Ardmore Shipping Corporation announced results for the three and twelve months ended December 31, 2016.

Highlights

Reported a net profit of $3.7 million for the twelve months ended December 31, 2016, or $0.12 basic and diluted earnings per share, as compared to a net profit of $32.0 million, or $1.23 basic and diluted earnings per share, for the twelve months ended December 31, 2015. The Company reported EBITDA (see Non-GAAP Measures section below) of $54.2 million for the twelve months ended December 31, 2016, as compared to $70.6 million for the twelve months ended December 31, 2015.

Reported a net loss of $3.7 million for the three months ended December 31, 2016, or $0.11 basic and diluted loss per share, as compared to a profit of $5.4 million, or $0.21 basic and diluted earnings per share, for the three months ended December 31, 2015. The Company reported EBITDA (see Non-GAAP Measures section below) of $10.9 million for the three months ended December 31, 2016, as compared to $17.1 million for the three months ended December 31, 2015.

Delivered a solid chartering performance for the year with spot and pool MR tankers earning an average of $14,627 per day and Eco-Design chemical tankers earning an average of $15,395 per day.

Completed a refinancing of the Ardmore Seatrader, a 47,000 Dwt Eco-Mod product / chemical tanker under a sale and leaseback arrangement, releasing gross proceeds of $9.3 million which, after repayment of existing debt, will be used for general corporate purposes.

Maintaining a dividend policy of paying out 60% of earnings from continuing operations. Consistent with this policy, the Company is not declaring a dividend for the fourth quarter 2016. The Company paid out $0.27 per common share in cash dividends, in the aggregate, for the first and second quarter of 2016.

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

“Throughout 2016, we achieved a number of key accomplishments that position Ardmore to benefit from the long-term trends driving the market for MR product and chemical tankers. We completed a refinancing of all our debt on improved terms and pricing, concluded a follow-on offering in June to finance the accretive acquisition of six Eco-Design MR product tankers at a highly attractive price, and opportunistically sold three chemical tankers, which partially funded the six-ship acquisition and refocused the fleet more toward MRs with greater earnings upside. Just as importantly, we remained focused on maintaining the best-in-class operational capabilities and cost structure that are central to our identity.

The charter market performance for the year reflected a strong first half that was partially offset by weakness in the second half, driven by high inventory levels and low oil trading activity, coupled with the high pace of MR newbuilding deliveries in 2016. We believe that underlying demand growth fundamentals will prevail again starting later this year and, coupled with the very low orderbook and a significantly reduced pace of deliveries, will set the stage for a strong and sustained charter market recovery. With our strong balance sheet, modern fleet, low cost structure, and with revenue days set to increase by 13% in 2017, we believe Ardmore is well positioned to take advantage of the anticipated charter market recovery and to generate strong returns and value accretion for our shareholders.”

Summary of Recent and Fourth Quarter 2016 Events

Fleet

Deliveries

During the quarter, the Company took delivery of the final of the six vessels we agreed to acquire in June 2016. The Ardmore Enterprise, a 49,500 Dwt Eco-Design IMO 2/3 vessel constructed by STX Offshore and Shipbuilding Co. Ltd. in Korea, delivered on November 2, 2016 and commenced employment in the spot market.

Fleet Operations and Employment

The Company has 27 vessels currently in operation, comprising 21 Eco MR tankers ranging from 45,000 Dwt to 49,999 Dwt (15 Eco-Design and six Eco-Mod) and six Eco-Design product / chemical tankers ranging from 25,000 Dwt to 38,000 Dwt.

MR Tankers (45,000 Dwt – 49,999 Dwt)

At year-end 2016, the Company had 20 MR tankers trading in the spot market or in pools, and one MR tanker employed on time charter. The 20 spot or pool trading MR tankers, comprising 14 Eco-Design and six Eco-Mod, earned an average of $12,113 per day in the quarter and $14,627 per day for the full year. Overall for the quarter, our 15 Eco-Design MR tankers earned $12,389 per day, and our six Eco-Mod MR tankers earned $11,910 per day.

