Q2 2023 Navigator Holdings Ltd Earnings Call

For sure our only pole market has been the hand size but also the mid-sized segment.

Okay, got it. Thanks so much for that. That's it for me. I'll turn it over.

Thank you, Omar.

have joined the meeting as an attendee and will be muted throughout the meeting.

America. I must advise that this conference is being recorded today. As we conduct today's presentation, we'll be making various forward-looking statements. These statements include, but are not limited to, the future expectations, plans, and prospects from both a financial and operational perspective and are based on the answer to the substance forecast and expectations.

as of today's date and are subject to material risks and uncertainties. Actual results may differ significantly from our forward-looking information and financial forecast. Additional information about these factors and assumptions are included in our annual and quarterly reports following the Securities and Exchange Commission. With that, we're going to be booking all of the stock report that has been added by the public Assembly and that will include report based findings from the

I now pass the floor to Mads Pieterzakou, the company's chief executive officer. Please go ahead, Mads. Mads Pieterzakou, Chief Executive Officer, MOSFET Good morning. Thank you for dialing in to the Navigator Gas Grinning phone.

I'll start off by providing a brief overview of Q2 results and then hand over to Hoivin and Randy for greater details on business drivers and recent events.

Our second quarter result came in similar to Q1 and much stronger than Q2 2022 with revenues of $135 million adjusted if it's just below $70 million and net income of $27 million.

The result was made driven by higher chart rate, whereas where the utilization was below that of human. Our balance sheet is robust with cash of $180 million at the end of the quarter. The initial $50 million here purchased program was completed in Q2 and a further 25 million organized as part of our new capital return program, opening up for both legitimate payments and prefer those shared by banks. Utilization came in Q2 at 89%, below the 96, seen in Q1, but higher than Q2, 2022, 87%. Terminal throughput ran well across the NAPD capacity 278,000 tons.

As previously announced, we grew our basic tasks through the acquisition of five efficient modern secondhand vessels. The takeover was completed faster than original plants and completed mid-acre.

Expansion of the gasoline export terminal at Morgan's point has come off to a good start and the first installments of $9 billion has been paid. We expect to pay another nine in August .

The expansion will give about two million tons of additional export capacity.

Total catnx power share is expected to be around $125 million and completed by the end of next year.

We saw full navigator ride in May above book value, and we also formed Luke Street, a joint venture with Gooney a matter to transport CO2 from UK Bay's stranded emissions.

After this build, two, three utilizations is expected to be about 90%, which is high in historical context.

Time travel rates are started, which leads to foundations for another robust edit-down results in Q3.

Terminal throughput in Q3 is expected to remain strong at or above main plate capacity, and the gasoline continues to flow long distance to Asia.

The global haze-eye port of book has not changed much. So in combination with the demand for seaborn gas transport and an aging global peak fleet, we think that the outlook is better than what we think for a long time.

This is normally the time when the presentation changes to proper English language, albeit with a distinct Irish accent.

This time around we have to fail with my broken English and the very language actions that I have for a apologise for that.

Slide six feet.

The Q2 financial result was a continuation and even slight improvement compared to previous this border and a clear improvement over the same theory of last year.

The financial result was mainly driven by us from the sub-time.

Total operating revenue of 135 million dollars was up 9.3% year-on-year, driven by high-td rates.

As you can see from the lower right table, TCE rates came in at $27,241 an average, which is a clear improvement over the 24,630 earn same time last year and also better than the 25,620 turns into one.

Utilization also increased to 8.9.1% to include two, up from 87.4 in the same period last year.

It was below the exception of 96% that we achieved in Q1, but as you can appreciate, it's been more than offset by high T3.

Our Greater Bay Joint Venture, which is 60% on by us, acquired its final vessel during the second quarter of the year. The third, 22,000 cubic meters, 29 team-built, Italy-incapable, liquidized gas carrier navigated a big gap on the April to 13 and the vessel acquisition is now completed.

This also increased best available days will contribute to an increase in revenue during the quarter.

You'll note that the operating revenue from the do-knock hole reduced to almost nearly.

