Q2 2020 StealthGas Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the South Gosh second quarter 2020 conference call.
All participants are in listen only mode. I started this because it doesn't change and there'll be a question answer session. Just a question doing a section you will need to press star one on your telephone.
Advice you that this conference is being recorded today Friday to 21st that's August 2020, I would now like trying to time frame. So bridge your speaker today, how he and the Fabiana President and CEO. Thank you. Please go ahead.
Good morning, everyone welcome to our second quarter six March 2020, <unk> earnings Conference call.
This cardiovascular shield Stealthgas went along with our financial services second lotteries.
And before we commence representation I would like to remind you that we'll be discussing forward looking statements, which reflect current views with respect to future events in financial performance at this stage. If you take one of them woman three dark.
Disclaimer on slide number two if this presentation.
The risks are fervor disclose this focus is filing with the securities and Exchange Commission.
I'd also like to point out at all or launch quoted unless otherwise clarified our explicitly stated in us dollars.
Slide three summarizes the key highlights from our second quarter 2020 results are pre released today.
In spite of a very difficult and I'm sure the market your to the corporate 19 pandemic Stealthgas has had an exceptionally good quarter in terms of both revenue and profitability.
They get to the success is that we had leveraged up on the strong market prevailing prices are pandemic outbreak and how she could almost all of US all of our vessels on charter a vessel.
That's supporting the spot market downturn, we're showing the second quarter, particularly in Europe.
Indeed dashboard exposure committing almost 10% of work for you if stays in the spot markets was very low and that's all over Spotify switchboard trading in Asia, we managed to keep them employed thus avoiding lump long periods of downtime.
Our operational utilization was as high as 97% stronger revenue generation, along with stable operating costs and very low finders course, whether cornerstones of our second quarter's performance success.
Going forward do we have about 71% of a free they secure their charters for the remainder of 2020, we still see deployment days or separate shrieking subsequent periods.
Generating approximately hundreds and $12 million in contracted revenues oddly, providing us with a good shield against those are sometimes.
Including the time charter agreements of our JV ships, but constrict your revenues increased 253 million.
In addition to Vsan not internet them doing your fleet with a small extended it took the opportunity of investing a portion of the 25 million proceeds from the conclusion of the and you see JV vessel financing in according to your small LPG ships.
The first vessel that 10 to 25000 cubic meter pressures that did you ship was acquired in June 2020, well. The second one which is a 7500 cubic meter ship you're building out did you ship will be delivered due September 2020.
Focusing on our financial performance highlights our voyage revenues came in at 36.3 million, marking an increase of 2.2 million compared to the same period of last year, mainly due to a sharp price almost 20% of our revenue stemming from our time charters I along with reduced presence in the spot market on a daily time charter it.
And then continues to rise compared to the first of course, there tend to 20 are there any time charter equivalent increased by about $1000 driven by revenue growth in conjunction with a 25% decline in voyage costs.
Generating an impressive every dollar of about 22 million or nothing can came in at 8.9 million of corresponding when need be actually tend to three cents.
Thus, marking the best performance since the first quarter over 2013.
Slide number four provides an emotional more fleet employment in terms of charter types out of a fit the 42 operating ships, excluding or eight to JV vessels, we have nine unbearable to 25 on time charters in eight in the spot markets.
Prior to the previous quarter, we had two.
Seven and a half thousand cubic meter ships, the GSC asking the guys mystical coming off bareboat.
I was would have increased our presence in the spot market those market softness due to both corporate and dynamic in the summer period make charters are like that stake fourth positions.
In spite of the difficult economic environment since our last announcement they concluded five new charters in charter extensions.
Overall, we have shown it seemed deployment or Peter coverage for the remainder of 200 Twentys in the order of 71% our contracted revenues on enjoyed the over hundreds and $12 million with about 45 million unsecured up until the end of Twentytwenty and including our JV is built on secured revenues increased 100 uncertain.
$3 million.
Slide five we're providing a somebody update our store our store and <unk> our store to a joint venture performances with regards to our first look stoppage joint venture comprising the majority of small LPG vessels were going to have don't over the five under time charter contracts and given the soft market conditions to see vessels in the spot.
Market marked a poor performance and consequently did not out seafront significantly more stability.
Focusing on our second a joint venture comprising three medium got Scott is these are all are under time charter contracts, that's producing a steady cash flow.
Please on your to conclude that time charter contracts for two of these m. just see vessels. The JV structure has 100% that coverage up until April 20.21.
We're sitting just like six would provide you with a brief summary of our nation's fill in purchase activity.
In mid June 20, trying to get to the took delivery of a brand new 5000 cubic meter pressurized vessels <unk> Eco takes you I know.
The vessel was acquired refinancing already in place invest where our equity contribution was only $80 million.
