Q2 2023 StealthGas Inc Earnings Call
Yeah.
Good day, and thank you for standing by welcome to that sense Gosh, Q2, 2023 results conference call.
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Please be advised that today's conference is being recorded.
I would like to hand, the conference over to your Speaker today, Mr. Michael Jolliffe Chairman of the Board. Please go ahead.
Good morning, everyone and welcome to our second quarter 2023 earnings conference call and webcast.
I'm, Michael Jolliffe, Chairman of the board of Directors and joining me on our call today is Harry boss Gasthaus C O to discuss Rockies and company outlook on consulting and a sister of varieties.
Handling investor relations to discuss the financial aspects.
Before we come out in the shop presentation, I would like to remind you that we will be discussing forward looking statements, which reflect current views with respect to future events and financial performance at this stage. If you could all take a moment to read our disclaimer on slide two of this presentation.
Risks are further disclosed in stealth gas filings with the Securities and Exchange Commission.
I would also like to point out that over the mountains quoted unless otherwise clarified are in.
Basically stated in U S dollars.
Today, we released our earnings results for the second quarter 2023.
While we Didnt break last quarters record profits, we maintained the strong profitability of $10 $5 million, resulting in our best performance on record for the first half of any year.
So let's proceed to discuss these results and update you on the company's strategy and the market in general.
Turning to slide three where we summarize some highlights.
In terms of outside Apache's activity, we continue to look for opportunities to sell some vessels now that asset prices are rising.
We have concluded the previously announced sale of four vessels in the last two were delivered in July and then entered into a new agreement for the sale of two more of the smaller L. P. Geez, yeah kind of a dream and eco Green sure.
Third party delivery in early 2024.
$35 million on block.
In terms of chartering, we were less active and concluded two six months' period charters, but we continue to have secured with them driving 80% of the remainder of 2023 days.
We have locked in about $19 billion in revenues for all subsequent periods.
Looking briefly at our financial highlights with an average fall less thresholds during the six month period net voyage revenues came in at a very strong $67.2 million compared to $66 3 million last year.
1% increase in spite of the much smaller fleet.
Adjusted net income for the second quarter was $10 $7 billion compared to $11 $3 million last year.
5% decrease.
Wow sort of a recent six month period adjusted net income was $2 28 million compared to 20 billion last year.
As we have now reported half of 2023, so far our profits would be the best on record.
We're delighted to announce that earnings per share for the six months was 71 seven cents.
During that period, we have hopped out debt by paying down facilities of $1 105 million in just six months and still maintaining strong liquidity.
To update you on the share repurchase program that was announced during the previous call up until now the company has used up about a third of the dollars 15 million. The board authorized and has repurchased 1.1 billion shares which is close to 3% of outstanding shares.
Let us move on to slide four for our fully owned fleet employment update as of August .
But he is bringing some imams parent activity was slow and as previously stated we entered into only two new time charters.
However, our contracted days remained at an elevated 80% for the remainder of 2023, and we have secured circa $1 43 million in revenues.
Our total contracted revenues for all periods up to 2026 are closer to $1 $90 million.
It is also worth noting that we currently have no vessels in the stock market as they are all fixed on period charters.
Lastly, after the three handy size vessels due for dry docking. This year all have completed their dry dock two of them during the second quarter and see how the basic dry dock expense without quota.
However, there are no more vessels due for dry docking our fully owned fleet for the remainder of this year.
In slide five I would like now to provide an update on our two joint ventures comprising of five vessels.
The first joint venture for small LPG vessels did not enter into any new period charters, mainly due to the fact that three of the vessels were also due for dry dock this year.
So yeah three out of the four vessels operating in the swap market. The gas bus completed its drydock in June .
Remains in the spot market.
Probably one of the two remaining drydocks for 2024.
The second joint venture currently comprises a single medium gas carriers in the water.
Plus one more under construction.
Following the sale of one vessel in the first quarter South gas received dollars $19 2 million in cash and distributions in the second quarter again boosting its liquidity.
