Q1 2021 StealthGas Inc Earnings Call

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Welcome to the static gosh angry, but first quantity of trying to try and do you want.

On the operating results conference call at the.

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Matt.

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The conference over to your speaker today most of them.

Michael Jolliffe the board chat.

This cash.

Thank you and good morning, everyone and welcome to our first quarter 'twenty 'twenty, 1 earnings conference call and webcast.

Hi, Michael Jolliffe, the board chairman of stealth gas and with me on our call today is Harry vast gosh. The C items sales Gus along without finance officer of fan you're sick of lot of this.

Before we commence our 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 all take a moment to read our disclaimer on slide 2 of this presentation risks of further disclosed in stealth gas filings with the Securities and Exchange Commission.

I would also like to point out that over the mountains quoted unless otherwise clarified the implicit the stated in the United States dollars.

Slide 3 summarizes the key highlights of our for first quarter 'twenty 'twenty 1 results that we released today.

Although we concluded a fair amount of new period charters, the slightly improved market conditions were not reflected in our revenues and profitability.

Our performance remained quite similar to the fourth quarter of 'twenty 'twenty as we still charged at a high number of our vessels in the spot market, thereby facing high voyage.

The higher costs.

Indeed in this first quarter spot days were equivalent to the full operation of 13 vessels in the spot market.

The increase in bunker costs, along with the fact that we operated 2 of our product tankers throw out this quarter in the spot market led to a sharp rise of the voyage costs, that's suppressing a spot of earnings capacity even further.

We do look at all of them with cautious optimists optimism.

The global vaccination process accelerates this gives us hope for a more substantial bucket of recovery.

In addition to this our market fundamentals remain strong with the low order book and a heightened demolition activity, that's assisting asset with even further.

We believe that the combination of these parameters will most probably lead out of market rates to pre pandemic levels.

However, the speed and timing of this anticipated recovery still remains uncertain.

Focusing on our operations out of fleet utilization for quarter..1 2021 was 98.7% with about 50 days of technical off hires mainly as a result of the dry docking of one's for LPG carrier.

In terms of our operational utilization. This came in at 93.1% mainly due to more than 15 of our ships operating predominantly in the spot market the equivalent to 31% of our flight voyage days.

The unusually high spot presence.

Going forward our fleet coverage has improved.

We have 61 per cent of athlete day secured on period charters for the remainder of 2021 with total fleet and private days for all subsequent periods generating $87 million.

And contracted revenues, including the time charter agreements of our joint venture structures totally secured revenues increases to about 100 million.

We need to highlight the this quarter leveraging upon out of proven and long standing sale and purchase experience and grasping the value of momentum in the M. G. C segment, we took the strategic decision to sell the 35000 cubic meter M. G C carrier of the gas Kim Hamburg Island.

I a M. G C. J V. The decision that proved to be profitable as the selling price resulted in an aggregate gain of U S study of 7 million.

The sale was concluded with in May of 'twenty, 'twenty, 1 and prove that out of expanded presence and diversification within the broader LPG segment has indeed been both profitable and strategically sound.

Focusing on our financial performance and compared to the first quarter of 'twenty 'twenty. Our revenues came in at 37 point for median does well out of daily time charter equivalent decreased by about $100.

As a spot exposure increased so did the voyage costs incurred thus suppress he got daily time charter equivalent earnings.

With an EBITDAR of about dollars 13.5 million our net net.

Net income came of it came in at 750000 corresponding to an EPS of 2 cents.

The capital structure remains healthy with low gearing and zero capital commitments in the near term future.

Slide number for provides an analysis of our fleet employment.

In terms of charter types out of a fleet of 42 operating vessels, excluding our 7 JV vessels. We have 5 of these on bareboat 28 on time charters of 9 in the swap bucket.

Compared to our previous announcements, we managed to reduce our spot presence and fixed all of our tankers on period charters, thus narrowing our spot exposure to the small LPG market.

Indeed, we successfully concluded 10, new charters and charter extensions of short durations.

We have 16 vessels concluding their period charters up until the end of 'twenty, 'twenty, 1, which we view as the real opportunity.

Our period coverage for the remainder of 2021 is in the order of 61%.

Well currently out of period coverage coverage for the second quarter of this year is it the odor of 80%.

We have close to $19 million of secured revenues and including our joint venture of vessels total secured revenues increase to about $100 million.

In slide 5 I would like to provide an update as to our 2 joint venture performances.

The first joint venture, which comprises the majority of small LPG vessels. Currently has 3 assets of 5 total vessels under time charter contracts.

