ASC Ardmore Shipping Corporation

SIGNATURES

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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ARDMORE SHIPPING CORPORATION

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and accompanying notes contained in this Report on Form 6-K and with our audited consolidated financial statements contained in “Item 18. Financial Statements” and “Item 5. Operating and Financial Review and Prospects” of our Annual Report on Form 20-F for the year ended December 31, 2020. The unaudited interim condensed consolidated financial statements included in this report have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements (“U.S. GAAP”) and are presented in U.S. dollars as at June 30, 2021 and for the three and six months ended June 30, 2021 and 2020. Unless the context otherwise requires, the terms “Ardmore,” the “Company”, “we,” “our” and “us” refer to Ardmore Shipping Corporation (NYSE: ASC) and its consolidated subsidiaries.

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GENERAL

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Ardmore owns and operates a fleet of Medium Range (“MR”) product and chemical tankers ranging from 25,000 to 50,000 deadweight tonnes (“Dwt”). We provide seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies, with our modern, fuel-efficient fleet of mid-size tankers. As at June 30, 2021, we had in operation 27 vessels (including two chartered-in vessels), including 21 MR tankers ranging from 45,000 Dwt to 49,999 Dwt (15 Eco-Design and six Eco-Mod) and six Eco-Design IMO 2 product / chemical tankers ranging from 25,000 Dwt to 37,800 Dwt.

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We are strategically focused on modern, fuel-efficient, mid-size product and chemical tankers. We actively pursue opportunities to exploit the overlap we believe exists between the clean petroleum product (“CPP”) and chemical sectors in order to enhance earnings, and also seek to engage in more complex CPP trades, such as multi-grade and multi-port loading and discharging operations, where our knowledge of chemical operations is beneficial to our CPP customers.

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Our fuel-efficient operations are designed to enhance our operating performance and provide value-added service to our customers. We believe we are at the forefront of fuel efficiency and emissions reduction trends and are well positioned to capitalize on these developments with our fleet of Eco-design and Eco-mod vessels. Our acquisition strategy includes to continue to build our fleet with Eco-design newbuildings or Eco-design second-hand vessels and with modern second-hand vessels that can be upgraded to Eco-mod.

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We believe that the global energy transition will have a profound impact on the shipping industry, including the product and chemical tanker segments. While this transition will unfold over years, the impact is already being felt through anticipated Energy Efficiency Existing Ship Index and Carbon Intensity Indicator regulations and constraints on newbuilding ordering activity. We view energy transition as less of a compliance challenge and more of an opportunity, which we have set out in our Energy Transition Plan (“ETP”), which is posted on our website.

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We are an integrated shipping company. The majority of our fleet is technically managed by a combination of Ardmore Shipping Services (Ireland) Limited and Anglo Ardmore Ship Management Limited, a joint venture entity that is 50% owned by us, and we also retain a third-party technical manager for some of our vessels. We have a resolute focus on both high-quality service and efficient operations, and we believe that our corporate overhead and operating expenses are among the lowest of our peers.

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We are commercially independent, as we have no blanket employment arrangements with third-party or related-party commercial managers. Through our in-house chartering and commercial team, we market our services directly to a broad range of customers, including oil majors, national oil companies, oil and chemical traders, chemical companies, and pooling service providers. We monitor the tanker markets to understand how to best utilize our vessels and may change our chartering strategy to take advantage of changing market conditions.

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As of June 30, 2021, our fleet consisted of the following 25 owned vessels:

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SIGNIFICANT DEVELOPMENTS

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Element 1 Strategic Investments and Maritime Partners, LLC Preferred Stock Financing

On June 17, 2021, we completed our previously-announced strategic investment in Element 1 Corp.'s methanol-to-hydrogen technology through the establishment of the e1 Marine joint venture with affiliates of Element 1 Corp and Maritime Partners, LLC each owning 33.33% of e1 Marine and our purchase of a 10% equity stake, on a fully diluted basis, in Element 1 Corp.  We paid an aggregate of $5.0 million in cash and $5.3 million through the issuance of ASC common shares for our equity stake in Element 1 Corp. and our equity interest in e1 Marine. In a related transaction, the affiliate of Maritime Partners, LLC also invested $25.0 million in our newly created Series A 8.5% Cumulative Redeemable Perpetual Preferred Shares. These represented the initial transactions under our Energy Transition Plan.

