EU and US could reach trade deal this weekend - Reuters
MPC Container Ships ASA reported robust financial results for Q1 2025, achieving an adjusted EBITDA of €66 million and gross revenue of €127 million. The company maintains impressive gross profit margins of 67.21% and offers a significant dividend yield of 10.23%. Despite these positive figures, the company’s stock fell by 12.19% in pre-market trading, closing at $15.05. This decline comes amid adjustments to the company’s dividend policy and broader market uncertainties. According to InvestingPro analysis, the stock currently appears undervalued based on its Fair Value assessment.
Key Takeaways
- MPC Container reported strong Q1 2025 financials, including €66 million in adjusted EBITDA.
- Stock price dropped by 12.19%, reflecting investor concerns.
- The company adjusted its dividend policy, now distributing 30–50% of net profit.
- Fleet modernization efforts continue with methanol dual-fuel vessels and retrofits.
- Charter coverage for 2025 stands at 96.77%, securing substantial revenue.
Company Performance
MPC Container Ships ASA demonstrated solid performance in Q1 2025, with significant earnings and revenue figures. The company’s strategic focus on fleet modernization and efficiency improvements has started to yield results, positioning it well within the competitive landscape of the container shipping industry. However, the stock market’s response highlights potential investor apprehension regarding future growth and dividend adjustments.
Financial Highlights
- Revenue: €127 million
- Adjusted EBITDA: €66 million
- Adjusted profit for the quarter: €48 million
- Dividend: $0.8 per share
- Operational cash flow: €75 million
Market Reaction
Despite the strong financial performance, MPC Container’s stock experienced a significant decline, falling by 12.19% to $15.05. This drop places the stock closer to its 52-week low of $12.20, indicating a cautious market sentiment. The adjustment in dividend policy, reducing the payout to 30–50% of net profit, may have contributed to investor concerns. InvestingPro data reveals the company maintains a moderate debt level with a debt-to-equity ratio of 0.74, and its liquid assets exceed short-term obligations. InvestingPro subscribers have access to 10+ additional key insights about MPCC’s financial health and market position.
Outlook & Guidance
The company has provided a full-year revenue guidance of $485–500 million and an EBITDA guidance of $250–325 million. MPC Container remains focused on fleet renewal and strategic investments, with a strong revenue backlog of $1.1 billion and an emphasis on capital allocation.
Executive Commentary
CEO Konstantin Bach emphasized the cyclical nature of the shipping industry, noting, "History has proven that shipping is a cyclical business." He also highlighted the company’s strategic focus, stating, "We believe there will be a significant catch-up needed in terms of replacing tonnage in smaller sizes."
Risks and Challenges
- Adjusted dividend policy may affect investor sentiment and stock performance.
- Modest growth in global container trade could impact future revenue.
- Fleet renewal and strategic investments carry inherent risks.
- Market uncertainties and potential macroeconomic pressures could influence performance.
MPC Container’s strong financial performance in Q1 2025 underscores its strategic initiatives and market position. With a beta of 0.18, the stock shows relatively low volatility compared to the market. While the stock’s decline reflects investor concerns, particularly regarding dividend policy changes and future growth prospects, InvestingPro analysis indicates the company maintains strong fundamentals. For deeper insights into MPCC’s valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
Full transcript - MPC Container Ships ASA (MPCC) Q1 2025:
Konstantin Bach, CEO, MPC Containerships: Good afternoon and good morning everyone. This is Konstantin Bach, CEO of MPC Containerships, I’m joined by our CFO and Co CEO, Moritz Forman. I would like to welcome you to our Q1 twenty twenty five earnings call. Thank you for joining us to discuss MPC Containerships first quarter twenty twenty five earnings. This morning, we have issued a stock market announcement covering MPCC’s first quarter results for the period ending 03/31/2025.
The release as well as the accompanying presentation for this conference call are available on the news and investor section of our website. Please be advised that the material provided and our discussion today contain forward looking statements and indicative figures. Actual results may differ materially from those stated or implied by forward looking statements due to risks and uncertainties associated with our business. Before we guide you through our Q1 earnings call presentation, let me share some initial reflections on the first quarter twenty twenty five. We’re very pleased to report another solid performance and a strong quarterly result despite prevailing macroeconomic and geopolitical uncertainties.
Overall, Q1 has been an excellent quarter and a good start to the year for MPCC. With that said, I’m happy to hand over to Moritz.
Moritz Forman, CFO and Co-CEO, MPC Containerships: Good morning and good afternoon everyone and welcome to MPCC’s earnings call for the first quarter of twenty twenty five. Following our agenda for today, we will start as usual with the review of the Q1 highlights, after which we will spend some time on the current market, followed by the outlook for the remainder of 2025. Kicking off with the highlights, we continue to post strong results both from a financial and operational perspective. As we have seen in the previous quarters, adjusted EBITDA came in at 66,000,000 for the first quarter. From a market perspective, both the container and the chartering markets remain very strong.
We continue to take advantage of the prevailing market environment. We see charter rates and durations remain very healthy, and we have further increased the employment coverage in line with our long term chartering strategy. And as a result, the backlog the revenue backlog now stands at US1.1 billion dollars with 9677% coverage of open days in 2025 and 2026 respectively. In addition, the Board of Directors has declared the company’s fourteenth consecutive dividend in the amount of point $8 per share, which will bring the total dividend paid to investors to north of US1 billion dollars over the last three years. And importantly, going forward, we will continue to emphasize on long term sustainable return to shareholders.
