Q1 2022 StealthGas Inc Earnings Call
Good day and thank you for standing by welcome to the first quarter 2022 conference calls at this time all participants are in listen only mode. After the speaker's presentation. There will be the question and answer session to ask a question. During the session you will need to press star and one on the telephone keypad.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to our first speaker today, Michael Jolliffe Chairman of the Board. Please go ahead Sir.
Thank you very much an idea.
Good morning. This is Michael Jolliffe, and joining me on our call today is <unk>, Chief Executive Officer, I'm, Konstantinos, <unk>, who will be handling the investor relations to discuss the financial aspects.
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 two of this presentation.
So if I had to disclose itself Gus filings with the Securities and Exchange Commission.
I would also like to point out that all amounts quoted unless otherwise clarified are implicit be stated in United States dollars.
Today, we released our earnings results for the first quarter, which was also the first quarter trading as a P. A L. P. G company and we saw a fantastic improvement compared to last year.
Let's proceed to discuss these results and what we see in the market in general.
Turning to slide three we summarize the highlights of our first quarter.
In the first quarter of 2022, we faced an improved L. P G market, particularly in Europe .
We took the opportunity and continue to secure more vessels trading in the area on period charters.
On the other hand, the market in Asia was stable, but we also have managed to secure more period charters.
In terms of operational utilization of our fleet at 92, 7%. It was at similar levels to last year I figure, we aim to improve as we had one vessel to dry dock and did experience all five days on the spot ships.
However, we marked an 18% reduction of spot days quarter over quarter, and 65% year on year managing to earn better returns on time chartered vessels on the spot ships.
We now have 59% of our fleet days secured on period charters for the remainder of 2022.
Total fleet employment day through subsequent periods generating almost $70 million.
That excludes the joint venture vessels in contracted revenues.
In terms of asset sale and purchase activity during the quarter, we completed the previously announced sale of two vessels.
Loyalty in the gassy inspiration.
Their new owners.
In addition, the current quarter, we entered into an agreement for the sale of our oldest 5000 cubic meter LPG vessel. The 1997 built gas monarch again for further trading and we delivered the vessels somebody the 23rd.
All of these transactions further enhanced our cash base.
Looking briefly into our financial highlights we need to keep in mind that in the last year's quarters mentioned, besides any sale and purchase activity are included the four tankers what that what part of the spinoff last December and are no longer in our fleet.
In quarter, one 'twenty two voyage revenues came in at $35 $9 million.
$1.5 million lower than in quarter. One 'twenty. One part is a result of fewer vessels on the spot market and partly due to the fewer number of ships, including before tankers.
Overall, comparing the LPG using our fleet, we saw a rise in revenues year on year and this can be seen.
In the T C revenues that came in at $31 6 million.
<unk> to 35 million last year, an improvement despite having good ships.
Well, we can better see the effects of the absence of the tanker vessels is in the operating expenses, where there was a $2 2 million dollar reduction to $12 9 billion and in depreciation expense, where there was a $2 5 million dollar reduction to $7 billion.
Our net profit for the quarter was seven 6 million.
Compared to 0.8 billion for the same period last year.
Well some of an adjusted basis, excluding impairment charges. We ended the quarter with net profits of $8 8 million compared to one 6 million in quarter, 121, and $2 8 billion in quarter 421.
Our adjusted income for the quarter corresponds to an adjusted EPS of <unk> 23 cents.
We manage this while at the same time, increasing our cash and cash equivalents from $31 3 million at the end of last year to $70 4 million at the end of quarter one 2022.
Or $82 4 million, including restricted cash.
They need through the sales, we completed and the refinancing of six vessels during the first quarter.
We continue to be well capitalized maintaining a low debt ratio of 37%.
And then just move on to slide four for our fleet employment update.
In terms of charter types and as of May 2022.
Out of a fleet of 34 LPG operating vessels, excluding our seven joint venture vessels, we have to unveil boat 30 on time charters and 32 in the spot market.
At the end of last year, we had four vessels on bareboat charters to two of these expire towards the end of quarter, one and the remaining two we will get delivery from their bareboat charters within the coming weeks.