Refinancing of Two Vessels

On June 25, 2021, we completed financing transactions for two vessels, Ardmore Seawolf and Ardmore Seahawk, which were refinanced with an existing lender.  The net cash proceeds to us from these transactions, after prepayment of existing debt, were $15.5 million in the aggregate.

COVID-19

In response to the COVID-19 pandemic, many countries, ports and organizations, including those where we conduct a large part of our operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions. Such measures have caused severe trade disruptions. In addition, the pandemic has resulted and may continue to result in a significant decline in global demand for refined oil products.

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As our business is the transportation of refined oil products on behalf of oil majors, oil traders and other customers, any significant decrease in demand for the cargo Ardmore transports could adversely affect demand for our vessels and services. The extent to which the pandemic may impact our results of operations and financial condition, including possible impairments, will depend on future developments, which are highly uncertain and cannot be predicted, including, among others, new information which may emerge concerning the severity of the virus and of its variants and the level of the effectiveness and delivery of vaccines and other actions to contain or treat its impact. Accordingly, an estimate of the impact on us cannot be made at this time.

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RESULTS OF OPERATIONS

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Factors You Should Consider When Evaluating Our Results

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There are a number of factors that should be considered when evaluating our historical financial performance and assessing our future prospects and we use a variety of financial and operational terms and concepts when analyzing our results of operations. Please read “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2020 for additional information.

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In accordance with U.S. GAAP, we report gross revenues in our condensed statements of operations and report voyage expenses separately. Ship-owners base economic decisions regarding the deployment of their vessels upon actual and anticipated time charter equivalent, or TCE rates (which represent net revenues divided by revenue days) and industry analysts typically measure rates in terms of TCE rates. This is because under time charters the customer typically pays the voyage expenses, while under voyage charters, also known as spot market charters, the shipowner usually pays the voyage expenses. Accordingly, the discussion of revenue below focuses on TCE rates where applicable. Net revenues, a non-U.S. GAAP financial measure, represents revenues less voyage expenses. Voyage expenses are all expenses related to a particular voyage, which include, among other things, bunkers and port/canal costs. Net revenue utilized to calculate TCE is determined on a discharge to discharge basis, which is different from how we record revenue under U.S. GAAP. Under discharge to discharge, revenue is recognized beginning from the discharge of cargo from the prior voyage to the anticipated discharge of cargo in the current voyage, and voyage expenses are recognized as incurred.

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Statement of Operations for the three months ended June 30, 2021 and June 30, 2020

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The following table presents our operating results for the three months ended June 30, 2021 and June 30, 2020.

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Revenue. Revenue for the three months ended June 30, 2021, was $47.3 million, a decrease of $20.6 million from $67.9 million for the three months ended June 30, 2020.

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Our average number of operating vessels increased to 26.1 for the three months ended June 30, 2021, from 25 for the three months ended June 30, 2020.  

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We had four product tankers employed under time charters as at  June 30, 2021 compared with none as at June 30, 2020. Revenue days derived from time charters were 361 for the three months ended June 30, 2021, as compared to none for the three months ended June 30, 2020. The increase in revenue days for time-chartered vessels resulted in an increase in revenue of $5.1 million.

We had 2,004 spot revenue days for the three months ended June 30, 2021, as compared to 2,269 for the three months ended June 30, 2020. We had 23 and 25 vessels employed directly in the spot market as at June 30, 2021 and 2020, respectively. The decrease in spot revenue days resulted in a decrease in revenue of $7.9 million, while changes in spot rates resulted in a decrease in revenue of $18 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Voyage Expenses. Voyage expenses were $20.5 million for the three months ended June 30, 2021, a decrease of $0.4 million from $20.9 million for the three months ended June 30, 2020. Voyage expenses decreased primarily due to the decrease in spot days for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020.