Up until January 21, we have to more vessel deliveries the equally so seven and a half thousand cubic meter newbuilding vessels to be delivered in September 2020 in the eco preserved and 11000 cubic meter newbuilding vessel to be delivered in January 21 financing for these vessels is already committed and already mending equity obligation is.
No he says <unk> 7 million.
It's about 37 billion or free cash, we're still gases balance sheet and additional cash of 11 million.
I was our shareholder stake you know jvs cash balance.
Our capital expenditure obligations are fully covered.
In terms of roughly geography on slide seven our company focused on regional trade and local distribution of gas and this graph is a snapshot of the positioning of our ships, excluding our JV vessels I was a real good third and currently we have 14 of our ships in Europe and they put a number in the middle East five vessels in Africa and five vessels.
In America.
During the call to Mr. second not just for a financial performance.
Thank you Harvey and good morning, everyone I will continue the presentation focusing on our financial performance for the second fourth of Twentytwenty.
Indeed, the quarter was outstanding given the margin difficult market situation, where I mean, you to the gold with 19 funding.
These unexpected market conditions, then 'cause leveraged appointed strong fees deployment, it's stable topics basing it slowed that exposed to produce wouldn't promising results. This is actually a proof of all we have been arguing <unk> first quarter said before they sound strategy that can demonstrate profitability given the couric circumstances. It didn't the second.
Scientists in the second quarter of Twentytwenty way right for our company, meaning that since the beginning of the core do we had secured 86% fleet coverage that's protecting us from one of the market. There look that took place last we got noise spot exposure in Europe.
It does move onto slide eight when we see the income statement for the second fourth of Twentytwenty against the same period over the previous year.
Voyage revenues gay minutes age 6.3 million looking at 2.2 million increase compared to the same periods of last year.
These increases that if you do not subadvisory time charter revenues stemming from wonder why vessel types, namely spoil MPG East went to 22000 cubic meter same U.S. and tankers, along with limited exposure in the spot market, which was weak due to the called 19 pandemic.
<unk> costs amounted to 2.1 million, marking a 50% decrease compared to Q2 19, you to support these reduction by 48%.
Each noted that the sharp decline in fuel price from my chart worn words altrus used it to our voyage cost reduction.
Based on all of that both our net revenues when the bids were 34.1 million corresponding to a net revenue margin of 94%.
Running cost chart 11.6 million liked about 2% degrees compared to Q2 19, mostly I'd give you did two fewer time charter in spot days you to our fleet construction.
General administration costs decreased compared to the same period of last year by about 400000, mainly as our stock compensation plan active in the same period of 2018 ended in almost 2019.
Based on based on all these started we thought using the order of 22.
And finally of course, my close to 1.7 million degrees, mainly attributed to library degrees and the lowering of our that.
Based on all the boy internalized above we ended the second order over the year with a net income of about 9 million corresponding to any ph of 23 cents Rvps resolve these more than 11 times ahead of Bloomberg consensus it actually the best quarterly performance, we have seen over the last seven years.
Slide nine demonstrates up in pharmacy indicators for the appeared to examine I should mention there you're on our operational utilization for good twotwenty watching the order of 97%. We watch this strong performance given the tight market conditions.
In terms of my adjusted time charter equivalent we not to say right on a quarterly basis by about 1000, 5000 daily and outcome, mainly due to improved time charter rates.
Looking at our balance sheet things like then our free cash season, the order of 36.3 million increase compared to the first quarter Twentytwenty almost 9 million.
As mentioned the beginning of I call. We utilized the 25 million. We received one of the conclusion of the aim GC JV vessel financing to acquired <unk>, no small LPG vessels and substantially reduced aren't that standing base. Once that's hard to do with our JV arrangement by almost six media.
Oh JV structures combined <unk> currently Hopscotching Youre, just 22 million, most probably excess cash in our JV arrangements, we'd be dividend now to shareholders towards the end of this year deciding to our free cash base.
Gearing isn't the order of 38% based on our scheduled principal repayments, we will reduce our leverage by around 40 million per year, we have no balloon refinancing view in the remainder of Twentytwenty with minimal balloon obligation of around 30 million in 2021 for which we have already entered into discussions 40 finance I.
I'll now hand, you over twice your heart I guess with these guys market than company.
[noise] proceeding on slide 11, this unprecedented times were going through make it very difficult to assess where markets from the future.
The strong element of uncertainty preferreds across a broader LPG space I was just the case for global shipping Nowadays.
Robert 19 by then we can look downs that took place in the second quarter of Twentytwenty I've had the shopping bucket.
Sectors of the economy.
Focusing on LPG demand and supply across geography geographical regions, we witness a dramatic decline of LPG demand in Europe and different the majority of the refineries in the area scaled back production.
