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Seaspan Corporation Earnings Float Higher As Its Fleet Continues to Grow

By Matthew DiLallo - Apr 26, 2016 at 8:14AM

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The containership company continues to use unique sources to raise capital to fund its growing fleet.

Image source: Flickr user Aah-Yeah. 

With the bulk of its fleet signed to long-term contracts, Seaspan (ATCO -1.49%) has relatively predictable revenue and cash flow. So when it adds a new vessel to its fleet, that addition pushes its revenue and earnings higher. That's exactly what happened during the first quarter, with both rising after the company made another new addition the fleet.

Seaspan Corporation results: The raw numbers


Q1 2016 Actuals

Q1 2015 Actuals

Growth (YOY)


$215.5 million

$188.5 million


Cash available for distribution

$100.5 million

$93.9 million


Normalized EPS




Data source: Seaspan Corporation.

What happened with Seaspan Corporation this quarter? 
Fleet additions continue to drive Seaspan:

  • Seaspan added one new vessel to its operating fleet during the quarter, bringing its fleet up to 86. That vessel, plus the seven others it added to since the first quarter of last year, were the primary drivers behind the company's revenue increase.
  • The benefit from those new additions was somewhat offset by Seaspan's vessel utilization, which fell to 97.2% during the quarter, down from 98.9% in the year-ago quarter. That lower utilization was primarily due a more than 100-day increase in unscheduled off-hire because of vessels that were off charter.
  • Ship operating expenses increased by 6.8% to $47.6 million because of the increase in the number of ships in its fleet. Meanwhile, general and administrative expenses increased 14.6% because of higher professional fees. However, both grew slower than revenue, which heledp drive stronger earnings growth.
  • On an absolute basis, normalized net earnings were up 19.9% to $46 million. Meanwhile, on a per-share basis, normalized earnings jumped 32% to $0.33 per share. That faster per-share growth is due in part to the company's lower share count, with Seaspan buying back more than half a million shares during the quarter.

What management had to say 
CEO Gerry Wang, commenting on the company's results, said:

During the first quarter, we generated strong operational and financial results, as we further implemented our stable and stress-tested business model. Our success in increasing our first quarter revenue and cash flow is directly related to our growing high-quality fleet and sizable contracted revenue stream. We continued to grow our fleet during the first quarter, taking delivery of our ninth 10000 TEU SAVER containership, which commenced an eight-year, fixed-rate contract with MOL.

The reason Seapan's business model has proved to be so resilient is that its fleet is backed by $6 billion in contracted revenue, with an average of six years remaining its charters. Further, only 2% to 3% of 2016 revenue is facing recharter risk this year, which is a big benefit right now given the currently challenging market conditions.

In fact, according to peer Costamare (NYSE: CMRE), "Charter rates and asset values are at historically low levels as a result of weak demand." That's leading to weaker recharter rates, which is a bigger problem for Costamare, given that it has a number of vessels potentially going off contract this year. But times of challenge also bring opportunities, with Costamare noting that it "believe[s] that today's environment provides attractive opportunities and the potential to increase our shareholders' returns."

Looking forward 
Seaspan, likewise, is keeping an eye out for opportunities that arise from the currently challenging environment, with CEO Gary Wang noting, "As we progress through 2016, we expect to remain well positioned to draw upon our predictable cash flows to provide shareholders with a stable dividend, while preserving our financial strength for capitalizing on attractive growth opportunities."

While the company's decision to halt dividend growth isn't what income investors like to see, it is a decision that could really pay off over the long term if that cash is used to acquire attractive assets at historically low valuations.

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