On the asset side, we continue to execute on our fleet optimization as we agreed the sale of seven vessels in total across two separate transactions. The vessels sold have an average age of around seventeen years and hence support our goal of building a long term sustainable fleet that is future proof, especially given the regulatory landscape in which it becomes more and more difficult to maneuver. As we continue to offload older non strategic assets, we’re very happy to have taken delivery of our first two methanol dual fuel newbuildings that has entered services in January and April and commenced a fifteen year time charter with our customer NCL. It has been a very busy quarter on the debt side. First of all, we closed our first Japanese lending transaction at highly attractive terms, which also marked the entrance into a deep and strategic market for MPCC.
And secondly, we have successfully tapped our existing senior unsecured sustainability linked bond, raising another million dollars and bringing the total outstanding bond to $200,000,000 The capital that we have raised will obviously support MPCC in its fleet renewal and optimization efforts going forward and obviously being an integral part to the company’s capital structure. Looking ahead into the remainder of 2025 and as the market continues to be very supportive, we will strongly focus on further driving our fleet optimization and our retrofit program to improve the fleet composition and at the same time enhance the long term shareholder value. Based on the current market, we reconfirm the revenue guidance of $485,000,000 to $500,000,000 And on the EBITDA side, we also reconfirm the guidance between $3.00 $5,000,000 to $325,000,000 Turning to the next slide and looking at some of the KPIs for the first quarter. As just mentioned, revenue and profitability are more or less in line with the previous quarter. First quarter gross revenue came in at €127,000,000 while profit for the quarter was the adjusted profit for the quarter was €48,000,000 From a balance sheet perspective, the bond tab as well as the drawdown under our newbuilding financing has increased the leverage ratio to 32%, which remain very moderate from our perspective.
However, the net debt position has actually decreased on a quarter by quarter basis, now standing at around €200,000,000 As mentioned before, the Board has declared a dividend of $08 per share, which will be paid in June 25, and the operational cash flow generation remains very strong in this quarter with SEK75 million as you can see at the top right. We continue to see good fleet utilization with 96% and OpEx has been slightly below expectation due to some shifting effects on the P and L, meaning that we will probably see a catch up effect or a make whole during the coming quarters. But so far, things are expected to be in line with budget from a full year perspective. Looking at Slide number five and spending some time on our recent chartering activity vis a vis the market condition, it is pretty evident that despite the negative noise and macro uncertainty that we see in the markets, we continue seeing strong demand from top tier liner companies for feeder tonnage for our vessels. Both charter rates and durations are holding up strongly as can be seen by the five fixtures concluded since our last reporting.
Depending on the vessel size, our new fixtures reach well into 2028. And for the remainder of 2025, we only have four vessels open for re chartering if you exclude another four vessels with a relatively wide redelivery window. And that basically means our P and L is shielded to a large extent from any adverse market movements in the foreseeable future. On the asset side, while we have already successfully delivered the RS Fenya to her new owners, we have further divested seven smaller older container vessels in two distinct transactions generating gross sales proceeds of about US94 million dollars These vessels will be handed over to the new owners in the next coming weeks and the sales are very much in line with our fleet optimization strategy, while the sales proceeds are intended to be reinvested into our fleet renewal efforts. Some of the sold vessels are being delivered with existing time charters attached and consequently future revenue will not be recognized in the MPCC P and L.
However, given the strong chartering activity, we maintained a total revenue backlog of $1,100,000 On the next slide, we take a step back reflecting a bit on our successful capital allocation strategy since 2021, which marked for us the transition from what we called a growth phase when we have built up the fleet where we have invested a lot of capital into the strategic execution phase. And between 2021 and today, we have in total bought and sold 68 vessels, I think which is a great testament for the transactional DNA of MPCC and the ability of us being able to execute on accretive transactions irrespective of the market cycle that we operate in. And while we have sold obviously more vessels than we bought, I think it’s very important to note that we have not only reduced the average age of the fleet and increased the average vessel size, I think we have more importantly or most importantly significantly increased the available trading days by more than 40% and therefore, the tail end value of our fleet, which adds substantial long term value to our company. On a more general note and going forward, we will continuously place very strong emphasis on both strategic and opportunistic fleet renewal in a market environment that will likely present many, many interesting opportunities.
And coupled with our retrofit program, which has shown efficiency improvement by up to 20%, we are very confident to rightfully position our fleet for the future. When assessing new investment opportunities, as in the past, we will focus very much on derisking through time charter coverage, especially in the current market environment, essentially managing appropriately residual risk. And having said that, our investment efforts of around €600,000,000 over the last three years have, as you can see at the bottom right, have yielded in a significant improvement of our fleet composition as it now features three dual fuel methanol vessels of which one is to be delivered in 2026, ’11 Echo vessels as well as 24 vessels that will have undergone substantial retrofits. And it’s the clear intention that going forward, we’ll able to execute on the same scale and further drive the fleet renewal as we have done in the past. Turning to Slide number seven and looking at the balance sheet development as well as the status quo.
We have continued to optimize the company’s capital structure by tapping our senior unsecured sustainability linked bond as well as drawing under strategic senior secured financings that are all against long term charters as can be seen at the bottom right when looking at the different financing silos. The cash breakeven of around $17,700 per day is sufficiently covered by the respective secured time charters. And from a gross debt perspective, we’re currently at around €440,000,000 which is substantially below the fleet’s fair market value of around $1,500,000,000 and while the net debt is also close to 3.5 times covered by our projected EBITDA backlog. Balance sheet flexibility is absolute key for us in MPCC, and consequently, we retain 33 debt free vessels on our balance sheet with a fair market value of around $800,000,000 And while we continue to reduce our average financing costs over time, we have no debt maturities before 2027. And in addition, we have been awarded Marine Money for our successful and innovative ECA covered green loan with Deutsche Bank and Cynosure.