Since our previous announcement, we successfully concluded eight new charters and charter extensions. These.
These new fixtures and both vessels previously on bareboat or in the spot market grew down at similar or improved rates.
Our period coverage for the remainder of 2022 is the order of 59%.
We have close to 70 million of secured revenues going forward.
<unk> 5 million of which is expected to be received within the remainder of 2022.
Similar figures to the previous quarter.
In slide five I would like to provide an update as to our two joint ventures.
We also saw improved performance in both.
Tributes paying $1 $7 billion to our bottom line.
Since our last call all vessels in our time chartered.
Our first joint venture weeks comprises it is majority of smaller LPG vessels at the gas defiance time chartered for three months, rather than a second joint venture.
Rising of two medium gas carrier vessels by swap more under construction.
Gus can Bremen was chartered for one year time charter.
During the first quarter, we received $1 million in dividends from the joint ventures, improving are improving our cash flow.
Our joint venture arrangements combined have a solid cash base of about $43 million.
We do not expect to have any capex related to the delivery in 2023 of the new building.
The medium gas carrier as the joint venture itself has enough cash in hand after the sale of one vessel last year to fund the acquisition together with any finance proceeds to be a range.
After all the rise of new building prices across all sectors includes these medium gas carriers.
Underpins the financing to be sold.
In terms of our fleet geography in slide six our company focuses on regional trade and local distribution of gas.
This graph is a snapshot of the positioning of our vessels, excluding our JV vessels as of May 2022.
Currently half of athlete 16 vessels trade in Europe .
Putting vessels trade in the middle and far east and two vessels trade in the U S and Caribbean and three in Africa.
Given the better market in Europe , we would expect to see more vessels moving there.
Opportunities arise.
I will now turn the call over to my colleague Konstantinos sister lives for our financial performance.
Thank you Michael and good morning to everyone.
I will discuss our financial performance for the first quarter of 'twenty to 'twenty two.
Let us turn to slide seven where we see the income statement for the first quarter of 2022.
Against the same period of the previous year.
Voyage revenues came in at $35 9 million.
Marking a decrease of $1 5 million or about 4% compared to the same periods of last year.
Partly due to the fewer vessels in the spot market.
Looking like its actually decreased by 65% and partly due to the fewer number of vessels, we had $36 five.
Average vessels in the first quarter of 2022 versus 41, six average vessels during the first quarter of 2021.
We should also note the increase in the Voyager in TCE revenues over the four handy sized LPG using the fleet.
We're all chartered at high rates in a stable market.
Beats starting from a lower base.
Voyage costs decreased by $2 7 million compared to the same period last year.
This decrease in voyage expenses was partly due to the absence of tankers in the 'twenty to 'twenty two results and partly due to the decrease in spot days, where we are responsible for the voyage costs. Some of these vessels.
Based on all of the above our net revenues for the period were in the order of 31 6 million compared to 30.5 million last year.
4% up.
Operating expenses saw a significant reduction of $2 2 million about 15% compared to Q1 'twenty.
2021 due to the fewer number of vessels.
Were we to exclude this effect our opex would be along the same levels as last year.
Positive result, given that we continue to face cost pressures, particularly in crew costs due to the COVID-19 pandemic.
In terms of Drydocking costs, we had 0.4 million.
The first quarter of 2022 from one vessel.
We expect to dry dock another five vessels during the year.
Depreciation is another items that saw a large decrease from nine 5 million to 7 million.
Due to the decrease in the number of vessels.
During the previous quarter. There was also an impairment charge of 0.5 million relates to the sale of the gas monarch that took place in the current quarter.
And the 0.4 million loss on the sale of the gas inspiration.
Interest and finance cost declined considerably from $3 1 million to 2.4 million, partly due to the decrease in the average debt during the comparable periods.
And partly due to the decrease in the average cost due to our reduction in the loan margins.
We expect this trend to reverse in the future as we will start seeing the effect of the recent interest rate increases in the coming quarters.
As a result of all the points analyzed the ball. We ended the first quarter of 2022 with a net income of seven 6 million and.
