C3is (ticker: C3IS), a global shipping company, announced a significant increase in financial performance for the third quarter of 2024 during their recent earnings call.
The company reported a 120% increase in revenues, reaching $32.9 million for the first nine months of 2024 compared to the same period in the previous year. The Aframax tanker Afrapearl II was a primary revenue driver, contributing approximately 77% to the total.
Adjusted EBITDA and net income also saw substantial increases, rising to $13.5 million and $7.7 million, respectively. Despite significant capital expenditures, the company maintained a cash balance of $8 million and reported no outstanding bank debt.
Key Takeaways
- C3is's revenues soared to $32.9 million, a 120% year-over-year increase, largely due to the performance of the Aframax tanker Afrapearl II.
- The company's adjusted EBITDA and net income for the first nine months of 2024 were $13.5 million and $7.7 million, up 92% and 106% respectively from the previous year.
- Significant capital investments were made, including the purchases of Afrapearl II and the Eco Spitfire drybulk carrier, with a combined cost of $41.12 million.
- C3is has no bank debt and a financial liability of $11.9 million for the Eco Spitfire acquisition, with the fleet's net book value standing at $85.8 million.
- The average time charter equivalent (TCE) rate increased by 24% to $23,000 per day, and the fleet's operational utilization was 90.6%.
- Operational costs rose due to an increased number of vessels, with voyage expenses at $10.4 million and vessel operating expenses at $6 million.
- The company recorded a non-cash loss of $15.18 million in Q2 but gained $4.8 million in Q3, leading to a net loss of $10.35 million for the nine months.
- C3is emphasized a disciplined growth strategy, focusing on acquiring high-quality vessels and maintaining strategic relationships with international charters.
Company Outlook
- Positive outlook for the tanker market through 2025, driven by increased crude oil trade and geopolitical factors.
- The company plans to continue its disciplined growth strategy, targeting quality vessel acquisitions and reputable charter partnerships.
Bearish Highlights
- Concerns over China's steel sector potentially affecting Handysize demand.
- A net loss of $10.35 million for the nine months due to a non-cash loss recorded in Q2 2024.
Bullish Highlights
- Strong performance with no outstanding bank debt and a healthy cash balance after significant investments.
- Fleet capacity increased by 234% since inception, with a net book value increase of 16% since year-end 2023.
Misses
- Fleet operational utilization decreased to 90.6% from 93.6% in the previous year.
- The company reported increased management fees, general, and administrative costs due to public offerings and a stock split.
Q&A Highlights
- CEO Dr. Diamantis Andriotis discussed the potential impacts of geopolitical factors and the forthcoming US election outcomes on global shipping.
- The company highlighted the importance of maintaining a high-quality fleet to reduce operating costs and enhance safety, which includes regular inspections and a comprehensive maintenance program.
C3is's third quarter performance showcases a company experiencing rapid growth and strong financial health, with a clear strategy in place to navigate the dynamic shipping industry.
The company's emphasis on maintaining a high-quality fleet and strategic charter relationships bodes well for its future, even as it faces industry challenges and macroeconomic uncertainties. Investors are invited to the next earnings call for Q4 2024 results to gain further insights into the company's progress and outlook.
InvestingPro Insights
To complement C3is's impressive financial performance reported in the third quarter of 2024, InvestingPro data provides additional context to the company's current market position and financial health.
According to InvestingPro, C3is (CISS) currently has a market capitalization of $11.39 million USD. Despite the company's strong revenue growth, with a remarkable 535.68% increase in quarterly revenue as of Q2 2024, the stock has faced significant headwinds. InvestingPro data shows that C3is's stock price has fallen by 37.72% over the past six months and is currently trading near its 52-week low, at just 1.52% of its 52-week high.
One of the InvestingPro Tips highlights that C3is holds more cash than debt on its balance sheet, which aligns with the article's mention of the company maintaining a cash balance of $8 million with no outstanding bank debt. This strong liquidity position supports the company's ability to make significant capital investments, as detailed in the earnings report.
Another relevant InvestingPro Tip notes the company's impressive gross profit margins. This is reflected in the data showing a gross profit margin of 71.44% for the last twelve months as of Q2 2024, which underscores C3is's operational efficiency despite the challenges in the shipping industry.
It's worth noting that InvestingPro offers 13 additional tips for C3is, providing investors with a more comprehensive analysis of the company's financial health and market performance. These insights can be particularly valuable given the dynamic nature of the shipping industry and the company's rapid growth trajectory.
Full transcript - C3is Inc (CISS) Q3 2024:
Operator: Good day and thank you for standing by. Welcome to the C3is Third Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. Please be advised that this conference is being recorded. I would now like to hand the conference over to your speaker today Dr. Diamantis Andriotis, CEO. Please go ahead.