Following the acquisition of the fifth vessel by the Greater Bay John Venture in April , the revenue from these vessels will now be fully consolidated into our financial statement and will not feature as operating revenues, all right, lawyer's expenses from the Looner School Collaborative Agreement.

Our vessel operating expenses or will take us as we call it increased by 11.3% to 43 million dollars in Q2 compared to the same order last year.

which resulted in vessel operating expenses for vessel days.

Increasing 6% year over year to 8,500. This was the reduction from the previous two forces as we continued to focus on our best operating cost.

Depreciation of our vessels increased slightly by 2.3% or 0.7 million dollars as the additional greater Bajor and Ventor vessels joined the team. Keep in mind that we depreciate all our vessels to their scrap value, recycling value on the 25th anniversary.

We realized that the book gained 4.9 million dollars from the sale of Navigator Ryan in the month of May.

There was also an unrealized game on our derivatives instruments of $3.2 million during the second quarter as the fair value of our fixed interest rate has watched increase.

Interest expense for the second quarter was $16.9 million compared to the $11.5 million per second quarter of 2022 as a result higher interest rate on the portion of our debt that is subject to the bloating interest rate.

The tax charge for the quarter was $2 million, is predominantly relating to both the cash and the third taxes on our share of the profits from the end of each term to the accused. Our share of the result from the terminal was $6 million, due to down from the 6.8 million for the comparative quarter of last year, as a result, lower-ass prices, and therefore reduced throughput rate. Through 1 of 277,582 tons, compared to 268,444 tons during the same quarter of last year.

Net income for the second quarter was 26.6 million for 36 cents per share. If we turn to the balance sheet on slide seven, you can see that it remains strong with a cash balance of $180 billion at June 30.

This compares to a minimum liquidity covenant on our bank loans and credit agreements of $50 million.

This cash balance is after buying back $50 million for the insurance shares during the first half of the year.

The strong cash balance will deduce for catching redistribution, the ethosine terminal expansion, and as mentioned earlier, we keep looking for projects and investments that can enhance our shareholder returns.

When the depth has increased due to the financing of 5 greater things.

queate some be joint venture vessels.

Our net debt to capitalization is low at 36.9% and the net debt to AVID-DAR announced we are managed for 3.4 times.

Following the recent refinancing, the company now has no long remembers.

Maturities for 2025 include the 100 million dollar senior unsecured bond, which may or may not be refinanced, depending on any investment opportunities that may occur.

The two bank facilities totaling $199 million will die to be refinanced at a higher than current loan to value as the vessels serving as collateral amongst our younger business.

So we expect that this refinancing, what is a person 2025, will be to catch positive events. So we expect that this refinancing, what is a person 2025, will be to catch positive events.

On slide number nine, we outlined the estimated cash break even for 2023 at $9,460 per day.

This low level relative to the charter rate market enables a generate positive if it that throughout the shipping cycle.

In the verse on the right page, slide 8, it provides a day of expectations for 2023 across our different exercise settings, ranging from 7,600 per day for the smaller vessels up to 10,500 dollars per day for the larger, more complex and the new vessels.

We all should provide.

expected annual expense for G&A costs, but in appreciation and interest expense for your interest.

On slide number 10.

We are flying out the story from quarterly impact, showing a step up over the past seven quarters and a further step up in this quarter. A trajectory that I mentioned at the outset that we expect to continue at least in the year two.

On the right hand side, like I said, we show our historical epitaphab.

with the last 12 months incorporating the latest portion of it. And the Nanyulai, if it are based on technical resources. In addition, the if it is a vast, to the right of those, shows the effect of an increase in if it are a average chart of rates were to increase by income in about $1,000 per day.

Within our hand to go over to you, boys and please go on it.

Thank you, Mupp. And good morning, all.

Moving to slide 12.

Um,

After small drop in US natural gas liquid production during the first quarter, the EIA statistics are currently showing a strong return to US production. The final figures from May came in at a record level of nearly 200 million barrels per day production.

US price of LPG is therefore attractive against oil and equivalent, measured both in price and energy content.

This will continue to support export fundamentals.