In the first quarter of 2017, the Company expects to have 99% of its revenue days for its MR Eco-Design tankers employed in the spot market or in pools. The remaining 1% of revenue days are expected to be employed on time charters at an average rate of $18,500 per day. For its Eco-Mod MR tankers, the Company estimates that all revenue days are expected to be employed in the spot market. As of February 6, 2017, the Company has fixed approximately 50% of its total MR spot revenue days for the first quarter 2017 at approximately $12,500 per day.

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

At year-end 2016, the Company had six Eco-Design IMO 2 product / chemical tankers in operation, five of which were trading spot or in pools and one of which was employed on time charter. During the fourth quarter of 2016, across all employment types, the Company’s six Eco-Design product / chemical vessels earned an average daily rate of $12,502 per day in the quarter and $15,395 per day for the full year.

In the first quarter of 2017, the Company expects to have 88% of its revenue days for its Eco-Design IMO 2 product / chemical tankers employed in the spot market or in pools. The remaining 12% of revenue days are expected to be employed on time charters at an average rate of $16,350 per day. As of February 6, 2017, the Company has fixed approximately 50% of its Eco-Design IMO 2 product / chemical tankers spot revenue days for the first quarter 2017 at approximately $12,500 per day.

Drydocking

The Company had no drydock days in the fourth quarter of 2016. Ardmore expects 45 scheduled drydock days in the first quarter of 2017.

Dividend

Based on the Company’s policy of paying out dividends equal to 60% of earnings from continuing operations, the Company’s Board of Directors has not declared a dividend for the quarter ended December 31, 2016, in which the Company experienced a loss from continuing operations of $3.7 million. The Company has paid out dividends of $0.27 per share for the full year 2016. In addition, the Company has paid a total of $0.71 per share over the five quarters since initiating a constant payout ratio dividend policy, as compared to $0.50 paid in the prior five-quarter period under a fixed dividend policy. The Company’s Board of Directors reaffirmed its intention to maintain a policy of paying out dividends equal to 60% of earnings from continuing operations moving forward. Earnings from continuing operations is defined as earnings per share (“EPS”) reported under US GAAP, as adjusted for unrealized and realized gains and losses and extraordinary items.

Results for the Three Months Ended December 31, 2016 and 2015

The Company reported a net loss of $3.7 million, or $0.11 basic and diluted loss per share, for the three months ended December 31, 2016, as compared to a net profit of $5.4 million, or $0.21 basic and diluted earnings per share, for the three months ended December 31, 2015. For the three months ended December 31, 2016, the Company reported EBITDA (see “Non-GAAP Measures” section below) of $10.9 million, a decrease of $6.2 million from $17.1 million for the three months ended December 31, 2015.

Results for the Twelve Months Ended December 31, 2016 and 2015

The Company reported a net profit of $3.7 million, or $0.12 basic and diluted earnings per share, for the twelve months ended December 31, 2016, as compared to $32.0 million, or $1.23 basic and diluted earnings per share, for the twelve months ended December 31, 2015. For the twelve months ended December 31, 2016, the Company reported EBITDA (see “Non-GAAP Measures” section below) of $54.2 million, a decrease of $16.4 million from $70.6 million for the twelve months ended December 31, 2015.

Management’s Discussion and Analysis of Financial Results for the Three Months Ended December 31, 2016 and 2015

Revenue. Revenue for the three months ended December 31, 2016 was $43.2 million, an increase of $1.4 million from $41.8 million for the three months ended December 31, 2015.

The average number of owned vessels increased to 27 for the three months ended December 31, 2016, from 23 for the three months ended December 31, 2015, resulting in revenue days of 2,417 for the three months ended December 31, 2016, as compared to 2,047 for the three months ended December 31, 2015.

We had ten and 16 vessels employed under time charter and pool arrangements as at December 31, 2016 and December 31, 2015, respectively. Revenue days derived from time charter and pool arrangements were 952 for the three months ended December 31, 2016, as compared to 1,331 for the three months ended December 31, 2015. The decrease in revenue days in time charter and pool arrangements resulted in a decrease in revenue of $6.4 million, while lower charter rates for the quarter ended December 31, 2016 resulted in a decrease in revenue of $3.5 million.

