Q2 2022 StealthGas Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Good day, and thank you for standing by when it come to the steel costs Q2, 2022 results call and webcast. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session you will need to see.
<unk> West Tal, one and then one on your telephone.
We then had rented to meet that message advising that you had is raised.
Please note that today's conference is being recorded I would now like to hand over to your first speaker Mr. Harry <unk> CEO . Please go ahead Sir.
Good morning, everyone and welcome to our second quarter two earnings conference call.
Theres cardiovascular CEO and joining me on our call today is Mr. Schuster water handling our investor relations to discuss the financial aspects.
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 and financial performance.
At this stage if you could all take a moment to read the disclaimer on slide two of the presentation.
Risks are further disclosed in spells gas filing with the Securities and Exchange Commission.
We'd also like to point out that all amounts quoted unless otherwise clarified are implicitly stated in U S dollars.
Today, we released our results for the second quarter of 2022, which was also the second quarter of trading as a pure LPG company and we saw a fantastic improvement compared to last year.
So let's proceed to discuss these results and what we see in the market in general.
Slide three we summarize the highlights over the second quarter.
The second quarter of 'twenty tied to the strong charter market that we experienced in the first quarter.
Tenured, particularly west of Suez, but also in Asia, we saw healthy number of inquiries for chartering our ships in terms of operational utilization of our fleet or 97%. It was at similar levels to last year and better than the previous quarter idle days for spot vessels were reduced however, we did.
Not dry dock any vessels during this quarter that will happen that will happen in Q3 and Q4.
We now have 62% of our fee based secure charters for the remainder of 2022, which total fleet employment days for all subsequent they're generating about $72 million, excluding JV vessels and contracted revenues.
In terms of our sale and purchase activity during the quarter. We completed the previously announced sales of our oldest <unk>.
5000 cubic meter vessel the 1997 built gas monarch for further trading.
And Furthermore, during the current quarter together with our JV partners, we entered into an agreement to sell to a third party our largest vessel the 38000 cubic meter <unk> vessel the eco nebula.
It was a profitable sale and the proceeds and accumulated profits after the debt repayment will be distributed to the partners. During the current quarter as a result, we estimate to increase our available cash bye bye.
By an additional $60 million.
As we always aim to renew your fleet with more modern vessels grocery enter into an agreement with the related party to purchase tune your building medium gas carriers 40000 cubic meters each already under construction in Korea with delivery.
Further in the first quarter of 2023.
If we were to place an order today, we would expect delivery of these vessels in 2025, the relevant capex of circa $117 million for these vessels, we expect to fund through our existing cash and new debt. We have approached one of our final children are in there and already in the commitment fees.
Looking briefly at our financial highlights we need to keep in mind that the four tankers that were part of the spinoff last December when include that were included in the Q2 2021 results.
It was a very strong quarter in voyage revenues came in at $39 3 million $3 4 million higher than the previous quarter and about the same as last year. When we had more vessels in the fleet overall comparing the LPG is in our fleet. We saw a rise in revenues year on year and this is also were affected.
In the D C revenues.
Came in at 40, $34 6 million and $1 3 million increase from last year, despite having fewer vessels in the fleet.
They're beneficial effects of the absence of the tanker vessels is conspicuous in the operating expenses, what there was a $6 4 million reduction in <unk>.
Operating expenses and depreciation combined our net profit for the quarter was $12 2 million compared to $1 6 million last year and $7 6 million in the first quarter.
On an adjusted basis, excluding derivatives, we ended the quarter with net profit of $11 3 million and an adjusted EPS of <unk> 30 cents.
That brings our six months EPS on an adjusted basis to 52 cents.
We managed this while at the same time, increasing our cash and cash equivalents from 31 3 million at the end of last year to approximately $78 million at the end of Q2, 'twenty, two or $92 million, including restricted cash mainly through their sales we completed refinancing of six vessels during <unk>.
Q1, and our internally generated cash flow.
We continue to be well capitalized maintaining a low debt ratio of 36%.
Let us move to slide four of our fleet employment update since our previous announcement, we successfully concluded five new charters and charter extensions.
Similar or better levels.
Terms of charter types out of.
<unk> got 22 out of a fleet of 34 operating vessels, excluding our seven JV vessels, we do not have any vessels on bareboat.
<unk> remained on bareboat were delivered back to us during Q2.
22 on time charter and Nathan the spot market slightly higher than before.
We are in the summer months, we don't expect to have more vessels on the spot market, but our target is to fix more on time charters as we enter the winter period.
Our period coverage for the remainder of 2022 is in the order of 62%, we have close to $72 million of secure revenues going forward.
Millions of which is expected to be received within the remainder of 2022.
Slide five we provide an update as to our two joint ventures. All six vessels are now time chartered our first joint venture, which comprises a small LPG vessels have begun calibers extended its time charter for 12 months, our spirit said, we decided along with our partners to sell the bigger.
The biggest vessel in 2007 built eco nebula at a profit.
Hum.
Sure shade below $10 million the delivery of the vessel occurred on August 9th and the associated debt was repaid the cash from the sale along with the accumulated profits will be distributed back we'll expect to receive about six to 8 million cash from this vessel as ours, our share and this will boost our already healthy cash base, our second Jay.
<unk> comprises of two medium sized gas Scott is plus one more under construction last quarter, where time charter the gasket Brendan and this quarter with time charter equivalent showing up for six months at a significantly higher rate. Our JV arrangements combined have a solid cost base of about six to 7 million, including the sale of.
The net proceeds we don't expect to have any capex related to the delivery of the new building I'm, just seeing 23 as a joint venture itself has enough cash on hand after the sale of one older vessel last year to fund the acquisition together with ant finance proceeds to be a range. After all is the rise of new building prices across all checked.
Including <unk> underpin the financing to be shot.
In terms of fleet geography on 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 August currently we have 19 vessels trading west of Suez.
