The manager of First Ship Lease Trust (FSL Trust) has declared distribution per unit (DPU) of 2 US cents (2.65 cents) for the 1QFY2021 ended March, 33.3% higher than DPU of 1.50 US cents in the year before.
Profit for the quarter plunged 95% y-o-y at US$336,000, reflecting reduced earnings following a decline in freight rates for the tankers operating in pools, the maturity of the charters for three containerships in 2020 and the lower number of vessels in the fleet of FSL Trust compared to the year before.
Earnings per unit in the 1QFY2021 stood at 0.02 US cents, from 0.38 US cents in the year before.
Revenue for the 1QFY2021 fell 64.3% y-o-y to US$6.6 million, while adjusted EBITDA stood 79.9% lower y-o-y at US$2.52 million.
Amount distributable to unitholders, however, increased 33.3% y-o-y to US$35.4 million.
The amount includes the net distributable amount of US$1.3 million and a partial capital distribution of US$34.1 million, the latter being a partial distribution of proceeds from the disposal of vessels.
The board has determined that the distribution reinvestment scheme will not apply to the distribution declared for the period ended March 31.
FSL Trust, in February and March, disposed of three vessels – FSL Suez, FSL Fosand FSL Osaka – which netted it US$47.8 million in cash and cash equivalents and no loans outstanding.
The distribution for the 1QFY2021 was due to the trust’s strong liquidity position. It adds that it has maintained a healthy capital structure post-distribution.
During the quarter, US$28.8 million of the cash proceeds from the trust’s disposal of the two LR2 product tanker newbuildings were used to prepay secured bank loans.
Nine out of the trust’s fleet of 11 vessels as at March 31 were employed under fixed-rate period charter with a remaining contracted revenue of US$25.9 million.
The trust, in March, accepted an offer for a loan of US$15.0 million from a reputable Taiwanese financial institution to refinance six product tankers. The new loan will be made available subject to definitive documentation being entered into and have a maturity of five years from the date of the drawdown.
“Whilst we are able to report a positive result for the 1st quarter 2021 thanks to the majority of our vessels being employed under fixed-rate period charters, the reduced earnings reflect the changed fortunes in the markets since summer last year and the headwinds tankers are currently facing,” says Roger Woods, CEO of the trust.
“At the same time, the disposal of the vessels without long-term employment during the last 12 to 18 months has hugely helped us to reduce market exposure and de-risk the trust, which pays off now as the market environment remains challenging in the near future with oil production and refinery throughput remaining below pre-pandemic levels and demand for oil and oil products not having recovered,” Woods adds.
“As the disruptions due to the Covid-19 pandemic continue, the board of directors thanks the entire FSL team and the crews on board our vessels once more for their professionalism and dedication during these testing times. We also thank our unitholders for their continued trust in us and the management team,” says Stathis Topouzoglou, chairman of the board of directors.
“It becomes very clear that the world is changing for our industry due to the increasing pressure
to reduce greenhouse gas emissions and urgently address climate change… In this respect, we have continued to dispose of our technologically outdated and emissions heavy vessels. Furthermore, we have made the decision to sell our two LR2 product tanker newbuildings which we ordered in 2018, when the world was very different, as the regulatory pressure to reduce carbon emissions was much lower.”
“Looking forward, we will continue to evaluate shipping projects which can potentially deliver long-term stable cash flows, subject that they meet future low/net zero carbon emissions targets,” Topouzoglou adds.
Shares in FSL Trust closed 0.1 cent higher or 1.1% up at 9 cents on April 23.