So far, LPG exports for the month of August this month is up 12% compared to August of 22.

These volumes are happening simultaneously.

your eng rest on the

The impact of recent US National Gas production growth can be seen of the price of ethane on page 13. It has decreased over the last two months, further increasing the competitive price production of American etily. The price arbitrage of etily in the Europe and Asia is widening. The current spread of this Asia is about $400 a ton, which is sufficient to allow for terminal handling and freight at these end returns. Asia-Pacific consumers are importing about $6.00 a ton.

heading through the Panama Canal and cross the Pacific Ocean.

due to the long duration of these voids.

Simulac retulin at 10 as a feedstock also enjoys US domestic excess supply. Therefore, it is cheap.

and its exports are increasing. And remember, all our ethylene capable ships can also carry a tank. And remember, all our ethylene capable ships can also carry a tank.

page 14 please.

ammonia has become an important commodity for us.

Despite natural gas prices, I'm going to return to normal levels.

The demand for maritime logistics for ammonia input to the fertiliser industry has remained.

Europe continues to source ammonia from across the ocean, both from North America and Asia.

And this is a shift from the path, whereby most of the volumes were supplied from within the continent.

European ammonia imported 10-to-favor hand size and medium sized vessel.

Seven out of the nine gas carriers we currently have contracted for ammonia and climate are servicing these European consumers and courts.

So it matters to navigate her.

Asia has reached about 50% share of the 17 million tons of yearly amount of ammonia export of worships. However, we strongly believe that the life-blue line and the graph to the right will increase over the next few years.

As US Gulf, Blue and Greenia Monia production comes on stream with a focus for exports.

targeted for global energy demands.

kamimura

On the back of healthy natural gas liquids production in the US, robust ethane and ethylene exports, as well as continued demand coming from Asia Pacific, we are glad to see utilization reducing less this quarter as we have historically experienced during the summer months.

And we're also happy to see that utilization has bottomed out and in fact increased earlier than previous.

happy to see that utilization has bottomed out and in fact increased earlier than previous summer months.

This gives a certain degree of confidence to guide third-court utilization for the three months above the 90% mark.

H-16 illustrates the latest gas carer rate indicators, all pointing in the right direction.

1.0, we are far cry away from the COVID-19 during 2020 and 2021.

and we see the trajectory in continuing.

On page 17, the graph here illustrates the gas carry segments. And we want to provide additional details on the updated development regarding the view of these announcements.

So as you can see on slide 19, we are pleased for now to overturn the capital for the second quarter of 2023, including our first ever dividend as a public company.

M-on or reach me an ounce to turn the capital policy and the OCA to table below. We are returning 25% of men in comp or $6.7 million to shareholder's fiscal.

The board has declared a casted in a five-cent per share payable on September 22, 2020-2032. All three of the board is expected as of September 8, 2023.

Equating to a 40 divinant payment of $3.70.

Additionally, with NETS fairs trading well below our annual of about $20.

We will use the variable portion of the return of capital policy to repurchase shares. As a reminder, between December and this past May, we repurchased 3.8 million shares at an average price of $13.12 per share, for a total of $50 million.

Subsequently, the board authorized a new $25 million repurchase program.

As the crew will repurchase approximately $3 million of common shares between now and quarter end, such that the dividend and share repurchases together equal 25% of the income.

6.7 million dollars.

Returning capital to shareholders is relatively new to Netlire, but something we see as a requirement for a shareholder-focused home.

Now turn to slide 20.

Following up on our previous announcement regarding the expansion of our ethylene export terminal, under our existing 50-50 joint venture with Enterprise Products Partners over at Morgan's Point, we agreed to a capital project to increase the export capacity from approximately 1 million tons per year, as it is today, to at least 1.55 million tons.

and up to over 3 million cups per year by converting an existing ethane refrigeration frame to also refrigerate epam and you'll see that in the yellow box.

The project is now underway as the Longleat items have been ordered, groundwork is progressing, and construction is still expected to be completed by the end of next year.

The total capital contribution required from us to the joint venture are approximately 125 million dollars.

