YF: Danaos Corporation – Q2 23 earnings call transcript

Our total charter backlog increased to $2.5 billion as of the end of the quarter and contracted charter coverage currently stands at 99% for 2023 and 86% for 2024. In the second quarter of 2023, Danaos received the Gold, first place awards in the Governance and Environment categories the inaugural ESG Shipping Awards. These accolades which we are proud of, acknowledge the company’s exemplary efforts in promoting sustainable practices, social responsibility and strong governance and reaffirm our position as a leader in responsible maritime operations. The timing of the awards is notable as the IMO recently reiterated and strengthen its commitment to decarbonize shipping by targeting net 0 by around 2050. Danaos continues to advance its decarbonization strategy in multiple ways.

We are constantly optimizing and retrofitting our existing fleet and have committed to upgrade around 20 vessels with new propellers, fuel saving appendages and low friction paints. We have also expanded our new building program with the order of 4 additional newbuilding vessels. These vessels, 2 of which are 6,000 TEU and 2 of which are 8,200 TEU, will be delivered methanol-ready, ensuring the longevity of our investment. In total, we have 10 vessels, with a total capacity of approximately 75,000 TEU, on order. All of these will be able to utilize alternative fuels and importantly, 6 of these vessels are already chartered for multiyear periods beginning on their delivery dates in 2024. We also deployed capital opportunistically after identifying weakness in the dry bulk market, a market we are very familiar with.

We believe the long-term fundamentals in the dry bulk market are very positive. In particular, the order book is at historically low levels and fleet supply growth is projected to decline significantly over the next several years against a backdrop of rebounding demand. Short-term market sentiment is not as strong and we were able to make investments at attractive prices. As has been previously reported, Danaos acquired a significant stake in Eagle Bulk Shipping, a New York Stock Exchange listed dry bulk company. Additionally, we acquired 5 Capesize bulkers in the secondhand market. With respect to Eagle, we were able to purchase shares in a company we believe had best-in-class corporate governance practices at a significant discount to our perception of the company’s net asset value.

Shortly following our investment, the Board of Eagle unilaterally implemented a poison pill and repurchased Oaktree Capital’s 28% stake in the company at nearly a 35% premium to Eagle’s 45-day average share prices and a 32% premium to our cost basis. These transactions which were done by Eagle’s Board, fundamentally alter our view of Eagle’s corporate governance. We are concerned with these developments and are taking clarification on the Board of Directors of Eagle. As Eagle Bulk’s current largest shareholder, we have a strong vested interest in seeing the company enhanced long-term shareholder value and believe that we have a duty to speak up when we think the Board and our management may be acting outside the best interest of all shareholders.

Accordingly, we are committed to working constructively with the Board to identify balanced, well-considered and effective methods to enhance shareholder value on behalf of all shareholders. With respect to our interest in the dry bulk market in general, Danaos has significant experience in the dry bulk market as an owner and operator. We exited the segment years ago which was a well-timed decision in hindsight and now we again see opportunity. Given the strength of our balance sheet, we are uniquely positioned to deploy capital in various ways to grow our revenue base and earnings. Our fleet of container vessels which are contracted in multi-year charters, provide strong revenue and cash flow visibility. While we will continue to grow and future-proof our core fleet by adding next-generation vessels to it, our ultimate goal is to generate value for our shareholders and we will consistently pursue the best opportunities to do so.

As I’ve said before, our healthy balance sheet allows us to opportunistically deploy our capital in various ways. During the quarter, we continued our buyback program and have now spent $65.5 million of our $100 million buyback program to retire more than 1 million shares. Finally, we remain committed to returning capital to shareholders, as evidenced by our $0.75 per share dividend announced this morning. We will continue to implement our strategy to ensure the long-term growth and profitability of the company and are consistently focused on creating value for our shareholders. With that, I’ll hand over the call back to Evangelos, who will take you through the financials for the quarter…

The full transcript is here.