As previously discussed the remaining vessel.
Cereal is on a very profitable time charter for one year charters option to extend one more yeah.
And our cell apache's option all at profitable levels.
The operating cash flow would be accurately cereal and out of the joint venture to also pay off the $10 million that's on that vessel in June .
He is currently unencumbered.
Regarding the new building vessels.
Tension to fund the new building acquisition, we still have cash equity.
Venture has sufficient cash in hand.
This Ah recently secured a circa 30.
30 million commitment from a financier for the debt needed for the delivery of the vessel subject to customary closings.
In terms of our fleet.
Griffey presented in slide six our company focuses on regional trade and local distribution of gas rather than long distance there.
This graph is a snapshot of the positioning of the fleet, including the joint venture vessels as of August 2023.
The distribution of athletes Theres, not really changed since our last call 17 vessels are positioned in Europe , particularly in the northwest and in the Mediterranean.
The gap between time charter levels in the east versus the West continues to be considerable and we may see some vessels deciding composition from east to west in the search for more lucrative period cover.
For the time being we have well positioned more than half about creating the most lucrative market.
In addition, eight vessels are trading in the middle and far east four vessels trading in the U S and Caribbean.
And three in Africa.
I will now turn the call over to Constantino sister wireless.
Who will discuss our financial performance.
Yeah.
Thank you Michael and good morning to everyone.
I will discuss our financial performance for the second quarter of 'twenty country.
Let us turn to slide number seven.
Where do we see the income statement for the second quarter and six months of 2023 against the same periods of 2022.
Even though calendar rates, where calendar days were reduced by 12% net revenues came in at $33 1 million for the quarter and $67 2 million for the six months.
The increase of 1% compared to last year.
For the six months period that was mostly.
Due to a reduction in voyage expenses, but also due to the afirma rates.
Operating expenses were $13, four 4 million for the quarter and $27 9 million for the six months.
Overall, there has been a significant increase in operating expenses as a result of inflationary pressures.
I was actually more pronounced during the first quarter less so in the second quarter that the company is actually trying to control.
In terms of dry docking costs and items that had major differences in the comparison.
But also depends on the timing of the dry dockings, we had $1 5 million in the second quarter and $2 6 million in the six months, an increase of $2 million or three and a half times six months now.
Wasn't because we dry docked three out of the forehand besides vessels in the fleet.
And they are the larger vessels enhance incur higher expenses.
Drydock every five years.
During the second quarter. The company also recognized a noncash gain on the sale of two vessels that were delivered a $2 9 million and a noncash impairment of $2 8 million on the agreed sale of two vessels that will be delivered in January 2024.
Interest and finance costs were slightly reduced over the quarterly period and flat over the six month period at $5 1 million, even though rates have more than tripled in the comparative periods.
This is a result of the aggressive debt repayment the company engaged in order to control interest costs.
For the six months period. There was also a considerable increase in equity income in joint ventures, which is our share in the profits of our joint venture structures.
Gaming at $10 5 million and was mainly attributed to the profits from the sale of one joint venture vessel in the first quarter.
As a result of all of the above we ended the second quarter of 2023 with net income of $10 5 million compared to $12 2 million for the same quarter of last year.
And for the six months period, $27 3 million compared to $19 8 million last year.
For the six month period were the highest this company has ever seen.
Moving onto our balance sheet in slide eight our liquidity, including restricted cash and short term investments was at the end of the quarter of $55 1 million.
From $95 7 million at the end of last year.
The debt repayments.
Vessels held for sale were $63 6 million as of June 30th.
It refers to the four vessels under agreement to sell.
During July the sale of the two vessels was completed and liquidity increased by about $35 million.
Advances of $23 4 million remained unchanged and relate to the advanced payments made on the medium gas carriers vessels under construction.
Vessels book value decreased from 628 million to $515 million.
Due to the sale of the vessels.
The total book value of our investments in our joint ventures decreased to 38 million. Following a $19 2 million dividend. We received during April after the sale of one vessel.
