MPC Container Ships Balancing Fleet Renewal, Growth & Shareholder Rewards - CFO Discusses MPC's Strategic Focus & Container Sector Outlook

Container Ships ASA MPZZF. The interview, which is part of Capital Link’s “Trending News Podcast Series,” touched upon MPC’s announced Q2 2023 results, but delved more deeply into the company’s strategy, recent developments, and the container sector outlook.

The full interview can be accessed here.

Interview Highlights

Despite the container market's softening from its peak in 2021 and 2022, MPC Containerships’ Q2 2023 results demonstrate the company’s resilience despite market challenges. In his interview with Capital Link, MPC’s CFO Mr. Mortiz Fuhrmann discussed the company's strategic direction, the current state of the containership industry, and MPC's positioning for future success.

• MPC reported operating revenues of $194.4 million in Q2 2023, marking a 28.1% YoY increase.
• The company declared a recurring dividend of $0.15 per share, totaling $231 million in shareholder rewards year-to-date.
• Increased financial guidance for 2023 to project operating revenues of $675-690 million and EBITDA of $490-510 million.
• MPC maintains a robust revenue backlog of USD 1.2 billion and has secured contracts covering 94% of remaining operating days in 2023.
• The company continues to focus on prudent capital allocation to enhance long-term shareholder value.
• Despite soft supply and demand dynamics in the container sector overall, MPC's performance in smaller vessel segments remains positive.

Q2 2023 Highlights 

In highlighting MPC's strong Q2 2023 results, Mr. Fuhrmann noted that despite industry challenges, MPC achieved a net profit of $101.5 million and generated operating cash flow of $130.7 million. EBITDA reached $142.7 million in Q2 2023, a significant increase from $111.8 million in Q2 2022. Earnings per share stood at $0.23, and the average Time Charter Equivalent (TCE) rate approached $30,000 per day, up from the previous year. This strong performance can be attributed to MPC's legacy contracts with reputable partners, which provide a foundation for consistent profitability.

In addition to these contracts, a high level of fleet utilization enabled MPC to remain competitive despite the softened container market. The company has optimized operational efficiency, achieving fleet utilization rates of 97.4% in Q2 2023 to maximize per-vessel contracts and maintain stable profits. MPC boasts a revenue backlog of USD 1.2 billion and contract coverage of 94% for the remainder of 2023, 60% for 2024, and 25% for 2025.

Company Guidance

Looking ahead, MPC has raised its 2023 revenue guidance to the range of $675-690 million (previously $610-630 million) and EBITDA to $490-510 million (previously $420-450 million).

Balancing Growth And Shareholder Rewards

With a profitable quarter, MPC announced a recurring dividend of $0.15 per share. Including this dividend, the company has distributed a total of $231 million to shareholders this year, showcasing its commitment to shareholder rewards. Historically, Mr. Fuhrmann noted, MPC has offered two types of dividends to shareholders—recurring dividends and event-driven. While the recurring dividend of $0.15 per share will continue, MPC has temporarily suspended event-driven distributions to bolster liquidity, aligning with market uncertainties and providing flexibility for future opportunities, particularly fleet renewal and optimization. 

Embracing Sustainability And Fleet Renewal

Given the increasing emphasis on sustainability, both in a regulatory and a financial context, fleet renewal has become a central focus in shipping generally. To maintain a competitive, operationally efficient fleet, MPC has acquired five eco-design ships, set for delivery next year, while retrofitting existing vessels to meet regulatory requirements. While these retrofits include enhancements such as silicone paint applications, they are essential to ensuring long-term operational excellence.

Supply And Demand Dynamics

Although the market has cooled off from the highs of 2021 and 2022, there is still a healthy level of market liquidity, Mr. Fuhrmann stated, and the supply and demand fundamentals for MPC’s specific segments suggest that the sector could be slated for growth.

In terms of the container sector’s supply and demand dynamics, the supply side paints an interesting picture—while the overall orderbook for containerships is high, at 30%, it's “heavily skewed towards the larger ships,” MPC’s CFO said. Specifically, the 12,000 – 17,000 TEU segment has an orderbook of close to 70%. However, MPC focuses mainly on smaller vessels, operating in the 1,000 – 3,000 TEU and 3,000 – 8,000 TEU segments, for which the orderbook is considerably lower, at 15% and 18% respectively. In the 1,000 – 3,000 TEU segment, which is the bulk of MPC’s fleet, there are only a total of 300 new ships on order. Not only are the orderbooks for ships in MPC’s primary segments very low, but the global fleet of ships of this size is quite old, which will lead to further scrapping in the years ahead.

Analyzing Demand

Despite global economic uncertainties, demand dynamics differ significantly between larger and smaller vessels, with MPC's focus on intra-regional routes. Recent trends indicate a gradual increase in freight rates within this segment, potentially signaling increased demand. Intra-regional trades, while affected by various factors, remain relatively less impacted by economic uncertainties than major East-West routes. The feeder vessel segment, MPC's area of focus, is expected to exhibit strength, particularly in emerging markets like intra-Caribbean routes.

Challenging Yet Promising Years Ahead

While 2024 and 2025 present challenges due to macroeconomic uncertainties and complex supply and demand dynamics, MPC believes it is well-positioned. Mr. Fuhrmann emphasized the company's strong revenue backlog, prudent capital allocation strategy, forward-looking fleet renewal approach, and a robust balance sheet with low leverage. Despite sector uncertainties, the fundamentals of MPC's specific segments within the container industry appear distinct and potentially healthier than expected.

Capital Link is the investor relations advisor to MPC Container Ships ASA.This content is for informational purposes only and not intended to be investing advice.