Q1 2020 Earnings Call

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Ladies and gentlemen, thank you to standing by welcome to just Stealthgas stuff quota Twentytwenty conference call given the core all participants will be on the listen only mode.

If you wish to ask a question you will need to press star one on your telephone keypad.

I must advise you that the cool is being recorded today on Tuesday, the 26 of May 2020.

She and I have the video haste Michael Jolliffe. Please go ahead.

Good morning, everyone welcome to Allfast quota Twentytwenty earnings conference call and webcast.

She's Michael Jolliffe, the board chairman of Stealthgas.

With me on the coal is our Chief Executive Officer, Harry Vafias somehow find that itself is a.

And yeah salaries will later on to discuss our financial performance.

Before we commence out presentation I would like to remind you that we will be discussing forward looking statements, which reflect current views with respect to future events and financial performance.

At this stage if you could take a moment to read out disclaimer on slide two of his presentation.

Risks are further disclose it stealthgas filing with the Securities Exchange Commission.

I would also I'd like to point out that old amounts quoted unless otherwise clarified.

Implicitly slated in us dollars.

Slide three summarizes the key highlights of our first quarter Twentytwenty that we released today.

If he is widely acknowledged that the Covidien 19 patent that makes in subsequent lockdowns have disrupted economic activity and demand.

This has had a major impact on global shipping markets. Indeed, we are experiencing unprecedented times and great uncertainty as to when global do mob will be restored thus returning shipping activity to normality.

Since the beginning of the year when the cobot 19 started spreading across China into its neighbors.

Okay, it's positive momentum was significantly altered.

We can to face weaker demand pull restrictions and safety regulations that resulted in a slowdown of shipping trade.

Nevertheless output quarterly results are a testimony stealth gas defensive positions is wet weather in well this unprecedentedly bad stool.

Our period coverage allowed us to commit less than 10% of our voyage days in the spot market, hence, we minimize the referring effects that pause spots activity and prolonged waiting times may have had an athlete performance.

We managed to achieve an impressive.

Given market conditions operational utilization of close to 98%.

Going forward, we have about 69% of feet days secured on period charters for the remainder of Twentytwenty with total fleet employment days through subsequent periods generating approximately dollars 126 million.

In contract revenues.

Doubts, Italy, providing us with a good shield against these uncertain times.

Folks focusing on our financial performance highlights.

Voyage revenues came in at dollars 34.4 million a decrease of dollars 4.1 million compared to the same period of last year solely attributed to our strategic fleet contraction.

Our daily time charter equivalent continues to rise.

Compared to the fourth quarter 2019.

Time charter equivalent increased by about $400, even though our daily spot revenues box about 15% decline.

With an EBITDA of about 16.5 million, we generated a net income of $3 million corresponding to an earnings per share of eight cents, thus, marking one of our best performances in the past couple of years.

We do need to note. This quarter. We also face substantial technical damages are one of our school lpgs. Consequently, burdening, our operating costs by almost a million dollars.

The positive aspect is that this damage is liable for insurance reimbursement.

Last but not lease we created value for our shareholders by purchasing during April twentytwenty through a tender offer over its 1.4 million gas shares for total consideration of nearly dollars threemillion.

Please move to slide number four.

Which provides an analysis of our fleet employment.

In terms of charter types atrophy to 41 operating vessels, excluding our eight joint venture vessels. We have 11 of these bareboat ptwenty five on time charters and five in the spot market.

Given market uncertainty and volatility driven by demand variations, we strive to minimize our spot exposure to the extent that our market permits us to do so.

During the past three months, we concluded for new charters and charter extensions isolating is most important the time charters concluded for two of our tankers.

Indeed, our Aframax tankers itself Parana is now under a one year time Chaucer wells, what about product tankers will commence a two year time charter at a quite competitive right.

Overall, we have a solid fleet employment period coverage for the remainder of Twentytwenty is it the older of nearly 70%.

More specifically our average fleet coverage for the third quarter is 79% well for the fourth it is in the order of 72%.

Our contracted revenues are in the order of dollars, a 126 million with about $67 million secured up to the end of Twentytwenty corresponding to an average daily time charter equivalent of about dollars 9700.

What about main risks or opportunities depending on how you view the market is the fact that we have 17 vessels come clothing their period contracts. That's a that's opening up until the end of this year.

In slide five I would like to provide a summary update as to our two joint venture performances.

With regard to our first established joint venture.

[laughter] that compromised in its comprise.

Sorry.

That comprising the majority of small LPG vessels. We currently have three after the five times the vessels under time charter contracts.

Given the soft market conditions, the two vessels in the spot market not to pull poor performance and consequently did not add significantly to our bottom line.

