Q3 2025 Ardmore Shipping Corp Earnings Call

Speaker #3: Good morning , ladies and gentlemen , and welcome to Ardmore Shipping . S Third Quarter 2025 Earnings Conference Call . Today's call is being recorded and an audio webcast and presentation are available in the Investor Relations section of the company's website , Ardmore Shipping .

Speaker #3: Com . We will conduct a question and answer session after the opening remarks . Instructions will follow at that time , a replay of the conference call will be accessible through November 12th by dialing 1888660634 5 or 1 (646) 517-4150 , and entering passcode 96494 .

Speaker #3: At this time , I will turn the call over to Gernot Ruppelt Chief Executive Officer of Ardmore Shipping .

Speaker #4: Good morning and welcome to Ardmore Shipping . S third Quarter 2020 Earnings Call . First , let me ask our president , Bart Kelleher , to discuss forward looking statements .

Speaker #5: Thanks , Gernot . Turning to slide two , please allow me to remind you that our discussion today contains forward looking statements . Actual results may differ materially from those projected in the forward looking statements .

Speaker #5: Additional information concerning factors that could cause the actual results to differ materially from those in the forward looking statements is contained in the third quarter 2020 earnings release , which is available on our website .

Speaker #5: And now back over to Gernot .

Speaker #4: Thank you . Bart . Let me outline the format of today's call , which you can see here on slide three . First , I'll give you a brief overview of third quarter results .

Speaker #4: Market trends and how we are executing on capital allocation . I will then hand over to Bart , who will cover the market outlook and update you on our financial and operating performance .

Speaker #4: Thereafter , I will conclude the presentation before opening up the call for questions . Turning to slide four . We are pleased to announce our third quarter results , delivering adjusted earnings of 12.6 million , or $0.31 per share .

Speaker #4: Earnings increased throughout the third quarter and into the fourth , driven by record volumes of refined product on the water . Our TCE performance remains exceptionally strong , defying seasonal norms .

Speaker #4: Rates have been firming throughout the year and into the typically stronger winter period at levels more than double our cash breakeven . Our Mrs. earned $24,700 per day for the third quarter , and 24,900 so far in the fourth quarter , with 40% booked .

Speaker #4: Our chemical tankers earned $22,600 per day for the third quarter and 22,200 so far in the fourth quarter , with 35% booked . We took delivery of three modern Mr. tankers during the quarter .

Speaker #4: These were opportunistically acquired during a period of market uncertainty before the summer . Second hand prices have been firming considerably since these vessels have been capturing strong spot markets .

Speaker #4: Notable fuel savings and increased our earnings power . Meanwhile , guided by our capital allocation policy , we have fully redeemed our 30 million preferred shares .

Speaker #4: Further reducing our cash breakeven . And we are declaring our 12th consecutive dividend consistent with our policy of paying out one third of adjusted earnings .

Speaker #4: In addition , we are further enhancing the value of our trading book through high quality , long term charter contracts . We recently fixed one of our 2014 Biltmores for two years to an oil major at $21,250 per day .

Speaker #4: Looking ahead , markets are experiencing evolving product tanker demand , significant near-term disruption and tight supply demand balances as Bart will cover in greater detail .

Speaker #4: Turning to slide five , where we highlight our disciplined and deliberate approach to capital allocation . We continue to balance returning capital to shareholders with growing the business and reinvesting in our fleet , while maintaining low debt levels .

Speaker #4: As just mentioned , we are paying our 12th consecutive dividend . We fully redeemed 30 million of preferred shares , and we took delivery of three high performing members .

Speaker #4: With that over to Bart .

Speaker #5: Thanks , Gernot . Turning to slide seven in the market outlook , export volumes and refined product in transit reached record levels during the quarter , fueling robust product tanker demand in addition , ample oil supply is driving strong refinery throughput and trading activity .

Speaker #5: At the same time , high crude fleet utilization is tightening supply across the tanker industry . Notably , 50% of the Lr2 fleet is now trading in the crude market , up 23% over the past year .

Speaker #5: Turning to slide eight , where we examine how geopolitical factors are creating further inefficiencies and favorably impacting the market . 16% of the global tanker fleet is now sanctioned , significantly reducing the pool of compliant vessels and limiting available supply .

Speaker #5: Looking ahead to the start of next year , the EU is further tightening restrictions targeting products refined from Russian crude . The map on the lower right highlights one example of notably longer voyage distances that are likely to emerge .

Speaker #5: Meanwhile , rapid changes to geopolitical conflicts , tariffs and trade disruptions are driving increased market activity . Slide nine highlights the favorable supply dynamics with positive trends on both ends of the age spectrum .

Speaker #5: In increasingly older fleet and a shrinking order book with decelerating ordering activity . Our favorite chart on the left illustrates the continued evolution of the aging fleet over time .