The overall outstanding debt was $145 million compared to $277 million at the end of last year.
Over a six month period, the company has half the outstanding debt.
As a result of the solid results being reported we increased shareholders' equity to $541 million.
Yeah.
Concluding our financial commentary with slide nine we will briefly have a look at the debt profile.
As a result of both recent vessel sales and rising interest rates. There was a major focus on reducing leverage for the company.
During the first quarter of 2023 $32 million of debt, including regular amortization was repaid.
During the second quarter and massive 105 million was he was repaid.
That doesn't include.
The repayments say joint venture vessels.
Overall debt has more than half from $294 million a year ago to $141 million at the end of the second quarter.
During the third quarter and another 13 million has so far been repaid.
About 35% of the remaining debt is hedged with interest rate swaps at an average of 2.1% that further mitigate the effect of interest rate rises.
Overall, we continue to maintain a very low leverage and have increased the number of unencumbered vessels from 10 to 15.
As far as the new building vessels are concerned we have signed a new loan agreement with one of our existing finance years for the financing of the two vessels whereby we expect to receive up to 17 million in finance proceeds for the delivery of these vessels subject to customary closing.
I will now hand, you over to our CEO , Jaime Vasquez, who will discuss the market.
And the company outlook.
On slide 10.
Our brief insight on the LPG market.
So far the first half of the year has been very positive as far as LPG suppliers concerned with global exports are estimated to have risen by five 5%.
I'll start by Carol Costa reports.
The U S being a main exporter has been exporting record amounts.
12% increases year on year.
Consistently exporting about one 5 million tonnes a month.
Scott I think that Theres been at high levels is likely this trend will continue with the main destination of U S exports being China and Japan.
This has provided the firm support for the larger LPG rates and subsequently the medium sized ships as well.
The middle East countries have also been exporting.
The amount of LPG, particularly in the second quarter, although the recent OPEC cut in oil production may moderate this growth.
It remains to be seen overall in training.
It's been a positive price differential with NAFTA or.
Supported use of LPG has finished up by crackers.
This had less effect in Europe as plants were operating at lower margins in general, but a more pronounced effect in Asia.
It has been a lot of talk in the news lately about China, and then importer of LPG and its economic recovery post COVID-19.
References to declining import and export numbers, but as far as LPG is concerned April show records amount being important and then May again, an all time high with 3.3 million bonds being imported.
Higher U S exports lower propane prices recover utilization rates above 70% and.
Capacity additions boded, well for LPG demand from Chinese PTH plants.
We have to have some big gas plants quite a few times before as we see it as a macro thing China wants to control its propane production, hence major investments have been made for increasing its capacity it has.
Been a bumpy ride for the vs Lance.
But the rapid expansion of <unk> capacity in China over the last few years as certain two more plants, rather than the second quarter and five more unexpected until the end of the year.
On slide 11, we present some of the key fundamentals are now shipping market commencing with market rates for our markets.
Stated in a previous call them on a year over year basis, which is significant increases in time charter rates up to 15%.
During Q2, 'twenty three time charter rates remained steady for the smaller ships, while increasing further for the larger ships.
Nurturing of the small LPG trade west of Suez the spot market remain tight for the majority of Q2 since the second half of June the spot market has started to cool off a bit in line with the usual seasonal pattern machine more or less every year.
Pedro outside the market continuing in their house and a fairly active states through Q2.
I've seen the stabilization of rates on the smaller pressurized ships and a continuous strengthening on the seventh day cubic meters and above.
Expectations are strong for the coming winter period and for the next couple of years in general and where she can interest from charters to lock in tonnage going forward.
They're still choice and there's the other spot market did not perform a strong as the western markets did well at the time of their I think the market is relatively quiet with the expectation of a pickup from September October onwards.
The biggest market in Asia remains of acquired through Q2 with charter still enjoying a relatively high tissue coverage.
We expect more activity towards Q4.
For the handsets versus the spot market continues to remain tight through Q2, as well with little tonnage available on either side of Suez.