The majority of which will be paid in 2024. You can see the schedule in the bottom right corner. We contributed the first private payment of $9 million in April , and the next payment is scheduled for late August .

Remaining cat-back is expected to be paid from pass-on hands until new financing agreements are completed sometime in early 1224.

As you can see on the bottom left side, the terminal continues to run out of 12 names like capacity with 20, it's with second quarter, 23 throughput reaching a new quarterly record time of 278,000.

The slight dip in July , which is due to an early loading of the cargo in the June and August is already trending time.

Discuss the door on going current and new customers from multi-orbit contracts with vast majority of the additional guaranteed capacity. Expect it to be contracted during the construction date next year.

On slide 21, our fleet renewal program continues to be implemented as we sell our oldest temples and replace them with modern second-gen public.

Starting with the sale on a second 2023, we sold our whole specials and navigator Ryan, a 2000 dose, 22,000 cubic meter L.C. to carrier to a third 20 for 20.9 million dollars. Resulting in a 4.9 million dollar profit.

That leads us to going through of our original navigator vessel built in 2000, and we continue to engage buyers who are showing interest to acquire those older methods. On the acquisition side, our new joint venture on 60% by navigator and 40% by green pickaxe has now taken delivery of all five of them.

Completing the acquisition earlier than previously expected. As a reminder, the total cost was $233 million and 65% of the finance by the 151 million dollar bank loan with 60% remaining cost roughly $49 million.

paid from all available cash. So as was often this FCP activity or current rates and such, the 50 successful average age of right at 10 years and average size of 21,000 cubic meters. So as was often this FCP activity or current rates and such, the 50 successful average age of right at 10 years and average size of 21,000 cubic meters.

Now finishing up slide 22, I want to personally invite all of you to our upcoming 2023 analyst and best of day here in Houston, Texas. A few months from now.

So on Wednesday afternoon, November 15th, we'll be hosting our Morgan's Point Tours of the S-O-L-E-Hexport Terminal and one of our vessels. So just take a look at that middle picture and imagine yourself climbing on board that beautiful S-O-L-E-Hex.

Later, by these things, we will dimension team and the members of the board of directors will host the dinner for analysts and investors. And then the next morning, Thursday, November 16th, we will host company and industry presentation covering current market trends, financial updates, as well as our median turnstretch.

We will end at lunch, followed by an appreciation event for our analysts, shareholders, customers, and partners.

lunch followed by an appreciation event for our analysts, shareholders, customers, and partners. And unlike today's heat, the weather will be much better.

So you won't want to miss it. We really hope to see you in November . And with that, I'll now turn it back over to Miles for closing your mouth.

Good, thanks a lot, Randy. Just to round it off, I just want to clarify that, to emphasize here that Navigate is on a good path. Earnings are trending in the right direction with robust utilization and practically higher charter rate.

Those are supported by the high utilization of our ethylene export facility at Morgan's Point, with more to come once the expansion is completed by N24.

The balance sheet is in its best shape ever with an appropriate level of depth and also a recently refinanced looking portfolio.

This gives us capacity for further growth, balancing growth with redistribution of capital through dividends and further share buybacks.

And now we will do both with dividends to be received on the 22nd of September and share buybacks for the initiated E-minute.

We published our annual DHEA report in June . I hope you had a chance to read it.

Our efforts in making our business more sustainable with significance were quickly picked up by the Web of Research 2023 ESG scorecard. We now rank 7 among 64 shipping companies and we have more initiatives ready to climb up further.

So, looking forward to see you in November in Houston and thank you very much. Back to you, Mandy.

Thank you, Bob. So, operator, we'll now open the line for some Q&A. To raise your hand, press star nine, and then you'll have to unmute yourself by also pressing star six. Or, if you zoom out, just use the raise hand function.

So, first question, you have our interview.

Hey.

Hey guys, can you hear me? Am I unmuted?

Howdy, good, good figured it out. Hey good word

I have a couple questions. First, you talked about it seems like more and more of cargos of all varieties are going to Asia, but at the same time I mean we're seeing seemingly news every day about congestion around the Panama Canal, water levels and so forth.

