Home Greece Capital Product Partners L.P. Announces Third Quarter 2019 Financial Results

Capital Product Partners L.P. Announces Third Quarter 2019 Financial Results

Capital Product Partners L.P., an international owner of ocean-going vessels, today released its financial results for the third quarter ended September 30, 2019.

As previously announced, the share-for-share transaction with DSS Holdings L.P. (the “DSS Transaction”), involving an aggregate repayment of debt in a principal amount of $146.5 million, the full redemption and retirement of our Class B Convertible Preferred Units at par value and the spin-off of our 25 crude and product tankers (the “Tanker Business”), was completed on March 27, 2019. Accordingly, we present our financial results for the three months ended September 30, 2019, as well as comparative periods, on a continuing operations basis, except where reference is made to discontinued operations.

We currently own a fleet of 11 vessels, consisting of ten Neo-Panamax container vessels and one drybulk vessel. For the third quarter 2018, our financial results from continuing operations include revenues, expenses and cash flows arising from, in addition to our current 11 vessels, the M/T Amore Mio II, which we sold and delivered on October 15, 2018. This tanker was not part of the Tanker Business that we spun off in the DSS Transaction.

All per unit data in this release have been retrospectively adjusted to reflect the impact of the one-for-seven reverse unit split we effected on March 27, 2019.

Overview of Third Quarter 2019 Results

Net income from continuing operations for the quarter ended September 30, 2019 was $3.4 million, compared with a net loss from continuing operations of $21.7 million (or net income from continuing operations of $7.1 million, excluding a non-cash impairment charge of $28.8 million in relation to the sale of the M/T Amore Mio II) for the third quarter of 2018. After taking into account the interest attributable to the general partner, net income from continuing operations per common unit for the quarter ended September 30, 2019 was $0.18, compared to a net loss from continuing operations per common unit of $1.33 for the third quarter of 2018.

Total revenue was $26.4 million for the quarter ended September 30, 2019, reflecting a decrease of 17% compared to $31.8 million during the third quarter of 2018. The decrease in revenue was mainly attributable to the decrease in the average number of vessels in our fleet following the disposal of the M/T Amore Mio II in October 2018 and to the off-hire period incurred by the M/V Agamemnon for the installation of exhaust gas cleaning systems (“scrubber”) and ballast water treatment systems, as well as passing of its special survey.

Total expenses for the quarter ended September 30, 2019 were $19.3 million, compared to $20.1 million in the third quarter of 2018 excluding the impairment charge incurred in connection to the sale of the M/T Amore Mio II. Voyage expenses for the quarter ended September 30, 2019 decreased to $0.7 million, compared to $2.8 million in the third quarter of 2018, mainly due to the period-on-period decrease in the number of days during which certain of our vessels were employed under voyage charters. Total vessel operating expenses during the quarter ended September 30, 2019 amounted to $9.8 million, compared to $7.6 million during the third quarter of 2018. The increase in operating expenses was mainly due to the passing of the special survey of the M/V Agamemnon and expenses incurred in connection with a settlement relating to an oil record book violation by shipboard staff of the M/V CMA CGM Amazon, partially offset by the decrease in the average number of vessels in our fleet. Total expenses for the quarter ended September 30, 2019 also include vessel depreciation and amortization of $7.3 million, compared to $8.4 million in the third quarter of 2018. The decrease in depreciation and amortization was mainly attributable to the decrease in the average number of vessels in our fleet. General and administrative expenses for the quarter ended September 30, 2019 amounted to $1.5 million as compared to $1.3 million in the third quarter of 2018.

Total other expense, net for the quarter ended September 30, 2019 was $3.7 million compared to $4.6 million for the third quarter of 2018. Total other expense, net includes interest expense and finance costs of $4.1 million for the quarter ended September 30, 2019, as compared to $4.7 million in the third quarter of 2018. The decrease in interest expense and finance costs was mainly attributable to the decrease in the average long-term debt outstanding during the period and the decrease in the LIBOR weighted average interest rate compared to the third quarter of 2018.

Capitalization of the Partnership

As of September 30, 2019, total cash, including $5.5 million of restricted cash under our 2017 credit facility, amounted to $64.2 million.

