Croatian shipping company Tankerska Next Generation published their FY 2019 results, showing a 10% YoY top line decrease. Meanwhile EBITDA went up 25%, while net profit soared to HRK 23m (+271%).
According to the report, daily TCE net rates per operating vessel in 2019 were USD 14,794 on average, representing an increase of 12.1% YoY. Meanwhile fleet utilization remained a 100%. The rise in TCEs was caused by improved market conditions witnessed in 2019.
The company’s strategic concept continued to focus on the efforts to secure a strong employment balance between spot and time charters, however with a stronger emphasis on the latter. As a result, at the end of 2019 TNG has four vessels charted out through time charters, while two remain available to charter out on the spot market. The vessels currently employed through time charters are: Velebit (USD 14,500 per day until Q2 2020), Dalmacija (USD 16,000 per day until Q2 2020), Vukovar (USD 17,000 per day) and Pag (USD 17,150 per day).
A breakdown of TNG’s charter activities in 2019 would go like this: TNG secured a 12-month time charter employment for one of the ECO class product tankers in March at USD 16,000 after which a one year employment for the conventional ice class product tanker MT Velebit, at USD 14,500 per day was concluded, leading to yet an additional eight months at approximately USD 15,500 per day in due course. In May, TNG secured an additional minimum 6 month time charter employment for one of the ECO class product tankers at USD 17,000 per day while yet another deal was concluded that same month for minimum 6 months for another one of their ECO class product tankers with charterers’ option to extend for up to 12 months chartered out to a leading U.S. charterer at approximately USD 17,100 per day.
EBITDA amounted to HRK 110.4m, which represents a 25.6% YoY increase. The increase came as a result of lower operating expenses which amounted to HRK 158.2m and were lower 25.4% than in the same period in 2018. This decrease was due to a change in the employment strategy of Vukovar, Velebit, Pag and Dalmacija which by operating on time charter contract have lower voyage associated costs e.g. port costs, bunker, which is accountable to the charterer.
Below the operating line, the net financial result deteriorated slightly, amounting to HRK -29.7m. This represents a widening of the loss by 13% YoY. Finally, net profit amounted to HRK 23.3m, representing an increase of 271% YoY.
Turning our attention to the balance sheet, TNG decrease their indebtedness by HRK 86.8m thus lowering their net debt to HRK 493.8m or 4.5x net debt/EBITDA. According to the Management, the decrease of debt is in accordance with the loan repayment plans of TNG and regular decrease in indebtedness, while a further decrease in the company’s debt is expected in the future.
The management provided a calculation of NAV per share, putting it at USD 10.69 (cca HRK 73.6). This would indicate that TNG is currently traded 73.5% below the NAV of their vessels. However, they highlighted that the assessment was based on current market conditions (revenue and cost assumptions of typical average product tanker) which show strong fluctuations and do not take into account TNG specifics and management expectations.
Initiation of a Buy-back program
TNG also announced an initiation of a share buyback program through which the company plans to repurchase up to 110,000 of own shares, representing 1.3% of the share capital. The aggregate purchase price of all shares acquired under the program will be no greater than HRK 5m. The repurchase price per share, will be at least 90% and up to 110% of the average market price for a share achieved during the previous trading day. Note that the Program started yesterday (24 February) and will last until 24 February 2021. As of the announcement date, the Company holds 13,200 of ordinary shares in treasury that represent 0.15% of the share capital.