Particularly in Europe , 11 vessels trading in the Middle East far East two vessels trading in the U S and Caribbean and two vessels in Africa, we have moved more vessels in the Europe met Black sea areas since our last call given the better market conditions in Europe , and expecting increased activity as the winter approaches.
Now I'll turn the call over to Mr. Novartis for our financial performance.
Thank you Harry and good morning to everyone I will discuss our financial performance for the second quarter of 2022.
Let's turn to slide seven where we see the income statement for the second quarter of 2022 against the same period of the previous year.
Voyage revenues came in at $39 3 million almost the same as last year.
Due to the fewer vessels in the spot market.
Spot market days decreased by six 9% just 364 days.
In spite of the fewer.
Number of vessels, we had 34 vessels.
Q2 versus 42 vessels at the end of Q2 2021.
We should also note the increase in the voyage in the TCE revenues over the four handy sized LPG and the fleet that we're all chartered at higher rates in a stable market.
Starting from a lower base.
Voyage costs decreased by $1 3 million compared to the same period last year.
246 million.
The same reasons.
The stable revenues and a decrease in costs combined resulted in net revenues for the period.
There were $34 6 million.
To $33 3 million last year, an increase of 4%.
Operating expenses.
African reduction of $2 5 million about 16% compared to the first quarter of last year due to the fewer number of vessels.
Where are we exclude this effect our operating expenses would be along the same levels as last year.
Was it the result, given that we continue to face cost pressures, particularly particularly in crew costs due to the COVID-19 situation due to rising inflation.
In terms of dry docking costs, we had 0.2 million in the second quarter.
We did not drydock and vessel during that period, and we extended the due date for a couple of vessels for a few months.
That means we still expect to dry dock another five vessels for the remainder of the year.
Depreciation is another item that saw a large decrease from $9 6 million to $7 million.
Due to the decrease in the number of vessels.
During the previous year. There was also an impairment charge of three 1 million related to the sale of one vessel, we did not incur any loss or gain during the second quarter of this year.
Interest and finance cost declined from 3 million to two 8 million, partly due to the decrease in the average debt during the period.
Due to the regulatory repayments and partly due to the decrease in the average cost.
The reduction in loan margins.
Beginning next quarter, we expect this trend to reverse as we will start seeing the effect of the recent interest rate increases in the rollover of our facilities.
Other income of $1 1 million, mainly relates to gains in the fair value of interest rate swaps, we have entered into as the increase in interest rate make these hedges more valuable.
As a result of all the points I analyze the bulb. We ended the second quarter of 2022 with a net income of 22.
2 million.
A six fold increase compared to last year.
And adjusted net income that's excluding.
The vessel impairments and derivatives of $11 3 million corresponding to an EPS of <unk> 32.
For the first half of 2022, we had net income of $20 million and then EPS of <unk> 52 cents.
Looking at our balance sheet in slide eight.
Our liquidity, including restricted cash was at the end of the quarter in the order of 92 million a substantial increase from the $45 7 million in Q4 2021.
The increase in liquidity came primarily from the refinancings and the vessel sales and secondarily from operating cash flow.
Our vessels net book value decreased from 681 million to $655 million.
The depreciation and the sale of two vessels.
The total value of our investments in our JV is $56 million.
With the sale of vehicle Nevertheless, the value will be reduced in the third quarter of 2022.
The overall outstanding debt is 292 million from $300 million at the end of last year.
We expect our debt amortization going forward to be about $7 $5 million per quarter.
While it was close to $10 million per quarter a year ago.
Concluding our financial commentary with slide nine we will briefly discuss our debt profile and capital structure.
As mentioned before since the beginning of 2021 and up until February 2022.
When the important project of refinancing a large part of the fleet.
With us raise more cash by about $16 million reduced our loan margins and reduce the debt amortization.
As a result, we have no refinancing risk until March 2025, when our first balloon issue.
During the second quarter, we did not enter into any new financing arrangements.
We expect to enter into a new financing arrangement before the end of the year in relation to the two new building vessels.
We have approached one of our finance he is willing to finance both vessels and we expect that.
Some up to 60%.
We will have more details in our third quarter presentation.
Overall, we continue to keep low leverage with a debt ratio below 40% and we continue to have six unencumbered vessels.
The rapid rise in interest rates will have a negative effect on our interest costs.
We will start seeing the increase in cost in the third quarter.
However, these negative effects will be mitigated by the interest rate hedges, we have put in place for <unk>.
36% of our debt as well as the lower overall debt level, we have today.
For comparison, a year ago that debt was $352 million compared to $292 million at the end of the second quarter of 2022.
I will now hand, you over to our CEO , Harry <unk>, who will discuss market and company.
Moving on slide 10, we are providing some insight on the LPG market Needless to say that given the ongoing geopolitical tensions in Ukraine, along with the ongoing COVID-19 pandemic is very difficult to foresee our market's performance last quarter. We discussed how we had not seen any increase in imports from China.
The largest importer of LPG, but we were expecting this to change indeed, it seems the lifting of Covid restrictions had a positive impact and thus latest reports show Chinese imports seem to have reversed.
And grown by yet the moderate to 1% here on a unit for the first seven months of 2022, and a strong 7% month on month growth in May This helped underpins the pressurized market for our vessels. The rising demand would have been stronger had there not been delays and PVH plants capacity additions out of the <unk>.
Seven 5 million ton capacity additions expected this year only $2 2 million tons have been added this thus far as potent research shows and the run rate of China's 17, PTH plant continues to run at lower levels.
We would expect more plants to come into the equation as the year progresses, India has seen a significant growth in recent years, becoming the second largest importer in Asia.
Data shows record imports close to 2 million tonnes are expected for the month of August however questions remain on the sustainability of this growth as important data from the subcontinent, theres unconfirmed and demand growth may be hampered by the rise in domestic LPG prices households in India have been hit by four hikes in LPG.
Their prices this year.
Despite the drop in LPG prices globally.