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TCE Rate. The average TCE rate for our fleet was $11,796 per day for the three months ended June 30, 2021, a decrease of $8,276 per day from $20,072 per day for the three months ended June 30, 2020. The decrease in average TCE rate was the result of lower spot rates for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. TCE rates represent net revenues (or revenue less voyage expenses) divided by revenue days, as further defined above.

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Vessel Operating Expenses. Vessel operating expenses were $15.1 million for the three months ended June 30, 2021, an increase of $0.8 million from $14.3 million for the three months ended June 30, 2020. This increase is due to the timing of vessel operating expenses between quarters. Vessel operating expenses, by their nature, are prone to fluctuations between periods. Average fleet operating expenses per day, including technical management fees, were $6,398 per vessel for the three months ended June 30, 2021, as compared to $6,325 per vessel for the three months ended June 30, 2020.

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Charter Hire Costs. Charter hire costs were $1.4 million for the three months ended June 30, 2021. There were no charter hire costs incurred in the three months ended June 30, 2020. We chartered-in one vessel in September 2020 and another in June 2021.

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Depreciation. Depreciation expense for the three months ended June 30, 2021, was $7.9 million, consistent with $7.9 million for the three months ended June 30, 2020.

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Amortization of Deferred Drydock Expenditures. Amortization of deferred drydock expenditures for the three months ended June 30, 2021 was $1.3 million, a decrease of $0.2 million from $1.5 million for the three months ended June 30, 2020. The deferred costs of drydockings for a given vessel are amortized on a straight-line basis to the next scheduled drydocking of the vessel.

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General and Administrative Expenses: Corporate. Corporate-related general and administrative expenses for the three months ended June 30, 2021 were $4.3 million, an increase of $0.3 million from $4.0 million for the three months ended June 30, 2020.

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General and Administrative Expenses: Commercial and Chartering. Commercial and chartering expenses are the expenses attributable to our chartering and commercial operations departments in connection with our spot trading activities. Commercial and chartering expenses for the three months ended June 30, 2021 were $0.7 million, a decrease of $0.2 million from $0.9 million for the three months ended June 30, 2020.

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Unrealized Losses on Derivatives. Unrealized losses on derivatives for the three months ended June 30, 2021 was $0.0 million compared to $0.1 million for the three months ended June 30, 2020. The loss for the three months ended June 30, 2021 relates to derivatives entered into in May 2020 that are not designated as hedging instruments.

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Interest Expense and Finance Costs. Interest expense and finance costs include loan interest, finance lease interest, and amortization of deferred finance fees. Interest expense and finance costs for the three months ended June 30, 2021 were $4.3 million, a decrease of $0.5 million from $4.8 million for the three months ended June 30, 2020. Cash interest expense decreased by $1.2 million to $3.2 million for the three months ended June 30, 2021, from $4.4 million for the three months ended June 30, 2020, primarily due to a decreased average LIBOR during the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, as well as our entering into three-year floating-to-fixed interest rate swap agreements during the second quarter of 2020 with an average fixed interest rate of 0.32%. Amortization of deferred finance fees for the three months ended June 30, 2021 was $1.0 million, an increase of $0.6 million from $0.4 million for the three months ended June 30, 2020.

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Statement of Operations for the six months ended June 30, 2021 and June 30, 2020

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The following table presents our operating results for the six months ended June 30, 2021 and June 30, 2020.

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Revenue. Revenue for the six months ended June 30, 2021 was $92.8 million, a decrease of $40.3 million from $133.1 million for the six months ended June 30, 2020.

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Our average number of operating vessels increased to 26.1 for the six months ended June 30, 2021, from 25.0 for the six months ended June 30, 2020.