Diamantis Andriotis: Good morning, everyone, and welcome to our C3is third quarter earnings conference call and webcast. This is Dr. Diamantis Andriotis, CEO of the company. Joining me on the call today is our CFO, Nina Pyndiah. Before we commence our presentation, I would like to remind you that we will be discussing forward-looking statements, which reflect current views with respect to future events and financial performance, and are based on current expectations and assumptions, which by nature, are inherently uncertain and outside of the company's control. At this stage, if you could all take a moment to read our disclaimer on Slide 2 of this presentation. I would also like to point out that all amounts quoted, unless otherwise clarified, are implicitly stated in US dollars. Today, we released our earnings results for the third quarter of 2024. So let's proceed to discuss these results and update you on the company's strategy and the market in general. Please turn to Slide 3 where we summarize and highlight the company's performances, starting with our financial highlights. For the first nine months of 2024, we reported revenues of $32.9 million, which is an increase of 120% compared to the same period of 2023. Our Aframax tanker, the Afrapearl II contributed around 77% to the total revenues. Our adjusted EBITDA was $13.5 million, a 92% increase from the first nine months of 2023. Our adjusted net income came in at $7.7 million, an increase of 106% from 2023. Our vessels net book value increased by 14% since year end 2023, due to the addition of the Eco Spitfire Handysize drybulk carrier that joined our fleet in April 2024. Our cash balance was $8 million by the end of third quarter 2024, after paying $39.5 million for the remaining 90% purchase price of our Aframax tanker in third quarter 2024 and $1.62 million, which was 10% of the purchase price of the Handysize drybulk carrier Eco Spitfire in second quarter 2024. Our short-term bank deposits yielded $800,000 for the first nine months of 2024. Our TCE for the nine months 2024 was $23,000 per day, 24% higher than the rate for nine months 2023, when it was $18,800 per day. The balance due on our CapEx is $14.57 million in April 2025, which represents 90% of the purchase price of the Handysize drybulk carrier Eco Spitfire. Slide 4 shows the Drybulk Trade by the end of the third quarter of 2024. Iron ore and coal trade continue to have the lion's share in the Drybulk Trade. Iron ore is the number one drybulk traded commodity. Trade is restricted on very few routes such as Brazil-China and Australia-China with the Pacific basin being predominant. Major importers are China, Japan, South Korea, Western Europe and the Middle East. Major exporters are Australia, Brazil, Canada and South Africa. Favorable weather conditions have supported record Brazilian iron ore shipments so far, while bauxite exports are expected to rise as rainy season comes to an end. Iron ore prices have fallen to the lowest levels since 2022, leading to the high imports in 2024. Coal is the second most traded drybulk commodity. Global coal trade continues to grow with higher imports from China, India and the New Zealand, compensating for the declining demand from Europe and Japan. Exports are mainly from Australia, Russia and US Canada. In January to September 2024, global exports of soybeans reached 114.1 million tons according to AXSMarine Vessel Tracking Data. 17% of exports were shipped from Brazil, 14% from USA, 4% from Argentina, 2% from Uruguay. In Slide 5, we see that the Drybulk market is enjoying healthy earnings due to major support from Red Sea diversions, uncertainty in the Russia-Ukraine war, the Middle-East, a potential escalation in the US-China trade war and OPEC's oil market games. Geopolitical conflicts and restrictions on the Panama Canal transits have been impacting shipping demand since 2023, leading to longer voyages through the Cape of Good Hope and aiding shipping demand. Handysize demand remains healthy, but it heavily depends on steel related exports, making it vulnerable to a potential slowdown in China's steel sector. Robust demand from the shipbuilding, automotive, manufacturing and renewables sectors will drive the global growth. The current pace of exports is sustainable, but in the long run, external demand and the threat of tariffs will determine China's ability to continue flooding the seaborne market with excess steel. So far, the market has been overwhelmingly positive and industrial metals, not just iron ore, are on a synchronized rise. Slide 6 shows that crude oil is the single most seaborne traded bulk commodity in the world. 2 billion meters per year. Traded volumes have not increased significantly over the last decade. Trade patterns, however, have changed dramatically. The USA is emerging as a significant exporter of crude, while China remains the top source of demand growth. In January-September 2024, global imports of crude oil reached 1,659.2 million tons, excluding cabotage according to Refinitiv vessel tracking. This was a 1. 3% increase year-on-year. 23% of imports were shipped to China, 22% to EU, 12% to the ASEAN, 11% to India. Despite the ongoing crude oil production cuts enforced by OPEC members, industry participants believe that the tanker market environment will remain healthy through 2025. Tanker demand outlook remains robust supported by growth in crude oil trade volumes as well as by trade partnerships arising from Red Sea diversions, benefiting long haul routes, thus boosting ton mile demand. Seaborne crude oil trade has been supported by increasing demand from China and rising exports from suppliers in the Americas. Slide 7 shows the Handysize fleet age and growth. The Handysize bulker fleet includes many old vessels with plenty of demolition potential. New environmental regulations likely to accelerate demolition. 