BW LPG Ltd. Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Results: Reported strong Q2 results with TCE in line, profitable trading activity, and a dividend of $0.58 per share declared (100% payout of shipping NPAT plus top-up from product services).
• Acquisition: Announced acquisition of 12 Avance Gas VLGCs for $1,050 million, a major milestone. Enabled by NYSE listing, enhancing liquidity and strategic position as a leading VLGC player.
• Market Outlook: Market recovering from summer doldrums; spot rates bottomed out, demand in consuming markets growing, FFA market pricing December liftings around $50,000 per day.
• Transaction Details: Acquisition propels fleet scale, commercial advantages, and fleet renewal; 53 VLGCs by start of 2025 (22 dual-fuel). Funded via new shares ($333 million), debt ($500 million), and a $350 million revolving unsecured shareholder loan.

Segment Performance

• Shipping: In Q2 2024, time charter equivalent (TCE) was $48,000 per calendar day and $49,700 per available day. For 2024, time charter outfit generated a profit of around $27 million over the time charter in-fleet, and the remaining fixed time charter out portfolio is estimated to generate $68 million for the year.
• Product Services: Q2 net profit was $16 million, with a gross profit of $25 million (comprising a $29 million realized gain from positions offset by a $5 million unrealized net loss from hedging). Net asset value ended in June at $69 million.

Guidance

• Net leverage ratio expected to increase to 30%-35% post-acquisition, a healthy and optimal level.
• Dividend of $0.58 per share declared, with focus on returning value to shareholders.
• Expect fleet expansion to contribute to growth while maintaining healthy liquidity and repayment profile.

Risks

• Potential overcapacity in LPG shipping, which could negatively impact rates.
• Uncertainty around ammonia project materialization and its effect on market dynamics.
• Panama Canal dynamics affecting market, though BW LPG has no plans to bid for slots in canal tenders.

Question and Answer

Q: About inspection and revenue days for the acquired 12 VLGCs.

A: Ships are on advance cost until delivery, following standard sale-purchase terms; no material cost impact on BW LPG's side.

Q: Market outlook and growth projections to 2026.

A: Based on terminal expansions, data collection, and infrastructure plans in U.S. Gulf and Asia, supporting long-term growth.

Q: Impact of fleet growth on product services.

A: No plans to expand the enterprise contract beyond what's already announced.

Q: Terminal export capacity and pricing.

A: Term contracts with U.S. Gulf terminals have case-by-case pricing; spot market exposure to supply/demand dynamics.

Q: Avance Gas shares issuance and tax redomiciliation.

A: Avance Gas receives shares on ship delivery; tax redomiciliation to Singapore doesn't change withholding tax for dividends to global investors.

Q: Impact of younger fleet on operating expenses.

A: Younger fleet expected to positively impact operating expenses due to greater fuel efficiency.