Q4 2022 StealthGas Inc Earnings Call
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Good day and thank you for standing by welcome to the Steve Katz Q4, 2022 results call and webcast at this time all participants are in listen only mode.
The speaker's presentation, there will be a question and answer session.
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Please note that today's conference is being recorded.
I would now like to hand over to your speaker Mr. Harris Raphael CEO . Please go ahead.
Good morning, everyone and welcome to our fourth quarter and 12 months' 2022 earnings conference call.
This is Raphael she'll still gushing.
I'm going to discuss market and company outlook and with me is Mr. Stover with 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.
Stage, if you could all take a moment to read our disclaimer on slide two.
Risks are further disclosed in <unk> filing with the Securities and Exchange Commission.
I'd like also to point out that all amounts quoted unless otherwise clarified are U S dollars.
Today, we released our earnings results for the fourth quarter of 'twenty to completing a full year of trading as a pure LPG company.
Following the 'twenty to 'twenty, one spin off and we are happy to report yet again.
Profitable quarter and record profits for the year.
So let's proceed to discussing the results and what we see in the marketing in general.
In slide three.
The fourth quarters, typically a seasonally strong quarter for LPG trading.
We had just finished drydocking older vessels upwards, you shall we had our full fleet available for chartering.
Already most of the charter most of our vessels on period, thus, reducing the spot exposure and we did.
And we did it by reducing spot days from 843 to 596.
Daily basis, we have reduced our spot exposure to just over 10% of our fleet days.
[laughter].
We kept saying charter interest in lodging clearly covered shall we continue entering into period charters of improving rates.
We have managed to have secured turtle today, 55% of our 2023 days contracted out.
We have locked in about $105 million for subsequent periods.
In terms of our sale and purchase activity will continue to look for opportunities to sell some of the older vessels in a rising market since the last announcement and up until now we enter into agreements to sell three of our oldest vessels 20 year old or more the gas part did you that got spirit and the golf Galaxy.
Two already delivered last month in the third and the third one is spending earning us for total proceeds of about $12 5 million.
As an update regarding the M. Just hitting your building vessels due to the yard constraints. We now expect the joint venture vessel to be delivered in Q3 of this year.
Mexico, especially in Q4 and the last vessel in Q1 24.
Looking briefly at our financial highlights we need to keep in mind that the four tankers are part of the spinoff last December what included in the last years comparative results.
Voyage revenues came in at a very strong $42 7 million compared to $36 1 million last year, an 18, 3% increase in spite of the smaller fleet of that all for the full year. Our revenues came in at $152 8 million the highest revenue figure since 2018.
Compared to a $150 2 million for the same period last year.
One 7% increase year on year.
In line with the trends in the.
Recent quarters without substantial decreases in opex and depreciation as well due to the smaller fleet, but we also saw shorter ICU voyage gosh that was due to a combination of higher spot exposure compared to Q4, 'twenty, one and then Chris and bunch of course due to the rise in crude oil prices.
Our net profit for the quarter was $7 7 million compared to a net loss of $38 7 million for the second quarter in 'twenty, one and a very strong 10 6 million adjusted income trigger Rockies, excluding embedded much compared to $2 8 million for the same quarter in 2021 almost four.
It was higher.
But the number of electric crashes their full year net income that went from a 35 point and $1 million loss for 'twenty, one to 34 important state million gain and 22. This is the highest annual profit since the company's inception and listing back in too.
Five.
That brings our EPS for the quarter to 20 cents and 90 cents for the 12 months.
We remain steadfast in managing prudently, our liquidity and short total cash, including restricted cash and short term investments more than doubled to $95 7 million compared to $45 7 million at the end of last year.
We continue to be well capitalized maintaining a low debt ratio of 36%.
On slide four.
We see our fleet employment update for February last time, we announced 11 your charters.
Time, we announced eight new charters and charter extensions at similar or better levels, and we continue to ship charters interested in locking in longer than usual tenures always a good sign for the future market.
