Textainer posts loss for Q4 2016

On a bright note, Philip K. Brewer, the president and chief executive officer of Textainer, said the container lessor is pleased with the progress it has made in recovering equipment from Hanjin, which was a major customer.    Textainer Group Holdings, one of the largest container lessors, reported a loss attributable to common shareholders of $346,000 for the fourth quarter of 2016 compared with a profit of $21.7 million for the fourth quarter of 2015.
   Revenues for the quarter totaled $120.1 million, down from the $129.7 million for the fourth quarter of 2015.
   For the full year of 2016, Textainer recorded a $50.7 million loss on revenues of $498.2 million, compared with a 2015 profit of $108.4 million on revenues of $544.3 million.
   Despite the loss, the company said the outlook for the container leasing industry is becoming brighter.
   “Our fourth quarter results improved significantly compared to the prior quarter, primarily due to improved market conditions and the prior quarter’s results being significantly impacted by Hanjin,” Textainer President and CEO Philip K. Brewer said.
   “During 2016, we invested $480 million to purchase 286,000 TEU of new and used containers and our utilization remained high at 94.5 percent,” Brewer said.
   “We are pleased with our progress recovering containers from Hanjin, who had been one of our major customers that filed for bankruptcy in August 2016,” Brewer said. “To date, we have recovered or are in the process of recovering 80 percent of the containers leased to Hanjin. We are also actively negotiating the release of another 13 percent of our containers, although we do not know whether all negotiations will result in successful recoveries. The remaining 7 percent of containers are being recovered in small batches. At this time, we expect to recover around 90 percent of our containers. We have $80 million of insurance, which we expect will substantially cover unrecovered containers, lost revenue and recovery and repair costs.”
   Brewer also said that Textainer’s results “were negatively affected by ongoing container impairments of $12.9 million for the quarter and $66.5 million for the full year due to low used container prices. These impairments prompted our decision to reduce residual values for certain equipment types, effective July 1, 2016. Subsequently, used container prices increased significantly, causing the level of impairments to decline. Impairments for containers held for disposal decreased 22 percent from an average of $5.5 million per month during the third quarter of 2016 to $4.3 million per month during the fourth quarter of 2016.”
   Textainer said that the price of new containers is rising and is now about $850 (or 70 percent) per cost equivalent unit (CEU) higher than they were at the low point last year.
   According to Textainer, “A CEU is a unit of measurement based on the approximate cost of a container relative to the cost of a standard 20-foot dry freight container, so the cost of a standard 20-foot dry freight container is one CEU; the cost of a 40-foot dry freight container is 1.6 CEU; the cost of a 40-foot high cube dry freight container (9-foot 6 inches high) is 1.7 CEU; and the cost of a 40-foot high cube refrigerated container is 8.0 CEU.”
   “Used container prices have increased 15 percent to 25 percent since September. More importantly, rental rates and margins on new and depot container lease-outs have more than doubled to levels not seen for several years,” Brewer said. After adjusting for Hanjin recoveries, he said the ratio of containers being leased out for each container turned was about 1.8 to 1 in the fourth quarter.
   “These are among the many positive signs we are currently seeing,” Brewer said.
   Wells Fargo Industry Analyst Michael Webber said Textainer “continued to recognize impairments on its container inventory scheduled for disposal, following its revised residual value policy” in the third quarter of 2016 by recognizing $12.9 million of impairments in the fourth quarter.
   “That said, we believe rising prices for used containers should gradually ease those impairments going forward,” Webber said.
   He said new container prices are continuing to firm and are currently at $2,000 per CEU, while used container prices have also risen 15-25 percent over the past six months.
   Webber also said asset prices are expected to continue going forward, with new box prices likely gaining a $100-$150 per CEU from a seasonal boost. He also noted that a requirement that container manufacturers use “waterborne paint” instead of solvent-based coatings is scheduled for early in the second quarter of this year.