Speaker #5: The fleet is the oldest . It's been this century , ongoing regulatory uncertainties continues to limit ordering activity , with the order book now representing just 13% of the fleet .

Speaker #5: Moving to the chart on the right, the older fleet approaching the scrapping window is four times larger than the current order book.

Speaker #5: As a reminder , even if these vessels are not initially scrapped , their utilization levels notably decline . Now moving to slide ten .

Speaker #5: Here we take a closer look at evolving trade flows and long term demand . The global refinery base continues to shift with capacity expansion , concentrated in Asia and the Middle East .

Speaker #5: While closures persist in the West . In Europe and the US , refinery shutdowns are increasingly requiring long haul substitution flows from the east driving ton mile demand , specifically in California , refined product imports are up 50% year on year , with some major refineries now permanently shutting down .

Speaker #5: Meanwhile , forecasts note extended oil demand growth supported by an increased focus on energy security and continued economic growth . Now moving to slide 12 and turning our attention to Ardmore's strong financial performance .

Speaker #5: As previously mentioned , we have utilized our low cost debt to fully redeem our preferred shares as a reminder , this was from a 2021 bilateral transaction done directly with our friends at Maritime Partners .

Speaker #5: Redeeming these shares supports our evolving capital structure and focus on low cash breakeven levels . Once again , the chart on the bottom left highlights the progress we have made to reduce our cash breakeven levels to $11,700 per day .

Speaker #5: This includes CapEx for dry docking cycles . Without this , our break even is an even lower $10,800 per day on an operating basis .

Speaker #5: Turning to slide 13 for financial highlights for the third quarter , we reported EBITDA of 27.6 million . And as mentioned earlier , earnings per share of $0.31 .

Speaker #5: We continue to frame EBITDA as an important , comparable valuation metric against our IFRS reporting peers . Full reconciliation details can be found in the appendix on slide 22 .

Speaker #5: Also , please refer to the appendix on slide 23 for our fourth quarter guidance numbers . And most importantly , our strong operating leverage positions .

Speaker #5: Ardmore to take advantage of market volatility . Every $10,000 a day in additional TCE increases annual earnings by approximately $2.15 per share . Moving to slide 14 for fleet operations Drydocking activity for the year is largely complete , with very limited dockings in the coming years , resulting in more revenue days , earnings , power and cash generation .

Speaker #5: As a reminder , capital expenditures for 2025 are projected to be 37 million , nearly half of which is elective CapEx related to efficiency and tank coating upgrades .

Speaker #5: Projects where we are already realizing notable early returns . Our strong spot exposure is further enhanced through high quality charter contracts that attractive levels and we're continuing to invest in tangible AI and digitalization projects with short paybacks .

Speaker #5: For example , we're currently upgrading high frequency data collection and transmission across our fleet to take voyage optimization to the next frontier . Our targeted use of biofuel bunkers supports trading strategies in the EU , and we are achieving full fuel EU compliance across the fleet in 2025 .

Speaker #5: Finally , our on higher availability was a strong 99% in the third quarter , a testament to our seafarers working in coordination with our global team .

Speaker #5: With that , I'm happy to hand the call back to Gernot and look forward to answering any questions at the end .

Speaker #4: Thank you . . Moving to slide 16 . Let me summarize . Earnings have continued to strengthen through the first three quarters of 2025 , and into the fourth quarter , supported by favorable market conditions and strong operating performance .

Speaker #4: Our recent acquisitions are capturing these favorable markets and increase Ardmore's earnings power . We are wrapping up our CapEx program for the year with a minimal drydock schedule for the coming two years , and we continue to enhance the quality of our trading book with compelling long term charters .

Speaker #4: Our strong financial position enables us to be opportunistic and resilient , giving us the flexibility to both reinvest in the business and deliver shareholder returns .

Speaker #4: As always , our actions are guided by industry leading governance and we take an agile and responsive approach to market shifts . Enabled by our high performing operating platform .

Speaker #4: With that, we now welcome your questions.

Speaker #3: Thank you . Ladies and gentlemen , we will now begin the question and answer session . Should you have a question , please press the star followed by the one on your touch tone phone .

Speaker #3: You will hear a prompt that your hand has been raised . Should you wish to decline from

Speaker #3: the polling process , please press . The star followed by the two . If you are using a speakerphone , please lift the handset before pressing any keys .

Speaker #6: afternoon . Thanks for taking the call . Maybe Bart or not . Either one . Hi . Either one of you guys Bart can answer this one , but if you look at slide seven , you know the I'll put on the water the size it's ever been .

Speaker #6: The refinery runs , size it's ever been a lot of favorable things . You're talking about as it relates to sanctions and , you know , 20 mid 20s a day is a decent rate , but it's not phenomenal rate .