I assume that's a positive for your business, but is there any way to sort of think about the implications or how positive it is? Is it a modest or something that's making a meaningful difference? Ben, excellent question. It's something we're looking at on a…

impact positively. Now for the industry, for the gas industry.

Any inefficiencies from a shipping point of view takes capacity out of the available market. So that is on a ship, if you look at it from a shipping point of view, that's a good thing.

And that is very much applicable for the bigger ships that have to transit through the new Panama locks. And the new locks only allow for nine transits each way, each day. And the gas carriers are competing with the bigger ships of containers and LNG and so on.

So we're starting to see large delays there, whereby ships are being deviated around the Cape if they go to Asia. So clearly I hope they're from a shipping capacity point of view.

For us, some of our midsize ships that are trading on Ettane, so taking Ettane from US to also Asia, have also started to move via Suez or Cape. So that is...

an immediate impact on our business. Our hand-decided ethylene ships are quite nimble. So they, we have a pretty fixed schedule on them. So we can reserve canal flops and so forth in advance. So we see less of an impact on the hand-decided ethylene ships going across the Pacific. But I think.

It is definitely one to watch. The more delays, the less shipping capacity, and that's a good thing. Now!

The other question that you might be thinking of, if that's the case and that is going to be for a long time then does the market lack vessels to get back in time to load AOPGs, ethane, ethylene and that's an entirely different question, but for now

It possily bring some positive implications to our freight marketokay. That's hel fulwhen appreciate all the color there, or then I guess from my for my second question, and I'll LL turn it over: we, we did see. You know there's hardly anything an order, but we did see.

All sorts of different things. I'm curious if that is something that you guys have considered doing. You're going through the fleet renewal program as Randy you outlined. There's not much on order. You still have some older assets that you're looking to divest. Any thoughts about maybe replacing them with something like that? Relation right now.

I'm curious if that is something that you guys have considered doing. You're going through the fleet renewal program as Randy outlined. There's not much on order. You still have some older assets that you're looking to divest. Any thoughts about maybe replacing them with something like that? The relation right now is worthwhile.

I appreciate it. Thank you, guys. Thank you, Ben. Okay, operator. I see Omar has his hand up. Hi. Thank you. Hi, Randy. Hi, team. Hi, Randy. Hi, Randy. Hi, Randy. Hi, Randy. Hi, Randy. Hi, Randy. Hi, Randy. Hi, Randy.

Good morning. Thanks for the update. And obviously, as you have continued to highlight, it seems like the past few quarters, the business continues to thrive. And EBITDA is pushing higher. Wanted to ask, the TCE rate you guys captured on the Handy fleet this past quarter was at 27,000 plus number, even with the utilization having come off towards 89, which is historically still fairly decent. How can we think about, say, the very near term – I know it's too short term, but in general about the – you've mentioned utilization for 3Q now being above 90 percent. What do you think of – what can you give us in terms of guidance on the rate? Can we expect the rate to also be climbing with utilization here in the near term?

Thanks for the update. Obviously, as you have continued to highlight, it seems like the past few quarters, the business continues to thrive and EBITDA is pushing higher. I wanted to ask, the TCE rate you guys captured on the Handy fleet this past quarter was at 27,000 plus number, even with utilization having come off towards 89, which is historically still fairly decent. How can we think about, say, the very near term – I know it's too short term, but in general about the – you've mentioned utilization for 3Q now being above 90 percent. What do you think of – what can you give us in terms of guidance on the rate? Can we expect the rate to also be climbing with utilization here in the near term? Why not focus on what QI versus R energies are, what are the

Obviously, as you have continued to highlight, it seems like the past few quarters, the business continues to thrive. And EBITDA is pushing higher. Wanted to ask, the TCE rate you guys captured on the handy fleet this past quarter was at 27,000 plus number, even with the utilization having come off towards 89, which is historically still fairly decent. How can we think about, say the very near term, I know it's too short term, but in general about the, you've mentioned the utilization for 3Q now being above 90%. What do you think of, what can you give us in terms of guidance on the rate? Can we expect the rate to also be climbing with utilization here in the near term? Thanks, Omar.