As of September 30, 2019, total partners’ capital amounted to $406.0 million, a decrease of $475.3 million compared to $881.3 million (including discontinued operations) as of December 31, 2018. The decrease was primarily due to the completion of the DSS Transaction, distributions declared and paid in the total amount of $22.9 million during the first nine months of 2019 and the total net loss of $128.1 million for the period (including an impairment charge of $149.6 million relating to the DSS Transaction).

As of September 30, 2019, the Partnership’s total debt was $270.1 million, reflecting a decrease of $175.8 million compared to $445.9 million (including discontinued operations) as of December 31, 2018. The decrease is attributable to the prepayment of our debt of $146.5 million in connection with the DSS Transaction and scheduled principal payments during the period.

Operating Surplus

Operating surplus from continuing operations for the quarter ended September 30, 2019 amounted to $12.7 million, compared to$16.9 million for the previous quarter ended June 30, 2019 and $17.3 million for the third quarter of 2018. For the quarter ended September 30, 2019, we allocated $7.7 million to the capital reserve in line with the previous quarter. Operating surplus after the quarterly allocation to the capital reserve was $5.0 million for the quarter ended September 30, 2019. Operating surplus is a non-GAAP financial measure used by certain investors to measure the financial performance of the Partnership and other master limited partnerships. Please refer to “Appendix A” at the end of the press release for a reconciliation of this non-GAAP measure with net income.

Fleet Employment Update

As previously announced, the M/V Agamemnon (108,892 dwt / 8,266 TEU, container carrier built 2007, Daewoo Shipbuilding & Marine Engineering Co., Ltd., South Korea) commenced on September 17, 2019 its new long-term time charter with Mediterranean Shipping Co. S.A., after successfully completing the installation of a scrubber system and ballast water treatment system and passing of its special survey. The charter is set to expire at the earliest in February 2024.

As a result, the Partnership’s charter coverage for the remainder of 2019, 2020 and 2021 currently stands at 100%, 90% and 67%, respectively.

Quarterly Common Unit Cash Distribution

On October 22, 2019, the Board of Directors of the Partnership (the “Board”) declared a cash distribution of $0.315 per common unit for the third quarter of 2019 payable on November 8, 2019 to common unit holders of record on November 1, 2019.

Market Commentary

Neo-Panamax Container Market

The Neo-Panamax container charter market for 8,000+ TEU vessels remained tight over the quarter, as there is limited vessel availability for the remainder of the year. As a result, most vessels have been fixed in advance at increasing charter rates and longer periods.

Off-hire related to scrubber installation continues to underpin the charter market, as off-hire periods have so far exceeded in most cases the original forecasts due to shortage of dry-docking space, materials and manpower.

Analysts estimate that the idle fleet presently stands at around 3.3% of the total worldwide container fleet including vessels out of service for scrubber retrofits.

The container orderbook is estimated to be close to historic lows and as of the end of September 2019 stands at 9.8% of the total worldwide container fleet, down from 11% at the end of June 2019 and 11.7% at the end of June 2018.

Container demolition for the first nine months of the year is estimated at 153,919 TEU, compared to 45,060 TEU for the same period last year.

Full year demand growth projection has decreased to 2.4% and, for the first time this year, is expected to be outstripped by supply growth of 3.7%, before accounting for container vessel off-hire related to scrubber retrofits.

Management Commentary

Mr. Jerry Kalogiratos, Chief Executive Officer of our General Partner, commented:

“We are pleased to have concluded the first scrubber retrofit on the M/V Agamemnon and to see the vessel subsequently deliver under its new long-term charter until 2024. The scrubber retrofit combined with passing of the special survey of the vessel and the associated off hire, as well as certain additional one-off expenses incurred this quarter have negatively affected our common unit coverage. While we expect the scrubber retrofits on at least six additional vessels over the coming months to generate additional volatility in our operating income and common unit coverage, we believe that once the retrofits have been completed, the Partnership will benefit in the long run from increased cash flow generation and visibility.

In the meantime, the Partnership’s strong balance sheet and cash position give us the opportunity to expand our asset base with a view to growing our long-term distributable cash flow.”

About Capital Product Partners L.P.

Capital Product Partners L.P. (NASDAQ: CPLP), a Marshall Islands master limited partnership, is an international owner of ocean-going vessels. CPLP currently owns 11 vessels, including ten Neo-Panamax container vessels and one capesize bulk carrier.

For more information about the Partnership, please visit: www.capitalpplp.com.