Danaos still suffering from Hanjin collapse

Danaos still suffering from Hanjin collapse

The collapse of Hanjin Shipping forced Danaos to recharter at lower rates some vessels previously chartered to the defunct carrier.

Danaos is still feeling the financial impact from the collapse of Hanjin Shipping in 2016, with the Greek charter ship owner posting sharply lower first quarter revenues and earnings.

The New York Stock Exchange-listed group’s net income tumbled to $18.4 million from $44.1 million a year earlier, and operating revenue fell to $110 million from $137.5 million.

Adjusted net income was down almost 50 percent at $24.5 million against $47.2 million in the same period last year.

“The results of Danaos for the first quarter of 2017 continue to reflect the impact of the Hanjin bankruptcy on the company’s financial performance,” said John Coustas, CEO of the Athens-based shipowner.

“The $22.7 million decrease in our adjusted net income was primarily attributable to $22 million of operating revenues lost from Hanjin.”

Danaos is also in breach of certain financial covenants due to the collapse of the Korean carrier, which had chartered eight of its vessels, and is negotiating with its lenders to extend the waivers for these breaches from April 1 to July 1.

The Hanjin vessels were rechartered at lower rates and in some cases were off hire during the quarter.

Excluding the off-hire days related to three 10,100-TEU vessels previously chartered by Hanjin and redelivered to new charterers in April, the company’s utilization of its 55-ship fleet rose to 98.1 percent during the quarter from 94.6 percent a year earlier.

Danaos had total contracted operating revenues of $2 billion at the end of the quarter, with charters extending through 2028 and remaining average fixture duration of 6.4 years.

Charter rates increased during April, largely the result of the launch of new carrier alliances, Coustas said.

“These increases were considerable on a percentage basis, but still low in absolute terms at levels that may be slightly above operating expenses, but still not enough to service investment returns.”

“While we do not expect the market to return to the lows of 2016, we also see signs of the charter market tailing off.”

However carriers’ more disciplined capacity utilization strategies following the launch of the alliances have boosted container rates, which in turn has improved the performance of Danaos’ customers and reduced its counterparty credit risks, Coustas said.

The group continues to have low near-term exposure to the weak spot market, with charter coverage of 90 percent over the coming 12 months based on current operating revenues and 73 percent in terms of contracted operating days.

Contact Bruce Barnard at brucebarnard47@hotmail.com.