Diamond S Shipping Inc. (DSSI) Tops Q2 EPS by 25c, Revenues Beat

Diamond S Shipping Inc. (NYSE: DSSI) reported Q2 EPS of ($0.21), $0.25 better than the analyst estimate of ($0.46). Revenue for the quarter came in at $149.3 million versus the consensus estimate of $100.13 million.

Highlights

• The Company operated all 68 vessels for a full quarter following completion of the merger on March 27, 2019 resulting in an increase in vessel operating days for the quarter by more than 50%.
• Net debt at June 30, 2019 was $876.8 million implying a debt to asset value leverage ratio of 50%.
• For the second quarter, net loss attributable to Diamond S was $8.5 million, representing a net loss of $0.21 basic and diluted earnings per share (“EPS”), and Adjusted EBITDA (see Non-GAAP Measures section below) was $33.6 million.

Craig H. Stevenson Jr., President and CEO of Diamond S, commented: “We are generally pleased with the performance of our fleet despite the prevailing weak conditions in the tanker market. Time-charter equivalent vessel earnings have been seasonally soft but still evidence a firmer market than the prior year. We are anticipating an uplift in the second half of 2019, as we prepare for the major shift toward compliance with IMO 2020 regulations. Refiners have accelerated their annual maintenance; storage facilities are beginning to lower their tanks; and shipowners are beginning their retrofit scrubber installations. These factors, along with anticipated oil demand over 100 million barrels per day, are expected to create higher utilization for available tankers. With 80% exposure to the spot market, the large Diamond S fleet of 68 crude and product carriers is positioned to benefit from the expected rise in earnings for the tanker market.”

Outlook

For the Diamond S fleet, the third quarter for both the Crude and Product Fleets is demonstrating the typical seasonal weakness of the tanker market. Global inventories remain at over 60 days forward demand cover. OPEC has reaffirmed its reduced capacity since the announced production cuts in the fourth quarter of 2018. Tanker availability is expected to decline over the second half of the year as result of about 16% of the global fleet’s installation of exhaust gas cleaning systems, or scrubbers. We expect greater inefficiencies with available tonnage as the industry begins its readiness to comply with IMO 2020 regulations.

As of July 26, 2019, the Company has booked approximately 48% of the Crude Fleet vessels at $17,265 per day. Vessels in the Product Fleet are 60% fixed at $13,000 per day.

The Company expects to see the overall tanker market conditions improve in the latter part of 2019. A growing distance between oil supply growth west of the Suez Canal and oil demand growth from east of the Suez Canal is expected to drive an increase in demand for oil tankers. Additionally, as oil demand continues to rise to over 100 million barrels per day, global inventories are expected to decrease, creating further demand for tankers. We believe the orderbook for new tanker supply is at manageable levels. The Company expects tanker supply to decrease leading up to compliance with IMO 2020 regulations as vessels are taken out of service for installation of scrubbers.

For earnings history and earnings-related data on Diamond S Shipping Inc. (DSSI) click here.

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