Ardmore Shipping Corp. — FY 2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021; filed March 11, 2022. This is an audited annual report, not a standalone fourth-quarter report. Financial statements use U.S. GAAP. Ardmore operates product and chemical tankers worldwide; at year-end it owned 25 vessels with about 1.12 million dwt.
Key financial and operating metrics
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Revenue | $192.5 million | $220.1 million |
| Net loss | $36.8 million | $6.0 million |
| Net loss attributable to common shareholders | $38.1 million; $1.12 per share | $6.0 million; $0.18 per share |
| Cash from operating activities | Used $2.9 million | Provided $46.1 million |
| Cash from investing activities | Provided $1.6 million | Used $21.0 million |
| Cash from financing activities | Used $1.7 million | Used $18.5 million |
| Cash and cash equivalents at year-end | $55.4 million | $58.4 million |
| Available liquidity, including undrawn revolver capacity | $67.0 million | — |
| Average fleet TCE rate | $11,216/day | $15,355/day |
| Debt principal outstanding | $147.0 million | $213.9 million |
| Finance lease obligations, net of interest and deferred fees | $226.5 million | $197.7 million |
Revenue fell 13%, while the average TCE rate declined about 27%, primarily reflecting weaker spot-market rates. Spot-charter revenue was $167.5 million and time-charter revenue was $24.3 million; Ardmore had four vessels on long-term time charters at year-end, compared with none at year-end 2020. Voyage expenses rose to $88.6 million, including a $14.4 million increase attributed to bunker prices. Vessel operating expenses declined to $60.8 million, or $6,426 per fleet day versus $6,509 in 2020. Interest and finance costs decreased to $16.8 million from $18.2 million.
At December 31, 2021, total assets were $724.5 million and total liabilities were $395.5 million. The company reported $40 million liquidation preference of Series A preferred stock, carrying an 8.5% cumulative dividend. No common dividends were paid in 2021 or 2020. The filing reports compliance with financing covenants at year-end; the minimum required cash balance was $18.8 million.
Material changes and notable items
- Net loss widened to $36.8 million from $6.0 million. Operating cash flow moved from a $46.1 million inflow to a $2.9 million outflow, reflecting the higher operating loss and working-capital outflows.
- Spot revenue declined by $38.9 million, reflecting fewer spot revenue days and lower spot rates; increased time-charter revenue partly offset the decline.
- Debt principal fell during the year, while finance lease obligations rose. The company completed a $49 million sale-leaseback financing for two vessels and reported $38.0 million net proceeds from preferred stock issuance.
- Ardmore invested in hydrogen-technology developer Element 1 Corp. and formed the e1 Marine joint venture in 2021. Investments and related transaction costs totaled approximately $10.5 million; the company recorded a $0.3 million equity-method loss.
- No vessel impairment was recorded. Management estimated the aggregate market value of owned vessels exceeded carrying value by approximately $11.4 million at year-end, compared with carrying value exceeding estimated market value by approximately $60.7 million at year-end 2020. The auditor identified projected future charter rates in impairment testing as a critical audit matter.
- After year-end, Ardmore gave notice on February 16, 2022 to exercise purchase options for the Ardmore Sealeader and Ardmore Sealifter, intending to acquire them on May 30, 2022.
Outlook, risks and contingencies
Management expected near-term liquidity, together with anticipated operating cash flow, to cover needs for at least the year following filing. It estimated 2022 requirements including $32.2 million of finance lease obligations, $15.8 million of scheduled debt repayments, $6.0 million of debt and lease service costs, $3.3 million of preferred dividends, $2.7 million of committed capital expenditures and $2.0 million of drydocking costs. These are estimates, not guaranteed outcomes. Management anticipated a tanker-market recovery as product demand and longer-haul trade improve, but described the timing and strength of recovery as uncertain.
- Results are highly exposed to volatile spot rates: 25 vessels traded directly in the spot market as of February 15, 2022. Lower rates, weaker oil-product demand, oversupply, bunker-price changes or vessel downtime could pressure earnings, cash flow and asset values.
- COVID-19 effects remained uncertain. The filing also discusses Russia’s February 2022 invasion of Ukraine and sanctions, noting possible disruption to oil trade, demand and financial markets.
- Environmental and decarbonization rules may require capital spending or affect vessel utilization and values. EEXI and CII requirements were scheduled to take effect from 2023; ballast-water system installations were also planned.
- Variable-rate debt and leases create interest-rate exposure. The company had $259.2 million notional of interest-rate swaps, with hedges expiring in 2023, and noted the transition away from LIBOR as a risk.
- Preferred-stock dividends are cumulative and have priority over common dividends; financing restrictions, cash needs and board capital-allocation decisions may constrain future common dividends.
- The company disclosed no legal proceedings expected to have a material effect. Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Important facts for investors to verify
- Review subsequent quarterly results for spot rates, TCE, operating cash flow and liquidity against the annual results and management’s recovery expectations.
- Confirm the timing, cost and financing of the planned vessel purchases, scheduled debt repayments, lease obligations, drydockings and ballast-water installations.
- Track covenant headroom, minimum-cash requirements, variable-rate exposure and the transition arrangements for LIBOR-based financing.
- Assess whether the preferred-stock dividend burden and other capital priorities permit common dividends or repurchases; no common dividend was paid in 2021.
- Monitor charterer concentration, vessel market values and impairment assumptions, including the future charter rates highlighted by the auditor.
- Evaluate the funding, commercial progress and potential returns of Element 1 Corp. and e1 Marine, as well as the effects of evolving emissions rules and geopolitical developments.