Generally speaking, we follow a pretty strict debt financing principle, trying to align leverage and cash flow visibility while at the same time trying to keep a substantial part of the fleet unencumbered. And when looking at our financing silo, it clearly outlines the comfortable employment coverage on the heightened financing breakeven, while the debt free silos feature both a comfortable breakeven as well as sufficient headroom between breakeven levels and the current plonant cover. In MPCC, we eventually intend to manage residual risk appropriately, as mentioned before, and position our assets best for the volatile shipping markets as we have seen in the past and will also probably experience in the future. Looking at Slide number eight, cash flows in Q1 twenty twenty five was dominated by the good operating cash flows of $75,000,000.01 and 2 by $110,000,000 in debt drawdowns throughout the quarter, significantly improving the company’s cash position and the investment capacity to two twenty six million pounds by the March. In addition to the balance sheet liquidity, we retained further flexibility through $75,000,000 in undrawn RCF capacity.
This was slightly being offset by investments into our fleet and regular debt repayments, but also MPCC’s thirteenth consecutive dividend in the amount of US40 million dollars was paid in the first quarter and together with the dividend declared today that will be paid June, the total shareholder distribution since we started paying dividends roughly three years ago will surpass the threshold of US1 billion dollars being a fantastic testament to our capital allocation strategy and our emphasis on long term shareholder return. And all in all, MPCC, I think it’s important to mention, remains very disciplined on the capital allocation side as we have always done. On that note, I hand over to Konstantin for the market update and the outlook section.
Konstantin Bach, CEO, MPC Containerships: Thank you, Moritz. I would like to continue with the next agenda point, which is the market. Let me start with a brief update on the current market environment. The first and most important message is that volatility is here to stay. Last week alone, Trans Pacific freight rates surged by more than 30% week on week.
Carriers have found themselves in a perfect storm of tariff hikes and tariff pauses, which has led to misaligned capacities and congestion across major trade lanes. It’s an environment in which freight rates can thrive and that’s exactly what we’re seeing. But this is about more than just short term rate spikes. We believe that market volatility will persist well beyond the current surge. There are several underlying factors in play.
Firstly, the shipping industry is navigating an increasingly complex mix of geopolitical tensions and regulatory shifts, which are making strategic planning more difficult, but also creating opportunities for non operating owners like us at MPCC. A key source of disruption right now is U. S. Trade policy. The list of tariffs introduced by the U.
S. Government is long. It includes substantial duties on Canada and Mexico, special tariffs on the automotive sector and most significantly sweeping tariffs on Chinese goods, even though these are still on their thirty day pause with lower tariffs. Today, 14% of global container trade by volume is already subject to U. S.
Tariffs. Historically or better during recent years, that figure has been more 2% to 3%. In sum, The U. S. Tariff situation remains difficult and the initial impact is disruptive to supply chains.
Looking forward, additional regulation on the horizon, the USTR three zero one proposal would introduce new port fees aimed at Chinese owned and Chinese built vessels with phased implementation beginning this October. On top of that, the Ships for America Act currently under discussions could impose yet another layer of cost and complexity on the global shipping industry. At the same time, we are witnessing renewed geopolitical tensions in The Middle East. The ceasefire between Israel and Hamas that had been in place earlier this year has now collapsed. Israel is pushing forward with plans to retake Gaza, while The United States has escalated its military operations in Yemen.
The Houthis meanwhile continue with attacks in Israel. This has left the security situation in the Red Sea highly unstable. At present, there’s no indication of near term return to the Suez route for most carriers, instead rerouting via the Cape Of Good Hope remains the default. And yet, amid this volatile backdrop, we are seeing sustained strength and resilience in critical segments, the charter market and S and P market. Next slide.
The charter market displayed here via the HarpEx has been robust going into 2025. Despite numerous uncertainties and volatility, the market remains on a plateau due to ongoing scarcity of available tonnage. Looking at the number of fixtures reported, there were roughly 33 fewer fixtures concluded in Q1 compared to Q1 last year. However, there’s still quite a solid number of fixed vessels being fixed as we observed a total of around two twenty fixtures in Q1 twenty twenty five. The decline can mostly be attributed to the limited availability of vessels.
Especially in the sizes above 3,000 TEU, the market is very tight for the remainder of 2025. Since January 2024, the Time Charter Index increased by more than 150%. In sum, charter rates and periods remain robust on a good level, only in Q1, but until today, as you have also heard from Moritz when looking at our most recent fixtures. Secondhand prices, another topic to look at, have likewise increased by around 40% to 50% since January 2024. The good market environment for ship owners has resulted in the strongest secondhand market for tonnage outside the pandemic boom in the last fourteen years.
As a result, the second hand market is still busy with the same level of activity being reported compared to Q1 twenty twenty four, roughly 50 to 60 vessels have been sold just like one year ago. It is predominantly the big liner operators like MSC and CMA and some non operator owners that are still securing tonnage to grow their fleet. Looking a little further, data from Clarksons Research show that after three years of record orders, the appetite of newbuilds among owners is weakening somewhat, which has seen newbuilding prices finally etch down a bit. Let’s continue by looking at some additional market parameters on Slide 12, specifically vessel availability and forward fixing in more detail. You can see that the development of forward availability of vessels on the left hand side here has significantly dropped in 2024 and continued the trajectory during the first months in 2025.
The decline of open positions has helped the charter rates to remain healthy despite the macroeconomic uncertainties. Only a few vessels are readily available and the term prompt tonnage usually refers to ships that are only available at least a couple of weeks out. As a result, owners remain calm and do not see the need to secure the first employment opportunity that presents itself. When looking at what is being done in terms of fixtures, as a general comment, we have seen continued demand for our midsize and smaller container ships from the liner operators as they took as they look to maximize flexibility in their networks to accommodate changing flows of cargo. The fixing of vessels for forward positions picked up again going into 2025.