<unk> to the drop in oil prices and the government is reluctant to keep subsidizing the LPG prices of gas cylinders and that's everywhere LPG demand is echoed in price increases and a possible economic recession.
On the other side of the World now 30% of European LPG imports from the U S. Our percentage of has arisen recently also partly as a result of the Ukrainian conflict.
We expect this trend to continue in the near term as the U S keeps increasing.
Increasing it.
Export capabilities and LPG imports of non Western Europe are expected to increase in the years ahead on the back of a rising petrochemical demand.
Previously said European intra regional LPG trade is a large market for small LPG vessels and has been one of the best performing markets for our vessels lately.
Although Russia has never been a major source for Europe LPG imports.
Rents have underpinned the need for diversifying LPG sources.
Besides increasing U S sourced LPG.
Yet identified significant changes in trading patterns and that being said one business. We as a company have been more evolving recently has been transferred and cargo from Algeria to Europe .
On slide 11, we present, the key fundamentals of our small LPG market commenced.
Commencing with the market rates evolution. During Q2 time charter rates continue to improve among all small LPG sub segments on a quarter on quarter basis, while on a year over year basis, where we witnessed double digit growth.
Looking at the LP at the small LPG trade west of Suez the market for pressurized LPG courage. During Q2 was quite active both on the LPG and petrochemical side.
Enjoy the firm.
Marketing, especially in northwest Europe as the summer approach activity slowed down is as we would expect and some of our vessels that were previously on TCR currently trading spot east.
East of Suez, The Asian spot market was tight for a significant part of Q2 easing of Covid restrictions assistant a rebound in Chinese imports, particularly in May and July and August It was India that saw a rebound in imports. However for the small vessels the market came under pressure during the summer months, while we are more optimistic going.
Into winter months on the video chat activity has been lower but rates have generally remained at healthy levels.
The fundamentals for our core fleet of small pressurized gas.
Gas ships continue to look promising.
<unk> continues to be an overhang of many older vessels over 20 years old so far in 2022 with the market for LPG shipping being strong we have not seen any scrapping.
Environmental regulations will also make it harder for older vessels to trade and we expect to see increasing scrapping activity is sooner or later the ordering activity continues to be subdued partly because of difficulties in finding yard availability and partly because you were building prices have risen together with additional charge and inflation globally.
New environmental regulations related to emissions and a lack of clear direction on the matter of fuel choice make the ordering of new vessels in motor skill decision.
Aspiration published orders there are 21 vessels on order to be delivered until the end of 2024 and a couple more beyond that while we did see a handful more vessels on order. We foresee that there is constraint bulk ordering of new vessels that could keep the supply demand balance used to being probable.
Sub two 5% annual increase in the fleet before scrapping is one of the smallest if not the smallest in any of the shipping segments.
Slide four presents our company share performance since the beginning of 2022, our share price has risen over the past few months close to doubling in June in a very volatile market. While we continue to see a correlation with crude oil at the same time, we reiterate that gas stock still trades at a deep discount to NAV and the six months EPS this year.
I'll point, 52 cents, making our stock more attractive on a price to earnings ratio.
In slide 13, we are outlining the key variables that will affect our performance in the quarters ahead.
Given the market turmoil, especially now with the current situation in Ukraine. The Covid situation in China is quite difficult to predict our market's future are.
Strong point going forward is that we have a sizable and quite diversified LPG fleet.
You can easily leverage up on any further market improvement and continue to have manageable debt levels. Our market fundamentals are quite solid as we enjoyed relatively low order book, while 27% of the industry fleet is above 20 years of age on the downside inflationary pressures may increase our caution we trade in a product that is sensitive to economic.
Amira recessions.
Regardless of the global situation our focus in the following quarters will be to secure revenue stream with more fixed charters. While at the same time contained cost pressures, we will be relying upon a robust capital structure and the support of our financials for renewing our fleet.
The addition of the two medium sized gas carriers.
Taking advantage of any opportunities to sell older vessels, we feel confident that our strategic decision to make <unk> the pure LPG company.
Across the broader LPG spectrum will pay off and strengthen our asset returns.
The first two quarters of the year has been very positive we announced today is the best results in a long time with strong profitability, especially the second quarter was our best quarter in the last decade, we should not expect to see some results in the same in the third quarter, which is traditionally weaker due to seasonality, but we are optimistic on the LPG market in EMEA.
And long term and hope that this continue this momentum keeps growing.
Have now reached the end of the presentation, we'd like to open the floor for your questions. So operator, please open the floor.
Thank you.
To ask a question you will need to slightly price gallois.
And you can wait for your name to be announced once again at all.
One and then one on your telephone.
Yeah. Thank you proceed with Nellix to ask question. Please standby.
Yeah.
Okay.
Our first questions come from the line of sight Chandra from ESA ceases. Please ask your question.
Hello <unk> your line is open.
Okay.
Yeah.
Hello, Mr. Chandra Your line is open from <unk> Suisse. You May ask your question.
We can go to the next caller show we're going to proceed with the next one please standby.
Our next questions come from the line of Tate Sullivan from Maxim Group. Please ask your question.
Hello, Good day.
Give more background on the decision to acquire the newbuild medium gas carriers versus buying smaller small gas carriers.
And will those be in your JV is as well or are within gas.
Thank you date nice to hear from your bigger ships.
Big your profitability once the once the market is firm and since we have said before that we want to balance the fleet.
Between small and bigger ships having.
A less smaller ships and more bigger ships, we are following exactly on that strategy.
Is that two ships will be 100% owned these two ships will be 100% owned by self guys.
Okay.
Let's see delivery in the second half 'twenty three how long ago, where these ships are originally ordered.
And second part of that question, if you would order medium gas medium size or small LPG ships.
When would you would probably take delivery of new builds if you order today.
These ships were ordered in a in a queue.
Q4.
Q4 2020.
And what was the second question sorry.
If you would order small gas carriers or medium gas carriers newbuild today would they be for 25 delivery or perhaps even later spoke earlier, yes. It would be 425 that was their prices as they are today.