As such when it increases our contracted days from 40% previously to 555% for the remainder of 'twenty, three and have secured about $80 million in revenue.
Our total contracted revenues for all periods have increased to $105 million.
I would also like to stress something that we really see that.
Today, all our vessels are fixed on period short or longer term, we have no vessels available in a fully owned fleet, if a charterer needs to more of a spot cargo today and that can only be seen as a favorable situation to be from our side.
Lastly, we have three vessels, we expect to dry dock in 2023.
Besides once another vessel that was due for dry dock was one of the vessels were sold for federal trading.
On five slide five I'd like to provide you an update on our two jv's comprising of a total of six vessels on our first JV, which comprises of small LPG vessels. After the sale of the level of last year, we fixed the vessel on a one year and a six month charter respectively.
Single vessel is operating in the spot market.
Three of the vessels are due for dry dock. This year, although we made the layer one of the dry docks to next year.
Our second JV.
[laughter] comprises of two medium gas carriers.
Plus one more under construction both of these vessels have have their charters expiring shortly but the markets for these larger vessels remained strong.
Previously discussed we do not intend to fund and you're building acquisition or without an equity. The JV has sufficient cash earmarked for this together with ant finance proceeds that are.
Arranged in terms of our fleet geography on six on slide six our company focuses on regional trade and local distribution of gas.
And this graph as yourself a snapshot of the concentration of our vessels excluding the JV once as of February 22, our distribution of our fleet has not really changed since our last call as we continue to have half of our fleet in Europe and the rest mostly in Asia. Currently would have 16 vessels trading west of Suez.
North Europe 11 vessels in the Middle East far East most of your Singapore and China.
Three vessels trading in the U S and Caribbean, and finally tool and Africa.
I'd like to turn over the call to Mr providers for our financial performance.
Thank you Holly and good morning to everyone.
I will discuss our financial performance for the fourth quarter and 12 months of 'twenty to 'twenty two.
Let's turn to slide seven.
Where we see the income statement for the fourth quarter and full year 2022 against the same periods of 'twenty or 'twenty one.
Net revenues came in at $36 2 million.
At quarter end one.
$135 million for the 12 months.
The slight increase by 2% over the 10 month period, despite the vessel sales and roughly.
10% reduction in the total.
Fleet days.
Operating expenses were $14 5 million for the quarter and $54 8 million for the 12 months.
And 11% reduction in the 12 month period.
Similar trends to what we saw in the previous quarters.
You are mainly to the reduction in the fleet size.
In terms of Drydocking costs, we had 3 million in 2022 versus $5 2 million in 2020 one.
We dry docked for vessels last year.
Depreciation is another item that sort of large decrease to $6 8 million for the quarter and 27 8 million for the 12 months period.
25% decrease year on year.
And that is also.
The decrease in the number of vessels.
Interest and finance costs increased to $3 4 million due to increases in interest rates, but overall during the year and people are actually lower.
Impairment loss was 44.
In 2021.
Which was the write down for the tanker vessels that were part of his piano.
Whereas in 2022.
3 million, which relates to the vessels that were held for sale.
Equity income.
All shares.
The profit so far JV structures.
Came in at $1 2 million for the quarter and $10 9 million for the 12 months.
Both our JV structures operated profitably.
So we can see that for the year 2022 income in all categories increased in expenses across the board were reduced.
As a result of all the points analyzed above we ended the fourth quarter of 2022 with a net income of seven 7 million.
And $34 3 million for the 12 months period.
This was the best ever full year net income for scope gas.
Even on a net income adjusted basis.
If we were to exclude the 40 million write off from the tankers.
'twenty one.
There's got to be reported.
The full year 2020 to $36 8 million.
More than 2.6 times the previous years.
Looking at our balance sheet in slide eight.
Liquidity, including restricted cash and short term investments.