17% of the trading fleet is over 20 years, 13% is 15 to 19 years, 39% is 10 to 14 years, 17% is five to nine years, while 14% has less than five years. The order book to trading ratio is 10.4% in deadweight terms. In 2023, net fleet growth for Handysize bulkers was 3.5% year-on-year. Net fleet growth is expected to continue at around 4.8% in 2024 and then at around 4.4% in 2025. Fleet growth forecast for 2024 to 2026 is based on the current order book after assuming slippage and expected demolition. Compliance with new environmental regulations like EEXI, CII, coupled with an overaged fleet might induce scrapping, thus reducing available fleet supply. Slow streaming retrofit time as part of complying with new environmental regulations are also factors that are expected to reduce available fleet supply in the years to come. Slide 8 shows the Aframax tankers fleet age, growth and order book. The global Aframax LR2 fleet now stands at 1,150 vessels. Of these 201 vessels are over 20 years of age accounting for 17.48% of the total number of vessels. With a starting tally of 1,134 vessels, the current fleet represents a change of 1.41% in vessels numbers over the year so far. Deliveries are holding at levels above the total number of removals from the fleet, creating a net gain in the fleet equivalent to 1.41%. This increase is higher than the change noted in the prior month, while compared to last year, there was a decrease in the trend noted. The order book now stands at 198 vessels and represents 17% of the current fleet. Demolition activity is expect to remain strong going forward. Significantly more vessels were built in the early 2000s compared to the 1990s. Slide 9 shows the current fleet of C3is. By the end of third quarter 20204, C3is owned and operated the fleet of three Handysize drybulk carriers and one Aframax oil tanker. In May 2024, the company took delivery of 33,000 deadweight drybulk carrier, the Eco Spitfire, bringing the total fleet capacity to 213,000 deadweight with an average age of 13.77 years. All vessels have had the Ballast Water Management System solidly installed and furthermore there are no immediate capital commitments for special surveys as the next one view is in third quarter 2025. All vessels are unencumbered and currently employed on short to medium term period charters and spot voyages. Slide 10 shows a sample of the international charters with whom the management company has developed strategic relationships and has experienced repeat business. Repeat business highlights the confidence our customers have for our operations and the satisfaction of the services we provide. The key to maintaining our relationships with these companies are high standards of safety and reliability of service. I will now turn over the call to Nina Pyndiah for our financial performance.
Nina Pyndiah: Thank you, Diamantis, and good morning to everyone. Please turn to slide 11 and I will go through our financial performance for the third quarter and first nine months of 2024. Voyage revenues for the nine months ending September 30, 2024 amounted to $32.9 million an increase of 120% compared to the first nine months of 2023. 77% of our total revenues were contributed by our Aframax tanker, the Afrapearl II. Our net revenues for the period generated September '24 were $22.5 million, an increase of 92% compared to the same period of last year. Our daily TCE was up 24% from Q3 '23. Our fleet operational utilization was 90.6% for the nine months ending September 30 '24 compared to 93.6% for the same period of 2023. Voyage expenses and vessels operating expenses for the nine months of 2024 were $10.4 million and $6 million. The increases in both voyage expenses and vessels operating expenses were attributed to the increase in the average number of vessels. Voyage expenses for the nine months of 2024 mainly included bunker cost of $4.9 million and port expenses of $3.4 million corresponding to 85% of total voyage expenses. Operating expenses for the nine months ending September 30 '24 mainly included crew expenses of $3.2 million, corresponding to 53% of total operating expenses, spares and consumable costs of $1.3 million corresponding to 22% and maintenance expenses of $600,000 representing works and repairs on both the vessels corresponding to 10% of total vessel operating expenses. Management fees increased by 55% from Q3 '23 due to the increase in the average number of vessels. General and administrative costs were $2.5 million and mainly related to the expenses incurred from the two public offerings and the reserve stock split. Depreciation recorded for the nine months of -- for the first nine months of '24 was $4.6 million, a 67% increase from Q3 of last year due to the increase in the average number of vessels. Related party interest and finance costs for the period was $2.1 million and related to the accrued interest expenses as of September 30, 2024, in connection with $53.3 million payable, which was the 90% balance payable on the acquisition prices of our Aframax tanker, Afrapearl II and our