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We had four product tankers employed under time charters as at June 30, 2021 compared with none as at June 30, 2020. Revenue days derived from time charters were 549 for the six months ended June 30, 2021, as compared to none for the six months ended June 30, 2020. The increase in revenue days for time-chartered vessels resulted in an increase in revenue of $7.3 million.

We had 4,102 spot revenue days for the six months ended June 30, 2021, as compared to 4,449 for the six months ended June 30, 2020. We had 23 and 25 vessels employed directly in the spot market as at June 30, 2021 and June 30, 2020, respectively. The decrease in spot revenue days resulted in a decrease in revenue of $10.4 million, while changes in spot rates resulted in a decrease in revenue of $37.4 million for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

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Voyage Expenses. Voyage expenses were $40.9 million for the six months ended June 30, 2021, a decrease of $3.6 million from $44.5 million for the six months ended June 30, 2020. Voyage expenses decreased primarily due to the decrease in spot days for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020.

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TCE Rate. The average TCE rate for our fleet was $11,576 per day for the six months ended June 30, 2021, a decrease of $8,162 per day from $19,738 per day for the six months ended June 30, 2020. The decrease in average TCE rate was the result of lower spot rates for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. TCE rates represent net revenues (or revenue less voyage expenses) divided by revenue days, as further defined above.

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Vessel Operating Expenses. Vessel operating expenses were $29.6 million for the six months ended June 30, 2021, a decrease of $0.4 million from $30.0 million for the six months ended June 30, 2020. This decrease is due to the timing of vessel operating expenses between quarters. Vessel operating expenses, by their nature, are prone to fluctuations between periods. Average fleet operating expenses per day, including technical management fees, were $6,369 per vessel for the six months ended June 30, 2021, as compared to $6,405 per vessel for the six months ended June 30, 2020.

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Charter Hire Costs. Charter hire costs were $2.6 million for the six months ended June 30, 2021. There were no charter hire costs incurred in the six months ended June 30, 2020. We chartered-in one vessel in September 2020 and another vessel in June 2021.

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Depreciation. Depreciation expense for the six months ended June 30, 2021 was $15.7 million, consistent with $15.8 million for the six months ended June 30, 2020.

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Amortization of Deferred Drydock Expenditures. Amortization of deferred drydock expenditures for the six months ended June 30, 2021 was $2.8 million, consistent with $2.8 million for the six months ended June 30, 2020. The deferred costs of drydockings for a given vessel are amortized on a straight-line basis to the next scheduled drydocking of the vessel.

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General and Administrative Expenses: Corporate. Corporate-related general and administrative expenses for the six months ended June 30, 2021 were $8.4 million, an increase of $0.5 million from $8.0 million for the six months ended June 30, 2020.

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General and Administrative Expenses: Commercial and Chartering. Commercial and chartering expenses are the expenses attributable to our chartering and commercial operations departments in connection with our spot trading activities. Commercial and chartering expenses for the six months ended June 30, 2021 were $1.4 million, a decrease of $0.3 million from $1.7 million for the six months ended June 30, 2020.

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Unrealized gains / (losses) on derivatives. Unrealized gains on derivatives for the six months ended June 30, 2021 was $0.1 million compared to unrealized losses of $0.1 million for the six months ended June 30, 2020. The gains for the six months ended June 30, 2021 relates to derivatives entered into in May 2020 that are not designated as hedging instruments.

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Interest Expense and Finance Costs. Interest expense and finance costs include loan interest, finance lease interest, and amortization of deferred finance fees. Interest expense and finance costs for the six months ended June 30, 2021 were $8.1 million, a decrease of $2.1 million from $10.2 million for the six months ended June 30, 2020. Cash interest expense decreased by $2.8 million to $6.5 million for the six months ended June 30, 2021, from $9.3 million for the six months ended June 30, 2020, primarily due to a decreased average LIBOR during the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, as well as our entering into three-year floating-to-fixed interest rate swap agreements during the second quarter of 2020 with an average fixed interest rate of 0.32%. Amortization of deferred finance fees for the six months ended June 30, 2021 was $1.4 million, an increase of $0.5 million from $0.9 million for the six months ended June 30, 2020.