Time deposits was at the end of the year in the order of $95 7 million.
Doubling from the 44 $5 7 million in Q4, 2021.
The increase in liquidity came from the refinancings, the vessel sales and from improved operating cash flow.
Advance over $23 4 million related to the payments made for the M. D C.
Vessels under construction.
Our vessels net book value decreased from $681 3 million to $628 3 million.
Due to regular depreciation and the sale of the vessels.
The total value of our investments in our JV is $46 6 million.
It was reduced compared to last year due to the.
$16 5 million in distributions, we received after the sale of the eco nebula.
The overall outstanding debt was 207 7 million from $300 million at the end of last year.
As a result of the solid result.
<unk> being reported.
Increased shareholders equity by 43 million.
During the year to 821 million.
As of December 31st 2022.
Concluding our financial commentary with slide nine when we briefly reiterate our debt profile and capital structure.
Following the refinancing we did in the last couple of years, we have extended the maturity of the loans to 'twenty to 'twenty five and beyond.
Thus securing the company from any refinancing risks in the medium term.
We have also signed a commitment letter with one of our existing finances for the financing of the two new building vessels, whereby we expect to receive up to $17 million in finance proceeds for the delivery of these vessels subject to customary intelligence.
We expect to conclude the loan agreement before the end of the quarter.
Overall, we continue to keep low leverage with net debt.
The ratio of below 40% and we continue to have six unencumbered vessels.
As previously mentioned the successive raises of interest rates by the fed have started showing into a rising interest rate expenses.
Our average labor cost went from below 20 basis points, a year ago to over 4% at the end of Q4.
We have in place interest rate hedges for 36% of our debt.
On average a $1 76.
That mitigate the effect of rising interest rates somewhat.
Rates seem to have plateaued in the economic debate has recently shifted to when the fed will do it.
We expect to continue to reduce our existing debt through regular repayments as well as prepayments as the case may be.
In order to reduce expenses.
Overall debt has been reduced from $303 million a year ago to 207 9 million at the end of Q4 2022.
I will now hand, you over to our CEO Hari last yes, please discuss market and company outlook.
Slide 10, we are providing some insight on the LPG market and how trade partners shape, the shipping markets for our product.
We have laid out these themes previously and trying to cut it too that are coming in to support our views.
One positive change from the previous calls being that resurgence of Chinese demand.
According to data from bank debt of course during 2022 LPG exports increased four 5% slightly better than what was expected.
The main export of LPG being the U S and middle East and countries. Both mine have significant increases in exports last year with the U S increasing exports by 9% and increasing volumes destined for Europe .
European exports continues to be muted.
European countries continue to diversify their sourcing away from Russia supplies and importing a third of their suppliers from sort of in a way that is mainly the U S. That's increasing ton mile demand.
Apart from Europe , the largest importers of LPG Art, India, China, Korea, and Japan, all increases in imports in the last quarter of 'twenty to show the lifting of Covid policies in China, and while there wasn't an initial concern over the horizon Covid infection numbers. It seems that the reopening has finally started boosting LPG.
<unk>.
And while in part that the vary widely all point that your net imports grew significantly at the end of the year, making the year on year change finally positive compared to negative in the previous calls that we had we therefore remain optimistic on Chinese LPG demand supported by expected economic recovery.
Let the spiking China's GDP growth to five 5% for this year.
The main catalyst for Chinese LPG demand will be the increasing capacity of which BPH plants that use imported propane as a feedstock. These plans have been plagued by startup delays and low production run rates.
The unfavorable margins, but the rapid expansion of <unk> capacity in China over the last few years is unquestionable.
To understand the scale.
The scale current domestic production capacity of around 10 million tons was less than $5 million and 2018.
There are no planned scheduled for 'twenty, three potentially increasing capacity by more than 20% and more projects beyond that.
On slide 11, we present, some key fundamentals in our shipping market commensurate with the market rates evolution.
During Q4, 'twenty two time charter rates rose on.