And adjusted net income excluding these excluding impairment and vessel sales.
<unk> eight 8 million.
Corresponding to an earnings per share of 23 cents, a tenfold increase compared to the meager two cents over the same period of last year.
Yeah.
Looking at our balance sheet in slide eight our liquidity, including restricted gosh was at the end of the quarter in the order of $82 4 million.
Substantial increase from the 52 8 million.
In the first quarter of 'twenty, 'twenty, one and $45 7 million in the fourth quarter of 2021.
The increase in liquidity came primarily from the refinancings and vessel sales and secondarily from operations and an increase in payables.
We also received a 1 million dividend from our JV investments during the first quarter.
The total value of our investments in our JV is $54 million.
The overall outstanding debt is 300 million similar.
Similar to the levels at the end of last year.
We expect our debt amortization going forward to be in the original 7.5 million per quarter.
While it was close to 10 million per quarter a year ago.
Furthermore, we have no planned capital expenditure at this moment.
Concluding our financial commentary with slide nine we.
We will briefly discuss our debt profile and capital structure.
As mentioned before since the beginning of 2021 and up until February 2022.
On the Wednesday important project of refinancing 20 vessels.
That's succeeding in first reshaping our loan portfolio and deferring balloon payments.
Our first balloon payment is now arguing March 'twenty to 'twenty five.
And second enhancing our free cash by about 16 million.
And knock on of our last refinancing that place in February .
We also reduced our average loan margin on all the new loans were at lower margin levels than the previous ones.
Compared to the end of last year, we slightly increased our debt, but net gains remained low due to the increased liquidity.
After the sale of the gas monarch, we continue to have six unencumbered vessels.
During the first quarter, we also entered into a new swap arrangement to hertz to hedge part of the interest rate exposure.
As a result interest rate hedges are in place for 36% of our debt.
I will now hand, you over to our CEO office, who will discuss market and the company LLC.
Yeah.
Going on slide 10.
Providing some insights on the LPG market Needless to say that given the current geopolitical tensions in the Ukraine I along with the ongoing COVID-19 pandemic.
It's very difficult to foresee our market's performance on the positive side during the first few Marshalls 2022.
The largest exporter of LPG has ramped up its exports over 10% and China has been importing a bigger share of its LPG imports from the U S.
However, China.
First quarter of the year because its imports I was a result of the COVID-19 policies.
It has followed with a 7% decrease we expect that this will reverse in China will continue to be the main demand driver, but for the time being such a slack in demand is being fueled by increases in push from operation in countries, particularly India that shortage himbo drives by 17%.
India, many choices that LPG from the middle East. So some of the LPG has been lead director from U S to Europe now, 30% of European LPG imports from the U S and its possible we see increased volumes in the future.
In addition, LPG imports of North Western Europe are expected to increase in the years ahead.
On the back of a rising petrochemical demand.
It'll be an internal term LPG trade is a large market for small LPG and has held pretty well given the circumstances.
They're continuing a war in the Ukraine.
Has created difficult isn't trade in Russia, even though as we speak the U S and Europe have not sanctioned LPG imports.
A result, we expect European Congress to try and reduce the dependency on Russian imports the biggest importance of Russian LPG has been Poland, Finland in Ukraine.
Usually done through railcars trade disruption and of course could be content either from other sources further afar or from switching from alternative fuels.
To be clear what the impact would be we can only hope that the war will end soon.
Slide 11, we present, the key fundamentals of our small LPG market commencing with market charge evolution.
During Q1, 'twenty two rates improved slightly all small LPG sub segments on a quarter on quarter basis, not as large as an increase as we witness you're over a year, particularly for the vessels trading in the west.
Looking at the small LPG trade west of Suez headed for spot market through the winter marshawn condition to spring and the owners have enjoyed the tight market and health number straight.
I buy in Chicago, she loves being withdrawn you try and availability of vessels. We don't expect the correction of the market leading to a summer and activity slowed down somehow.
But the market is quite well balanced and it doesn't make it doesn't take more than a couple of vessels to leave the area.
Northern for things to be tight again.