Generally, fixtures increased due to the scarcity of tonnage. The majority of fixtures that were concluded further out than others were reported in the larger sizes above 4,000 TEU, whereas the supply of vessels is already very limited for 2025. As a result, the non operating owners fleet can still be deemed fully employed based on a very low count of idle vessels. Moving on to the next slide, where we present a bit more specifics on regional markets, and we believe that going forward, regional markets will continue to grow, the regional fleets not so much. What does that mean specifically?
On the demand side, while we see strong volatility in freight rates on the Mainland trades, especially the Transpacific, it is important not to lose sight of the strong market fundamentals in intra regional trades. Mainland volumes will not be the growth drivers of container trade in the coming years. The average annual growth of only around 1% is expected over the coming years. At the same time, intra regional trade, the core market for the MPCC fleet is expected to grow by 3.5% annually on average for the next two years. The container trade volume on intra regional trades is also significantly higher than the total volume on the Mainland trades, which clearly demonstrates the importance of intra regional traffic.
Looking at the supply side, we see growth potential in intra regional trade, but we don’t see the corresponding fleet serving these trades growing at the same pace. Within MPCC’s core segment, vessels between 1,000 to 8,000 TEU roughly, almost a quarter of the fleet is already 20 years old or older. On the other hand, the order book is small in relation to the fleet at just 6% compared to 47% of the fleet, including larger sizes in the segment. Smaller and older units are less adaptable to regulatory compliance due to the less economically viable retrofit case for smaller units. Hence, we see a considerable need for fleet renewal and potential in MPCC’s core segment towards younger, more efficient units.
As we look ahead on the next slide, Slide 14, the market remains shaped by a set of wildcard events. Four key factors that will drive how the market will develop over the next twelve to twenty four months are shown on this slide. Firstly, regulation and decarbonization. The regulatory landscape continues to evolve and the implications of the IMO net zero framework could reshape the newbuilding market. While compliance will raise cost and complexity, it may also create windows of opportunity for modern fuel efficient vessels, especially in the sub 8,000 TEU segment, where a significant modernization gap still exists.
U. S. Tariffs and trade tensions is another topic where trade policy remains a major source of uncertainty. The escalation of U. S.
Tariffs and the USTR three zero one proposal could deepen fragmentation in global trade pattern. In the longer term, we see a strengthening of regional trades and increased relocation of manufacturing that has already started a few years ago and that might be accelerated by the most recent developments. In the near term, the stop start of tariff announcements and pauses could cause bullwhip effects along supply chains. Supply outlook in general, the fleet supply is another wild card to watch closely. The order book to fleet ratio currently stands at 30%, but the growth is heavily skewed towards larger tonnage.
In contrast, there are still a significant shortfall in modern sized midsize ships and again, especially below 8,000 TEU. Still on a global scale supply growth is forecasted to exceed demand growth by 2.7% in 2026 and one point one percent in 2026. Red Sea disruptions and finally, the situation in the Red Sea as a very important factor remains an operational wildcard. The ongoing rerouting around the Cape Of Good Hope continues to add about 12% in TEU miles to the market. At this stage, a return to the Suez route appears unlikely in the near term.
But once conditions improve and the first major carrier shapes its network back to the Red Sea, we can expect domino effect with others quickly following suit. That would rapidly unwind the current detour, bring those additional 12% TEU miles back to zero. And that brings us to the outlook section and how MPCC is positioned to navigate this environment. Let’s move on to the next slide, Slide 16. Now let me start with a few general comments.
History has proven that shipping is a cyclical business, and we expect this to continue. It is our conviction that shipping, at least the asset heavy part of it, is almost a pure capital allocation business. Prices paid for assets as well as effectively managing residual value risk and upside are key factors for generating attractive full cycle returns. There are times to place a strong emphasis on investing and deploying capital and there are times to place a strong emphasis on returning capital to investors. Maintaining a through the cycle balance sheet that is robust, whilst ensuring appropriate investment capacity at hand to be able to act strategically and opportunistically is a key principle for us, so is a proactive approach to fleet and portfolio optimization.
Now these are some of the key principles that we act upon. Another key principle that we have subscribed to since foundation of the company is clear and transparent communication and walking the talk. On this slide, we have illustrated MPCC’s development since foundation of the company in 2017. It shows how we have acted in different market phases to create value for MPCC and our shareholders. Firstly, the growth phase.
During our initial growth phase, we have placed full focus on fleet buildup and deployment of capital. Initially, we have acquired 70 vessels whilst we have sold six at attractive prices based on a countercyclical investment thesis focused on the smaller vessel sizes. During this phase, we did not pay any dividends as we placed full focus on deploying capital with a goal and promise to shift gear and return capital to investors when the time is right. During the next phase, which we call the strategic execution phase with historically strong container market, we have executed on our investment thesis and strategy by realizing value via the charter market on the one hand, I. E, by locking in period charters at highly attractive levels and selectively carrying out divestments and selling ships at historically high prices.
Consequently, as promised, we have returned significant capital to investors based on a very high payout ratio of 75% of net profit. More than $1,000,000,000 in dividends over the past years have made MPCC one of the leading dividend stocks in global shipping in terms of dividend yield. But creating value is not only about a high dividend. We have, at the same time, also optimized our balance sheet, as Morris has alluded to earlier, and we have optimized our vessel portfolio, having been a seller and a buyer of ships over the last couple of years and having invested $600,000,000 in our fleet renewal program. We have further strengthened our relationship strategic relationship, I should say, with our liner customers as evidenced by a series of charter package deals and joint retrofits, which are good examples for our excellent relationships.