I would refrain from from ordering new builds.
Okay.
And can you and selling the nebula.
In this strong market and IC was built in 2007 can you talk about that.
Decision to sell versus versus retaining the ships, even if they can generate profit where you are in this type of market.
They've described as simple.
Jeff gave you can sell a ship which is.
For 15 years old with access Special survey being do you and you can sell her at the price when you make a sizable profit.
Then you take that decision and do it and that's.
But why the board of <unk> and the JV partners.
The sale.
Great. Thank you and one more for me if I may are the Ah you may noticed noted dry dock costs. So for I think five ships in the second half of the year approximately how much dry docking cost per ship or historically havent have dry cough and various smaller LPG ships.
It depends on the location as well as not only the size depends on the location and the age of the ship. So I don't have the exact in for right now, but if you'd like you can send us an email and we can come back with more.
More more more more numbers more and more specific numbers.
Okay great. Thanks, Thank you for the detail. Thanks, Paul Thank you.
Once again, if you do have any questions or comments. Please press star one and then one of your telephone and wait for your name to be announced.
We have no further questions at this time I will now hand back the conference to you for any closing comments, we just have two questions just one moment.
The next question is come from the line from guidelines from the guys Foundation. Please ask your question. Your line is open.
Yes, Hi, I had to leave for a moment I don't know if anyone asked you about stock buybacks did they.
No that dividend Oh, okay what.
We used to talk about $12 a share of niv, maybe the numbers lower I don't know Ive crunch numbers, a little bit lower but.
Whatever the number it's tremendously it's a multiple of what are market prices.
Yes.
I agree with you, 100% good well, we have a lot of cash more cash why aren't we buying stock back it seems to me to be one of the best buys in the market.
Yes, but you probably forgot what we said then.
The Q1 results.
Which.
Pertaining to this I guess Sai, yes pertaining exactly to this if you don't remember I don't mind repeating it.
Okay. Thank you.
The board has told US since we had the two or three years of really bad markets and they're covered.
Disruptions.
They wanted to ship three solid quarters before we discuss our share buybacks, okay. Great fair enough. So I guess this is a second.
Second solid quarter. So if we have a very solid Q3, I think it will be a matter for discussion at board level.
Great.
Thank you very much Gary thank.
Thank you.
We are going to principally the next question.
Okay.
The next question comes from the line of Tate Sullivan from Maxim Partners. Please ask your question.
Thank you for taking a follow up.
You commented on some of the seasonality.
Earlier, you think <unk> will probably be not as strong as Q2, but then in the time charter equivalent rate table in the presentation. It seems like good momentum in rates, but still seasonality, particularly without the tankers in your fleet now after the spin off.
So still every year three Q2, Q do you expect an LPG to be the weakest quarters of the year.
Yeah.
As with.
With under normal circumstances Q4, four in Q1, our strong Q2 in Q3 are weaker.
Okay great.
Thank you very much have a great.
Thank you.
Thank you participating in the next question please standby.
The next question is coming from the line of Mike <unk> from mentor partners. Please ask your question.
Harry how you and the board feel comfortable buying committing to by over $100 million in two new ships.
Yet uncomfortable buying back stock.
Till you see three or four quarters when buying back stock is essentially buying a diversified portfolio of ships that are already built on the water and lease that you know a lot about and purchasing two new ships you know none of those facts I don't quite see how you can do one without the other.
Very good point the strength of this company.
One without the other.
Very good point.
Strength of this company is the size of the fleet and the modernity and quality of the fleet if we don't keep.
Building and buying quality vessels are oil major customers will dampen our oil major customers will dampen for somebody else.
So for.
For a company that has $800 million in assets low leverage and a very strong balance sheet.
<unk> two ships with minimal.
Cash outflow I don't consider that.
<unk> Crazy move.
Right.
Purchasing your stock is essentially buying shifts if youre comfortable buying.
Not for our customers.
Our shareholders, yes, but not for our customers.
It is.
I appreciate what we do for our customers, but buying back stock is what you do for your shareholders amongst paying and Thats. Why we are one of the few LPG companies in the world Dan consecutive buybacks and also a tender offer if you remember I understand that but.
The analysis.
Order ships purchased ships.
No different than purchasing stock buyback.
Because the one pleases the shareholders. The other please as the customers and we need to try to have both.
Please which is not an easy equation.
I'm going back to what the board and you said in the first quarter, which is you want to see two or three strong quarters before you would do a buyback, but if you look at it from the perspective of purchasing ships buying your stock is the functional equivalent of purchasing ships I understand from a customer perspective, but from a financial analysis perspective.
<unk> in our risk analysis.
Integral thing.
I am the largest shareholder of the company my good friend, Don do you think it will be benefit me with it.
Share buyback.
Sure It would and so I'm trying to is that it.
Exactly so.
So I agree with you, 100%, but thats what the board has said then we have to respect their opinion.
Which we agree with.
I'm just trying to understand the analysis that the board went through and which commits to purchase two shifts as opposed to purchasing.
$13 $14 20.
Just explain it to you three minutes ago exactly explain why we did it.
Hi.
It's not coming through.
Okay, we can discuss it offline then okay.
Thank you very much.
Thank you.
We have enterprise data and the next question last one please.
The next question comes from the line of guidelines from the Gates Foundation. Please ask your question, Yes, Hi, Harry one one other question.
You don't do conference calls for Imperial Petroleum would you consider it.
<unk> very difficult to see.
Follow that company would you considered doing conference calls.
Surely I don't understand the question what do you mean conference calls.
What we're doing today you don't.
This is roughly about we are obliged by law, perhaps quarterly results announcements and obviously, we do calls for both companies.
Oh, you do you do them for Imperial Petroleum, we are obliged by law. So yes.
Oh, gosh, I haven't seen any notice of it or.
Email and as they were a website or.
<unk> is a web site. Okay. Then it's it's my negligence. Thank you no problem.
This is a staff call now.
