Get ready to ride the wave. Early, just in time to get on the ridge and make good use of the recovery wind. No, this is not a message for surf enthusiasts. even if it concerns ships and oceans. But it is the signal coming from D'Amico shipping, an Italian multinational that figures among the big tankers that is preparing to take advantage of the market recovery by strengthening the capital structure with a capital increase (35 million) that the majority shareholder, 58,28% strong, will subscribe in full. He will also exercise the warrants, up to a total of 60 million, which will allow the d'Amicos, like the other subscribers of the increase, to receive the right to subscribe for new shares free of charge within five years. Only if things go as planned and desired.
But why should it make sense to focus on an increase in traffic and freight rates in a situation that remains difficult, marked among other things by the rampant protectionism of Donald Trump?
“In our opinion, the conditions for a turning point are ripening – replies Marco Fiori, CEO of D'Amico International Shipping – The favorable prospect is supported by the forecasts of leading shipping market analysts and is based on several elements: an expected slowdown in of new ships together with the growth in the demand for the transport of petroleum products by sea, also attributable to an increase in the average distances covered".?
2016 was certainly not a good year. What's changing?
“Ours is a cyclical market, starting with shipyard activity. In just a few years, the delivery went from 200 ships to almost none. The boom has put pressure on the banking system, which is now in serious trouble. I am thinking of the bankruptcies in Germany where Commerzbank has announced its intention to exit shipping. Thus the premises are being created for a balanced market. A period of sluggishness is looming for ship moving orders. Let's hope that's the case”.
A possible recovery that comes after difficulties that have left their mark. Or not?
“Several competitors have experienced great difficulties. On the other hand, 2016 was a particularly difficult year for the tanker sector characterized by decreasing freight rates especially in the second half of the year.? In 2016, the group's daily spot rate stood at 13.302 dollars, compared to 18.814 dollars reached in the previous year. We defended ourselves thanks to a prudent strategy characterized by the use of 45,9% of ship days available through contracts flat rate (average daily flat rate of $15.989, up from $15.214 in 2015) . The remaining portion on the spot market also maintained good profitability at an operating level with an Ebitda of 55,0 million euro, managing to minimize losses to 6,2 million. Now we are able to face the recovery”.
But what is our prediction based on?
“Also, but not only, on the growth trend of economic activity. On the oil front, in particular, we are already witnessing the beginning of the disposal of the stocks accumulated over the years. In the meantime, consumption is on the rise”.
Despite cleaner cars and more electric cars?
“The new machines provide for an increasing share of plastic parts, i.e. derivatives of naphtha. The reality is that the dynamics of the market are also changing. The refineries are getting closer to the production sites, the demand for long-distance transport is growing, to be tackled with ever larger and more specialized ships. The market has changed profoundly. Not only is our fleet young, with an average age of 6-8 years, but it is made up of vessels that can meet the needs of our customers. We are among the few able to deploy another part of the fleet in long-term contracts with major oil companies. Among the top ten there are the main big Oils, but also the big traders, from Glencore to Trefigura and Vitoil”.
It's Italy? How do you see the possible recovery from your point of view?
“I think Italy is in better shape than it is depicted in these parts. It is the impression of someone who, like me, has lived abroad for a long time. Recently, especially in London, I have heard operators talking with great interest about the business prospects in Italy. And we will have confirmation of this at the next Star conference of Borsa Italiana.”
In short, optimism rests on solid foundations…
“Economic growth makes it possible to predict growing consumption. The dynamics of demand, starting from the strength of the Asian market, should favor the increase in traffic. And the market structure tends to favor large ships. Like ours, including those to be delivered in 2017/18, all already financed. It is one of the strong points of our offer which we will carry out within the first half of the year. The number and exact price of the new shares will be communicated closer to the launch of the operation”.
What can we say for now?
“It will be an offer at a discount to the value of the stock and to the NAV. There is a strong optional component (warrants) which, if the growth we forecast occurs, will allow us to exploit very interesting market prospects. Finally, the operation is assisted by the commitment of the shipowners. And this is probably the best guarantee”.