On the way forward, looking ahead, as discussed throughout the presentation, we see changing market dynamics, high uncertainty and volatility. And this, we believe, will create an attractive set of opportunities for accretive growth. And we are therefore rebalancing our capital allocation strategy. A sustainable recurring dividend will continue to be an integral part of our capital allocation strategy. Now let me move to Slide 17 and elaborate in a bit more detail on the rebalancing capital allocation for accretive growth.
Let me provide some more perspective on the way forward. The rebalancing of our capital allocation strategy is being done in order to continue to develop MPCC in the best interest of the company and its shareholders. This is based on our market expectations as well as our firm belief that we will see an interesting set of opportunities as well as strategic fleet renewal investment prospects. Our balanced approach includes, firstly, full commitment to a sustainable dividend at an adjusted level of 30% to 50% of net profit, combined with retaining parts of the cash earnings in order to continue to develop MPCC as a leading tonnage provider and create long term value for the company and its shareholders. The rebalanced capital allocation strategy does certainly not mean that we will go all in, in the market right now.
It does mean that we will take a balanced approach. And in any case, we will continue to be rational in our divestment and investment decisions, adhering to our principle that we have followed over the years and since inception of MPCC. Now what does that mean in terms of capital allocation strategy? And we have put some of the bullets on the right hand side, but let me guide you through some of the considerations. Firstly, we will continue to carry out portfolio enhancements.
That is, we will continue to pursue strategic and opportunistic growth, both in second hand and newbuildings, with a clear focus on managing residual value risk and upside. We will focus on accretive deals for P and L and long term value, and we will seek active investments into the existing fleet, including retrofits, significantly advancing the vessel’s performance and tail end value of the respective vessels. Secondly, we will continue our rational capital allocation approach in different market phases, that is focus on long term and sustainable growth for shareholders and other stakeholders and focus on returns that will be driven by well timed capital deployment with a strong emphasis on timing of investing versus returning capital. A clear dividend policy and commitment based on 30% to 50% of adjusted net profit as well as event driven distributions. Thirdly, always active balance sheet management, focus on low and moderate leverage and general high flexibility as well as optionality through a high degree of debt free vessels on the balance sheet and the diversification of sources of funding as Moritz has alluded to.
Now taking a step back, in sum, we have developed MPCC successfully in different market phases by executing our strategy and being adaptable and rational in terms of capital allocation strategy. Going forward, we will continue to build MPCC in that way in order to create value regardless of market environment. Now from a more strategic dimension to the company specific outlook on Slide 18, where we look at charter backlog on the left and you can find some more details of the coverage. As explained in detail by Moritz, we have continued to utilize the strong market and we have increased our coverage for 2025, ’20 ’20 ’6 and 2027. We’re basically looking at almost a full utilization for this year already in terms of operating days, and we have almost 80% covered for next year with visibility of almost 30% for 2027.
That is a very good basis to continue to develop the company going forward. And furthermore, in terms of counterparties, more than 90% or around 90% is covered by top 10 liner companies or backed by long term cargo commitments. And on the right hand side, you can also see the open positions for the remainder of this year and next year, and we already have active dialogue on a number of positions of open charter positions in this year and partly even next year. Now let’s move forward to the next slide and where we have shown on Slide 19 what we deem is a strong value proposition in terms of low risk and significant upside. We firmly believe MPCC has a strong value proposition with significant upside, and let me explain why.
As you can see on the left hand side, the current enterprise value is fully covered by the projected EBITDA backlog of EUR0.7 billion and the recycling value. Further significant upside potential is present from the existing fleet of 54 vessels plus further earnings capacity. In addition, we have run on the right hand side an indicative sensitivity analysis on open rates based on the charter coverage that we have in two scenarios. One is the current market rates in blue and the ten year average from Clarksons in gray. And you can see the outcome and that is basically underpinning firstly our resilience, but also our earnings capacity going forward.
Before we now open the floor for questions, let me summarize some key takeaways from today’s call. Q1 has been another good quarter for MPCC. And based on a strong operational execution, we look at an excellent backlog and forward visibility into 2025 and also 2026. Despite the current geopolitical, macroeconomic and regulatory environment, the container market continues to show resilience, supported by strong secondhand demand, firm time charter rates as well as durations and basically no idle capacity. With our rebalanced disciplined capital allocation strategy, we continue to focus on a continuous dividend distribution as well as strategic fleet renewal and opportunistic growth.
Additionally, we have strengthened our financial flexibility by tapping our bond and diversify our sub funding sources, including entry into the Japanese financing market. And lastly, we also reaffirm our full year guidance highlighting our continued confidence in the company’s outlook and market position. We are looking forward to the remainder of 2025 and to create further value for MPCC, and we’re looking forward to the future with confidence. And on that note, I’m opening the floor for questions. Thank you very much.
Alright, we have the first questions coming in here via the web and I’m happy to start off with the first question which is about retrofitting. The question is what is the plan for the 33 conventional ships built between 02/2005 and 2010? Do they all need retrofitting or do you plan to do so or is there an option of selling more of them? So first of all, we have done quite a number of retrofits for vessels for all kinds of vessels, of course, also for vessels built between 02/2005 and 2010. Overall, we have retrofitted around 24 ships with more major retrofits, meaning the bulbous bow and propeller and paint system.
But we have also done probably eight to 10 vessels where we have carried out smaller retrofits. We would always consider to retrofit ships in order to improve the commercial viability of the ship and or potentially hand in hand with our chartering partners get charter extensions, etcetera, and simply to improve the vessels quality. Having said that, at the same time, we’re also looking at the possibility of certain designs to dispose ships. And as you have heard throughout the presentation, we have been quite active in selling ships throughout Q1 this year, in total seven ships. And we would at all times consider both investing in the ships and or disposing the ships.