Right of course.
So we're we like as a factor at this time. Thank you.
I would like to thank you everybody for joining us at our conference call today.
I look forward to have you again with us for our Q3 results in November . Thank you very much close today's conference call. Thank you for participants close today's conference call. Thank you for participating you may now disconnect your lines. Thank you.
Yes.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Good morning, everyone and welcome to our second quarter 2022 earnings Conference call.
Hi, Vasquez CEO and joining me on our call today is Mr. Schuster Ladish was handling our investor relations to discuss the financial aspects.
Before we commence our presentation I'd 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 the disclaimer on slide two of the presentation.
Risks are further disclosed installed gas filing with the Securities and Exchange Commission.
I would also like to point out that all amounts quoted unless otherwise clarified are implicitly stated in U S dollars.
Today, we released our earnings results for the second quarter of 2022, which was also the second quarter of trading as a pure LPG company and we saw a fantastic improvement compared to last year.
So let's proceed to discuss these results and what we see in the market in general in.
In slide three we summarize the highlights over the second quarter and the SEC.
Current quarter of 2022 the strong charter market that we experienced in the first quarter continued particularly west of Suez, but also in Asia. We saw healthy number of inquiries for chartering our ships in terms of operational utilization of our fleet at 97%. It was at similar levels to last year and better.
On the previous quarter idle days for spot vessels were reduced however, we did not dry dock any vessels. During this quarter that will happen that will happen in Q3 and Q4.
We now have 62% of our fleet days secured period charters for the remainder of 2022 with total fleet employment days for all subsequent periods generating.
About $72 million, excluding JV vessels and contracted revenues.
In terms of our sale and purchase activity during the quarter. We completed the previously announced sales of our oldest 5000 cubic meter vessel. The 1997 built gas monarch for further trading.
Trading and Furthermore, during the current quarter together with our JV partners, we entered into an agreement to sell to a third party or largest vessel the 38000 cubic meter mtc vessel the eco nebula.
It was a profitable sale and the proceeds and accumulated profits after the debt repayment will be distributed to the partners during the current quarter.
As a result, we estimate to increase our available cash bye bye.
By an additional $60 million.
As we always aim to renew your fleet with more modern vessels will enter into an agreement with the related party to purchase two new building medium gas carriers 40000 cubic meters each already under construction in Korea with delivery in the third and fourth quarter of 2023.
If we were to place an order today, we would expect delivery of these vessels in 2025.
The relevant capex of circa $117 million for these vessels, we expect to fund through our existing cash and new debt.
Approach one of our finance she has in her in there.
Already in the commitment fees.
Looking briefly at our financial highlights we need to keep in mind that the four tankers that were part of the spinoff last December when include we are including the Q2 2021 results.
It was a very strong quarter in voyage revenues came in at $39 3 million $3 4 million higher than the previous quarter and about the same as last year. When we had more vessels in the fleet overall comparing the LPG is in our fleet. We saw a rise in revenues year on year and this is also were affected.
In the TCE revenues that came in at 40, $34 6 million and $1 3 million increase from last year, despite having fewer vessels in the fleet.
The beneficial effects of the absence of the tanker vessels is conspicuous in the operating expenses, what there was a $6 4 million reduction in <unk>.
Operating expenses and depreciation combined our net profit for the quarter was $12 2 million compared to $1 6 million last year and $7 6 million in the first quarter.
On an adjusted basis, excluding derivatives, we ended the quarter with net profit of $11 3 million and an adjusted EPS of <unk> 30 cents.
That brings our six months EPS on an adjusted basis to 52 cents.
We managed this while at the same time, increasing our cash and cash equivalents from $31 3 million at the end of last year to approximately $78 million at the end of Q2, 'twenty, two or $92 million, including restricted cash.
Mainly through the sales we completed the refinancing of six vessels during Q1, and our internally generated cash flow.
We continue to be well capitalized maintaining a low debt ratio of 36%.
Let us move to slide four of our fleet employment update since our previous announcement, we successfully concluded five new charters and charter extensions.
Similar or better levels.
Terms of charter types as of August 22 out of a fleet of 34 operating vessels, excluding our seven JV vessels, we do not have any vessels on bareboat.
<unk> remained on bareboat were delivered back to us during Q2.
22 on time charter and Nate in the spot market slightly higher than before.
We are in the summer months, we don't expect to have more vessels on the spot market, but our target is to fix more on time charters as we enter the winter period.
Our period coverage for the remainder of 2022 is in the order of 62%, we have close to $72 million of secure revenues going forward.
$3 million of which is expected to be received within the remainder of 2022.
In slide five we provide an update as to our two joint ventures. All six vessels are now time chartered our first joint venture which comprises of small LPG vessels have begun carrabba's extended its time charter for 12 months.
Said, we decided along with our partners to sell the bigger.
The biggest vessel the <unk> 2007, built eco nebula at the profit.
A shade below $10 million.
Delivery of the vessel occurred on August 9th in the associated debt was repaid the cash from the sale along with the accumulated profits will be distributed back we'll expect to receive about six to 8 million cash from this vessel as ours, our share and this will boost our already healthy cash base.
Our second JV comprises of two medium sized gas carriers, plus one more under construction last quarter with time charter the gasket, Brendan and this quarter with time charter equivalent shown it for six months at a significantly higher rate our JV arrangements combined have a solid cost base of about six to 7 million <unk>.
<unk> the sale of the navigator proceeds we don't expect to have any capex related to the delivery of the new building I'm, just seeing 2023 auto joint venture itself has enough cash on hand after the sale of one older vessels last year to fund the acquisition together with any finance proceeds to be a range. After all is the rise of new building prices.
Cross all sectors, including <unk> underpin the financing to be short.
In terms of 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 August currently we have 19 vessels trading west of Suez, particularly in Europe 11 vessels trading in the Middle East far East two vessels trading in the U S and Caribbean and two vessels in Africa.
