BW LPG Limited (BWLP) on Q1 2025 Results - Earnings Call Transcript

Aline Anliker : Hello, everyone. Good morning, good afternoon, good evening. A warm welcome to BW LPG's Q1 2025 Earnings Presentation. My name is Aline Anliker, and I'm the Head of Corporate Communications at BW LPG. Today's presentation will be given by our CEO, Kristian Sorensen; and our CFO, Samantha Xu. After the presentation, we will have a Q&A session. [Operator Instructions] Before we begin, I would like to highlight the legal disclaimers displayed on the current slide. Please also note that today's call is being recorded. And without further ado, I would now like to hand over to our CEO, Kristian. Kristian Sorensen: Thank you, Aline and hello, everyone. Thank you for taking the time to be with us today as we review our first quarter 2025 financial results and recent developments. Let's turn to Slide 4, please. For Q1, we reported a TCE income of $39,800 per available day and $38,800 per calendar day. This is above our guidance of $36,000 per day, thanks to the performance of our time charter portfolio. After minority interest, the Q1 profit was $46 million, equivalent to $0.30 per share. And the Board of Directors has declared dividends of $0.28 per share, which is equivalent to 75% of our shipping NPAT and translates to an annualized dividend yield of 10%. We've been quite busy on the financing side and have concluded a Japanese JOLCO lease for 1 vessel, the BW Kyoto, while we are at the final stages of refinancing a $380 million bank loan where we have received very strong interest from the banking group. As per our trading update back in April, BW Product Services realized positions showed a solid $33 million in profit in Q1, but due to a downward adjustment of the valuation of the unrealized positions, they reported a gross loss of $3.6 million and a net loss after tax of $12.5 million for the first quarter. We like, again to emphasize that this is -- that it is the realized positions, which generated dividend capacity and the downward adjustments to the valuation of the unrealized positions does not necessarily mean the positions are loss-making when they are realized in the future. Into the second quarter, we reactivated the share buyback program after the share price dropped in the wake of the U.S. China tariff war. We are happy to see that the share price has improved significantly since then as the solid fundamentals in the LPG market played out. More about that later. For our activities in India, two major events should be noted. The first is a sale of the 2015 built BW Chinook and BW Pampero to strengthen our Indian flag fleet. And this is a strong sign of our belief in the Indian LPG market. Secondly, we have made the strategic decision to discontinue our involvement in the LPG import terminal outside Mumbai. This was a very difficult decision to make. But given the increased geopolitical risk, which our freight and trading activities are exposed to, we believe it is in our shareholders' best interest to focus our attention and resources on the key value drivers for our company. Although this journey did not end as intended for us, I would like to thank our partners Confidence Petroleum and Ganesh Benzoplast for the cooperation on this project and wish them the best of luck going forward. Okay. Let's take a look at the market, Slide 5. Q1 was relatively uneventful compared to what unfolded as we moved into the second quarter. As the Chinese retaliatory tariffs on U.S. sourced goods and commodities were introduced, the U.S.-China LPG trade came to a halt and freight rates tumbled. However the solid fundamentals of the market prevailed. And with high U.S. LPG production, the export levels were unabated as U.S. LPG volumes were shifted to other Asian import markets outside China. The U.S. terminal operators are moving forward with their expansion plans, which will facilitate for further export growth. While the OPEC cutback reversals are expected to increase the Middle Eastern exports with more export projects also on the horizon later in the decade. We are closely monitoring the Panama Canal traffic, and there are indications that more ships are sailing around South Africa on its way from the U.S. to alternative markets in India and Southeast Asia, driving up ton-mile as the sailing distances increase. Another event, which the whole industry closely monitored was the proposed sharp hike in the U.S. port charges for Chinese builds and/or Chinese-controlled vessels. Ships arriving in ballast are exempted, and the BW LPG fleet is set to trade as normal but we’re awaiting news from the second public hearing, which is taking place this week, whether any changes are proposed or made. For the newbuilding market, we will take a closer look at the order book, which is now counting 109 ships later in the presentation. The spot market has taken a sharp upturn as the exports were back on track from the U.S. and the Middle East. We are currently fixing vessels around $50,000 per day mark from the U.S. while the Middle East is trading around the $60,000 per day range. Next slide, please. On this slide, we're trying to show the market turmoil we went through when the Chinese introduced their import tariffs on U.S. sourced LPG. Overnight, it became uneconomical to ship U.S. cargoes to China, its largest export markets, and prices for delivered LPG in Asia came off quickly. There were talks about U.S. cargoes being canceled and withdrawn from exports. On the first week, the spot rates went from $40,000 per day to $10,000 per day in three days. It was a swift and brutal reaction, but it took out a downside and the market could quickly thereafter start repricing itself. Non-Chinese players quickly moved in to capitalize on the situation, and after a couple of days, the market bounced back with increasing freight rates, reflecting the high activity level. A very strong force in the LPG market is the fact that it is a supply-driven byproduct from crude oil and natural gas production. And LPG, which