FSL Trust's Q2 net profit drops 34.7%; no distributions due to Covid-19

WITH a weaker showing in its top line, First Ship Lease (FSL) Trust, which leases vessels to the shipping industry, posted a 34.7 per cent drop in net profit to US$1.33 million for Q2 FY2020 ended June.

The lower earnings came on the back of an 11 per cent drop in revenue US$14.51 million for the quarter. FSL Trust also recorded a US$3.27 million impairment for two chemical tankers and three specialised tankers in Q2.

The company also decided not to declare any distributions to unitholders for Q2, as it is not "in a position to predict the full depths of the global pandemic and its impact on the shipping industry", said its chairman Stathis Topouzoglou.

The firm had posted a Q1 distribution per unit (DPU) of 1.5 US cents in Q1, which was only its second consecutive distribution payment in more than seven years.

For the six months to June, FSL Trust's net profit was up 58.8 per cent to US$8 million, even as revenue dipped 7 per cent to US$32.92 million.

The bottom line was boosted by a US$2.7 million gain from the sale of two product tankers and a crude oil tanker in March, as well as a fall in voyage expenses and vessel operating expenses by 35.6 per cent and 25.2 per cent respectively.

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FSL Trust said that it is continuing to pare down its debt and improve its capital structure. In addition to scheduled debt amortisation, the firm voluntarily prepaid US$2.94 million to optimise its debt profile.

FSL Trust's net leverage stands at 0.1 times as at end-June, compared to 1.0 times a year ago. The firm has US$33.28 million in cash, against US$39.66 million outstanding under loan facilities.

Its vessel portfolio comprises 17 vessels, including 15 container ships and tankers of different sizes on the water and 2 tanker newbuildings under construction, which are expected to be delivered in late 2020 and early 2021.

FSL Trust said that the tanker markets are firm. In May 2020, the charterer of the two chemical tankers, FSL London and FSL New York, exercised its option to extend the charters by one year each.

Chief executive Roger Woods noted that the Covid-19 pandemic has posed unprecedented challenges to the shipping industry, with obstructions to crew changes and the sale and purchase market.

"Whilst we have seen a very firm tanker market in the first five months of the year, supporting FSL Trust to deliver strong results for the first half 2020, the market has corrected in June as a result of the combination of seasonality and the impact of the global pandemic on vessel demand," Mr Woods said.

He added: "Whilst we expect a rough sea ahead for the industry in the second half of the year, our strong financial position coupled with limited new tonnage entering the market, keeps us cautiously optimistic for the overall performance of the trust in 2020."

Mr Topouzoglou noted that there are zero cases of Covid-19 among the company's offices and vessels.

Shares of FSL Trust closed at S$0.082 on Tuesday, up 1.24 per cent before the results release.