ASC Ardmore Shipping Corporation

HAMILTON, Bermuda, Aug. 1, 2023 /PRNewswire/ -- Ardmore Shipping Corporation (NYSE: ASC) ("Ardmore", the "Company" or "we") today announced results for the three and six months ended June 30, 2023.

Highlights and Recent Activity

• Reported net income and Adjusted earnings (see Adjusted earnings in the Non-GAAP Measures section) of $23.7 million for the three months ended June 30, 2023, or $0.57 earnings and Adjusted earnings per basic and diluted share, compared to net income of $28.8 million, or $0.82 earnings and Adjusted earnings per basic share and $0.81 earnings and Adjusted earnings per diluted share, for the three months ended June 30, 2022.
• Reported net income of $66.9 million for the six months ended June 30, 2023, or $1.63 earnings per basic share and $1.60 earnings per diluted share, compared to net income of $21.0 million, or $0.60 earnings per basic and diluted share, for the six months ended June 30, 2022. Adjusted for certain costs (see Adjusted earnings in the Non-GAAP Measures section), we reported Adjusted earnings of $66.9 million, or $1.63 Adjusted earnings per basic share and $1.60 Adjusted earnings per diluted share, for the six months ended June 30, 2023, compared to Adjusted earnings of $28.0 million, or $0.81 Adjusted earnings per basic share and $0.80 Adjusted earnings per diluted share, for the six months ended June 30, 2022.
• Consistent with the Company's variable dividend policy of paying out dividends on its shares of common stock equal to one-third of Adjusted earnings, the Board of Directors declared a cash dividend on August 1, 2023, of $0.19 per common share for the quarter ended June 30, 2023. The dividend will be paid on September 15, 2023, to all shareholders of record on August 31, 2023.
• MR Eco-Design tankers earned an average spot TCE rate of $27,460 per day for the three months ended June 30, 2023. Chemical tankers earned an average TCE rate of $24,555 per day for the three months ended June 30, 2023. Based on approximately 45% total revenue days currently fixed for the third quarter of 2023, the average spot TCE rate is approximately $26,100 per day for MR Eco-Design tankers; based on approximately 63% of revenue days fixed for the third quarter of 2023, the average TCE rate for chemical tankers is approximately $20,400 per day.
• On June 15, 2023, the Company amended its term loan agreement with ABN AMRO Bank NV and Credit Agricole Investment Bank. The amendment converted 50% of the outstanding balance under the facility into a revolving credit facility with the remaining 50% of the outstanding balance continuing as a term loan facility.
• On June 15, 2023, the Company published its 2022 Sustainability Report, highlighting its progress towards a more sustainable future. In 2022, the Company reached new heights in both operating performance and sustainability. Ardmore continues to believe that consistent superior operating performance is a key driver of long-term value in its business, and Ardmore is committed to driving its sustainability agenda forward. The Sustainability Report is available on the Ardmore website at www.ardmoreshipping.com/about/progress/

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

"While rates have moderated over the past quarter consistent with a well-established seasonal pattern and some incremental weakness in the global economy, we are very pleased with the resilience of the MR and chemical tanker markets, with overall rates holding in the mid-$20,000's per day, roughly $10,000 above our breakeven rate and supporting continued strong earnings. Even more encouraging is the fact that our key regional markets are experiencing short-duration spikes, which if these were to happen simultaneously, would result in a significant increase in the global average from already strong levels.

We have remained disciplined and focused during this period of heightened charter rates, successfully executing on initiatives to benefit Ardmore over the long term: reducing our net leverage to 18%, improving our breakeven levels, and deploying innovative technologies and processes to maximize fleet efficiency and minimize our emissions footprint. We will continue focusing on progress and performance in all of Ardmore's activities, paying our shareholders an attractive quarterly dividend, and assessing potential growth opportunities, to maximize shareholder value for the long term."

Summary of Recent and Second Quarter 2023 Events

Fleet

Fleet Operations and Employment

As of June 30, 2023, the Company had 26 vessels in operation (including four chartered-in vessels), consisting of 20 MR tankers ranging from 45,000 deadweight tonnes (dwt) to 49,999 dwt (15 Eco-Design and five Eco-Mod) and six Eco-Design IMO 2 product/chemical tankers ranging from 25,000 dwt to 37,800 dwt. The Company also commercially manages one of Carl Büttner's 24,000 dwt chemical tankers.

