Triton reports $45m profit as container demand jumps
Bermudian-based container company Triton International Limited made a profit of $45.9 million, or 67 cents per diluted share, in the third quarter.
That included a $24.3 million write-off of unamortised debt and other costs related to the prepayment of ABS notes and other facilities, and $8.6 million non-cash tax expense related to an intra-entity transfer of assets.
Adjusted net income was $78.1 million, or $1.14 per diluted share, an increase of 32.6 per cent from the second quarter.
The company is the world’s largest lessor of shipping containers. It said trade volumes and container demand jumped in the third quarter. Utilisation increased 2.6 per cent during the quarter to reach 97.4 per cent as of September 30.
Triton issued $2.3 billion of ABS notes during the third quarter at an average interest rate of 2.2 per cent. Most of the proceeds were used to prepay $1.8 billion of higher cost notes, which is expected to reduce interest expense by more than $25 million over the next year.
The board of directors announced a nearly 10 per cent increase in its quarterly common share dividend to 57 cents per share payable on December 23, to shareholders of record as of December 10.
Brian Sondey, chief executive officer of Triton, said: "Triton took advantage of a strong upward inflection in container demand during the third quarter to drive a significant increase in our performance.
"Global containerised trade volumes rebounded sharply in the third quarter as lockdowns in Europe and the United States eased, and container export volumes from key ports in China currently exceed pre-pandemic levels. The pace and magnitude of the trade recovery have generally exceeded our customers’ expectations, and virtually all of the major shipping lines have needed to add significant container capacity.
“We leveraged our market leading container supply capability to provide rapid and sizeable container solutions for our customers, and we generated a record number of container bookings in the third quarter. Our team demonstrated remarkable agility in quickly responding to this surge in activity, and we are very proud to be playing an important role helping our customers keep the global supply chain functioning at this critical time.”
The company has purchased approximately $800 million of new and sale-leaseback containers for delivery this year. It has accelerated container purchases during the third quarter, but said its ability to quickly order large numbers of containers was constrained by tight container manufacturing capacity. Triton has also ordered approximately $350 million of containers for delivery in the first few months of 2021.
Looking ahead, Mr Sondey said: "Container demand remains exceptionally strong as we start the fourth quarter. Our customers expect trade volumes to remain solid despite the end of the traditional summer peak season for dry containers. Customers are projecting meaningful container shortages into at least early next year, and they continue to rely heavily on leasing.
“We will benefit from a full quarter of revenue on the large number of containers picked up in the third quarter, and new containers produced in the fourth quarter should be picked up quickly.”
He added: “Looking forward to next year, the ongoing Covid-19 pandemic continues to create a high level of macro uncertainty for the global economy and trade. However, the vast majority of the containers leased-out over the last few months have been placed on multiyear leases, and the very low inventory of new and used containers available in the market should further support our utilisation. In addition, the interest expense reduction from our ABS refinancing will benefit US into 2021 and beyond. As a result, we expect to achieve strong profitability and an attractive return on equity in 2021."
- Disclosure: the author owns shares in Triton International