DANAOS CORPORATION

(DAC)
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Danaos : Annual Report

06/09/2021 | 09:49am EDT

ANNUAL REPORT

2020

World-Class Shipping, Leading-Edge Expertise

MISSION STATEMENT

Danaos Corporation seeks to remain the premier choice of global seaborne container transportation for its clients by utilizing its solid operational, technical and financial infrastructure.

Danaos will continue to provide outstanding customer service, enforce rigorous operational standards, maintain a steadfast commitment to safety and environmental protection, and reward its shareholders.

4

FROM THE PRESIDENT & CEO

DANAOS CORPORATION

ANNUAL REPORT 2020

5

Dear Fellow Shareholders,

I am very pleased to be writing this letter at a time when optimism abounds in our segment of the maritime industry. When front page headlines refer to the shortage of both ships and containers and decade- high rates for both, it is hard to not be confident about our prospects. This is the result of a remarkable turnaround of the Container industry that during the pandemic kept the world moving. Now, the increased demand coupled with a slowdown in turnaround times due to Covid restrictions has driven the biggest boom the industry has ever seen.

Danaos has benefited tremendously, as the timing of the remarkable demand for container vessels coincided with the expiration of the charters of almost half the fleet. Additionally, all the acquisitions we made in 2020 proved to be extremely well-timed and accretive. We are currently in the process of securing longer period charters for many of our vessels to ensure the stability of our cash flows over the next few years.

Setting aside favorable market conditions,our most remarkable recent achievement was the complete overhaul of our capital structure, which significantly strengthened our balance sheet. After a company buyback of shares and a subsequent offering by legacy shareholders who received shares of Danaos in the 2018 refinancing our shareholder base was renewed. We also refinanced all our prior debt facilities through a combination of a new bank debt facility and a $300 million seven-year bond. Our new bank debt facility allows for Danaos' significant cash flow to be deployed towards growth opportunities. It also has no maturity payment until 2025.

Dr. John Coustas

President & CEO

When front page headlines refer to the shortage of both ships and containers and decade-high rates for both, it is hard to not be confident about our prospects.

Danaos has benefited tremendously, as the timing of the remarkable demand for container vessels coincided with the expiration of the charters of almost half the fleet.

Our most remarkable recent achievement was the complete overhaul of our capital structure, which significantly strengthened our balance sheet.

Other important events that further improved our balance sheet were the recently announced early redemption of bonds we held on our balance sheet, which will add at least $75 million of liquidity in 2021, and the IPO of ZIM which gave us a profit windfall of at least $250 million, which we hope at some stage will be translated into our cash balances. Combined with our strong operating performance, this series of events led to the reinstatement of a dividend, which we hope to grow over time.

Looking forward, recent market euphoria has led to significant ordering of new vessels. These vessels will not be delivered into the global fleet until 2023. We are taking a very prudent approach to capital allocation and will only order new vessels if they are backed by long-term contracts.

We expect that the continued uncertainty around the industry's path to decarbonization will limit new investments, and we are focused on continuing out advanced research projects on reducing the carbon footprint of our existing fleet.

Special mention should be made and I would like to convey my gratitude to the crews on board our vessels who have shown astounding resilience and performance amid the various restrictions and enhanced safety protocols related to COVID-19. They have kept our vessels running smoothly facing unprecedented challenges. I hope that by this time next year the restrictions related to COVID-19 will be in the past and that the world economy will grow to new highs, benefiting the container industry and Danaos.

Finally, I would like to thank all my colleagues who helped to successfully navigate the company during this challenging period and now join me in seeing the future with greater certainty and optimism. We will continue to work towards bringing value to the company and reward our shareholders

Respectfully,

Dr. John Coustas

President & CEO

6

DANAOS CORPORATION

FROM THE SENIOR

VICE PRESIDENT & COO

ANNUAL REPORT 2020

7

Iraklis Prokopakis

Senior Vice President & COO

I am satisfied that we have managed to build an enterprise that generates value, a true value that everyone can benefit from. As an enterprise, we are determined to reduce carbon emissions, provide career development opportunities to our employees, and manage our business responsibly over the long-term to support

a sustainable future.

Dear Shareholders, Colleagues and Danaos employees,

This time last year, as the pandemic intensified, nobody foresaw the extent of the difficulties the entire maritime industry would face with respect to crew changes. Countless seafarers were away from their homes and families for extended periods of time, due to port restrictions globally.

We are extremely thankful to the crews onboard our vessels and the staff of all our crewing offices ashore for the resilience displayed amid unprecedented difficulties and restrictions imposed upon their working environment by the consistent waves of the COVID-19 cases.

We thank all the staff of our managing offices and all our seafarers onboard for their support and for ensuring the efficient operations of Danaos' vessels and the high standards of one of the best fleets in the world under extremely difficult circumstances.

Together, we achieved a 97.2% fleet utilization, operating expenses 4.2% less than budgeted and 0.3 deficiencies per Port State Control inspection against the world fleet average of 3. The average performance KPI of our fleet vessels was 8.92 out of a maximum of 10.

We all hope that science and our strong wills, with the support of the vaccination process, will win the battle against the pandemic and return normalcy to our lives.

I am satisfied that we have managed to build an enterprise that generates value, a true value that everyone can benefit from. As an enterprise, we are determined to reduce carbon emissions, provide career development opportunities to our employees, and manage our business responsibly over the long-term to support a sustainable future.