MR Tankers (45,000 dwt – 49,999 dwt)

At the end of the second quarter of 2023, the Company had 20 MR tankers in operation, all of which were trading in the spot market. The MR tankers earned an average TCE rate of $27,180 per day in the second quarter of 2023. In the second quarter of 2023, the Company's 15 MR Eco-Design tankers earned an average TCE rate of $27,460 and the Company's five MR Eco-Mod tankers earned an average TCE rate of $26,240 per day.

In the third quarter of 2023, the Company expects to have all revenue days for its MR tankers employed in the spot market. As of August 1, 2023, the Company had fixed approximately 45% of its total MR revenue days for the third quarter of 2023 at an average TCE rate of approximately $26,800 per day, which includes MR Eco-Design tankers at $26,100 per day and MR Eco-Mod tankers at $28,400 per day.

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

At the end of the second quarter of 2023, the Company had six Eco-Design IMO 2 product / chemical tankers in operation, all of which were trading in the spot market. During the second quarter of 2023, the Company's six Eco-Design product / chemical vessels earned an average TCE rate of $24,555 per day.

In the third quarter of 2023, the Company expects to have all revenue days for its Eco-Design IMO 2 product / chemical tankers employed in the spot market. As of August 1, 2023, the Company had fixed approximately 63% of its Eco-Design IMO 2 product / chemical tankers revenue days for the third quarter of 2023 at an average TCE rate of approximately $20,400 per day.

Drydocking

The Company had 12 drydock days in the second quarter of 2023. The Company expects to have 89 drydock days in the third quarter of 2023.

Dividend on Common Shares

Consistent with the Company's variable dividend policy of paying out dividends on its shares of common stock equal to one-third of Adjusted earnings, as calculated for dividends (see Adjusted earnings (for purposes of dividend calculations) in the Non-GAAP Measures section), the Board of Directors declared a cash dividend on August 1, 2023, of $0.19 per common share for the quarter ended June 30, 2023. The dividend will be paid on September 15, 2023, to all shareholders of record on August 31, 2023.

Financing

On June 15, 2023, the Company amended its term loan agreement with ABN AMRO Bank NV and Credit Agricole Investment Bank. The amendment converted 50% of the outstanding balance of the facility into a revolving credit facility with the remaining 50% of the outstanding balance continuing as a term loan facility.

Publication of 2022 Sustainability Report

On June 15, 2023, the Company published its 2022 Sustainability Report, highlighting its progress towards a more sustainable future. In 2022, the Company reached new heights in both operating performance and sustainability. Ardmore continues to believe that consistent superior operating performance is a key driver of long-term value in its business, and Ardmore is committed to driving its sustainability agenda forward. The Sustainability Report is available on the Ardmore website at www.ardmoreshipping.com/about/progress/

Conflict in Ukraine

Please see "Item 3. Key Information--Risk Factors" in the Company's Annual Report on Form 20-F for information about risks to the Company relating to the conflict in Ukraine. The conflict in Ukraine has disrupted energy supply chains, caused instability and significant volatility in the global economy and resulted in economic sanctions by several nations. The ongoing conflict has contributed significantly to related increases in spot tanker rates.

Results for the Three Months Ended June 30, 2023 and 2022

The Company reported net income of $23.7 million for the three months ended June 30, 2023, or $0.57 earnings per basic and diluted share, as compared to net income of $28.8 million, or $0.82 earnings per basic and $0.81 earnings per diluted share for the three months ended June 30, 2022.

Results for the Six Months Ended June 30, 2023 and 2022

The Company reported net income of $66.9 million for the six months ended June 30, 2023, or $1.63 earnings per basic share and $1.60 earnings per diluted share, as compared to net income of $21.0 million, or $0.60 earnings per basic and diluted share for the six months ended June 30, 2022.

Management's Discussion and Analysis of Financial Results for the Three Months Ended June 30, 2023 and June 30, 2022

Revenue. Revenue for the three months ended June 30, 2023 was $91.9 million, a decrease of $15.2 million from $107.1 million for the three months ended June 30, 2022.