Focusing on our second established joint venture comprises your threes, maybe emphasizes gas carrier vessels. These are all on the time charter contracts, that's producing a steady cash flow.

Current average daily time charter equivalent is in the order of dollars 17500.

Earlier this month, we concluded the financing of the ships at quite attractive pricing.

In terms of athlete geography presented in slide six our company focuses on regional trade and local distribution of gas.

This graph is a snapshot of the positioning of our El <unk> LPG vessels.

It's excluding our joint venture vessels and as of May the 18th Twentytwenty.

Currently we have 15 of our LPG vessels trading in Europe, an equal number of vessels trading in the middle East far East and three vessels in Africa and four in America.

I will now turn the call Evans Affinia salaries for our financial performance like.

Thank you Mr., Jonathan Good morning, everyone I, we continue the presentation focusing on financial performance for the first quarter Twentytwenty.

Indeed, we enjoyed the profitable quarter quite impressive results given the very difficult market, we have been facing since the covered 19 became a pandemic.

Our success strategy will either minimizing our exposure in the spot market preserving a strong operational utilization and reaping the benefits of up to concluding additional period charters.

Let's move onto slide seven where we see the income statement for the first quarter of Twentytwenty against the same period of the previous year.

Mortgage revenues came in at 34.4 million, marking a 4.1 million decrease compared to the same period of last year.

Contraction in revenues due to the net reduction of whatever Joan fleet by four vessels to less charter in vessels and one vessel previously on time charter, which commenced bareboat charter.

Cash costs amounted to 2.8 million, making a 27% decrease compared to Q1 19, you to spot days reduction by 43%.

Each noted that the sharp decline in fuel price from much or worse, well is not reflected in this quarter as usual, we anticipate seeing it falling I bunker cost in the next quarter.

Based on all of their both our net revenues for the period, where 31.5 million corresponding to a net revenue margin of 92%.

Running cost at 13.2 million month about 3% increase compared to Q1 19 I was this quarter, we incurred heavy costs of about 1 million for the technical done much in one of our small lpgs.

General and administrative costs decreased compared to the same period of last year by about 500000, mainly as our stock compensation plan active in the same period of 2019 and that in August 2019.

Based on all of these I'd be tile isn't the order of 16.5 million interest and finance course, mikes close to 1.7 million decrease mainly attributed to the lowering of our debt and library degrees.

Based on all the points analyzed above we ended the first quarter of the year within that they come of about 3 million corresponding to an earnings per share of eight cents.

Slide eight demonstrates our performance indicator for the appeared to examine.

As mentioned earlier on our operational utilization for Q1 20 was in the order of 98%, which might this strong performance given the tight market conditions.

In terms of our adjusted time charter equivalent we not they say rise on a quarterly basis by about 300 daily and outcome of improved time charter rates.

Looking at our balance sheet to slide nine a free cash has dropped given they all cash purchase on the three MGC vessels operating under our recently established joint venture arrangements. However asked financing for these vessels has been already drawn stealthgas cash will increase once more in the second quarter by about 25 million by a return of equity.

The M.D.C. joint venture.

Gearing isn't the order of 37.5% based on our scheduled principal repayments, we will reduce our leverage by around 40 million per year, we have no balloon refinancing with you in twentytwenty with meaningful balloon obligations of around 30 million in Twentytwenty, one for which we have already entered into discussions 40 financing.

I'll now hand, you over to I see Ohio is obvious we discuss marketing company outlook.

Yeah.

On slide 10, we should the market fundamentals for the LPG market looks promising up in the end of February.

Since then the global spread of coffee the coupled with the recent on price collapse of course turmoil in all markets.

According to a forecast produced by Potanin partners Global LPG demand is expected to rise by 2 million metric tons in twentytwenty to reach a total of 256 million <unk>.

Implying a slower growth driven primarily by lower global demand.

During the first quarter Twentytwenty trade you to covert 19 was mostly disrupted in the Chinese market.

This is evident when looking at the number of small to medium LPG ships. The chart discharging in China. During this period.

The report calls were down by 41% year on year and in February.

28% year on here in March.

In addition to the global covered 19, Locdown, which caused a sharp decline in LPG demand lower crude oil prices make LPG uncompetitive on the price basis against naphtha, thus, reducing petrochemical demand for LPG.

This is a risk element in our market going forward.

By the end of the first quarter 10 to 20, we witnessed two factors are partly offset to the general negative market sentiment.

Firstly, what was the gradual lift of covenant in Lockdowns in China, that's accelerating the PDH plant operations second was the Indian government announcing new subsidies for LPG for household consumption, thus, providing a boost to LPG demand.