Looking at these days yard fun around just dropped as well, particularly in the North East of Asia, However, LPG imports held up fairly well.
So the residential demand for LPG that covered 19 by Democrats or the mix impact.
Demand in China skin Buck White LPG consumption, maybe a marked a considerable rise in the United States. All LPG production has dropped from 2019 levels volume already cruising lately, marking seems made 2020 a rise of about 12% what export Josh showing an upward trend to.
Moving to slide 12, we see that during Q2 2020 injury to the covenant in pandemic outbreak rates for small lpgs decline, mostly driven by the sharp deterioration of the European LPG market.
Demand for larger ships I used seven in house thousand cubic meters remained relatively steady and very for rate declined for the segment was negligible.
West of Suez and marketing was heavily affected by the Koby 19 should Tracy.
By me deepens at least of open ships in Europe Bridge historical sites and for owners with significant sport and or she away exposure. It was not their mother or flooring for freight rates in order to secure employment for their ships there simply were not enough cargoes.
Scheme about doesn't UNC outcome of extensive locked down of economies across Europe, including the Logano several European refineries, which suffered heavily from the drop in demand for all products.
The standstill into market last last it also to the end of the second quarter naturally because of that in existence sport market. There was extremely limited time charter activity. It remains to be seen wasn't a market recovery, perhaps a few months down the line will stimulate bid activity in the region the eastern market experience, thus far but their second quarters on Europe.
After that coffee and I didn't situation or started to improve in China early in their second quarter and the economy open up again, well show significantly more active sport market. This was driven mostly by the Chinese importers starting to bite bedrooms again after an extended period of locking down in addition to the LPG market remained stable on the Peter charted wish.
For a bit more activity as charges gain more confidence in that market. Then we're willing to take some forward coverage.
As mentioned in remains uncertain, whether heading towards the winter months on multiple recover or whatever a potential deterioration of the government in pandemic situation and you will impose government restriction would keep our segment under pressure.
Regardless, what regardless of the garage situation driven by global economic conditions, our market specific fundamentals.
Out of an agency below what they would remain positive and will likely actually their market recovery rate wants a broader economic environment, but it makes it so.
The small LPG pressure segment has substantially older tonnage.
26% of the fleet is above 20 years of age, hence, we do anticipate than explanation of demolition into future.
Since the beginning of the here we have recorded a demolition of one small ship Oscar scrapping has come to a holding their bust few months, mainly due to their coven 19 locations and missteps, who could subsequent closing of the demolition yards.
Aspiration published daughters are 17 vessels out is almost 5% of the total fleet to be delivered up until the end of 20 to 22, and let him into small order book.
On slide 13, we are discussing our company's outlook commencing with our share performance since the beginning of the year.
Performance Overstock is presenting along with selected got Scottish peer group and the price of oil and the global.
Over 19 outbreak and imposed looks down resulted in us in a falling demand for petroleum products.
However, these have loved ones in may increase the demand for oil and consequently oil prices began to rise.
These events affected energy related stocks, which has drifted a broad correlation with on price volatility.
They spoke of still does was less volatile, but just in the pricing remained low in the region of 2.5 dollars.
Slide 14 were outlining the key variables that will affect our performance in the quarters ahead.
Even in markets, where mortgage quite difficult to make predictions.
These are laid in threeq coupons at Mashes their financial performance in the upcoming periods.
First point, just as we have quite Hyperion covers 71% for the remaining of the year that shielding us from any further market volatility than we might face or spot exposure in Europe. However is bound to be low wasn't have only three vessels in the region, concluding that Peter charges up until the end of the year.
Secondly, we have all over the over 22 K. semi ref ships on time charters at much improved rates Wasnt majority of our bankers are all shouldn't be their charters producing a solid cash flow.
Last but equally important we are under a very low labor rate environment has hence or finance costs will decrease even further.
However, we have 40 investments concluding that period employment up until the end of the year, but as mentioned the majority of these are situated in Asia, where currently the market is better than in the Western region. Moreover, in the two remaining quarters, we have quite a heavy drydocking schedule with nine.
Right Dawkins industry water by the system fittings with a total budget of about 7 million.
For of course basis was burdened.
Most important and now known viable however is the uncertain market. We are in the evident impact over the covered 19, which has had on the industrial demand for LPG.
Including our presentation will be slide 15, we present, a brief summary of our companies and markets strong points and remain confident but once I covered 19 pandemic eases in our market Rebalances Stealthgas says it has a proven capable of demonstrating an even stronger performance of in the second quarter of Twentytwenty.
At this stage I will summarize.
Our concluding remarks for the period examined.