It was also a spillover effect from the very tight medium sized market, which again was held up by strong very large just got their market.
On the theater side rates remain relatively stable in the small order book for this size bodes well for the coming years.
Like to reiterate that the fundamentals for our core fleet of small pressurized ships continues to look promising.
Almost one third of the fleet is over 20 years old well show a handful of vessels being scrapped while market rates hold for them, but this quarter. We also did not see any new ordering of vessels.
Already subdued new building market.
It's finished and published orders or about 18 vessels on order to be delivered the uptick until the next couple of years is sub 2% annual increase in the fleet.
For scrapping should eventually lead to a dead for vessels in the mid term we continue to believe that the risk of saying bulk ordering of new vessels. In this segment that could keep the supply demand balance is improbable.
Slide 12, we're showing the evolution of our LPG fleet.
This slide for comparison purposes, we have excluded the tanker ships.
2021 and refocus the pure LPG fleet in terms of cubic capacity, including our JV vessels, we have always been active in the sale and purchase market buying and selling ships.
As you can market to continue to sell some vessels after selling for in 'twenty, two and made more of this year as well as the one shown by our JV, we entered into an agreement to sell another two vessels.
For circa 35 million in aggregate.
While we recorded an impairment on this loss and we extended the timing of the delivery to early 'twenty for sure we will take advantage of little longer over the profitable charters, but these ships are under.
We're looking to show more vessels into the pressures right throw short sales. We have maintained the average age of our fleet to 10 years, which is quite more than for the industry standards.
We have been investing in more than you're building vessels.
Our order book consists of Korean built medium gas ships with 40000 cubic capacity each the first one on by our JV is near completion and we will take delivery in October while the other tool we will take delivery in Q1 24.
The strategic decision to diversify the fleet between the smaller vessels that we have traditionally operated and the larger ships Han besides the medium sized gas carriers that have slowly been entering our fleet since 2018.
In slide 13, we are outlining some of the key variables that may affect our performance in the quarters ahead, we remain optimistic on the longer term for the reasons. We analyze earlier. Despite many of them started there's mostly related to the macroeconomic environment in the short term we are in the summer months and the market has held up pretty well so far we expect.
As we enter the winter for the northern hemisphere to those rates will start increasing as they normally do.
Summing up after having reported record annual profits last year and record quarterly profits in Q1, the market remained firm and we had another strong second quarter, allowing us to report record six months profit and keep us on target to break last year annual record.
In terms of strategy during the second quarter, we further divested assets in a rising market will continue to diversify the fleet with the timely addition of larger more eco friendly ships.
We were also largely focus on reducing debt repaying $105 million. During this quarter alone that's greatly reducing our interest rates expenses the same.
Same time, our board authorized us to repurchase shares that they started being late in the previous quarter.
Now we have repurchased over 1 million common shares and we will continue to do so without the fortunate position, where we can deleverage diversified.
Purchase stock and maintain strong liquidity and at the same time.
This is the way, we are creating shareholder value for our investors and even though our share price has climbed significantly over the past six months, we believe we can.
I think it would be a sound investment for anyone wishing to invest in our company at this time, we've now understand of our presentation, we would like to open the floor for your questions.
Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced do.
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We will now take the first question.
One moment please.
From the line of Tate Sullivan from Maxim Group. Please go ahead.
Hello.
You are where.
<unk>.
Or are you putting the repurchase plan late late in the second quarter.
The majority of the one.
Sure.
Sorry, sorry.
If you can speak louder and more clearer sorry.
Where most of the repurchases.
In the quarter.
I can't give you a date.
Yeah.
We will go now to the next question.
From the line of David Cohen. Please go ahead.
Yes.
What is the current planning to destroy a stockholder value as you did with imperial petroleum.
Next question please.
What is it what is planned is.
We will now take the next question.
From the line of clean that Mullins from value Investor's edge. Please go ahead.
Hi, good morning or afternoon. Thank you for taking my questions.
On the press release, you mentioned you wanted to continue to diversify with larger vessels and I was wondering could you provide some more insight on this regard is this something you're planning to do let's say in the immediate future for once I said valuations normalized.