And currently, where we see price levels, we would definitely on some what we deem weaker designs that don’t necessarily have the same retrofit path consider disposing ships going forward.
Moritz Forman, CFO and Co-CEO, MPC Containerships: The next question is concerning the today announced adjustment of the dividend policy. Is the new policy of reducing the payout ratio to half a permanent or a temporary decision? And if you may comment on how you arrived at such decision, especially when you state in the report that forward availability is decreasing, the number of pictures is increasing and rates are high. I think it’s needless to say that this decision has been carefully and very diligently being considered before obviously announcing and taking a step back and understanding that shipping obviously is a very cyclical business and that also the capital allocation strategy should be adapted to the specific point in the cycle where we are. So again, taking a step back to when the company was founded in 2017.
’20 ’17, the capital allocation was full steam ahead on building a fleet. Everything has been invested to build a sizable fleet. And then we have in 2020, have entered the next strategic phase in our company, where the focus has shifted into harvesting the fantastic market that we have experiencing. So we have ever since started to return now with the dividends announced today, which will be paid in June, we would be north of $1,000,000,000 paid out in dividends. At the same time, we have been able to also invest significantly in the fleet renewal.
So $600,000,000 is the figure that we’re stating. It has been invested both in or it’s actually three pillars. It’s newbuilding investments, modern secondhand ships and opportunistic secondhand ships as well as retrofit investments in the fleet. And we have also, a balance sheet perspective, managed to lower the debt burden and free up some of the collateral. If we look ahead and we believe or we’re convinced that we are now entering into the third sort of phase of the company.
And if we look ahead, it is very hard to predict how the market will develop in the foreseeable future, especially given today’s macroeconomic uncertainty. There will be strong regulatory shifts upcoming. And at the same time, looking at the feeder markets in particular, we see a very, very strong underinvestment in the current fleet. And that’s why I believe it is the right point in time to adjust the payout ratio from the originally 75% to 30% to 50% to ensure the needed flexibility to execute going forward on the needed fleet renewal and strategic opportunistic because we want to grow the fleet, and we strongly believe that there’s massive value from a shareholders’ perspective in growing the fleet beyond today. So that obviously is a shift in the long term value creation while maintaining our sort of disciplined, transparent shareholder focus on return on distributions.
So again, the payout ratio has been adjusted. There is beyond that, there’s still the possibility to pay out event driven distributions as we have done in the past. So that will not change. So from that perspective, we have a lot of flexibility going forward and we believe that this is the right sustainable payout ratio going forward. And yes, the market is performing very well as we speak.
But as I just mentioned, there’s a lot of macroeconomic uncertainty looking ahead. And in order to be prepared for any opportunities that might arise in the horizon, we think it’s prudent to adjust the payout ratio from 75% to 30% to 50%. The next question is on P and L item. Could you please provide some more color on the increase in other income and the decrease in depreciation? The increase in other income is primarily driven by insurance payments.
We had a few main engine damages on our vessels and now the insurance money that is covering those damages is flowing into P and L through the other income. And the decrease in depreciation is linked to the four three thousand eight hundred vessels that we acquired in the second half of twenty twenty four. We acquired those vessels with below market time charters and thanks to some IFRS magic, there’s actually a write up on those assets, which is now being reflected in the P and L. From the second quarter and going into the third quarter, the depreciation on the P and L is expected to normalize and be in the tunes of around €20,000,000 per quarter. Next question, given the current high asset values, do you see greater value in expanding the fleet through newbuild orders or by acquiring younger secondhand vessels?
Additionally, if attractive vessels or M and A opportunities remain limited should we expect any additional adjustments to the dividend policy. Taking the latter part first, the dividend policy is there to stay. That’s why we have decided to adjust the dividend policy to be sustainable from a long term perspective. And on the asset side, we would like to have as much flexibility as possible. We would like to be able to act in the current market and that means being able to buy asset at historically speaking high prices, but mitigating the entry by long term charters both on a second hand basis, but also on a newbuilding basis, but also going forward be able to act opportunistically if asset value should change.
Konstantin Bach, CEO, MPC Containerships: The next question is around optimizing the fleet. Are you only optimizing or renewing your ship portfolio or are you also planning on growing the fleet? Well, we have, over the years, obviously done that hand in hand. I mean, over the last couple of years, we have, on a net basis, sold more ships than we have acquired. Yet, as Moritz has presented earlier, we have added runway in terms of more trading days because we have bought more modern younger ships.
So I think one should not necessarily only think in number of ships, but in number of capacity available and age of the fleet and trading days available. And there we have actually grown over the last couple of years at least in terms of the vessels that we have sold versus the vessels that we have bought. Going forward, we would at all times consider to grow. We believe there is a certain minimum scale that you should have as a container tonnage provider vis a vis your customers to be in a more strategic dialogue. And I mean, that’s not a line in the sand, but I would say, we should not go below 40 ships in order to have a constant and frequent dialogue with our customers.
And that would also include growth. And we clearly have the ambition and we believe the market is right also to selectively take growth measures. And that’s also why we have rebalanced our capital allocation strategy going forward. So yes, we would consider also growing, but not for the purpose of growing, but for the purpose of generating shareholder value going forward. There’s another question and that is regarding the order book.
Why do you think there is such a discrepancy in order book across TEUs with very low order book for vessels below 8,000 TEU? Obviously, that is a topic that we have discussed over the last couple of years and quarters. I think there is no very simple answer, but part of the answer is that at least as far as you know propulsion technology is concerned for example, it’s easier to order larger ships I. E. The premium you pay in terms of dual fuel technology is relatively speaking smaller if you go for a larger ship and you also have more clarity on where the ships trade mainly on the East West routes, the main lane trades.
