Net profit for the quarter ended 31 March 2014 dropped 37.4% year-on-year to $8.41m while revenue declined 7.3% to $135.49m.
“This decrease is mainly a result of the previously announced Zim restructuring which accounts for $6m in lower operating revenues,” said John Coustas, ceo of Danaos.
“We anticipate this effect to be partially offset upon legal consummation of the Zim restructuring when we will commence to gradually recognise through our income statement the debt and equity instruments that we will receive in return for the charter rate concessions,” he commented.
Coustas, however, believed that a positive income driver is the decrease in the company’s financing costs due to the deleveraging of its balance sheet and gradual expiration of interest rate swaps in the coming quarters.
“During the first quarter of 2014 finance costs were $4.6m lower when compared to the first quarter of 2013. In the current quarter, we reduced indebtedness by $60.7m while we will reduce debt by at least $200m in total within 2014,” he said.
“Interest rate swaps were $300m lower between the two quarters while there is a further $1bn in swaps expiring within 2014.”
The impact from Zim on Danaos relates to six panamax vessels on charter to Zim until 2020 and 2021, with Zim paying a reduced hire and Danaos having to absorb the loss in exchange for equity as part of Zim’s restructuring.
Coustas noted that pressures on the gearless panamax charter market “will subside in the medium term as demand growth eventually absorbs in the non-mainlane trades what today are considered ‘surplus’ vessels.”
He added that on a macro level, operational consolidation and rationalisation in the liner industry are a positive step to make the industry become healthier and the counterparty risk for charter owners like Danaos will improve.
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