Secondly, do you have a preference for new builds for mother and tonnage or what's what's your sense.
Thank you for your question our Claremont base.
Basically.
What was the way the market is and with the way that the LPG is such a small business with very few are players.
Basically if we don't have a choice.
We find a.
Good quality vessel.
It doesn't really matter, if it's secondhand or in your building and its valued properly and we're going to buy it.
Unfortunately, it's not like a dry bulk water you have hundreds of ships and you can pick and choose.
When you wanted to buy and what you want to buy this is a really small market with very few quality ships for sale.
And therefore, if you want to diversify and buy bigger ships.
We have to be a bit more.
It's more a easy on our decisions.
Okay.
Makes sense.
Turning towards the share buybacks. It seems you started to use the authorization towards the end of the quarter.
What was the reasoning behind this decision.
And going forward could you provide some commentary on how you plan to continue to allocate capital.
What was the first what was the first part of the question.
Yeah like what was the reasoning we started to use the authorization towards the end of the quarter.
Because you need to do a legal paperwork, you'll need to take approvals and all this takes time.
Makes sense and regarding the second one so how you plan to continue to allocate excess capital. So how do you think about repurchases versus Newbuild orders, how do you.
Glenn to balance.
How should we have discussed before we are in a fortunate position that we can do both we will buy back stock. If we have another approximately 10 million to spend.
We have also to.
He built a company with because we have sold a lot of tonnage over the last two years.
Yeah makes sense and final question from me its more on the modeling side as of quarter end, how much debt did the issuing banks yours has after the repayment of the loan.
<unk>.
Yeah.
Please send us an email on that because I don't want to give you a number.
If you want to send us an email and we can check and come back to you.
Yeah, let's do it okay. That's all for me. Thank you for taking my questions. Thank you.
Thank you.
We will now take the next question.
From the line of Tate Sullivan. Please go ahead from Maxim Group.
Hello. Thank you can you hear me now Harry.
A bit better.
Okay. Thank you.
Just for the Newbuild deliveries so the JV joint venture Newbuild delivered in October .
And your first to your new builds in the fourth quarter. The second in the first quarter 'twenty four I believe.
Can you talk about the remaining commitments for those newbuild.
<unk>.
Yeah.
Finally cable data.
No we're paying for the JV, we don't need to do to spending your money for the two other ones that are doing that both in Q1, 'twenty four we need to spend about $20 million.
Okay, and then with part of the decision to sell the Eco Dream Eco green related to.
Financing those commitments are totally separate consideration.
You said the financing.
Or are you using some of the proceeds from selling eco dream Eco Green.
Dubai the Newbuild ships.
No not at all that there probably are a bit confused we have 15 unencumbered vessels.
We can raise hundreds of millions of that very easily and very cheaply not at all we're just all the ships because we saw a very good price for the size and age of the ships were.
Okay.
And then do you are you.
Can you share the current number of shares outstanding or are out after the repurchases.
Or maybe can you do that.
Yeah.
Yeah.
It's it's whatever it was minus one 1 million shares that we have good luck.
Okay, Yeah, just Europe .
The diluted shares okay.
And then.
When would you look to start a book contracts for the new builds for the <unk>.
<unk> under construction.
That something that you do well ahead of delivery or how does it usually works LPG industry. Please.
It all depends on the number of simply good numbers in advance of a book if we don't do we wait normally we booked 30 to 60 days prior to delivery.
Great Okay.
Alright.
And then you mentioned you've already had $70 million of financing for the new builds and did I hear you right.
The two ships.
$5 million.
Is that okay. Yes, okay. Thank you. Thank you very much thank you Dave.
Okay.
There are no further questions at this time I would like to hand back over to management for final remarks.
We'd like to thank you all for joining us today for our conference call and for your interest and trust in our company and we look forward. However, you again with us for the third quarter results in November . Thank you.
That does conclude our conference for today. Thank you for participating you may now disconnect.
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