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LIQUIDITY AND CAPITAL RESOURCES

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Our primary sources of liquidity are cash and cash equivalents, cash flows provided by our operations, our undrawn credit facilities and capital raised through debt and equity financing transactions. As at June 30, 2021, the Company had $77.0 million in liquidity available with cash and cash equivalents of $55.4 million (December 31, 2020: $58.4 million) and amounts available and undrawn under its revolving credit facilities of $21.6 million (December 31, 2020: $0.0 million). We believe that our working capital, together with expected cash flows from operations, will be sufficient for our present requirements.

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Our short-term liquidity requirements include the payment of operating expenses (including voyage expenses and bunkers from spot chartering our vessels), drydocking expenditures, debt servicing costs, lease payments, dividends on our shares of preferred stock, any dividends on our shares of common stock, scheduled repayments of long-term debt, as well as funding our other working capital requirements. Our short-term and spot charters contribute to the volatility of our net operating cash flow, and thus our ability to generate sufficient cash flows to meet our short-term liquidity needs. Historically, the tanker industry has been cyclical, experiencing volatility in profitability and asset values resulting from changes in the supply of, and demand for, vessel capacity. In addition, tanker spot markets historically have exhibited seasonal variations in charter rates. Tanker spot markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere and unpredictable weather patterns that tend to disrupt vessel scheduling. Spot charters preserve flexibility to take advantage of increasing rate environments, but also expose the ship-owner to decreasing rate environments.

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Our long-term capital needs are primarily for capital expenditures and debt repayment and finance lease payments. Generally, we expect that our long-term sources of funds will be cash balances, long-term bank borrowings, finance leases and other debt or equity financings. We expect that we will rely upon internal and external financing sources, including, cash balances, bank borrowings, lease financings and the issuance of debt and equity securities, to fund acquisitions and expansion capital expenditures.

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Our credit facilities and finance leases are described in Notes 3 (“Debt”) and 4 (“Leases”), respectively, to our interim condensed consolidated financial statements included in this Report on Form 6-K. Our financing facilities contain covenants and other restrictions we believe are typical of debt financing collateralized by vessels, including those that restrict the relevant subsidiaries from incurring or guaranteeing additional indebtedness, granting certain liens, and selling, transferring, assigning or conveying assets.  The majority of our financing facilities do not impose a restriction on dividends, distributions, or returns of capital unless an event of default has occurred, is continuing or will result from such payment. Our financing facilities require us to maintain various financial covenants. Should we not meet these financial covenants or other covenants, the lenders may declare our obligations under the applicable agreements immediately due and payable, and terminate any further loan commitments, which would significantly affect our short-term liquidity requirements. As at June 30, 2021, we were in compliance with all covenants relating to our financing facilities.

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Cash provided by operating activities

For the three months ended June 30, 2021, net cash used in operating activities was $1.4 million. Net loss adjusted for non-cash items resulted in an inflow of $2.6 million. Changes in operating assets and liabilities resulted in an outflow of $0.5 million and drydock payments were $0.7 million. For the three months ended June 30, 2021, net cash provided by operating activities was $19.2 million. Net income adjusted for non-cash items resulted in an inflow of $24.5 million. Changes in operating assets and liabilities resulted in an outflow of $3.9 million and drydock payments were $1.4 million.

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For the six months ended June 30, 2021, net cash used in operating activities was $0.3 million. Net loss adjusted for non-cash items resulted in an inflow of $4.2 million. Changes in operating assets and liabilities resulted in an outflow of $0.5 million and drydock payments were $3.3 million. For the six months ended June 30, 2020, net cash provided by operating activities was $31.1 million. Net income adjusted for non-cash items resulted in an inflow of $41.3 million. Changes in operating assets and liabilities resulted in an outflow of $6.6 million and drydock payments were $3.6 million.