Whereas the smaller vessels are more flexible and they will basically trade globally in regional markets all over the world. And therefore, to take a decision on the propulsion technology has not been easy. Secondly, and very importantly, the charter market for the smaller vessels, I. E. The availability for liner operators to charter in vessels has been significantly higher for the smaller vessels.
In the past, we had like 1,500 ships per annum available to the charter market. Now, at the moment with longer charter periods, etcetera, we’re rather looking at 300 to 400 vessels a year. So, we do believe that there will be a significant catch up needed in terms of replacing the tonnage in the smaller sizes as we have alluded to across or throughout the presentation. But those are a few reasons why we haven’t seen orders. We do believe there will be more orders this year and also going forward because we need to replace or the global fleet needs to be replaced in the smaller sizes with more than 1,000 ships above 20 years of age.
There is a clear path towards a fleet renewal necessity going forward.
Moritz Forman, CFO and Co-CEO, MPC Containerships: Next question that is on the screen is how much debt do you have the seven vessels sold for delivery in Q2 and Q3? And number two, you have a significant cash position as of end of Q1 and with more to come from out of seven vessels in Q1, Q3. In addition to securing additional debt of €52,000,000 drawn in May taking the pro form a cash to more than €350,000,000 do you have any investment besides the newbuilding deliveries and the joint venture vessel explaining the dividend policy cut? Or do you expect to build a large cash pile for investments in the medium term horizon? To answer the first question, there was only very, very limited debt attached to the seven vessels in the tune of between 3,000,000 and $4,000,000 And on the second question, obviously, ideally, you always have immediately sort of use of proceeds or deployment of capital as we luckily had when we raised the bond the first time around in October when we managed to immediately acquire a small fleet of modern ships.
We don’t have this immediate opportunity right now, but obviously building up a cash position is certainly designed to be deployed in the foreseeable future. And as we speak, we are working on what we believe is very interesting opportunities from a fleet renewal perspective. So it’s certainly not the intention to just sit on a large amount of idle cash on the balance sheet without proper use for it.
Konstantin Bach, CEO, MPC Containerships: Then there’s a question said, you’ve been clear regarding your intention to modernize the fleet. Should you order newbuilds or do you think about ordering alongside a long term contract relative to speculative ordering? I guess we have been clear since inception MPCC that we would always look at investments on a risk adjusted basis. We have not until this date ordered a ship on speculation. To the contrary, we have actually done newbuilds with charges attached where the EBITDA exceeds the new building price.
We would always look at de risking, a certain de risking of a new building order. So, would opt for new buildings with long term charters attached, bringing down the or managing the residual value risk in a way that we believe it is after the chart an attractive entry point overall. So, that’s kind of the way we would approach it. And there is another question, any insight you can provide on how you think about the trade off between acquiring assets and the S and P market versus ordering considering current asset values? Again, it’s always looking at, let’s call it, adjusted entry price into the asset.
Can we buy ships? And if you buy ships with in today’s market with charters attached, be it newbuilds or be it secondhand ships, you would obviously buy them implicitly at a lower price than today’s price because you have cash flow attached that brings down the entry price. And that’s the way we would look at it weighing up. I think one should expect us to do similar transactions as the ones that we have done in the most recent phase. Again, we have over the last three to four years sold 39 ships, we have bought 28 ships and the ones that we have bought, we believe have been extremely good investments in terms of a derisked entry price.
And you should consider similar transactions to be carried out going forward. And there’s one more question sorry, can you go back to the question? There’s one more question, how should we think about dividends being declared at the low or high end of the 30% to 50% payout going forward? Secondly, how do share repurchase play into the new return policy? I would start with the first part.
I mean, have intentionally provided a range of 30% to 50% to cater for firstly, the volatility in the markets and the somewhat uncertainty around the outlook and at the same time the ability to possibly utilize opportunities that we see in the market. So, we would define and discuss with the board on each quarter what the payout ratio will be. It will be there will be a dividend and the dividend will be in the range of 30 to 50 considering the parameters that I’ve just mentioned. Secondly, share repurchases, how do they play into new return policy? Mean, purchases have always been part of the capital allocation strategy.
We would, of course, consider that, in particular, we see a significant shift in share price and a significant disconnect between the inherent value of the company and the share price and the valuation in the market. And share purchases will be part of the strategy going forward. Having said that, we do also believe that creating long term value in the company by continuing the investment strategy that we have carried out since inception, I. E, buying at a price in the cycle that is either low or that is a reduced entry price by having charters attached is something that we believe is extremely attractive as well. And that’s why we want to also develop the company further by increasing the modern or modernizing the fleet going forward.
And we see extremely attractive dynamics when you look at supply and demand in our sector, and we do also see opportunities on the share basis sorry, on asset basis and newbuilding basis. But a share buyback would definitely be and is a topic that we discuss and consider. Then there’s a question, what is your comment on the market shock from changing the dividend policy this much basically overnight given the relative sound market outlook and the company’s significant revenue backlog and cash balance and thus no obvious need for change. As I said and also Morris alluded to, it is a very thorough consideration that we have done over the last couple of months and quarters considering the market outlook, considering the opportunities that we see and considering that a dividend will be, has been and will continue to be an important ingredient in our capital allocation policy. We do believe that we will be able to generate value by continuing to do what we have done over the last couple of years, deploying capital when the time is right and returning capital to investors, and we will continue to do via dividends.
So, you know, a share price reaction that as we have seen today is obviously not good. I mean, we will continue to work the plan that we have. We believe we have shown over the last eight years that we are able to generate value across cycles, that we have shown that the way we allocate capital does create value for shareholders and that we are a good partner to our stakeholders, we will continue that path. I do think that throughout the presentation we have explained how we want to approach that. We have also explained why we believe there are significant opportunities going forward and we will continue to execute on that path.