We have moved more vessels in the Europe matte Black sea areas since our last call given the better market conditions in Europe , and expecting increased activity as the winter approaches.
I will now turn the call over to Mr. Just novartis for our financial performance.
Thank you Harry and good morning to everyone.
Our financial performance for the second quarter of 2022.
Let's turn to slide seven where we see the income statement for the second quarter of 2022 against the same period.
Yeah.
Voyage revenues came in at $39 3 million almost the same as last year, partly due to the fewer vessels in the spot market.
Spot market days decreased by six 9% just 364 days.
And in spite of the fewer.
Number of vessels, we had 34 vessels at the end of Q.
Q2 versus 42 vessels at the end of Q2 2021.
We should also note the increase in the voyage in the TCE revenues over the four handy sized LPG in the fleet that we're all chartered at higher rates in a stable market.
Starting from a lower base.
Voyage costs decreased by $1 3 million compared to the same period last year down.
Down to $4 6 million for the same reasons.
The stable revenues and the decrease in costs combined resulted in net revenues for the period in the order of $34 6 million.
Compared to $33 3 million last year, an increase of 4%.
Operating expenses.
Difficult reduction of $2 5 million about 16% compared to the first quarter of last year due to the fewer number of vessels.
Were we to exclude this effect our operating expenses would be along the same levels as last year.
Was it the result, given that we continue to face cost pressures, particularly particularly in crew costs due to the COVID-19 situation.
A rising inflation.
In terms of dry docking costs, we had 0.2 million in the second quarter, we did not drydock and vessel during that period and we extended the due date for a couple of vessels for a few months.
That means we still expect to dry dock another five vessels for the remainder of the year.
Depreciation is another item that saw a large decrease from $9 6 million to $7 million.
Due to the decrease in the number of vessels.
During the previous year. There was also an impairment charge of three 1 million relate to the sale of one vessel.
Did not incur any loss or gain during the second quarter of this year.
Interest and finance cost declined from 3 million to $2 8 million, partly due to the decrease in the average debt during the period.
Due to the regulatory repayments and partly due to the decrease in the average cost.
The reduction in loan margins.
Beginning next quarter, we expect this trend to reverse as we will start seeing the effect of the recent interest rate increases in the rollover of our facilities.
Other income of $1 1 million, mainly relates to gains in the fair value of <unk>.
Interest rate swaps, we have entered into.
As the increase in interest rate make these hedges more valuable.
As a result of all the points analyzed we ended the second quarter of 2022 with a net income of 20.
2 million.
A six fold increase compared to last year.
And adjusted net income that's excluding.
The vessel impairments and derivatives of $11 3 million corresponding to an EPS of <unk> 32.
For the first half of 'twenty to 'twenty, two we had net income of $20 million and then EPS of <unk> 52 cents.
Looking at our balance sheet in slide eight.
Our liquidity, including restricted cash was at the end of the quarter in the order of 92 million a substantial increase from the $45 7 million in Q4 2021.
The increase in liquidity came primarily from the refinancings and the vessel sales and secondarily from operating cash flow.
Our vessels net book value decreased from 681 million to $655 million.
The depreciation and the sale of two vessels.
The total value of our investments in our JV is 56 million.
With the sale of the eco nebula, the value will be reduced in the third quarter of 2022.
The overall outstanding debt is 292 million from $300 million at the end of last year.
We expect our debt amortization going forward to be about seven 5 million per quarter.
While it was close to 10 million per quarter a year ago.
Concluding our financial commentary with slide nine we will briefly discuss our debt profile and capital structure.
As mentioned before since the beginning of 2021 and up until February 2022.
When the important project will be financing a large part of the fleet.
With us raise more cash by about $16 million reduced our loan margins and reduce the debt amortization.
As a result, we have no refinancing risk until March 2025, when our first balloon issue.
During the second quarter, we did not enter into any new financing arrangements.
We expect to enter into a new financing arrangement before the end of the year in relation to the two new building vessels.
We have approached one of our finance he is willing to finance both vessels and we expect that we will.
Up two 6%.
We will have more details in our third quarter presentation.
Overall, we continue to keep low leverage with debt ratio below 40% and we continue to have six unencumbered vessels.
The rapid rise in interest rates will have a negative effect on our interest cost.
We will start seeing the increase in cost in the third quarter.
However, these negative effects will be mitigated by the interest rate hedges, we have put in place for <unk>.
36% of our debt as well as the lower overall debt level, we have today.
For comparison, a year ago, the debt was $352 million compared to $292 million at the end of the second quarter of 2022.
I will now hand, you over to our CEO , Harry <unk>, who will discuss market and the company outlook.
Moving on slide 10, we are providing some insight on the LPG market Needless to say that given the ongoing geopolitical tensions in Ukraine, along with the ongoing COVID-19 pandemic is very difficult to foresee our market's performance last quarter. We discussed how we had not seen any increase in imports from China.
The largest importer of LPG, but we were expecting this to change indeed, it seems the lifting of Covid restrictions had a positive impact and thus latest reports show Chinese imports seem to have reversed.
And grown by yet the module to 1% here on a unit for the first seven months of 2022, and a strong 7% month on month growth in May This helped underpins a preference market for our vessels. The rising demand would have been stronger had there not been delays in PTH plants capacity additions out of the <unk>.
Seven 5 million ton capacity additions are expected this year only $2 2 million tons have been added this thus far as potent research shows and the run rate of China's 17 Th plant continues to run at lower levels.
We would expect more plans to come into the equation as the year progresses, India has seen a significant growth in recent years, becoming the second largest importer in Asia.
Data shows record imports close to 2 million tonnes are expected for the month of August however questions remain on the sustainability of this growth is a important data from the subcontinent, theres unconfirmed and demand growth may be hampered by the rise in domestic LPG prices.
Holds in India have been hit by four hikes in LPG cylinder prices. This year, despite the drop in LPG prices globally.
