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D'Amico revels in sale and purchase markets

John McLaughlin - Tuesday 29 July 2008

D’AMICO International continues to play happily in the sale and purchase markets, announcing sharply increased earnings today on the back of strong profits from vessel sales. 

Earnings for the Milan-listed tanker company came in at $39m for the second quarter and $74.4m for the first half of this year, up from $29m and $49m for the respective periods in 2007. 

Those earnings figures represented a solid 20%-plus on time-charter equivalent earnings, excluding vessel sales. But profiting from the purchase and disposal of ships has also been a consistent part of company strategy, and small wonder. 

When the Rome-based d’Amico family took its tanker operation public last year, it already had a string of valuable purchase options in its portfolio. It has since been exercising those options, adding vessels to its fleet at prices now substantially below market levels. 

This year alone, it has picked up four vessels under purchase options, the latest the 48,700-dwt product carrier High Presence, which it acquired in June for $30m, an estimated $20m below market value. It has done similarly well with its other buys. 

It has also been reselling. In the first half, it sold two vessels for a combined profit of $47m, using the low acquisition price of its options and the strength of current second-hand tanker values to offset a weaker market, in which day rates were down 10% in the first half on the same period last year. 

Thus, d’Amico’s improved earnings came despite a drop in time-charter equivalent earnings from $71.1m to $63.2m in the second quarter and from $139.8m to $120.4m for the first half. 

The company still has up to three purchase options still to exercise, which should provide something of a cushion over the next two years as it awaits the arrival of the first of ten MR newbuildings for Glenda International, its 50-50 joint venture with Glencore. 

Company chief executive Marco Fiori described progress this year as slightly better than his initial, cautious expectation, with freight rates improving steadily through the second quarter: “2008 could be a better year than we expected,” he said. 

He also expressed confidence in the staying power of the company’s young and growing fleet, even in a market likely to see some near-term weakening as a wave of newbuildings hits the market this year and next. 

Purchase options aside, d’Amico has also added six chartered vessels to the fleet this year and renewed the contract of another. Including partial shares in vessels, d’Amico now has a controlled fleet of almost 37 ships. 

Mr Fiori said this would grow to almost 45 by 2011, with the owned portion of the fleet rising from 17 ships to 25. Much of that growth would come via Glenda’s newbuilding programme. 

He added that, one year after its initial public offering, d’Amico was happy with life on the Milan stock exchange and had no intention of following its fellow tanker companies, Premuda and Montanari, which now appear to be heading for the door. 

“We are very pleased,” with being publicly listed, he claimed. “It requires a different level of effort and commitment. But we are abiding by our decision.”