Moritz Forman, CFO and Co-CEO, MPC Containerships: Next question is why don’t you let your shareholders benefit from the net profit you made from the seven ships you recently sold? As you just mentioned, this should be one of the event driven events. Yes, as mentioned event driven is remains part of the overall mix of the dividends. But as also explained throughout the presentation and just now, we strongly believe that there’s more long term value in recycling the capital into opportunistic and strategic opportunities and to grow the fleet going forward and hence to extend the long term and the tail end value of the fleet because again shipping is a cyclical industry and in the next in the foreseeable future especially based on the current demand and supply dynamics in the feeder segment, we are a strong believer that we will run into another strong up cycle and we want to be perfectly positioned to take advantage of that cycle. And you don’t do that by only having a small fleet of between twenty and thirty ships.
You want to make sure that you have sufficient scale to have a meaningful impact in such cycle. Then there’s a very short balance sheet question, leverage going forward? A leverage perspective, we will continue to be conservative as we have been in the past. On a gross basis, the leverage has gone up. On a net debt basis, the leverage has actually been slightly decreased relative to the previous quarter.
And the clear intention is to not over leverage the company. We want to stay prudent. We want to make sure that the balance sheet remains intact throughout cycles. Yes, we’re at a good point in the cycle, but that can change going forward. So you want to make sure that both the leverage on the vessels, but also the breakeven remains to be manageable.
And also from a flexibility perspective, currently, we have around 50% of the fleet being debt free, not necessarily saying that is a number we want to keep forever, but we certainly want to keep specific amounts of vessels as fully debt free on the balance sheet also being again a testament to us being very conservative from a balance sheet management perspective.
Konstantin Bach, CEO, MPC Containerships: And there’s a follow-up question to the order book question earlier. A follow-up question, are you aiming for bigger in terms of TEU ships in the future? I mean, referring to one of the slides that Moritz has presented earlier, I mean, obviously, the vessels that we have sold over the last couple of years have on average been smaller, older and the ones that we have bought have been larger and younger. So that is a trend that we believe also seeing how the market develops will continue, but that doesn’t mean smaller ships are out of focus for us. We would try to develop, you know, the right ships and acquire the right ships where we see value for money, and that doesn’t necessarily have to be only larger ships.
But I guess, you know, in terms of trend, we have invested in slightly larger ships recently, and I would not rule out that that trend or that trajectory will continue. Then there’s a question on another question on dividends. Is it still not possible of spreading the dividends, I. E, paying them monthly? I mean, we have looked at that in the past.
I think a quarterly dividend is a very frequent dividend, in my view, for shipping and considering also the size, different SPVs, upstreaming of liquidity, having closing accounts, etcetera, we believe that a quarterly dividend is the right thing to go about and smaller companies might be able to do it monthly. In our view, quarterly is the way to go about it, and that’s what we will do going forward. There’s one more question. Have small vessel rates held up or been better during the period of uncertainty because canceled orders due to tariffs made it more economic for charterers to send a full small ship than use a larger half full vessel? Might this be a feature during continued volatility as does the tail MPCC?
Well, if I understand the question correctly, it’s basically around utilization of ships on certain trades and whether small vessels will actually be benefit. I don’t think that the way this question is at least raised that that will be a clear benefit. Having said that, I do think that intra regional trade, as we have said throughout the presentation, has increased disproportionately stronger than main main trades on average over the last ten, twenty years. We believe that will actually be even accelerated going forward with everything that is happening in the world at present and intra regional trade will continue to grow disproportionately stronger. And on intra regional trades, 98% of the ships deployed, they will be below and have been below 5,000 TEU.
So we clearly see a demand that is structurally supported when it comes to demand growth, structurally supported by that trading pattern. And that obviously meets a very low order book in the smaller sizes and more than 1,000 vessels above 20 years of age, meaning there is a in the next three to five years, we do believe there will be a supply crunch. There is a need to replace the tonnage. That’s also why we have rebalanced our capital allocation strategy.
Moritz Forman, CFO and Co-CEO, MPC Containerships: I think one of the last questions here is you mentioned cycles and you mentioned lots of uncertainties. How would you identify the top or bottom of cycle? You can obviously look historically and compare asset values and charter rates and I think it’s fair to say that from an historical perspective, we are operating in a rather high market, so probably being closer to the top of the cycle. And then going forward, yes, there’s lots of uncertainties. You have erratic behavior, let’s call it coming out of U.
S. You have a tariff landscape that is ever changing, very hard to pin down. You have probably penalties being imposed by The U. S. On Chinese owned and built vessels.
You have a new IMO regulation that is also likely being introduced from 2027. So there’s yes, there’s lots of uncertainties, but also if you combine those uncertainties with the current supply side outlook in the feeder segment, we believe it can also create a lot of opportunities. So it’s obviously, we don’t have a glass bowl. We cannot predict whether the market will increase from here or whether it will decrease from here. But irrespective of what the market will do, we want to be best positioned from a capital perspective to act because, again, of the supply demand dynamics that we foresee in the next couple of years, we want to make sure to be able to renew the fleet and be perfectly positioned for the next phase as we have done ever since the inception of the company.
Konstantin Bach, CEO, MPC Containerships: It seems there are no further questions coming in. Thank you for your interest and for all the questions. We obviously appreciate the interaction. And as we said throughout the presentation, we believe we are very well positioned for the market ahead. We are excited about 2025 and 2026 and beyond.
And on that note, thank you very much again and stay tuned. Speak soon. All the best. Bye bye.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.