Another positive element worth to mention is or the U.S. shipments to China resumed with the end of tariffs in March hence broadening the existing LPG trade patterns, mainly for the real juices.

On slide 11, we see that during Q1 rates for the majority of small lpgs slightly weekend west of Suez. The markets was relatively healthy up until the end of the first quarter.

However, our exposure to the market has been very limited that's the vast majority of our ships in that area out on video charters.

East of Suez the market has been feeling the effects of covering 19 pandemic since February when China, when do locked down on that point, we show a big drop in pet Chem cargoes and although the LPG was moving at reasonable levels. It was not enough to keep the market from softening <unk>.

This is China started to reopen who have seen more movement on the pet Chem side.

In the time charter market, we have seen only a few short video deals done and somebody new all says to the existing time charters.

We'll have yet to see increased interest from charters in new longer period the term deals.

In slide 12 will provide the summary review of demolition activity in order book in relation to scrapping the small LPG pressure. Our segment has has an average age of 14 years. It has substantial alternators, though 26% of the fleet.

Currently above 20 years of age since the beginning of Twentytwenty. We have recorded at the demolition one pressure a ship overall scrapping has come to halt in the past few months mainly due to.

Corporate 19 Oak Downs is anticipated that demolition activity main densify wants countries like India open up.

Osbert published new building orders or 16 vessels that is 4.5% of the total fleet to be delivered until the end of 2022 at a relatively small order book.

In slide 13, we discussed the company's outlook commencing with assure performers for the past five months. The performance Overstock is presenting along with selected GSC got his peer group and the price of oil and.

During the club global covered 19 outbreak demand fell for petroleum products additional pressure on oil prices rose exerted after OPEC and related to our lives. This agreed to extend production cuts in March inevitably these events severely affected energy related stocks, which from arch onwards, amongst the negative than decline.

Turning performance, there's talk of Stealthgas follow the same market trend.

But we're off to an extent assisted by the tender offer we commenced at the end of April.

Slide 14, who you're outlining the key variables that will affect our performance in the quarters ahead.

Given the market thermal it's quite difficult to make from predictions and therefore, we will not present, an EBITDA forecast as we normally do.

We have visual 83 key points that message to our financial performance in the upcoming periods.

First it doesn't have quite high Peter coverage that shielding us from any market volatility we might face secondly, we have the majority.

Oh var tankers on period charters in all of us for 22000 cubic meter semi refs on time charters as well.

Lastly, but does most importantly were under a very low libel rate environment, Hence our finance costs will decrease further.

We have 17 vessels, concluding that Peter unemployment until the end of Twentytwenty. The majority of these vessels are situated in Asia, where it comes with a market you slightly better than it is in the west them side.

In addition, this year, we have quite a heavy drydocking schedule with nine.

Scheduled dry dockings and three water ballast system fittings with a total budget of about $7 million.

That for of course, the base is quite burdened the most important to now known viable. However is the uncertain market that we are in the evident impact of the covert 19 pandemic has had on the industrial demand for LPG.

Obviously, everyone is wanting where wherever we will have a second wave of corporate 19 infections in the fall or not.

Including a presentation slide 15, we present, a brief summary of our companies and markets strong points and remain confident that wants to covert 19 pandemic uses so this is quite flexible to grasp all the market opportunities that may arise.

At this stage, our chairman of the board of Mr. Joel If we summarize the concluding remarks.

The first quarter Twentytwenty Cummins quite promising leave for outperformance in profitability. Indeed, we are pleased that we generated net income of close to $3 million with a very strong operational utilization of 98%.

However, the cobot 19 pandemic has had a significant negative effect not only on the shipping markets, but also on the global economy.

Future periods of consequently governed by a question mark around LPG demand and period chartering activity.

In the short run the market has markedly deteriorated and although stealthgas is quite protected due to hyperion coverage and very low debt no prediction could be made how long. The cobot 19 pandemic will be a major global concerned severely affecting the whole of the shipping industry and the reason.

<unk> impact on our company.

Second wave of this pandemic outbreak may hit this winter and so yes, it's already taking a defensive position in order to ride out the storm as smoothly as possible.

We have now reach the end of our presentation and we would like to open the floor to your questions. So operator, please open the floor.

Thank you find that Sir ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone keypad and Wakefield names you know.

I cannot star one if you have any question.

Oh, that's question food today, it's from the line of lumpy given some Jefferies. Please go ahead.

Holiday teams telco how are ya.

Hi, Rob.

They.

Great Great, Yeah, Oh I've grown.

You questions for you. So first look like your they can remain near 90% or so or kind of a third quarter in a row.

