Shares of DHT Holdings (DHT -1.68%) are down 17% as of 11:15 a.m. EDT after the crude oil company's earnings took a steep turn into the loss column and wildly missed analyst expectations.
It's been a tough quarter for DHT. Revenue, net of voyage expenses, slid 33% from this time last year to $50.3 million. The cause of the large slip in revenue was in part because shipping rates declined as well as several ships in the fleet were dry docked for repair. This just barely missed analyst consensus analyst expectations compiled by S&P Global Market Intelligence that was projecting net revenue of $52.4 million. On the earnings side, however, things weren't even close. Net income per share came in at $0.81 whereas S&P Global Market Intelligence's analyst estimates expected a $0.02 gain. Pretty much all of that was attributed to a $76.6 million impairment of assets as lower charter rates for its fleet have materially changed the value of some of its vessels.
To make matters worse, the company revised its dividend policy. Now, it will allocate 60% of its net income to either dividend or share buybacks, based on what management decides. The rest will go into funding for its new vessels under construction.
Shipping has been a tough business as of late. DHT and many of its peers started huge vessel expansion plans several years ago in anticipation of rapidly growing demand for oil, gas, and just about every other commodity, especially to serve the rapidly growing Asia-Pacific market. Today, though, there are way too many vessels to meet current demand. As a result, DHT is left with some vessels without work and that are working at much lower contract rates. Hence, the asset writedown this quarter.
There aren't a whole lot of signs right now that this glut of oil tankers is clearing anytime soon. Even though the company has some of the better financials in the shipping industry, it's probably best to just stay away from this stock.