He used of Suez the spot market in Asia remained quite active until around the time, China locked down Shanghai and since then things have been less active, especially on the pet Chem side, hopefully opening in China will give a boost to the market to watch more. However, we are now going into the turnaround maintenance season for the bank that can plan shall we don't expect much change in the market for.
The next couple of months on the period side activity has been lower but rates have generally remained at a healthy level. We have however, since several vessels, leaving Asia and going through the Atlantic. The last five months. So this has been a positive and keeping a reasonable market balance in the region.
Demand for our core fleet continues to look promising there continues to be an overhang of many older ships in the fleet over 20 years of age, which we expect will keep scrapping activity elevator sooner or later.
Environmental regulation from Russell make it harder for older vessels to trade.
The ordering activity continues to be subdued partly because of difficulties in finding yoghurt availability and partly because new building prices have risen together with the recent surge in inflation globally.
Environmental regulations related to emissions and a lack of clear direction on the micro fuel choices make the ordering of new ships and more risky decision.
I was personally published orders there are 19 vessels on order nine in Japan, and Korea and tend to be built in China to be delivered until the end of 'twenty 'twenty four.
In fact, we consider translator favorable sub two 5% on yearly Christian the fleet before scrapping.
Slide 12 presents our company short performance since the beginning of 2022, our share price has risen over the few past months in a very volatile market.
They did have lagged behind crude oil rises in other companies in the wireless sector.
Gosh, Stokes, who trades at a discount to NAV.
13, we're outlining the key variables that will affect our performance in the quarters ahead, given the market turmoil, there, especially now with a concentration in Ukraine and the coverage situation in China, it's quite difficult to make market predictions are shrunk point going forward is that we have the sizable and quite diversified LPG fleet.
Is that we can easily leverage upon any further market improvement and continue to have to have manageable debt levels and additional and I'm sure you have seen in the past the oil price surge may increase demand for LPG, particularly for industrial use our market fundamentals are quite solid as we enjoyed relatively low order book, while 27% of the industry.
Sleep is above 20 years of age.
On the downside and given the recent geopolitical crisis inflationary pressures on our cost may become stronger.
Regardless of the global situation our focus in the following quarters would be to adapt.
Two of them to now to the seaborne trade in all LPG market will shape, while relying upon a strong fleet and robust capital structure, we feel confident that our strategic decision to make those guests are pure play LPG company Cross the border I Hope your spectrum will pay off and shrank from our asset returns.
At this stage, our chairman Michael Jolliffe will summarize our concluding remarks for the period examined.
Thank you Harry.
We're very pleased with the results we announced today.
It was one of the best quarters for our company over the last few years.
Following the strategic decision to become a pure player in the broader LPG market. This was the first quarter. The Astellas got sleep assisted only LPG carriers of various sizes.
During the first quarter.
Improving LPG market continued its upward trend and we manage to capitalize posting improved profits of 7.6 million one of the best quarterly results in many years.
The adjusted basis, our EPS for the quarter was 23 cents.
We also have managed to contain cost pressures, particularly related to crude and bunker prices that continue to push our cost base.
That being said, we continue to operate in a challenging geopolitical environment with the war in Ukraine, and the COVID-19 pandemic.
Particularly with regards to the situation in China still ongoing and creating more uncertainty for the future.
Now we can also add economic uncertainty as a result of high inflationary pressures and rising interest rates.
This will affect the LPG shipping market and whether we would be I would have benefit from any change in trade patterns remains to be determined as this is a market that is still seeking direction.
Going forward, we cannot predict how markets reality, especially in such turbulent times. However.
Sizable fade a market strong fundamentals L. P. J Reits improvements in the first quarter of 2022, along with a healthy capital structure of the strong points of which we will rely that matter any potential market disturbances, we might need to face.
We have now reached the end of our presentation and we would like to open the floor for your questions. So operator. Please open the floor. Thank you.
Thank you Yeah participants we will now begin the question and answer session.
If you wish to ask a question. Please press star and one on the telephone keypad and wait for a name.
And to be announced.
Yeah.