We had 17 and eight vessels employed directly in the spot market as at December 31, 2016 and December 31, 2015, respectively. For spot chartering arrangements, we had 1,465 revenue days for the three months ended December 31, 2016, as compared to 716 for the three months ended December 31, 2015. This increase in revenue days derived from spot chartering arrangements resulted in an increase in revenue of $20.2 million, offset by an $8.8 million decrease in spot market revenue related to softer market conditions.

For vessels employed directly in the spot market, revenue is recognized on a gross freight basis, while under time chartering and 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 $13.4 million for the three months ended December 31, 2016, an increase of $5.9 million from $7.5 million for the three months ended December 31, 2015.

Revenue days increased to 2,417 for the three months ended December 31, 2016, as compared to 2,047 for the three months ended December 31, 2015. For spot chartering arrangements, we had 1,465 revenue days for the three months ended December 31, 2016, as compared to 716 for the three months ended December 31, 2015. This increase in revenue days results in an increase in commissions and voyage related expenses of $5.9 million. In direct spot employment, all voyage expenses are borne by us as opposed to the charterer, while under time chartering and pool arrangements, the charterer typically pays voyage expenses.

TCE Rate. The average TCE rate for our fleet was $12,307 per day for the three months ended December 31, 2016, decreasing by $4,660 per day from $16,967 per day for the three months ended December 31, 2015.

Vessel Operating Expenses. Vessel operating expenses were $16.1 million for the three months ended December 31, 2016, an increase of $2.1 million from $14.0 million for the three months ended December 31, 2015. This increase is primarily due to an increase in the number of vessels in operation for the three months ended December 31, 2016. 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 $6,531 for the three months ended December 31, 2016, as compared to $6,503 for the three months ended December 31, 2015.

Depreciation. Depreciation expense for the three months ended December 31, 2016 was $8.5 million, an increase of $1.6 million from $6.9 million for the three months ended December 31, 2015. The increase is primarily due to an increase in the average number of owned vessels to 27 for the three months ended December 31, 2016, from 23 for the three months ended December 31, 2015.

Amortization of Deferred Drydock Expenditure. Amortization of deferred drydock expenditure for the three months ended December 31, 2016 was $0.7 million, an increase of $0.2 million from $0.5 million for the three months ended December 31, 2015. The capitalized costs of drydockings for a given vessel are depreciated on a straight-line basis to the next scheduled drydocking of the vessel.

General and Administrative Expenses. General and administrative expenses for the three months ended December 31, 2016 were $2.8 million, as compared to $3.1 million for the three months ended December 31, 2015. The decrease in general and administrative expenses was primarily as a result of a decrease in professional fees of $0.2 million during the three months ended December 31, 2016, as a consequence of transactional costs associated with vessels and financings in the fourth quarter of 2015.

Interest Expense and Finance Costs. Interest expense and finance costs (which include loan interest, capital lease interest, and amortization of deferred financing fees, and are net of capitalized interest) for the three months ended December 31, 2016 were $5.5 million, as compared to $4.3 million for the three months ended December 31, 2015. Cash interest expense increased by $0.1 million to $4.1 million for the three months ended December 31, 2016, from $4.0 million for the three months ended December 31, 2015. This is explained by a reduction in the interest expense following the refinancing of debt completed during the first quarter of 2016 in addition to the sale of the Ardmore Calypso, Ardmore Capella and Ardmore Centurion, offset by an increase in costs following the delivery of the six acquired vessels. Capitalized interest, which relates to vessels under construction, was nil for the three months ended December 31, 2016, as compared to $0.2 million for the three months ended December 31, 2015, as there were no vessels under construction during the three months ended December 31, 2016. Amortization of deferred financing charges for the three months ended December 31, 2016 was $1.3 million, as compared to $0.5 million for the three months ended December 31, 2015. The $1.3 million is inclusive of a write-off of deferred finance fees of $0.3 million relating to the sale of the Ardmore Centurion.

Source: Ardmore Shipping Corporation