<unk> to the drop in oil prices and the government is reluctant to keep subsidizing the LPG prices of gas cylinders and that's everywhere LPG demand is echoed in price increases and a possible economic recession.
On the other side of the World now, 30% of European LPG imports from the U S and percentage of has arisen recently also partly as a result of the Ukrainian conflict.
We expect this trend to continue in the near term as the U S keeps increasing.
Increasing it.
Export capabilities and LPG imports of non Western Europe are expected to increase in the years ahead on the back of a rising petrochemical demand.
Previously said European intra regional LPG trade is a large market for small LPG vessels and has been one of the best performing markets for our vessels lately.
Although Russia has never been a major source for Europe LPG imports.
Rents have underpinned the need for diversifying LPG sources.
Besides increasing U S sourced LPG.
Yet and identified significant changes in trading patterns and that being said one business. We as a company have been more evolving recently has been transferred and cargo from Algeria to Europe .
On slide 11, we present, the key fundamentals of our small LPG market.
Commencing with the market rates evolution. During Q2 time charter rates continue to improve among all small LPG sub segments on a quarter on quarter basis, while on a year over year basis, where we witnessed double digit growth.
Looking at the LP at the small LPG trade west of Suez the market for pressurized LPG carriers. During Q2 was quite active both on the LPG and petrochemical side.
Honest enjoy the firm.
Marketing, especially in northwest Europe as the summer approach activity slowed down as we would expect and some of our vessels that were previously on TCR currently trading spot east of Suez The Asian spot market was tight for a significant part of Q2 easing of covered the restrictions or system that rebound in Chinese imports, but.
In May and July and August It was India that saw a rebound in imports. However for the small vessels the market came under pressure during the summer months, while we are more optimistic going into winter months on the PTO chat activity has been lower but rates have generally remained at healthy levels.
Fundamentals for our core fleet of small pressurized.
That ships continue to look promising there continues to be an overhang of many older vessels over 20 years old so far in 2022 with the market for LPG shipping being strong we have not seen any scrapping new environmental regulations will also make it harder for older vessels to trade and we expect to see increasing scrapping activity sooner or later.
<unk>.
Ordering activity continues to be subdued partly because of the difficulties in finding yard availability and partly because you were building prices have risen together with additional charge and inflation globally.
New environmental regulations related to emissions and a lack of clear direction on the matter of fuel choice make the ordering of new vessels in motors get decision.
Aspiration published orders there are 21 vessels on order to be delivered until the end of 2024 and a couple more beyond that while we did see a handful more vessels on order, we foresee that the risk of seeing bulk ordering of new vessels that could keep the supply demand balance used to being probable.
Sub two 5% annual increase in the fleet before scrapping is one of the smallest if not the smallest in any of the shipping segments.
Slide four presents our company share performance since the beginning of 2022, our share price has risen over the past few months close to doubling in June in a very volatile market. While we continue to see a correlation with crude oil at the same time, we reiterate that gas stock still trades at a deep discount to NAV and the six months EPS is zero.
Point, 52 cents, making our stock more attractive on a price to earnings ratio.
In slide 13, we are outlining the key variables that will affect our performance in the quarters ahead, given the market turmoil, especially now with the current situation in Ukraine. The Covid situation in China is quite difficult to predict our market's future. A strong point is going forward is that we have a sizable and quite diversified LPG fleet.
Can easily leverage up on any further market improvement and continue to have manageable debt levels. Our market fundamentals are quite solid as we enjoyed relatively low order book, while 27% of the industry fleet is above 20 years of age on the downside inflationary pressures may increase our caution we trade in a product that is sensitive to economic.
Recessions.
Regardless of the global situation of our focus in the following quarters will be to secure revenue stream with more fixed charters. While at the same time contained cost pressures, we will be relying upon a robust capital structure and the support of our financials for renewing our fleet.
With the addition of the two medium sized gas carriers.
<unk> advantage of any opportunities to sell older vessels, we feel confident that our strategic decision to make sales guys are pure LPG company.
Across the broader LPG spectrum will pay off and strengthen our asset returns.
First two quarters of the year has been very positive we announced today is the best results in a long time with strong profitability, especially the second quarter was our best quarter in the last decade.
We should not expect to see some results in the same in the third quarter, which is traditionally weaker due to seasonality, but we are optimistic on the LPG market in the near and long term and hope that this continue this momentum keeps growing we have now reached the end of the presentation and we'd like to open the floor for your questions. So operator, please open the floor.
Thank you.
A reminder to ask a question you will need to slightly downward.
Yeah.
Your name to be announced once again its all one and then one on your telephone.
We I think differentiated ways and our first question. Please standby.
Yeah.
Our first questions come from the line of <unk> Chandra from ESA ceases. Please ask your question.
And if I can draw your line is open.
Okay.
Yeah.
Hello, Mr. <unk>. Your line is open you may ask your question.
We can go to the next caller show we're going to proceed to the next one please standby.
Our next questions come from the line of Tate Sullivan from Maxim Group. Please ask your question.
Yes, Hello, good day.
We give more background on the decision to acquire the newbuild medium gas carriers versus buying smaller small gas carriers.
And will those be in your JV dweller or with gas.
Thank you date are nice to hear from you.
Bigger ships have a bigger profitability when the when the market is firm and since we have said before that we want a balanced the fleet.
Between small and bigger ships are you having.
Less smaller ships and more bigger ships, we are following exactly on that strategy.
Is that two ships will be 100% owned these two ships will be 100% owned by <unk>.
Okay, and then I could see delivery in the second half 'twenty three how long ago, where these ships originally ordered.
And second part of that question, if you would order medium gas medium size or small LPG ships.
When would you would probably take delivery of Newbuild that you order today.
These ships were ordered in a in.
In our Q.
Q4.
Q4 2020.
And what was the second question sorry.
If you would order small gas carriers or medium gas carriers, new builds today would they be for 25 delivery or perhaps even later earlier, yes. It would be 425 that the prices as they are today.
We would refrain from some ordering new builds.