The time charter contract for the medium gas carrier of the echoed in the Buda was recently extended for another 3 months, while we recently fixed the gas out of out of that bus are the 1 year time charter.

Focusing on our second joint venture comprising of 2 medium gas carrier vessels. These are all under time charter contracts, that's producing steady cash flows.

Following the aforementioned sale of the gas <unk> gas Chem handbag, which produce considerable gains total free cash base within our joint venture arrangements has increased and the seasonality in the order of about 40 million.

In terms of our fleet geography presented in slide 6 our company focuses on regional trade and local distribution of gas.

This graph is a snapshot of the positioning of our LPG vessels, excluding the joint venture vessels as of May of 'twenty 4 'twenty 'twenty 1.

Currently 16 vessels of the LPG fleet traded Europe 14 vessels in the Middle East 5 vessels trade in South America and 3 in Africa.

I will now turn the call average offend your salaries for our financial performance. Thank you fine yeah.

Thank you Mr. Jordan.

Good morning to everyone.

I'll give you that theres inflation.

The financial performance for the first quarter of 2021.

As mentioned earlier this.

The first quarter of.

Our sports activity remained high that's on the mining.

Perfect.

True.

And it does move on to slide 7 where do we see the income statement for the first quarter of 2021 against the same period of the previous year.

I'll take the 7.4 million.

Compared to the same period of last year.

Exactly.

7.

Now operating out of this book for the time.

Charter contract.

The voyage costs amounted to 7 million margin of $4.1 million increase compared to Q1, 'twenty as I spoke to the sales more than doubled.

In terms of productivity brought up on the sharp rise in costs, particularly for bankers, which increased by 50% compared to the previous quarter when accounts for a number of spot days.

The increase is primarily due to the Fox of this quarter, we had 2 of our <unk>.

The songs.

Primarily the spot market.

Hi, Carlos and for time charter equivalents youth of itself the tanker market.

Good.

Based on all of the of Borgwarner for the.

The good work there.

Running costs of $15.1 million Mark for about 14% increase compared to Q1 'twenty. Most led the beauty of 2.7 fewer vessels on bareboat for weeks.

And of course, along with the hundreds of 50 don't the rise in our daily group costs attributed to the.

COVID-19 pandemic.

As already discussed in our previous calls the COVID-19 for them.

And the group costs by about 500000 per quarter.

Based on all of these our EBITDA is in order for the first pinpoint for million interest and final scores from our close to 1.1 of the degrees Mango debuted at the library degrees.

In terms of interest cost, we did witness the sharp decline and of course it is worth to mention that the average might be marching including library.

Region of 2 point day, 1 for the same period of last year's the average margin was about $4.5 per cent.

With regards to income from our JV both of our JV. The ended the quarter with the proceeds of which $1.1 million accounted the sales guys.

Based on all of the points on the lives of the ball. We ended the first quarter of 'twenty 'twenty, 1 with the net income of 750000 corresponding to an EPS of 2 cents.

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The slide 8 demonstrates our performance of the gave the for the period examined I've mentioned earlier on other based on the utilization for Q1 'twenty..1 was in the order of 93 point of 1% I think we export activity led to a higher number of idle days.

The average daily TCE.

All sales class vessels for Marlin.

Current tankage, but the excluding J devices.

No other than our average daily breakeven.

Not not simple increase is the performance of our spot vessels.

Exclude it.

Looking at the balance of the slide 9 our free cash and since the order of 37 million 1.

To date, we have no part of the capital expenditure I know cash commitments in the near.

The future I gaming is not only the order of Turkey, 8% based on our scheduled principal repayments.

Leverage by around 42 million per year, we'd have nobody looming financial obligations for the remainder of 'twenty 'twenty, 1 and have already a range with any for a nice couple of about 65 per cent of the balloons in 'twenty 'twenty 1 'twenty.

'twenty 3 as well.

I will now hand, you over to our CEO myself all of your boxes, who will discuss market and company outlook.

Okay.

Yeah.

Let's proceed with slide 10.

During Q1, 'twenty 1 of the market sentiment slightly firmed most of the gear to the increasing demand from India and China.

Going forward of the LPG demand in Asia subject of course, the COVID-19 of our mission is expected to increase further driven by the petrochemical and retail sector.

In China, we were just doing you'll pay the edge plants came on line in 2020.1 more since the beginning of 'twenty, 1 and for Additionally, the dish plants are scheduled to commence operations of the end.

End of 'twenty to 'twenty 2.

Oh, there's plants heavily relying in part of the propane. This is positive for LPG trade.

Focusing on retail demand. This is expected to increase as the results of the growth in population in the Asian region, Although we of investments he means Australia legislation of ore.

