue days for the second quarter of 2018 at an average rate of approximately $14,250 per day.

Drydocking

The Company had 20 drydock days in the first quarter of 2018. Ardmore expects 35 scheduled drydock days in the second quarter of 2018.

Vessel Delivery

On January 23, 2018, Ardmore took delivery of its most recent vessel acquisition, the Ardmore Sealancer, a 2008 MR product tanker built at Onomichi, Japan. Upon delivery, and repositioning, the vessel commenced employment in the spot market. The vessel was partly financed under a Japanese operating lease arrangement which was completed on January 30, 2018.

Financing

The Company agreed terms for refinancing of two 2013-built Eco-design MR product tankers under a sale and leaseback arrangement on April 25, 2018. The transaction is on attractive pricing and terms and is expected to be completed in May 2018 with net proceeds, after repayment of existing debt, of approximately $8.5 million.

Dividend

Based on the Company's policy of paying dividends equal to 60% of earnings from continuing operations, the Company's Board of Directors has not declared a dividend for the quarter ended March 31, 2018, in which the Company reported a loss from continuing operations of $5.2 million. The Company's Board of Directors reaffirmed its intention to maintain a policy of paying dividends equal to 60% of earnings from continuing operations moving forward. Earnings from continuing operations is defined as earnings per share ("EPS") reported under U.S. GAAP, as adjusted for unrealized and realized gains and losses and extraordinary items.

Results for the Three Months Ended March 31, 2018 and 2017

The Company reported a net loss of $5.2 million, or $0.16 basic and diluted loss per share, for the three months ended March 31, 2018, as compared to a net loss of $2.2 million, or $0.06 basic and diluted loss per share, for the three months ended March 31, 2017. For the three months ended March 31, 2018, the Company reported EBITDA (see "Non-GAAP Measures" section below) of $9.9 million, a decrease of $1.8 million from $11.7 million for the three months ended March 31, 2017.

Management's Discussion and Analysis of Financial Results for the Three Months Ended March 31, 2018 and 2017

Revenue. Revenue for the three months ended March 31, 2018 was $50.5 million, an increase of $0.8 million from $49.7 million for the three months ended March 31, 2017.

Our average number of owned vessels increased to 27.7 for the three months ended March 31, 2018, from 27.0 for the three months ended March 31, 2017, resulting in revenue days of 2,416 for the three months ended March 31, 2018, as compared to 2,410 for the three months ended March 31, 2017.

We had 24 and 19 vessels employed directly in the spot market as at March 31, 2018 and March 31, 2017, respectively. For spot chartering arrangements, we had 1,784 revenue days for the three months ended March 31, 2018, as compared to 1,606 for the three months ended March 31, 2017. This increase in revenue days derived from spot chartering arrangements, resulted in an increase in revenue of $4.2 million, while changes in spot rates resulted in a decrease in revenue of $1.6 million.

We had four and eight vessels employed under pool arrangements as at March 31, 2018 and March 31, 2017, respectively. Revenue days derived from pool arrangements were 632 for the three months ended March 31, 2018, as compared to 804 for the three months ended March 31, 2017. The decrease in revenue days in pool arrangements resulted in a decrease in revenue of $2.4 million, while changes in market conditions for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 resulted in an increase in revenue of $0.6 million.

For vessels employed directly in the spot market, Ardmore typically pays all voyage expenses and revenue is recognized on a gross freight basis, while under pool arrangements, the charterer typically pays voyage expenses and revenue is recognized on a net basis.

Commissions and Voyage Related Costs. Commissions and voyage related costs were $19.5 million for the three months ended March 31, 2018, an increase of $0.7 million from $18.8 million for the three months ended March 31, 2017. Commissions and voyage related costs increased due to the increased number of revenue days derived from spot charter arrangements for the three months ended March 31, 2018.

Total revenue days increased to 2,416 for the three months ended March 31, 2018, as compared to 2,410 for the three months ended March 31, 2017. For spot chartering arrangements, we had 1,784 revenue days for the three months ended March 31, 2018, as compared to 1,606 for the three months ended March 31, 2017.

TCE Rate. The average TCE rate for our fleet was $12,897 per day for the three months ended March 31, 2018, a decrease of $22 per day from $12,919 per day for the three months ended March 31, 2017. The decrease in average TCE rate was the result of lower spot rates for the three months ended March 31, 2018.

Vessel Operating Expenses. Vessel operating expenses were $17.3 million for the three months ended March 31, 2018, an increase of $1.8 million from $15.5 million for the three months ended March 31, 2017. This increase is due to an increase in the number of vessels in operation for the three months ended March 31, 2018, increased crewing costs due to differing crewing locations, and the timing of vessel operating expenses between quarters. Due to the nature of this expenditure, vessel operating expenses are prone to fluctuations between periods. Fleet operating costs per day, including technical management fees, were $6,786 for the three months ended March 31, 2018, as compared to $6,361 for the three months ended March 31, 2017.

Depreciation. Depreciation expense for the three months ended March 31, 2018 was $8.7 million, an increase of $0.3 million from $8.4 million for the three months ended March 31, 2017. This increase is primarily due to an increase in the average number of owned vessels to 27.7 for the three months ended March 31, 2018, from 27.0 for the three months ended March 31, 2017.

Amortization of Deferred Drydock Expenditure. Amortization of deferred drydock expenditure for the three months ended March 31, 2018 was $0.8 million, an increase of $0.2 million from $0.6 million for the three months ended March 31, 2017. The capitalized costs of drydockings for a given vessel are amortized on a straight-line basis to the next scheduled drydocking of the vessel.

General and Administrative Expenses: Corporate. Corporate-related general and administrative expenses for the three months ended March 31, 2018 were $2.9 million, a decrease of $0.1 million from $3.0 million for the three months ended March 31, 2017.

General and Administrative Expenses: Commercial and Chartering. Commercial and chartering expenses are the expenses attributable to our chartering and commercial operations departments in connection with our spot trading activities. Commercial and chartering expenses for the three months ended March 31, 2018 were $0.8 million, an increase of $0.1 million from $0.7 million for the three months ended March 31, 2017. This increase reflects the expansion of chartering and commercial activities in our Singapore and Houston offices.

Interest Expense and Finance Costs. Interest expense and finance costs include loan interest, finance lease interest, and amortization of deferred finance fees. Interest expense and finance costs for the three months ended March 31, 2018 were $5.7 million, as compared to $4.9 million for the three months ended March 31, 2017. Cash interest expense increased by $0.8 million to $5.1 million for the three months ended March 31, 2018, from $4.3 million for the three months ended March 31, 2017. These increases in interest expense and finance costs are attributable to an increased average LIBOR during the three months ended March 31, 2018 compared to the three months ended March 31, 2017 as well as a change in our debt structure due to the new finance leases. Amortization of deferred finance fees for the three months ended March 31, 2018 was $0.6 million, consistent with the three months ended March 31, 2017.

Liquidity

As of March 31, 2018, we had $35.3 million (December 31, 2017: $39.5 million) available in cash and cash equivalents. The following debt and lease liabilities (net of deferred finance fees) were outstanding as of the dates indicated:


As of


Mar 31, 2018

Dec 31, 2017

Debt

394,295,314

404,423,570

Finance leases

57,204,705

42,494,019

Operating leases (1)

2,353,991

-

Total

453,854,010

446,917,589

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