No there were more than halfway through the second quarter, no wouldn't that utilization to be arena this quarter or what have you seen it over the last six weeks and then also your press release stated and Mike are you stated that when the short run be market has good.

Like what are the current spot rate levels for the smaller LPG vessels compared to the one can swing route you show on slide 11.

Thank you Randy on the first a part of the question.

I would take you to now I would take utilization if you're not just down in Q2.

So I cannot give you an exact figure but you know you can you can take your guess on that.

On the monitoring of the rates, it's not that trades have or it's not that spot rates have fallen that much is that we have a fewer cargos available in the spot market and therefore, if you have spot ships you have.

More waiting time in between the cargos, thus eating eating away your Ah time charter equivalent.

So I would use Ah Ah 10% to 15%.

Lower.

Spot rates for two to.

For Q2 got it okay.

Looking at your Crete, you know so it looks like all five or.

Yeah.

Good delivered said right you know there any others kind of planned or to be delivered.

It sort of did you say five.

Yeah, the JV vessel.

As that is wrong. The total number of ships is eight is a five belong to the first JV and threed belonging to the second JV all of which have been delivered.

Oh.

In terms of future plans for those JV acquisitions.

Oh, no no plans for acquisitions right this minute.

Okay.

And then on the time charters can get some details on rates around those who are time hurdles, especially on the crude and the chronic vessels.

Or we haven't given the exact numbers, but for calculation purposes, or we can say that we.

Our from marks.

From its previous great of course, we have to our them deduct because the previous rate was a bareboat rate and the current today, there's a time charter rate, but comparing apples with apples I would say that is in that region of the 30% better.

For the Aframax and for the admire the one single Amar that we fixed I would say, it's in the region of 15% better.

Got it anyway, my cousin to move those are bare boat her time chartered smile.

Yes, there is a new fixtures are time charters.

Yeah, Hi, and then kind of last quick.

From the tender offer you were able to read kirker, the 1.4 million sooner.

You offered up to buying back 4.8 million shares. So you spent a little under 3 million out or the $1 million. So with that you know you repurchase more clear is now in the open market you do another tender offer what are kind of the plan for the remainder of that are caught $7 million that your market share repurchase.

That's a good question Randy we have not discussed with the board because as you were very curious they are also very curious about what will happen.

This summer.

So I think we'd have to wait a bit.

To see what happens with the LPG trade the LPG demand the time charter interest for our ships as usual we have quite a few opening up a until December.

And depending on what we see we will then decide on a on a board level or how to spend the money that we did not spending the lost a tender offer.

Got it Okay, and then just for our model, what's the current share count following the tender offer.

Right around 38 million shares.

I don't have the exact number off my head I don't want to give you a wrong number she will have to email you on that.

Sounds good.

Well that's it for me you all are they stay healthy and well talk to them.

Thank you Randy.

I remind you ladies and gentlemen star one if you have questions. The next question George bomb infancy on Securities. Please go ahead.

[noise] can you hear me.

Hello, George.

Hey, I'm on you know and more tank cars are you running them clean or dirt dirty.

Good question mixed.

Makes okay.

And I want to talk about that they're buyback a in previous calls you mentioned that the volume wasn't a strong enough explain why you think that Ah. So few shares were.

Given into your tender offer.

I cannot be a in a every shareholders mine George maybe because they are bullish about the future.

Uh-huh or the D. A price was ER and apparently at a very very low low level and as a continued shale the in the company. Despite the difficulties here. We do appreciate if you would consider Oh, we upping that Ah Ah offer or add a little.

Hi, or a price because because I think essentially a you'll company like so many shipping companies are trading at almost ridiculous discounts.

Yes, George I think we have discussed that many many times and I just answered exactly the same question do around these show depending on what happens this summer and if we don't share complete the destruction of the LPG demand the money if I do it did not spend in on the previous tender offer might be redirected for.

Or more a share buybacks.

Great and then you had mentioned D D a and numbers for this quarter could have been even higher by a million dollars. There was not for the damage to one of your vessels when do you expect to get the insurance reimbursement there.

That there's not an easy a question because as you know the insurance or try to find their very kind of excuse not to pay you fast.

But you know I would say between certain six days.

Okay.

Great. Thanks, very much and good luck for the future.

Thank you George.

Ladies and gentlemen, if there any further questions. Please press star one and you kind of think keypad.

[laughter].

[noise] have a nice other questions that coming three.

We would like to thank you for joining us at our conference call today and for your interest and trust in our company. We look forward to having your again in our next called for a second quarter results in August. Thank you very much.

Thank you very much so ladies and gentlemen that that's concrete to cool. Thank you all for joining amen disconnect.

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