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Cash (used in) / provided by investing activities

For the three months ended June 30, 2021, net cash used in investing activities was $5.6 million, with payments made for the Element 1 investments and related transaction costs of $5.0 million as well as payments in relation to vessel equipment, advances for ballast water treatment systems and other non-current assets. For the three months ended June 30, 2020, net cash used in investing activities was $0.7 million consisting of payments in relation to vessel equipment, ballast water treatment systems and other non-current assets.

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For the six months ended June 30, 2021, net cash provided by investing activities was $3.6 million, with proceeds from the sale of the Ardmore Seamariner in January 2021 of $9.9 million partially offset by payments made for the Element 1 investments and related transaction costs of $5.0 million as well as payments in relation to vessel equipment, advances for ballast water treatment systems and other non-current assets. For the six months ended June 30, 2020, net cash used in investing activities was $1.3 million consisting of payments in relation to vessel equipment, ballast water treatment systems and other non-current assets.
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Cash provided by / (used in) financing activities

For the three months ended June 30, 2021, the net cash provided by financing activities was $9.4 million. Net proceeds from the issue of preferred stock were $23.0 million and proceeds from finance lease arrangements were $49.0 million. Repayments of debt amounted to $56.9 million and total principal repayments of finance lease arrangements were $4.8 million. For the three months ended June 30, 2020, the net cash used in financing activities was $10.1 million. Repayments of debt amounted to $5.4 million and total principal repayments of finance lease arrangements were $4.7 million.

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For the six months ended June 30, 2021, the net cash used in financing activities was $6.9 million. Repayments of debt amounted to $68.5 million and total principal repayments of finance lease arrangements were $9.5 million. Net proceeds from the issue of preferred stock were $23.0 million and proceeds from finance lease arrangements were $49.0 million. For the six months ended June 30, 2020, the net cash used in financing activities was $8.6 million. Proceeds from debt were $10.2 million. Repayments of debt amounted to $7.9 million and total principal repayments of finance lease arrangements were $9.3 million. Payments of cash dividends in relation to the fourth quarter of 2019 were $1.7 million.

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(1) Includes one drydock which occurred in the three months ended March 31, 2021

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We endeavor to manage the timing of future dockings across the fleet in order to minimize the number of vessels that are drydocked at any one time. As our fleet matures and expands, our drydock expenses are likely to increase.

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Ballast Water Treatment Systems Installation

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The ballast water treatment systems (“BWTS”) installation schedule for our vessels that were in operation as of June 30, 2021 is as follows:

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We endeavor to manage the timing of future ballast water treatment system installations across the fleet in order to minimize the number of vessels that are completing ballast water treatment system installations at any one time.

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CRITICAL ACCOUNTING ESTIMATES

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We prepare our financial statements in accordance with U.S. GAAP, which require us to make estimates in the application of our accounting policies based on our best assumptions, judgments and opinions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ materially from our assumptions and estimates. Accounting estimates and assumptions that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties are discussed in “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2020. There have been no significant changes to these estimates and assumptions in the six months ended June 30, 2021.

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OFF-BALANCE SHEET ARRANGEMENTS

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We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity or capital resources.

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DISCLOSURES ABOUT MARKET RISK

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In addition to the risks set forth below, you should carefully consider the risk factors discussed in “Item 3. Key Information – D. Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2020, regarding risks which could materially affect our business, financial condition and results of operations.

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Operational Risk

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We are exposed to operating costs arising from various vessel operations. Key areas of operating risk include drydock, repair costs, insurance, piracy and fuel prices. Our risk management includes various strategies for technical management of drydock and repairs coordinated with a focus on measuring cost and quality. Our relatively young fleet helps to minimize the risk. Given the potential for accidents and other incidents that may occur in vessel operations, the fleet is insured against various types of risk. We have established a set of countermeasures in order to minimize the risk of piracy attacks during voyages, particularly through regions which the Joint War Committee or our insurers consider high risk, or which they recommend monitoring, to make the navigation safer for sea staff and to protect our assets. The price and supply of fuel is unpredictable and can fluctuate from time to time. We periodically consider and monitor the need for fuel hedging to manage this risk. We are also subject to operational risks relating to COVID-19 as described in the “Significant Developments” section of this report.