bulk carrier the Eco Spitfire. The Afrapearl II was completely paid off in July '24 and the balance due on the Eco Spitfire is payable in April '25. Interest income of $800,000 for the first nine months of 2024 were recorded and relate to the interest received on our bank deposits. As a result of the above, for the nine months ended September 30, '24, the company reported an adjusted net income of $7.7 million compared to an adjusted net income of $3.7 million for the same period of last year, an increase of 106%. Adjusted EBITDA for the nine months ended September 30, '24 amounted to $13.5 million compared to an adjusted EBITDA of $7 million for the same period of last year, an increase of 92%. A non-cash item of $15.18 million loss was recorded in Q2 2024 and $4.8 million gain in Q3 '24, resulting in a net loss of $10.35 million for the nine months of '24. This represent the unrealized gain or loss on the fair value of non-exercised warrants. Turning to Slide 12 for the balance sheet. Our cash balance was $8 million by the end of Q3 '24 after paying $39.5 million for the remaining 90% purchase price of our Aframax tanker, Afrapearl II in Q3 '24 and $1.62 million which was 10% of the purchase price of the Handysize drybulk carrier Eco Spitfire in Q2 '24. The fleet book value as at the end of September '24 was $85.8 million an increase of 16% from year-end 2023 due to the addition of the bulk carrier, the Eco Spitfire. The company has no outstanding bank debt. The financial liability of $11.9 million relates to the following. 90% of the purchase price of Eco Spitfire which was $14.57 million. Less receivable of $2.7 million freight income from the management company, which was collected in Q4 2024. The warrant liability of $9.7 million relates partly to the net fair value losses on non-exercised warrants at Half One '24. $690,000 from the total fair value losses has been recorded to equity. Concluding the presentation on Slide 13. We outline the key variables that will assist us progress with our company's growth. Owning a high-quality fleet, reduces operating cost, improves safety and provides a competitive advantage in securing favorable charters. We maintain the quality of the vessels by carrying out the regular inspections, both while in port and at sea and adopting a comprehensive maintenance program for each vessel. The company's strategy is to follow a disciplined growth with in-depth technical and condition assessment review. Management is continuously seeking a timely and selective acquisitions of quality vessels with current focus on short to medium term charters and spot voyagers. We always charter to high-quality charters such as commodity traders, industrial companies and oil producers and refineries. The company maintains an adequate level of cash flow and liquidity that will enable us to act instantly as the windows of growth and opportunities open. Despite being in operation for just over a year and having increased our fleet by 234% since inception, the company has no bank debts. No interest was charged by the affiliated sellers for the subsequent 90% payments due on the Afrapearl II and the Eco Spitfire. At this stage, our CEO, Dr. Diamantis Andriotis, will summarize the concluding remarks for the period examined.
Diamantis Andriotis: Following the completion of the first nine months of operations in 2024, C3is has reported voyage revenues of $32.9 million, an increase of 120% for 2023 and adjusted net income of $7.7 million, 106% higher than 2023 and adjusted EBITDA of $13.5 million, 92% higher than 2023. We have taken delivery of our fourth vessel this year, bringing our total fleet capacity to 213,000 deadweight, an increase of 234% from the company's inception over a year ago. In April 2024, we paid off $1.62 million representing the 10% balance due on the Eco Spitfire. And in July 2024, we paid off the remaining balance of $13.5 million due on our Aframax tanker. We have more than tripled our fleet capacity without incurring any bank debts. Our strategy of expansions has continuously been bearing fruits, as proven by the results of every single quarter since the company's inception. We will continue to aim at achieving sustainable growth despite the current challenges of macro and micro conditions. The results of the US elections will have significant implications on the global shipping industry. The proposed policies of 10% tariff on all US imports and 60% tariff on Chinese products are poised to reshape trade dynamics, thus affecting shipping. The industry also faces added uncertainties around the current geopolitical situation with the two major conflicts having a significant impact on shipping markets, combined with the outcome of environmental regulations. We will closely monitor these evolving situations and maintain an agile and effective control of our business, focusing on maximizing our results. We will continue to address industry challenges and we'll maintain our strategy to provide safe global transportation services in parallel with producing excellent financial performance, attractive returns and growth prospects for our shareholders. We would like to thank you for joining us today and look forward to having you with us again at our next call for fourth quarter of 2024 results.
Operator: That does conclude our conference for today. Thank you for joining. You may now all disconnect. Have a nice day.
End of Q&A:
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