d’Amico International Shipping reports first half results

The Board of Directors of d’Amico International Shipping S.A. (Borsa Italiana: DIS) (the Company or the Group), a leading international marine transportation company focusing

on the product tanker market, today approved the half‐yearly and second quarter 2011 financial report.
MANAGEMENT COMMENTARY
Marco Fiori, Chief Executive Officer of d’Amico International Shipping commented:
‘The first half of 2011 and the second quarter, in particular, produced encouraging returns,
despite the global economic environment, the worries about the economic situation in Europe
and the geo‐political situation in North Africa and the Middle East.
In such market scenario, DIS was able to realize better average spot rates in the second quarter compared to the first three months of the year, due primarily to the short‐term rate spikes occurred in May and June. The significant percentage of fixed contract coverage (48.2% on average in the first half of 2011) and the competitive market positioning highlight the ability of DIS to generate a positive operating cash flow and to maintain a very solid financial position even in long‐lasting challenging market scenarios. At the same time a well‐balanced business model allows DIS to take full advantage of any market upside.
In the first half of 2011 the product tanker market has also shown signs of recovery in asset
values resulting in increased sales and purchase activity. Our Company confirmed to be a
leading participant in the sale and purchase product tanker market, buying two new vessels at
attractive prices. These deals confirm our competitive positioning as well as the value of our
established preferred relationships with key market players. They also validate our balanced
strategy and business model, which provide vessel sale and purchase as an integral part of it,
aiming to build up additional equity for our shareholders.
d’Amico International Shipping continues to maintain a conservative approach for the current
year, with a more positive view on the medium term. We believe the market is moving into the right direction and that a period of weak spot rates in the near‐term will be positive for the
balance of tanker supply and demand in the longer term. At the same time, the consolidation of refining capacity outside the OECD, expected in the coming years, should lead to improved tonmile demand and better utilization rates.
I am also pleased to see DIS making steady progress under our share buy‐back program,
creating value for its shareholders. Since July 2011, we have repurchased nr. 179,977 shares,
representing the 0.12002% of the outstanding share capital of the Company, for a total
consideration of Euro 144,594.’
FINANCIAL REVIEW
SUMMARY OF THE RESULTS IN THE SECOND QUARTER AND FIRST HALF OF 2011
The first half of 2011, in particular starting from May, produced encouraging returns, considering the global economic environment, the worries about the economic situation within Europe and the geopolitical situation in North Africa and the Middle East. Oil product demand expectations have not significantly changed. The inflationary pressures on emerging economies and on‐going concern about sovereign debt issues within the Euro‐zone could influence any large increase in the demand. The catalogue of Natural disasters coupled with the Geopolitical problems and conflicts (Libya) have put substantial pressure on the supply of Oil, resulting in the release of strategic reserves. The disruption of supply of Petroleum Products continues with now real substantial improvement in returns. Better utilization rates of the Medium and Handy size product tankers have led to no large fluctuations in freight rates. Whereas the release of Oil reserves and poorer than expected demand has had a greater
effect on the other Tanker segments. Oil demand growth has and is being supported almost entirely by emerging economies. The increased demand is easily met by the existing fleet. However as this continues with a reducing new building list, rates should further improve in the longer term. The product tankers market showed signs of recovery over the second quarter of the year. The Net loss of US$ 5.5 million in Q2 and US$ 10.2 million in the first half of 2011 were significantly influenced by the exchange rate differences on the US Dollar conversion of the Japanese Yen denominated debt. Excluding that effect, the Q2 net loss was US$ 3.9 million, compared to the Net loss of US$ 5.8 million occurring in Q1, reflecting the improved operating environment. The H1 loss, net of foreign exchange differences, was of US$ 9.7 million. H1 results were driven by the trend in TCE Earnings level, which followed the performance on the spot market: DIS realized a spot daily average TCE of US$ 12,516 in Q2 and US$ 12,185 in H1 2011, but the average daily spot rates in May/June 2011 were in the range of US$ 14,500.
Thanks to the positive EBIDTA and to the working capital trend, DIS generated positive operating cash flow, which amounted to the significant level of US$ 18.4 million in H1 2011. The significant percentage of fixed contract coverage (48.2% on average in H1 2011) and the competitive market positioning highlight the ability of DIS to generate a positive operating cash flow and to maintain a very solid financial position even in long‐lasting challenging market scenarios. At the same time a well‐balanced business model allows DIS to take full advantage of any market upside.
According to its strategy, DIS maintained a high level of ‘coverage’ (fixed contracts) throughout the first half of 2011, securing an average of 48.2% of its revenues. The lower level of the average fixed daily rate in H1 2011 is simply due to certain contracts renewed during 2010 and 2011. Other than securing revenue, those contracts pursue the objective of strengthening DIS historical relationships with the main oil majors, which is one the pillars of its commercial strategy.
The Gross operating profit (EBITDA) for Q2 2011 was of US$ 8.3 million (US$ 9.4 million in Q2 2010) and for the first half of 2011 was US$ 13.9 million (US$ 16.6 million in H1 2010). The lower results were mainly due to the weaker spot market rates at the beginning of this year, together with a lower average fixed rate. The Q2 2011 EBITDA margin on TCE Earnings was of 17.2% (Q2 2010 19.5%), while the H1 margin was 14.4% (H1 2010 16.7%). An improvement in the EBITDA margin was noted compared to both Q4 2010 (8.6%) and Q1 2011 (11.7%).
The Operating result (EBIT) of the second quarter of the year was very close to the break‐even level (US$ 0.9 million of loss), compared to the US$ 1.3 million positive EBIT in Q2 2010, showing a substantial improvement compared to the first quarter of this year. The H1 2011 EBIT was negative US$ 4.0 million vs. the positive result of US$ 0.5 million posted in the same period last year. As disclosed above, this variance is mainly a consequence of the lower performance registered at TCE Earnings level, but the Q2 2011 performance recovery confirmed the longer term positive view for the product tanker market.
The Net loss for Q2 2011 was US$ 5.5 million in line with the same quarter of 2010. The H1 2011 Net loss was of US$ 10.2 million (Net loss of US$ 8.9 million in H1 2010).
Source: d’Amico International Shipping