The first question comes from the line of Chris Robertson from Jefferies. Please ask your question.
Good morning, gentlemen, and thanks for taking my questions.
Good morning.
So it looks like you have seven scheduled dry dockings. This year can you talk about kind of the cadence around that how many were completed during the first quarter and what's your expectation for total off hire days this year.
And we had one already.
But it's not that easy to calculate the off hire because that will depend on where in which country. The dry dockings will take place and it also depends if China will be open for dry dockings, because that makes a huge difference on costs and also higher.
So I think we have to to see that closer to the drydocking dates.
Are any in the yards during <unk> or are you trying to wait and wait it out to see what happens with the China easing lockdowns.
Awesome market is a hot operationally, we try to delight as much as it's allowed by class.
We don't have any vessels now on a dry dock.
And as I said, if China does open that would be a big Oh.
A big projected reduction on caution on fire, because China is a cheaper than most other places.
Okay got it and for that one that was in dry dock during the first quarter I believe it was off hire of 61 days during <unk> was that a 100% related to that one vessel.
No I don't think that's right, we can check and come back to you. If you want to send us an email on it.
Sure I'll follow up with you offline thanks for that.
I guess, what the market improving now and you know the share sold trading below NAV.
Aside from a general market improvement in the LPG sector. What do you think is going to drive kind of a net.
Growing of that discount to the NAV.
Our consistent quarterly profits.
Got it that makes sense.
Okay guys. Thank you very much for the time that that's it for me.
Thank you.
Thank you. The next question comes from the line offer it.
From top of you. Please ask your question.
Hey, good morning, Harry Congratulations on obviously, a very strong quarter.
As you guys know we've been very long term supportive shareholders in my questions on capital allocation also you guys have historically been pretty opportunistic you sold stock when its gotten close to book value you repurchase shares on the open market and even launched a tender.
But your stock now trades at $2.64. The book value at reported is $12 80 per share.
And you've continued to sell shares including this past quarter excuse me ships, including this past quarter with minimal impairments.
And we have a pretty meaningful cash balance so why doesn't it make sense.
Even given uncertainty and continued uncertainty to repurchase a meaningful amount of stock at this level or if the book is truly scalable at anywhere near these prices how does it how does it make sense to operate the business and what are the better uses of cash or if not to repurchase stock. Thanks guys. Appreciate.
<unk>.
Thank you Eric as you know very well the biggest mistake that investors do you use that there too quick to judge either on the upside out of a downside.
They're smokers still at these levels because were just announced results and I guess, most investors wanted to see if that good markets.
Persists or not.
What should we have seen in the past the same psychology in mentality from the shareholder base.
Now you'll shin.
We've sold the three ships, both young and old.
And crystallize than IV, which again emphasizes the fact that the N V is about the numbers you talked about.
And indeed at this level, we are in good shape, but if we have two or three quarters with very good results and the stock price is still at about those levels, but then to your point will be absolutely right. When we had the previous quarters, where the numbers were not good.
And obviously people were disappointed that they did not expect that very good.
Uh huh.
Huge turnaround our net income this quarter was up 900 per cent.
On top of that don't forget there's still cause not very liquid.
But in the end of the day you know we've taken the right decisions I'm the largest shareholder so obviously on.
What is best for me its best for all of you.
And of course, if we continue to have his profitable quarters and our.
Our cash balance is a big as it is now of course, when we buy so kosmos has done before.
If we have never do it to your point would be.
Well I could but I should.
As you said, we've done it before and we actually did the tender offer.
The Covid times, which I don't think many companies had the guts to do.
So that's travel does that to a patient will be rewarded as it happened in the previous upturn in O nine or 10.
Yeah.
Thanks, Eric I appreciate it.
Thank you Eric.
Thank you Yeah participants as a reminder, if you wish to ask a question. Please press star and one on the telephone keypad.
Yeah.
I see that the Oh no question childhood questioner, so we'd like to thank you for joining us at our conference call.
We are looking forward to having you us again for our Q2.
Poor results in August Thank you very much.
That does conclude our conference for today. Thank you for participating all disconnect have a nice day.
Okay.
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