The Company's average number of operating vessels was 26.0 for the three months ended June 30, 2023, as compared to 27.0 for the three months ended June 30, 2022.

The Company had 2,295 spot revenue days for the three months ended June 30, 2023, as compared to 2,348 for the three months ended June 30, 2022. The Company had 26 vessels employed directly in the spot market as of June 30, 2023 and 2022. Changes in spot rates resulted in a decrease in revenue of $11.5 million and the decrease in spot revenue days resulted in a decrease in revenue of $2.4 million for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

The Company had no product tankers employed under time charter as of June 30, 2023, as compared to one as of June 30, 2022. There were no revenue days derived from time charters for the three months ended June 30, 2023, as compared to 90 for the three months ended June 30, 2022. The decrease in revenue days for time-chartered vessels resulted in a decrease in revenue of $1.3 million.

Voyage Expenses. Voyage expenses were $31.5 million for the three months ended June 30, 2023, a decrease of $9.7 million from $41.2 million for the three months ended June 30, 2022. A decrease in bunker prices resulted in decreased voyage expenses of $6.3 million and a decrease in spot revenue days resulted in a decrease in bunker consumption, port and agency expenses plus commission costs of $3.4 million for the three months ended June 30, 2023 compared with the three months ended June 30, 2022.

TCE Rate. The average TCE rate for the Company's fleet was $26,541 per day for the three months ended June 30, 2023, a decrease of $1,265 per day from $27,806 per day for the three months ended June 30, 2022. The decrease in average TCE rate was primarily the result of lower spot rates for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, which was partially offset by a decrease in bunker prices. TCE rates represent net revenues (a non-GAAP measure representing revenue less voyage expenses) divided by revenue days. Net revenue utilized to calculate TCE is determined on a discharge-to-discharge basis, which is different from how we record revenue under U.S. GAAP.

Vessel Operating Expenses. Vessel operating expenses were $15.3 million for the three months ended June 30, 2023, a decrease of $0.6 million from $15.9 million for the three months ended June 30, 2022. This decrease was primarily attributable to the completion of the sales of the Ardmore Sealeader in the second quarter of 2022, and the Ardmore Sealifter and Ardmore Sealancer in the third quarter of 2022. In addition, the decrease also reflects the timing of vessel operating expenses between quarters. Vessel operating expenses, by their nature, are prone to fluctuations between periods.

Charter Hire Costs. Total charter hire expense was $4.3 million for the three months ended June 30, 2023, an increase of $1.9 million from $2.4 million for the three months ended June 30, 2022. This increase is the result of the Company having an average of 4.0 vessels chartered-in during the three months ended June 30, 2023, compared to an average of 2.3 vessels chartered-in for the three months ended June 30, 2022. Total charter hire expense for the three months ended June 30, 2023 was comprised of an operating expense component of $2.2 million and a vessel lease expense component of $2.1 million.

Depreciation. Depreciation expense for the three months ended June 30, 2023 was $6.8 million, a decrease of $0.2 million from $7.0 million for the three months ended June 30, 2022. This decrease is attributable to the change in the scrap value of each vessel from $300 per lightweight ton ("lwt") to $400 per lwt during the first quarter of 2023.

Amortization of Deferred Drydock Expenditures. Amortization of deferred drydock expenditures for the three months ended June 30, 2023 was $0.9 million, a decrease of $0.1 million from $1.0 million for the three months ended June 30, 2022. The deferred 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 June 30, 2023 were $4.8 million, an increase of $0.5 million from $4.3 million for the three months ended June 30, 2022. The increase in costs was driven by an increase in non-cash stock-based compensation expense and an increase in compensation and benefits during the three months ended June 30, 2023, compared to the three months ended June 30, 2022.

General and Administrative Expenses: Commercial and Chartering. Commercial and chartering expenses are the expenses attributable to Ardmore's chartering and commercial operations departments in connection with its spot trading activities. Commercial and chartering expenses for the three months ended June 30, 2023 were $1.1 million, consistent with $1.1 million for the three months ended June 30, 2022.