Speaker #6: And it's also lagging , I would say an historical relationship with the strength of the VLC market . So is this like , you know , things are building and you expect a much stronger winter period ?

Speaker #6: Or is there some limiting factor that kind of keeps the Mr. spot rates from getting , you know , 35 , 40,000 a day ?

Speaker #4: Yeah . Thanks , John . I'm going to I'm gonna start here and then see see what Bart might want to add . But you're making a good point .

Speaker #4: If you look at just sort of the short term sort of relationship between Mrs. and some of the , some of the crude tankers know , if you zoom out there is a , there is a relatively strong correlation .

Speaker #4: And of course , you could argue that whatever goes into the refinery also comes out the other end . So yeah , I think I think that point is well made .

Speaker #4: You know , just kind of looking at looking at our sector , you know , we feel pretty compelled by , you know , the , the , the significant ramp up in earnings that we've seen from the start of the year , where there's been more of a risk of approach in markets to our trading activity , really going through a catch up phase .

Speaker #4: But we are equally excited , of course , about sort of the long term demand drivers , sectoral drivers , evolution of the demand picture of product tankers as a whole , where , you know , the market that we're facing today is , is vastly evolved from what it would have been 10 to 15 years ago .

Speaker #4: And of course , not to forget that we have the the oldest fleet kind of on record . The century . So so we are , you know , we're quite positive about the long term picture and , and I think near term , you know , not to kind of dive into all the geopolitical factors that are in play , but it certainly feels like the the world is nowhere near an equilibrium .

Speaker #4: And , and , you know , while there are these shifts brought on by geopolitical tension or even by conflict , you know , of which there are many that creates volatility in commodity markets and with volatility in commodity markets , you see more trading and with more trading , you have a higher demand for for ships carrying those commodities to move and to move it lengths .

Speaker #4: You know , I think what we hinted at what's going on right now with regard to , you know , imports really moving up significantly into California as significant .

Speaker #4: Some of the new triangulations we're seeing in the Atlantic basin is just a story that's starting to play out now . You know , we've of course , talked talked at length about , you know , the the the displacement rate of of formerly Russian diesel exports into Europe , whereby Europe is covering that from different regions , but probably very little talked about is that Russia is now actually looking to import CPP or petroleum products from , from relatively far away places like in Asia to actually bridge the shortfall of their own domestic petroleum production , which has been quite heavily hit .

Speaker #4: Of course , recently . So I think I think taking taking into account all of that , we feel we feel positive about about the market outlook .

Speaker #6: Okay . That's very helpful . And then given that , I mean , I understand you want to balance chartering strategy and two years with an oil major is probably pretty good business .

Speaker #6: But again , that's at a level that's lower than what you just did in the third quarter , what you're indicating for the fourth quarter , what you're effectively insinuating for the near term .

Speaker #6: So help us understand the thought process behind that deal . And your appetite to do others of similar duration and rate levels .

Speaker #4: Yeah , I mean , it is , of course , a relatively small portion of the fleet , and the fleet is predominantly operating in the spot market where we can capture those favorable currents .

Speaker #4: We look at it really as a portfolio . We have been active on both the time charter and and time charter out front .

Speaker #4: Sometimes simultaneously , and and will continue to do that . You know , this was this was an opportunity to to lock in a really strong return with , with a with a high quality counterparty .

Speaker #4: And as we expanding the the earnings power , we also kind of , you know , augment and solidify earnings quality with a counterparty that is well known to us .

Speaker #4: You know , first grade and we have a long operating history with . So we'll continue to of course evaluate opportunities on both sides of the table .

Speaker #4: In out . Well , of course , on the S&P side of things . And it's just one part of a broader portfolio .

Speaker #4: And I think maybe taking the taking , you know , a little a little cue here from your first question on on market direction , I mean , this is a major oil and refining company .

Speaker #4: And for that to be the confidence to take a long term charter at these , at these good levels , I think also is reflects positively on on their view of their of their physical needs in terms of moving that product over the over , over multiple years .

Speaker #6: Thank you . Appreciate the time .

Speaker #4: Thanks , John .

Speaker #3: Thank you . As a reminder , if you wish to ask a question , please press star followed by the one . Your next question comes from Omar Nokta with Jefferies .

Speaker #3: Please go ahead .

Speaker #7: Thank you . Hi , Gernot . Bart , a couple of questions on my end . I just a couple for for for me .

Speaker #7: And maybe just following up on the first question from from John . I guess thinking about the market and you've already talked about it , but just from maybe your vantage point , obviously the market's gotten better .

Speaker #7: This year as time has gone on . Right ? Your results have sequentially improved , but it doesn't have that sizzle yet . Like like we are seeing in crude tankers .

