First quarter financials
For the 1Q14, Scorpio Tankers (STNG) recorded net income of $53.3 million compared to net income of $6.6 million in the 1Q13. TCE increased to $72.8 million from $43.7 million in the same quarter last year as the average number of operating vessels increased to 50.7 in the 1Q14 from 29.6 in the 1Q13. There was an overall decrease in time charter equivalent revenue per day to $15,906 per day from $16,597.
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To reduce the company’s expenses, STNG has planned to reduce the number of chartered-in vessels because the company’s owned fleet are operational. As of June, 2014, the company had already reduced the chartered-in vessels to 26 from 31 as of December 31, 2013.
Also, its corporate structure minimizes operating and corporate expenses because the management agreements with affiliates provides access to superior technical and commercial management at a lower cost than what could be achieved by performing the functions in-house unlike its peers. STNG has peers like Navios Maritime Acquisition (NNA), Capital Product Tankers LP (CPLP), and Tsakos Energy Navigation Ltd. (TNP). The Guggenheim Shipping ETF (SEA) tracks the shipping companies.
In 2013, the company’s revenue growth was primarily driven by charter-in of vessels while its charter hire cost increased and dented the company’s margins. However, in 2014, the company’s growth would be from owned vessels which will boost the earnings before interest, taxes, depreciation, and amortization (or EBITDA) margin.
Over the next two years, Scorpio Tankers has a massive fleet expansion plan that will result in strong revenue and EBITDA bump-up. The company’s $1.4 billion fleet expansion plan is fully financed as of June, 2014. As a result, there are no equity dilution concerns. After the delivery of all vessels in 2015, Scorpio Tankers will have the world’s largest ECO vessel fleet.
For the 2Q14, revenue increase isn’t expected to be significant because only four new vessels are going to be delivered in May, 2014, and another four in June, 2014. However, revenue and EBITDA growth in 3Q14 and 4Q14 is likely to be strong with 17 new tankers to be delivered in the 3Q14 and 14 new tankers to be delivered in the 4Q14.
In the next section in this series, we’ll discuss the company’s stable equity and debt leverage profile.