On the back of increasing demand while on a year over year basis, there continues to be healthy growth between 5% and 10%.
Depending on the size and location.
The smaller LPG trade west of Suez falling the softer summer months the final months of trading.
Beginning of 'twenty three.
Average been reasonably tight and at times, even show tied their cargoes have gone unfixed due to the lack of available ships.
There has been a fair bit of activity on the PEO side been raped grades continued to push upwards, although at a moderate pace.
As of now we see limited tonnage available for time charter and we cannot see any major reasons for a drastic turnaround in sentiment in the near future.
Offshore is like an Atlantic were short a fair bit of activity on the payer side. They are spot market has been less active unusual considering the time of the year, but it's also explained by the high time charter coverage amongst them in charters in this market.
Rates have trended marginally upwards for the handy size vessels in the spot market has been tight or very tight to the final months of 'twenty two and during the beginning of starting to see.
A significant number of handy sized ships were fixed for short term ammonia.
Time charters and this resulted in less tonnage being available for the LPG and pet Chem trades.
Fundamentals for our core fleet of small pressurized vessels continues to look promising as almost a third of the fleet is over 20 years old.
The market remains strong scrapping activity remained subdued even the vessels that were recently showed we're adjusting for federal trading however, upcoming environmental regulations on exa and carbon intensity will make it harder for older vessels to trade and we expect to see increasing scrap.
Activity or vessel or vessels being removed from international trading to do it is stupid cobalt our strategy less demanding areas.
If you're ordering activity continues to be subdued with only a handful of ships being ordered.
A recent published orders that are 24 ships on order.
To be delivered up until the next couple of years, we continue to believe that the risk of seeing bulk ordering of vessels that could keep the supply demand balance.
As improbable as sub 2% annual increases the fleet before scrapping is one of the smallest if not the smallest in all shipping segments.
On slide 12, we are showing the evolution of our LPG fleet in this slide for comparison purposes, we have excluded the tanker vessels that we held up until 2021 and we have focused on the pure LPG fleet in terms of cubic capacity, including our JV vessels, we have always been active in the sell and purchase Mark.
Buying and selling vessels recently, we have been shutting quite a few older ships for in 'twenty to 'twenty, two and three more this year.
As part of our strategy to keep renewing our fleet in order to maintain its competitiveness. We thus have reduced the average age of our fleet to below nine years in our joint ventures, where you may have a little more opportunistic approach in terms of selling and buying however in our core flex rate, we expect that with the addition of the 40000 cubic meters.
Bill.
Starting in late 'twenty, three we will once again increase our capacity in terms of cubic meters, while being able to better service the diverse nature of our customers.
In slide 13, we are planning some some key variables that will affect our performance for the quarters ahead.
Obviously, the most important development that we have mentioned earlier is the reopening of China. After a long awaited two years without China's economy back on track, we should see increased LPG trading on the other hand recessionary fears should be a concern for all of us.
Latest impression is that the global economy, especially the U S is fairing better than originally imagined.
And recently, the IMF, even revised slightly upwards, its projections, but with persistent inflation and high interest rates economies are more fragile than what they've been for a long time to.
To sum up I'm very pleased to support to report best ever annual profit for stealth gas in a difficult environment with rising interest rates and a smaller fleet, we manage to our total net income of about $34 million or 0.9 per share or adjusted EPS for Q.
Florida was four times higher than the adjusted EPS for Q4, 'twenty, one our total cash doubled to four four from $45 7 million.
$45 7 million.
At prior year end to $95 7 million.
At the end of 'twenty two while our total assets were $821 5 million at the end of last year with only a few hundred 10 3 million in total liabilities.
So it does give us the energy, we all need to continue to push for more noteworthy results and to strengthen the company and our balance sheet. Even further we hope to keep the momentum going and we expect another strong quarter for the beginning of the year.
We have now reached the end of our presentation and would like to open the floor for questions.