No Jason that take place in the area.

Another factor of the heavily affects the LPG market, there's a price of 1 it should be noted that the further recovery of the oil market, we make LPG more competitive relative to NAV, hence for PGM demand for industrial usual increase.

Indeed, the price of 1 has risen about 70% since October 2020, as prices increase due to higher demand for <unk>.

11 of we see that during Q1 'twenty 1 the rates for small LPG spark the slight increase compared to the previous quarter, but still remain much lower than pre pandemic level.

Looking at the small LPG trade west of Suez the effects of COVID-19 of a sudden visibly in the market, but the show signs of improvement, particularly from mid January onwards, which materialize the more fully towards the end of the quarter.

Number of cargoes increased that's beginning to reduce the significant number of items ships.

We therefore witness an increase in rates all of who we are still far away from a balanced market. We expect the does Europe slowly of measured from the pandemic. It will add further activity and call for them to the market.

He used offshore of the market remain the more stable both in the LPG and pet Chem cargos.

The witness an assistant from charters for my people are afraid the increase in terms of theater charters concluded. This has only been for short periods.

It seems that charters are still hesitant to take longer time charter positions, which is most probably linked to the pandemic.

It is expected that rolls of does the COVID-19 pandemic subsides, it had coverage and confidence will increase.

Focusing on the market, sometimes that does the small LPG pressurized segment has substantially old tonnage.

The 1% of the fleet is already above 20 years of age which is the driving force behind the increased scrapping some of the big.

All of the year, we have witnessed the demolition of for small pressurized ships, it's highly likely that scrubbing. The activity will increase further within the remainder of 'twenty to 'twenty, 1 if the market if the market remains unchanged.

Well, that's pretty recent published orders of 19 vessels on order.

Moving to rebuild in Japan, and Korea and day to be built in China and the beat.

The labor the until the end of 'twenty 'twenty free.

On slide 12, we discuss our company's outlook commencing with our share performance since the beginning of the due on the performance of the stock is presented along with selected gas carriers peer group and the price of oil.

Since the beginning of this year of the majority of shipping Stokes photo of correlation to oil price increasing trend would you expect for that does the economy bounces back from the COVID-19 pandemic on the global.

Trading cruises this will favor all segments of the shipping industry for.

Focusing on other companies since the beginning of 'twenty 'twenty 1 of our share price has increased by about 30%. However, we still trade at the discount to the Navy.

The slide 13 of the outlining the key variables that will affect the outperformance in the quarters ahead.

Given the market the demand is quite difficult to make firm predictions because of it.

As of late at a few key points of mass since the financial performance for 4 months for the upcoming quarters for.

First point is of how the total debt coverage of about $100 million and drink contracted revenues.

In addition, we have several vessels expiring for the period charters in the short term loss of about 10 ships in the spot market, which poses a risk but at the same time it gives us significant operating leverage.

The other activity pick up in market rates improve.

Moreover, we have all of all of our 22 K semi refs in mtc vessels and tankers from time charters at improved rates that securing revenues from shielding our voyage costs.

Fourth point yourself for your under a very low LIBOR rate environment and sort of finance cost will decrease even further.

Last but most importantly is the troops vaccines brings the pandemic into remission, we anticipate our market to leverage on the strong fundamentals such as low order book of accelerated scrapping and therefore recover relatively fast.

Concluding our presentation on slide 14 of represent the brief summary of the company's and market strong points.

As mentioned in our previous Ah.

The earnings call of we are all firm believers that their health of capital structure, along with other market expertise.

Help us grasp of the benefits of the small LPG market recovery when it arrives.

Stage of our chairman, who will summarize our concluding remarks for the period of examined.

Our performance in the first quarter 2021 was still governed by the COVID-19 pandemic.

Demand for small LPG carriers slightly strengthened and rates seem to have gained the positive momentum. These effects began to materialize towards the end of the quarter. Thus were not reflected in our results for quarter 1.2021.

Due to market conditions, and our presence in the spot market remained high and compared to the last quarter of the year.

Most of it mostly undermine the asphalt profitability was the operation of 2 of our product tankers in the spot market for the whole duration of the quarter, thus in carrying high voyage costs against for freight compensation.

What we find the important amidst these market conditions is that we have designed our fleet employment so as to grasp the positive market unexpected with the remission of the COVID-19 pandemic.

We have 16 vessels concluding their period of employment up until the end of 2021 and along with other ships currently in the spot market. It gives us the opportunity to reach out to 60 per cent of athlete.

At the time when hopefully the market is expected to improve.