In closing, I would like to encourage the next generation of Danaos' Department Managers, primarily those in the fields of Technical, Operations, RnD, Finance and Business Development, to exert their maximum effort in order to successfully take the Company into the next era of low-carbon emissions, which is the major challenge for the future of our industry.

With warm regards,

Iraklis Prokopakis

Senior Vice President & COO

97.2%

4.2%

fleet utilization rate

opex less than budgeted

0.3

8.92

deficiencies per

out of 10 average

inspection

performance KPI

8

DANAOS CORPORATION

FROM THE CHIEF

FINANCIAL OFFICER

ANNUAL REPORT 2020

In April 2021, the Company concluded a transformative $1.25 billion refinancing of the majority of our debt through a combination of secured debt and a bond offering that was concluded in January 2021. The result is an improved debt profile and free cash flow visibility which puts the Company in a very good position to both pursue accretive growth opportunities and return

9

Significant de-leveraging

Net Debt/Adjusted EBITDA

Evangelos Chatzis

Chief Financial Officer

The Company has significantly reduced its leverage over the past

3 years and intends to steadily continue to do so. Our current Net Debt to Pro-Forma 2021 Adjusted EBITDA is already below 3.0x and is expected to improve further during 2021.

Dear Fellow Shareholders,

The strength of the container market that started in the second half of 2020 reflects the vital role of our industry, particularly in light of severe disruption of the pandemic to the global economy. Danaos was fortunately in the position to reap the benefits of the swift rebound in global container trade. The achievement of this position was the result of the efforts undertaken to ensure the ongoing prosperity of the Company.

Over the past few years, the Company reshaped its balance sheet, positioning us uniquely to take advantage of the current favorable market conditions. We believe that underlying market fundamentals indicate that the strength of the market will not be short-lived.

The Company's profitability improved by 14.9%, or $22.2 million, in 2020 based on Adjusted Net Income of $170.9 million compared to $148.7 million for 2019, mainly as a result of a $19.1 million decrease in net finance expenses.

The charter market for container vessels has strengthened significantly since the middle of 2020. Operating revenues for

2020 were $462 million, and as a result of the charter fixtures of 34 vessels concluded in the past few months, we already expect operating revenues for 2021 to exceed $585 million. This is an increase of $123 million, or 27%, compared to 2020. The percentage of our operating days contracted for 2021 already stands at 96%. Our contract backlog and contract coverage for the next years is continuously improving on the back of strong charter rates and longer charter durations.

The Company has significantly reduced its leverage over the past

3 years and intends to steadily continue to do so. As of December 31, 2020, our debt (including lease obligations) was $1.46 billion compared to a cash position of $65.7 million. Based on 2020 Adjusted EBITDA of $318.3 million, our Net Debt / Adjusted EBITDA ratio was 4.4x, a significant improvement when compared to the equivalent Net Debt / Adjusted EBITDA ratio of 7.3 x as of the end of 2017. Our current Net Debt to Pro-Forma 2021 Adjusted EBITDA is already below 3.0x and is expected to improve further during 2021.

value to our shareholders through dividend payments. During the second quarter of 2021 the Company announced an annualized dividend of $2 per share. In 2020, we concluded a $40 million investment program to install scrubbers on nine vessels and acquired three 8,500 and two 9,000 TEU containerships for approximately $142 million. These acquisitions proved to be well-timed as asset values have increased considerably in recent months.

We continue to maintain our strong commitment to the integrity of our financial reporting, and we are pleased to report that for 2020 we again had effective controls under the Sarbanes Oxley regulatory framework. I would like to take this opportunity to sincerely thank our Audit Committee and our finance team for their hard work and commitment towards the continuous enhancement of a reliable financial reporting framework.

We would also like to extend our gratitude to the crews on board our vessels and to our Manager, Danaos Shipping Co. Ltd. and all its employees for their hard work and their commitment to support our mission to remain the premier provider of global seaborne container transportation, particularly given the very challenging conditions caused by the pandemic. They have continuously helped us to provide high quality and reliable service to our clients while at the same time maintaining operating expenses among the most competitive in the industry.

We will continue our efforts to provide best in class services to our valued clients, enforce rigorous operations standards, maintain a steadfast commitment to safety and environmental protection and seek to reward our shareholders.

Respectfully,

Evangelos Chatzis

Chief Financial Officer

4.4 x for 2020

versus

7.3 x for 2017

Net Income

$170.9

million, compared to $148.7

million for 2019

$182

million capex investments

in scrubbers &

5 vessel acquisitions

Disclaimer

Danaos Corporation published this content on 09 June 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 June 2021 13:48:08 UTC.


© Publicnow 2021
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Financials (USD)
Sales 2022 914 M - -
Net income 2022 444 M - -
Net Debt 2022 689 M - -
P/E ratio 2022 3,67x
Yield 2022 3,81%
Capitalization 1 691 M 1 691 M -
EV / Sales 2022 2,60x
EV / Sales 2023 1,90x
Nbr of Employees 4
Free-Float 9,39%
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Managers and Directors
John Coustas Chairman, President & Chief Executive Officer
Evangelos Chatzis Chief Financial Officer & Secretary
Dimitris Vastarouchas Technical Director & Deputy COO
Iraklis Prokopakis COO, Treasurer, Director & Senior Vice President
Myles R. Itkin Independent Director
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