Unrealized Gains / (Losses) on Derivatives: We had no unrealized gains or losses on derivatives for the three months ended June 30, 2023, as compared to an unrealized gain of $0.3 million for the three months ended June 30, 2022.

Interest Expense and Finance Costs. Interest expense and finance costs for the three months ended June 30, 2023 were $2.8 million, a decrease of $2.0 million from $4.8 million for the three months ended June 30, 2022. The decrease in costs was primarily due to lower aggregate outstanding obligations following the refinancing of 19 vessels completed during the second half of 2022. Amortization of deferred finance fees for the three months ended June 30, 2023 was $0.3 million, generally consistent with $0.4 million for the three months ended June 30, 2022.

Liquidity

As of June 30, 2023, the Company had $255.6 million in liquidity available, with cash and cash equivalents of $51.0 million (December 31, 2022: $50.6 million) and amounts available and undrawn under its revolving credit facilities of $204.6 million (December 31, 2022: $170.0 million). The following debt and lease liabilities (net of deferred finance fees) were outstanding as of the dates indicated:

Conference Call

The Company plans to host a conference call on August 1, 2023, at 10:00 a.m. Eastern Time to discuss its results for the quarter ended June 30, 2023. All interested parties are invited to listen to the live conference call and review the related slide presentation by choosing from the following options:

1. By dialing 844‑492‑3728 (U.S.) or 412‑542‑4189 (International) and referencing "Ardmore Shipping."
2. By accessing the live webcast at Ardmore's website at www.ardmoreshipping.com.

Participants should dial into the call 10 minutes before the scheduled time.

If you are unable to participate at this time, an audio replay of the call will be available through August 8, 2023 at 877‑344‑7529 or 412‑317‑0088. Enter the passcode 8126419 to access the audio replay. A recording of the webcast, with associated slides, will also be available on the Company's website. The information provided on the teleconference is only accurate at the time of the conference call, and the Company takes no responsibility for providing updated information.

About Ardmore Shipping Corporation

Ardmore owns and operates a fleet of MR product and chemical tankers ranging from 25,000 to 50,000 deadweight tonnes. Ardmore provides, through its modern, fuel-efficient fleet of mid-size tankers, seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies.

Ardmore's core strategy is to continue to develop a modern, high-quality fleet of product and chemical tankers, build key long-term commercial relationships and maintain its cost advantage in assets, operations and overhead, while creating synergies and economies of scale as the company grows. Ardmore provides its services to customers through voyage charters and time charters, and enjoys close working relationships with key commercial and technical management partners.

Ardmore's Energy Transition Plan ("ETP") focusses on three key areas: transition technologies, transition projects, and sustainable (non-fossil fuel) cargos. The ETP is an extension of Ardmore's strategy, building on its core strengths of tanker chartering, shipping operations, technical and operational fuel efficiency improvements, technical management, construction supervision, project management, investment analysis, and ship finance.

CO₂ Emissions Reporting⁽¹⁾

In April 2018, the International Maritime Organization's ("IMO") Marine Environment Protection Committee ("MEPC") adopted an initial strategy for the reduction of greenhouse gas ("GHG") emissions from ships, setting out a vision to reduce GHG emissions from international shipping and phase them out as soon as possible. Ardmore is committed to transparency and contributing to the reduction of CO₂ emissions in the Company's industry. Ardmore's reporting methodology is in line with the framework set out within the IMO's Data Collection System ("DCS") initiated in 2019.

On January 1, 2023, the BIMCO CII Operations Clause for Time Charter Parties came into force. This clause outlines that the charterer should take responsibility for a ship's emissions. On this basis, Ardmore's GHG emissions analysis has been updated to exclude the impact of ships time-chartered out and to include the impact of ships time-chartered in. Previously all vessels were included in Ardmore's analysis from the fleet except for vessels commercially managed by Ardmore.