We have now reached the end of the presentation and we would like to open the flow of your questions. So operator. Please open the floor. Thank you.

Your line.

Your line.

Yes.

Just the question.

Yeah. Your question is.

Yes.

Uh huh.

The first question comes from the line of around <unk>.

Some of it.

Yes.

Okay.

The teamstaff gas hasn't gone.

Hi, Randy Hope you're well.

Yes, they're all good a few questions for me.

The state of at least there was some positive momentum materializing towards the end of the first quarter as such of how much stronger are you expecting rates and maybe utilization of the here in the second quarter and what is utilization currently.

And listen around the you know in this environment with the Covid still raging in certain countries like India.

The vaccination percentage is still very low.

A huge huge increases in crew change on crew change of expenditure.

And the big hit the we'd go out the previously from the big gas of bankruptcy.

The makes us very very cautious.

And I don't believe that Q2 will be in any way better than Q1 of.

As you saw from our commentary.

We expect that we're going to see some improvement after the summer.

So if I was you would continue to calculate the you know the financials and making your analysis basis that Q2 is not very dissimilar from Q1.

Okay.

And then I guess the consolidation that continues to take place throughout the LPG sector are you open at this time to either selling further vessels or purchasing vessels or maybe even switching vessels right changing out some of your handy sized LPG carriers for additional small LPG carrier.

There's obviously you recently sold the gas Cam Hamburg for a profit so our additional vessel sales likely here.

And again around the you know how we think.

What kind of make a nice profit tour of clever move we're gonna make it if it's not the traditional you know all of us.

The fleet.

Oh, we as you know have.

We own shifts the style of gas in for different segments of the pressurized LPG semi ref LPG as full year I felt the Gs product tankers are not from actually that's actually 5 segments.

So indeed, we are open for anything of that will add the shareholder value and the gas Kim Hamburg sales.

Which is a ship that we bought last year, we managed to make a profit out of the ship and sell it for the 7 million profit in the other.

Non 12 moms consider that in this environment.

Quite the successful asset play.

Okay, and then you mentioned share holder value there any updates on additional tender offer of share repurchases going forward.

Yeah, I don't think we have the financial strength of these moments.

To do big things like we did the previously with the share buybacks and the tender offer. Unfortunately, the COVID-19 pandemic caused the lasted longer than we expected last year.

Of course, our board is always are eager and ready when we see.

The better times.

That the rates and obviously more cash.

1 of our balance sheet, because don't forget that 40 million.

<unk> is in the JV structures or not.

The sales gas a bush.

The 2 and of course, the stuff, they're still got share price being a Oslo as it is now of course to really discuss and Reapprove.

Further share repurchase as we have done a lot of them in the last 3 to 4 years.

That makes sense and then I guess lastly, you know there was the report out this morning, saying that you know massive levels of LPG scrapping maybe needed you know in the coming months I guess 2 questions. What are your thoughts on this end and why hasn't there been much scrapping in recent quarters.

I think that refers around the on the larger ships. It wasn't there for them some of the smaller ships because none of the ships.

Yeah.

Yes.

And again I think I think the article mostly the first on the VLCC side, the where you have a lot of new buildings and the quite the modern fleet.

This is the exact opposite of the pressurized market, where you have a relatively small order book and the huge a.

Percentage of average ships.

I think of that happened I mean for ships being scrapped in the in the pressurized segment.

Is the number of but we haven't seen for many years.

Actually don't forget that.

The scrap prices currently are very high.

And he was just people to sell for scrap.

But of course don't forget that it's all of the mother of expectations. If people have a debt free of 25 year old ship and expect the market to be a good income for you all.

For.

Maybe they want to hold on to it you have the X.

This was done by Peter Loves then obviously events shoes of scrap candidates, but I think this year will be of clear Oh, it will be a clear.

Sign of what people believe because we hope it will be the end of.

The COVID-19 pandemic and also want to see what the rates will do towards the end of the year will they go up all of the list day same at low levels.

And we are 1 of the few segments of shipping that has not.

Have a good run up in the last few years like the other segments have had I mean containers and dry are doing really well.

Cause I was being really badly but had the boom here the last year. So I think sooner or later Arthur should come.

We don't know when that's going to be but let's hope it's in the end of Q3 or 2 for this year.

Got it.

Alright, and then okay I'll turn it over thank you so much good luck.

Thank you Randy.

Okay.

Questions once again the lease task.

These passes.

Yeah.

I think there are no other questions. So we'd like to thank you for joining us at the conference call today and for your interest and trust in our company and look for having them again for our second quarter results in the.

August 21, thank you very much.

Yes.

Thank you for.

Yes.

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