Despite of the global thermonuclear covert 19 pandemic has brought on self gsix or is it the very strong performance in the second quarters Twentytwenty, marking the best quarter result would have seen over the last seven years.
The pillars of our success were principally our strong paired coverage secured ahead of imports look downs are stable operating cost base and the lowering of our finance costs.
Our conservative strategy of striving to secure our fleet on pure charters paid off.
In fact, we had to conclude that several Peter charters at competitive rates prior to their covert 19 pandemic outbreak and hence we were shielded from many market deterioration while at the same day managed to improve larger up on our profitability.
We approved another strong fleets solid financial position and efficient strategy, which instances with confidence in these uncertain market. We're facing our performance was also proofing your share price levels, which we deem as an unfair reflection of still guesses dynamics.
Going forward, we still strategically navigate the damage of this pandemic pushing the best of course of action on means to what we may prove to be difficult market conditions.
We have now reaches the end of the presentation, we'll like to open the floor for your questions. So operator, please open the floor.
Thank you ladies and gentlemen, we will now begin to question answer session.
Sure. So question. Please press star wanting your telephone anyway, playing into the amount if you wish to catch and young Crostini Praful hashed.
Once again that its Taiwanese good my checks.
And now the first question comes from the line as Randy even spread of Jefferies. Your line is now open. Please ask your question.
Oh it includes stuff that's her doing.
Hi, Randy I hope you're well.
Oh, good here artisan congrats on a very strong quarter here, so far exceeding our citizens or earnings so with that should we expect kind of cost to them.
In the second quarter to conclude or do you expect a lot of her her current closer to the once the numbers now looking out that's a lot that economics, even though it's just it's Darren I'm not on the revenue side.
Similar utilization on a rates on the third quarter relative to the second Blair.
To beyond do I understand it depends how many ships are going to trying to fix on period. If we are a successful to doing show.
Because as you can understand the opex and costs caused a lot to do with even the ship is trading spot or not.
And that I would feel confident to save that it would be in between of Q1 in Q2, if you want my opinion.
Okay.
And then on on the interest expense side is that fair run rates.
Looking at swapping money cloning instruments or how you look at <unk> interest expense in here, obviously are having oh, we are not wore it we are not worried they're gonna see a rapid increase of a of the labor rates. Therefore, we are a we are staying put for now.
Got it Okay, and then inevitably going to instead of your acquired the two vessels coming affiliates.
Can you give a little more linco on that.
Are there spark on contract.
So on their terms around at Chrysler.
Yes, I think it seems a they're both Brian you know.
Oh, one that was delivered in June and one is delivering and in September is under construction as we speak both our Japanese.
Japan has been chips.
The first one how's the shorter time charter on it the second one is not fixed because she hasn't been delivered yet she was delivered in an end of September.
On the cost of those two vessels per vessel.
I think its.
I think it's not and I think it's not in.
He's not disclose the Randy.
Okay.
Qunar for total cost of though.
I will have to go to start my people be go before doing that.
Oh I don't know one of the so last question you know who the share price sites are under three bucks, even after it's been pretty good moved here other than another condo occur in the near term.
Open market purchases and then also why purchase two vessels I know by this or is that Oh looking for some goods gone to live within them. Because this is good but the share price.
It is a quota unclear reflection of stuff that they want.
Well you know you know he I'm sure you're knows the answer to the does that Randy we've been buying stock nonstop as you know over the last three years, both in the open market them through our tender offer a few months ago, but still it's got to strength is its fleet.
Or if you remember we show the 13 ships.
What was it two years ago show I think combined to Brown your ships to Barclays replace those older ships that were sold off it's not such a big expansion.
Especially when we think now's, a good time or to buy quality assets and weight.
Hopefully for a for a better markets, one and if the pandemic is Ah taken care off.
Got it and does this kind of substitute personally purchase incidents. This accomplishment teed up in terms of used to cost going forward.
I think we're gonna have more authority to buy more shares when we have a better view of the control of the pandemic. If we see that the Oh vaccine is out and people start doing it and the the.
Cases go down.
Maybe that will give confidence to the board to do what do you authorized us to buy more says I don't think we're going to have the annual Saudi before we have more clarity on that.
Got it.
All right well that's with me yeah.
Thank you.
Yes.
Thank you once again Gentle reminder, please press star one in your telephone keypad, if you'd like to ask a question. Thank you.
Thanks, Best Taiwanese telethon, if you had much asked a question.
Then I know for your questions at this time, Sir please continue.
Well I'd like to thank you very much for joining us at that conference call to Dan for interest and trust in our company and we look forward or however, you are with US again, what our next call for third quarter Twentytwenty results in November. Thank you.
Thank you would that does conclude teleconference for today. Thank you for participating you may all disconnect speaker. Please standby.
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