And can you and selling in <unk>.
In this strong market.
2017, you talk about the decision to sell versus versus retaining the ships. Even if they can generate profit where you are in this type of market.
They've described as simple.
If you can sell a ship which is.
So 15 years old with access Special survey being do you and you could sell her at the price when you make a sizable profit.
Then you take that decision and do it and that's.
But why the board of <unk> and the JV partners.
The sale.
Great. Thank you and one more for me if I may I, even noticed noted dry dock costs or I think.
Five ships in the second half of the year approximately how much dry docking cost per ship or historically havent have dry cough and for smaller LPG.
Yeah.
It depends on the location as well as not only the size depends on the location and the age of the ship. So I don't have the exact in for right now, but if you'd like you can send us an email and we can come back with more our.
More more more more numbers more and more specific numbers.
Okay, great. Thanks, Thank you for the detail.
All right excellent. Thank you.
Once again, if you do have any questions or comments. Please press star one and then one on your telephone and wait for your name to be announced.
We have no further questions at this time I will now hand back the conference to you for any closing comments well, we just have two questions just one moment.
The next questions come from the line from guidelines from the gas Foundation. Please ask your question. Your line is open yes, hi, I had to leave for a moment I don't know if anyone asked you about stock buybacks did they.
No they didn't oh, okay what.
We used to talk about $12 a share of niv, maybe the numbers lower I don't know I've crunch numbers, a little bit lower but whatever the number it's tremendously it's a multiple of what are market prices.
Yes, I would agree.
I agree with you 100%.
Good well, we have a lot of cash more cash why aren't we buying stock back it seems to me to be one of the best buys in the market.
Yes, but you probably forgot what we said in our in the Q1 results.
Which.
Pertaining to this I guess say, yes pertaining exactly to this if you don't remember I don't mind repeating it.
Thank you.
The board has told US since we had the two or three years of really bad markets and they're covered.
Disruptions as they wanted to ship two three solid quarters before we discuss our share buybacks. Okay. Great fair enough. So I guess this is the second.
Second solid quarter. So if we have a very solid Q3, I think it will be a matter for discussion at board level.
Great.
Very much Harry.
Thank you.
We are going to principally the next question.
Okay.
The next question comes from the line of Tate Sullivan from vaccine partners. Please ask your question.
Well. Thank you for taking a follow up just you commented on some of the seasonality.
Earlier, you think <unk> will probably be not as strong as Q2, but then in the time charter equivalent rate table in the presentation. It seems like good momentum in rates.
Still seasonality, particularly without the tankers in your fleet now after the spin off.
So still every year three Q2, Q do you expect an LPG to be the weakest quarters of the year.
Yeah.
As us with under normal circumstances Q4, four in Q1, our strong Q2 and Q3 are weaker.
I agree.
Thank you very much thank you.
Yeah.
Okay and compressed speaking to the next question. Please standby.
The next question is coming from the line of my Gosh water from mentor partners. Please ask your question.
Harry how you and the board feel comfortable buying committing to by over $100 million in two new ships and yet uncomfortable buying back stock until you see three or four quarters when buying back stock is essentially buying a diversified portfolio of ships that are already built.
On the water and lease that you know a lot about and purchasing two new ships you know none of those facts I don't quite see how you can do one without the other.
Very good point.
Strength of this company.
One without the other.
Very good point.
Length of this company is the size of the fleet and the modernity and quality of the fleet.
If we don't keep.
Building and buying quality vessels are oil major customers will dampen our oil major customers will dampen for somebody else.
So.
For a company that has the $800 million in assets.
Low leverage and a very strong balance sheet.
Buying two ships with minimal.
Cash outflow I don't consider that.
Crazy move.
Right.
Purchasing your stock is essentially buying ships, if youre comfortable buying.
No not for our customers.
Holders, yes, but not for our customers.
It is.
I appreciate what we do for our customers, but buying back stock is what you do for your shareholders amongst paying yes.
That's why we are one of the few LPG companies in the world than consecutive buybacks and also a tender offer if you remember I understand that but the.
The analysis.
Order ships purchased ships is no different than purchasing stock.
<unk>.
Because the one pleases the shareholders the average pleases the customers and we need to try to have both.
Please which is not an easy equation.
I'm going back to what the board and you said in the first quarter, which is you want to see two or three strong quarters before you do a buyback, but if you look at it from the perspective of purchasing ships buying your stock is the functional equivalent of purchasing ships I understand from a customer perspective, but from a financial analysis perspective.
In our risk analysis.
Nickel thing.
I am the largest shareholder of the company and my good friend, Don do you think it will be benefit to me if we did the share buyback.
Sure It would and so I'm trying to understand exactly so.
So.
100%, but thats what the board has set then we have to respect their opinion of which we agree with.
I'm just trying to understand the analysis that the board went through in which it commits to purchase two shifts as opposed to purchasing.
$13 $14 20, just explain it to you three minutes ago exactly explain why we did it.
Hi.
It's not coming through.
Okay, we can discuss it offline then.
Okay.
Thank you very much.
Thank you.
We have enterprise sales and the next question the last one please.
The next question is coming from the line of Cat lines for the <unk> Foundation. Please ask your question, Yes, Hi, Harry one one other question.
You don't do conference calls for Imperial Petroleum would you consider it.
It seems very difficult to follow that company would you considered doing conference calls.
Surely I don't understand the question what do you mean conference calls.
What we're doing today you don't.
This is public or below we are obliged by law to have quarterly results announcements and obviously, we do calls for both companies.
You do you do them for Imperial petroleum.
By law so yes.
Oh, because I haven't seen any notice of it or.
Email and as they were a website or of course as a web site. Okay. Then it's it's my negligence. Thank you no problem, but this is a tough gas call now.
<unk> of course.
Yeah.
So we're we like the fact at this time thank you.
We'd like to thank you everybody for joining us at our conference call today, and we look forward to have you again with us for our Q3 results in other in November . Thank you very much.
Yes.