Seaspan Corporation's (ATCO) financial results continued moving full speed ahead in the third quarter due in large part to a needle-moving acquisition it completed earlier in the year. That deal, along with improving market conditions and its financial maneuvers to strengthen its balance sheet, positions the company for continued success.
Seaspan Corporation results: The raw numbers
|
Metric |
Q3 2018 |
Q3 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$295 million |
$211 million |
39.8% |
|
Net earnings |
$80 million |
$48.4 million |
65.3% |
|
Earnings per share |
$0.36 |
$0.26 |
38.5% |
Data source: Seaspan Corporation.
What happened with Seaspan Corporation this quarter?
The Greater China Intermodal Investments (GCI) deal continues to pay dividends:
- Seaspan's revenue surged compared with the year-ago period thanks primarily to the acquisition of GCI, which added 16 vessels to its fleet, bringing it up to 112. Revenue set a quarterly record and came in at the high end of the company's $291 million to $295 million guidance range driven by those new additions; higher charter rates for ships on short-term contracts; and an improvement in its utilization rate, which averaged 98.4% in the quarter, up from 96.9% in the year-ago period.
- Earnings, meanwhile, rose sharply due to the higher revenue as well as the company's ability to keep a lid on costs. Ship operating expenses, for example, were $55.4 million during the quarter -- well below the company's $59 million to $63 million guidance range -- while general and administrative expenses came in at the low end of its forecast range.
- Earnings per share, however, didn't grow quite as fast because the company has issued more stock over the past year to bolster its financial position.
- The company continued strengthening its balance sheet during the quarter. Fairfax Financial exercised some of its warrants, which provided Seaspan with $250 million in cash. Meanwhile, the company closed a new $150 million credit facility and issued $150 million in preferred stock that it used to redeem $143.4 million of higher-yielding preferred shares. These transactions enabled the company to pay off $225 million in debt and reduce interest expenses while also boosting its liquidity to $541 million.
- The company intends on using some of that liquidity to help restructure Swiber Holdings Limited. Seaspan plans to invest up to $200 million in the company, including $20 million for an 80% equity stake in Swiber -- a Singaporean offshore engineering, procurement, and construction business that owns five maritime vessels -- as well as invest up to $180 million in a $1 billion LNG (liquified natural gas) to power a project in Vietnam that's under development.
Image source: Getty Images.
What management had to say
CEO Bing Chen commented on the company's progress during the quarter, saying:
I am pleased with our record operating results in the third quarter, and the strategic milestones we have achieved so far this year. We are realizing benefits from the full integration of GCI, which is the main driver of our year-over-year growth, while we continue to invest in and improve operations of our integrated containership platform to provide best-in-class services. These improvements are evidenced by our 98.4% utilization rate for the quarter, as well as marking the lowest ever number of lost time injuries since we began tracking in 2013.
Seaspan's strategic maneuverings over the past few months are paying dividends. The acquisition of GCI has significantly bolstered the company's financial results, which has accelerated its turnaround. In addition to that, the company has continued to strengthen its balance sheet, which has boosted its liquidity so that it can capture compelling opportunities in the market, such as its proposed investment in Swiber. That positions the company for continued success for the balance of 2018 and into the next year.
Looking forward
Seaspan's acquisition of GCI should continue to drive accelerated revenue and earnings growth for the next couple of quarters. Meanwhile, the company's moves to shore up its balance sheet have enhanced its liquidity position so that it has ample dry powder to continue pursuing compelling investment opportunities.