Thank you so as a reminder to ask a question you will need to press star one and one on your telephone and wait for your name to be announced.
Do we have to all your questions you can please press star one and one again once again, it's still one and one on your telephone and wait for your name to be announced and at Star One and one if you won't need to withdraw your question. Thank you.
We are not going to proceed with our first question.
And the question is come from the line of Tate Sullivan from Maxim Group. Please ask your question.
Hello. Thank you. Thank you Harry for the comments and I mean, with the cash and restricted cash and short term investments increasing to $96 million at the end for Q up from $86 million and you pay down debt can you can you talk about capital allocation priorities going forward with that building cash.
Are you going to fund mortgage or do newbuild deliveries and cash versus debt or brand can you also comment on your previous potential timeline to repurchases.
Thanks, Dave as we said on the previous quarter. The board wanted to see two to three good quarters before they allow us to do yours to be cashed more opportunistically.
Yeah.
They show the second good quarter, hopefully if all goes well, they're going to see a good Q1, and therefore after that we will discuss.
Discuss the different opportunities for the cash.
For sure one opportunities buying back stock and another opportunity is paying down debt now that interest rates are rising or a combination of the tool, which is something that I would I would vote for.
Yeah.
And financing the newbuild deliveries for that for the next year or so I saw one of your slides you pointed to the available financing on those when you find out those instead of 40.
40% loan to value, 60% or or what is your usual financing on new builds.
The level, you're at 60% debt or the equity requirements are not March we have already paid the 20% deposit.
Therefore, the no new money that needs to be injected is actually very little.
And then a follow up on you mentioned some delays in shipyards and I have not heard many other companies mentioned delays from the shipyards are these specific to the shipyards, where you're getting your medium gas carriers have built or have you seen other delays or other companies in the market. If you don't want to comment on that.
It was a very popular shipyards are the majority of them are all facing delays.
Thank God the delays are minimal odds we wanted their ships to be active there soon is to ask the market is strong.
Okay and last one ship cells to convert did you say $12 5 million of proceeds from a three ship sales and then the impairment and then so no gains or sales gains or losses on those sales because you already took the impairment on one of the vessels.
Yes.
Yeah.
Okay.
$12 5 million total lives is one of our smallest and oldest by Friday vessels in our fleet. The margin one of the vessels. There's 97 built which would normally go for demolition, but we managed to get the higher price and sell it for portfolio trading.
Alright, Thank you Harry.
Thank you.
Once again as a reminder to ask a question. Please press star one and one on your telephone and wait for your name to be announced.
We're now going to proceed with our next question.
And the question is come from the line of Cleveland Mullins from value Investor's edge. Please ask your question. Your line is opened.
Good morning. Thank you for taking my questions I wanted to start by asking you reviewing ventures you mentioned the finished at where do we the combined base of $30 million, but could you provide some insight on the amount of debt outstanding under those structures.
Sure.
There is not very clear the amount what.
Sorry, the amount of debt on the GBS.
Most of them.
H region 40 million, but our if you want you can send us an email and check it out precisely as we don't have this number in front of us.
So sir thank you.
Following up on that capital allocation question and all those share repurchases shouldn't be Paradise here, given the I would say it has come to an EV as well as two theories motivation has the board given any thought to maybe instituting a dividend policy.
Very good question as you said very rightly ashworth trading to a discount when I V.
The share buyback.
The vet.
Sure sure dividends at the moment.
Makes sense that's it from me. Thank you for taking my questions. Thank you very much.
As a reminder, once again, if you have any questions or comments. Please press star one and one on your telephone and wait for your name to be announced thank you.
We have no further questions at this time I will now hand back the conference to Mr. Harris for closing comments.
We would like to thank you for joining us at our conference call today and for your interest and trust in our company and we look forward to the five year again with us for our Q1.
Results Conference call in May Thank you very much.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect your lines. Thank you.
Yeah.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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