Ardmore Shipping Corp. reports financial results for the quarter ended September 30, 2017.
- Summary numbers: Revenues of USD 48.65 million, Net Earnings of USD -4.64 million.
- Gross margins narrowed from 16.08% to 9.48% compared to the same period last year, operating (EBITDA) margins now 20.71% from 26.85%.
- Change in operating cash flow of -19.03% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
- Earnings growth due to contribution of one-time items.
The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:
|Relevant Numbers (Quarterly)|
|Revenue Growth (%YOY)||28.14||25.51||14.08||3.37||-19.53|
|Earnings Growth (%YOY)||3.34||-133.74||-132.16||-168.73||-135.29|
|Net Margin (%)||-9.54||-3.72||-4.36||-8.54||-12.64|
|Return on Equity (%)||-1.17||-0.46||-0.54||-0.91||-1.17|
|Return on Assets (%)||-2.14||-0.85||-0.99||-1.67||-2.28|
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Market Share Versus Profits
Compared to the same period last year, ASC-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if ASC-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -2.40% and earnings by -150.23% compared to the previous period.
Earnings Growth Analysis
The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 9.48% to 16.08% for the same period last year, while operating margins (EBITDA margins) went from 20.71% to 26.85% over the same time frame.
Gross Margin Trend
Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.
ASC-US’s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days are now 68.58 days from 158.21 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.
Cash Versus Earnings – Sustainable Performance?
It is important to examine a companyï¿½s cash versus earnings numbers to gauge whether its performance is sustainable.
ASC-US’s year-on-year change in operating cash flow of -19.03% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.
The company’s operating (EBIT) margins contracted from 5.49% to 1.37%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from -12.59% to -9.50%.
Access our Ratings and Scores for Ardmore Shipping Corp.
Ardmore Shipping Corp. operates as a shipping company. It provides seaborne transportation of petroleum products and chemicals to oil majors, national oil companies and traders, chemical traders and companies, with its fuel-efficient fleet of tankers. The company was founded by Anthony Gurnee on May 14, 2013 and is headquartered in Hamilton, Bermuda.
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