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Foreign Exchange Risk

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The majority of our transactions, assets and liabilities are denominated in U.S. Dollars, our functional currency. We incur certain general and operating expenses in other currencies (primarily the Euro, Singapore Dollar, and Pounds Sterling) and, as a result, there is a risk that currency fluctuations may have a negative effect on the value of our cash flows.

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Such risk may also have an adverse effect on our financial condition and results of operations. We believe these adverse effects to be immaterial and we have not entered into any derivative contracts to manage foreign exchange risk during the six months ended June 30, 2021.

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Interest Rate Risk

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We are exposed to the impact of interest rate changes primarily through borrowings that require us to make interest payments based on LIBOR. Significant increases in interest rates could adversely affect our results of operations and our ability to repay debt. We regularly monitor interest rate exposure and enter into swap arrangements to hedge exposure where it is considered economically advantageous to do so.

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We are exposed to the risk of credit loss in the event of non-performance by the counterparties to the interest rate swap agreements. In order to minimize counterparty risk, we have only entered into derivative transactions with investment grade counterparties at the time of the transactions. In addition, to the extent possible and practical, interest rate swaps are entered into with different counterparties to reduce concentration risk.

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During the three months ended June 30, 2020, we entered into floating-to-fixed interest rate swap agreements over a three-year term with multiple counterparties. In accordance with these transactions, we will pay an average fixed-rate interest amount of 0.32% and will receive floating rate interest amounts based on LIBOR. These interest rate swaps have a total notional amount of $324.1 million of which $273.3 million are designated as cash flow hedges.

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LIBOR is scheduled to be phased out and alternative reference rates for interest rates may be adopted, which could affect our interest rate risk.  For additional information, please see the risk factor entitled “There is uncertainty as to the continued use of LIBOR in the future, and the interest rates on our LIBOR-based obligations may increase in the future” Item 3.D (Key Information--Risk Factors) in our Annual Report on Form 20-F for the year ended December 31, 2020.

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Liquidity Risk

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Our principal objective in relation to liquidity is to ensure that we have access at minimum cost to sufficient liquidity to enable us to meet our obligations as they come due and to provide adequately for contingencies. Our policy is to manage our liquidity by forecasting of cash flows arising from or expense relating to spot voyage revenue, time charter revenue, pool revenue, vessel operating expenses, general and administrative overhead and servicing of debt.

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Credit Risk

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There is a concentration of credit risk with respect to our cash and cash equivalents to the extent that substantially all of the amounts are held in ABN Bank and Nordea Bank, and in short-term funds (with a credit risk rating of at least AA) managed by Blackrock State Street Global Advisors and JPMorgan Asset Management. While we believe this risk of loss is low, we intend to review and revise our policy for managing cash and cash equivalents if considered prudent to do so.

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We limit our credit risk with trade accounts receivable by performing ongoing credit evaluations of our customers’ financial condition. We generally do not require collateral for our trade accounts receivable.

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We may be exposed to a credit risk in relation to vessel employment and at times may have multiple vessels employed by one charterer. We consider and evaluate concentration of credit risk regularly and perform on-going evaluations of these charterers for credit risk, including credit concentration risk. As at June 30, 2021, our 27 vessels in operation (including two chartered-in vessel) were employed with 22 different charterers.

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Inflation

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We do not expect inflation to be a significant risk to direct expenses in the current and foreseeable economic environment.

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11

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Ardmore Shipping Corporation

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INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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F-1

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The accompanying notes are an integral part of these interim condensed consolidated financial statements.

F-2

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The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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F-3

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The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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F-4

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The accompanying notes are an integral part of these interim condensed consolidated financial statements.

F-5

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