Speaker #7: And I guess just from what you're saying , it is this as expected , is this what you would have thought would have happened to product tankers given the shift in OPEC that we would see crude tankers surge products just of ho hum improve and then is it just simply a matter of time as you mentioned , that it's just simply these cargoes now need to deliver into the refining system .

Speaker #7: And then that will then create more product flow . Is it as simple as that ?

Speaker #4: Yeah . I mean , look , if there is a if there's an abundance of of oil supply , which I think is , is at this point pretty much a given given the , you know , not just the , the strong output and , and Opec+ production increases , even though they might be moderated now at the at the start of the year .

Speaker #4: But of course , that's always kind of a balancing act . But Opec+ of course are not the only oil producers at the moment .

Speaker #4: And and I think we have we have continued to observe as there is ample oil supply that creates , you know , really strong incentives for refineries to , of course , put that to the refinery .

Speaker #4: We see already refining margins , very strong . We see , you know , product on the water . Indeed quite firm and and just with the , with the , with the , with the market sort of the oil market kind of flirting with the contango , you know , kind of not quite there , but dipping in and out of that , of course , that then creates all sort of interesting commodity plays , increases economic incentive for long haul trading for the larger ships could certainly lead to some storage activity , which has a very positive cascading effect and just kind of creates that additional layer of trading demand .

Speaker #4: So to your point , I think there's still there's still a lot of a lot of positive factors that could play out in addition to just , you know , continue just trade shifts that are purely within , within , within refined products , trading .

Speaker #5: And I'll just add in Omar as well. You know, typical seasonality is always more of the discussion of, is it mid-November or kind of prior to Thanksgiving.

Speaker #5: And so , you know , from that , I mean , we still do have part of the refining base , you know , coming back from maintenance , period .

Speaker #5: And everything . And then you have the accelerants that that Gernot just spoke about .

Speaker #7: Thank you . Yeah , that helpful . And I just wanted to ask maybe a bit on Ardmore specifically strategy . Obviously , you guys have done very well in terms of strengthening the balance sheet you've got now just looking here on your slides , no dry docks next year .

Speaker #7: You've got no real debt repayments next year . And you've paid for those three misses . Have delivered . So you're in a great position with plenty flexibility as we look into 26 .

Speaker #7: Presumably the market still looks fairly decent . Kind of . What are you thinking now that you've especially now that more the Preferred's , you have a lot more flexibility than you have had in the past .

Speaker #7: Does this change anything in terms of how you want to deploy capital , whether it's returning more capital to shareholders , or do you think there's opportunities to kind of maybe replicate the the , the sale and purchase transaction ?

Speaker #7: You did a few months ago with those three misses ? How are you thinking about that ?

Speaker #4: Yeah , that's a great question , Omar . And I think ultimately our next steps will be guided by the market always , of course , underpinned and guided by by our strong governance and our very balanced approach to capital allocation .

Speaker #4: We feel like we have found a way to to be value enhancing across a wide range of transactions . So , you know , of course , the three vessels we took delivery of just after the summer , you know , if you take if you just take sort of price point that we paid for , the five year old would have been around 38 million .

Speaker #4: Just north of that. And we've seen now ships of the same age getting sold for $43 million. In one case, as much as north of $44 million.

Speaker #4: So we're in the money by 15% there within four months . And of course , we take note of that . That big step up .

Speaker #4: Happy with that transaction . And to what extent there are opportunities moving forward . You know closely , of course , connected with all sources of deal flow .

Speaker #4: It's an active market , fragmented buyers , sellers that sometimes buy and sell ships for for reasons that are , you know , not necessarily only economically motivated , but at the same time , we've also found ways to reinvest in the business , not by acquiring ships , but by investing in vessel upgrades that had extremely short payback periods .

Speaker #4: Whether it was efficiency upgrades that that enabled really compelling fuel savings , whether it was increasing cargo versatility by upgrading our chemical tankers and of course , you know , across the past year , we have we have provided shareholder returns , not just through , through , through dividend , but also through share buybacks .

Speaker #4: When we thought there was an opportunity to lean in and and all those avenues will continue to be on the table . And of course , what we did recently with the PEF helps reduce our break even on top of kind of really rigorous cost discipline as well .

Speaker #4: And I think I think that will continue to be the guiding pillars of of our strategy focused on the product and chemical space and looking to do , you know , value enhancing transactions across the spectrum and how that would look in detail , again , is ultimately guided by by the market .

Speaker #7: Thank you . Thanks . I appreciate that and thank you , Bart . I'll turn it back .

Speaker #4: Thanks , Omer .

Speaker #5: Thanks .

Speaker #3: Thank you . Since there are no further questions , this concludes today's conference call . Thank you for your participation . You may now disconnect .