Ardmore Performance

It should be noted that results vary quarter to quarter depending on ship activity, ballast / laden ratio, cargo carried, weather, waiting time, time in port and vessel speed. However, analysis is also presented on a trailing 12-month basis to provide a more accurate assessment of Ardmore's progress over a longer period and to mitigate seasonality. From a weather perspective rougher weather (based on Beaufort Scale wind force rating being greater than 4 BF) will generally have a mitigating impact on the ability to optimize fuel consumption while idle time will impact ships metrics as they will still require power to run but will not be moving. Overall Ardmore Shipping's carbon emissions for the trailing 12-month period have increased from 355,502 metric tonnes to 416,097 metric tonnes of CO2, primarily due to increased vessel speeds and multiple shorter voyages. Fleet EEOI for the period increased from 11.91 g / ctm to 13.62 g / ctm, while AER increased from 5.84 g / tm to 6.18 g / tm.

Ardmore seeks to achieve continued improvements through a combination of technological advancements and operational optimization.

Non-GAAP Measures

EBITDA + vessel lease expense component (i.e. EBITDAR)

EBITDAR is defined as EBITDA (i.e. earnings before interest, loss on extinguishment, unrealized gains/(losses) on interest rate derivatives, profit/(loss) on equity method investments, taxes, depreciation and amortization) plus the vessel lease expense component of total charter hire expense for chartered-in vessels. Adjusted EBITDAR is defined as EBITDAR before certain items that Ardmore believes are not representative of its operating performance, including gain or loss on sale of vessels.

For the three months ended June 30, 2023, we recognized total charter hire expense of $4.3 million in respect of time charter-in vessels under operating leases. The total expense includes (i) $2.1 million in respect of the right to use the leased assets (i.e. vessel lease expense component), and (ii) $2.2 million in respect of the costs of operating the vessels (i.e. operating expense component). Under US GAAP, the expense related to the right to use the leased assets (i.e. capital component) is treated as an operating item on our consolidated statement of operations, and is not added back in our calculation of EBITDA. The treatment of operating lease expenses differs under US GAAP as compared to international financial reporting standards ("IFRS"). Under IFRS, the expense of an operating lease is presented in depreciation and interest expense.

Many companies in our industry report under IFRS; we therefore use EBITDAR and Adjusted EBITDAR as tools to compare our valuation with the valuation of these other companies in our industry. We do not use EBITDAR and Adjusted EBITDAR as measures of performance or liquidity. We present below reconciliations of net income / (loss) attributable to common stockholders to EBITDAR (which includes an adjustment for vessel lease operating expenses) and Adjusted EBITDAR.

EBITDAR and Adjusted EBITDAR, as presented, may not be directly comparable to similarly titled measures presented by other companies. In addition, EBITDAR and Adjusted EBITDAR should not be viewed as measures of overall performance since they exclude vessel rent, which is a normal, recurring cash operating expense related to our in-chartering of vessels that is necessary to operate our business. Accordingly, you are cautioned not to place undue reliance on this information.

EBITDA, Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings (for purposes of dividend calculations)

EBITDA, Adjusted EBITDA and Adjusted earnings are not measures prepared in accordance with U.S. GAAP and are defined and reconciled below. EBITDA is defined as earnings before interest, loss on extinguishment, unrealized gains/(losses) on interest rate derivatives, profit/(loss) on equity method investments, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before certain items that Ardmore believes are not representative of its operating performance, including gain or loss on sale of vessels. Adjusted earnings excludes certain items from net income attributable to common stockholders, including gain or loss on sale of vessels and write-off of deferred finance fees (i.e., loss on extinguishment) because they are considered to not be representative of the Company's operating performance.

EBITDA, Adjusted EBITDA and Adjusted earnings are presented in this press release as the Company believes that they provide investors with a means of evaluating and understanding how Ardmore's management evaluates operating performance. EBITDA and Adjusted EBITDA increase the comparability of the Company's fundamental performance from period to period. This increased comparability is achieved by excluding the potentially disparate effects between periods of interest expense, taxes, depreciation or amortization, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. The Company believes that including EBITDA, Adjusted EBITDA and Adjusted earnings as financial and operating measures assists investors in making investment decisions regarding the Company and its common stock.

For purposes solely of the quarterly common dividend calculation, Adjusted Earnings represents the Company's Adjusted earnings for the quarter ended June 30, 2023, but excluding the impact of unrealized gains / (losses) and certain non-recurring items.

These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to, financial measures prepared in accordance with U.S. GAAP. In addition, these non-GAAP measures may not have a standardized meaning and therefore may not be comparable to similar measures presented by other companies.