is not consumed domestically in the U.S., must eventually be priced to clear in the international markets. We were, however, somewhat surprised to see that the U.S. prices remain quite resilient, while the increase of the landed price in the Far East supported freight rates to increase while the U.S. Mont Belvieu prices remained stable at least so far. The 90 days tariff relief announcement led to another upswing in the freight market as more payers try to secure shipments. Over the last two weeks, the ARB has narrowed, and there is currently kind of a standoff between Mont Belvieu prices and the Far East prices, while shipping remains tight with more ships diverting to a very active Middle East markets. Next slide, please. The LPG market is extremely dynamic and adapt very quickly to market conditions. And as you can see on this slide, new trades emerged within days and weeks after the Chinese import tariffs were introduced. Chinese import demand was met by cargo swapping and reshuffling of Middle Eastern and other non-U.S. LPG cargoes, while U.S. cargoes increasingly changed their destinations to Japan, Korea and Southeast Asia. India being the second largest importer of LPG, played a key role in the new trade pattern, which emerged. And we saw the first U.S. cargoes shipped all the way from the U.S. to India. And from a shipping perspective, sailing distances increased somewhat and a more inefficient LPG supply chain supported freight rates to rebound. The fundamentals of the LPG market remain robust, and the U.S. production of LPG is rising unabated backed by oil price in the low $60 per barrel. We do, however recognize that the lower oil price may lead to reduced production of LPG, although more U.S. LPG will come from natural gas production going forward. Terminal expansion plans are going ahead, as previously announced, and it is in our view, a positive sign for shipping demand in the future. Let's take a look at the order book before Samantha walks you through the financials. The total order book is now at 109 ships by including vessels scheduled for delivery in 2029. There is a tension on the Chinese bill part of the 406 strong sailing fleet, and currently, we count 50 of these as built in China, while 26 units are an order from Chinese yards. Dry-dockings continue to absorb capacity from the global VLGC fleet. We are heading into a higher pace of dry-dockings into the months ahead which should be positive for the rate environment. And then I'll leave the floor to you, Samantha. Samantha Xu: Thank you, Kristian, and hello, everyone. Please follow me to Slide 12 and have a closer look at our shipping performance. For this quarter, we are very pleased to report achieving TCE per calendar day of $3,800, or per available day, $39,800 over a 96% fleet utilization after deducting technical off-hire and waiting time. The healthy result achieved in a volatile market was a strong statement to our commercial strategy, consistently taking on fixed rate time charter and FFA for -- to cover a stronger market and to support -- provide support when spot markets are under pressure. In Q1, the time charter portfolio was 41% of the total shipping exposure, among which 30% is fixed rate time charter, supporting the earning when the spot market softened. For Q2 2025, we have fixed 79% of the available fleet days at about $35,000 per day. Looking ahead, we have secured a total 30% of our portfolio with fixed rate time charters and FFA at $45,000 per day and $50,600 per day, respectively. For 2025, our time charter at fleet is estimated to generate a profit of around $24 million over our time charter-in fleet. And on top of that, the balance of our fixed time charter-out portfolio estimate to generate $137 million for 2025. Next slide, please. On Product Services side, the business posted a realized gain of $33 million for Q1, a very strong quarter delivered. On the unrealized open positions we reported a negative change in mark-to-market valuation on our cargo of $51 million which offset by a positive paper position change of $50 million. This broad product services trading result to a gross loss of $4 million for the quarter. After accounting for other expenses, which mainly comprise of general and administrative expenses accrued, Product Services reported a net loss after tax of $12.5 million. As we mentioned in the previous quarters, the large sum of mark-to-market valuation change is due to the gradual phasing-in of our multiple year churn contract, which reflects value adjustments in time of a volatile market. While the value is significant, it reflects the delta between the balance sheet dates, and we will continue to see fluctuation before the position are realized. As at the end of Q1 '25, Product Services book equity position stands at $53 million. This was after a dividend of $65 million paid out to shareholders as reported in our Q4 earnings call. As usual, we would like to highlight that the reported book equity does not include the unrealized fiscal shipping position of $8 million, which was based on our internal valuation. In Q1, our average value-add risk bar was $5 million, reflecting a well-balanced trading book, including cargoes, shipping and derivatives, including also the impact of the increased churn contract volume as mentioned earlier. Going on our financial highlights. We reported a net profit after tax of $67 million, including a profit of $48 million from BW LPG India and a $12.5 million loss from product services. Profit attributable to equity holders of the company was $46 million for the quarter, which translate to an earnings per share of $0.30, and an annualized earnings yield of 11% when compared against our share price at the end of March. We reported a net leverage ratio of 31% in Q1, a slight decrease from 32% reported at the end of December due to the release of restricted cash held in brokerage account of $30 million and a reduction of total borrowing of $45 million. For Q1, the Board declared a dividend of $0.28 per share, which translate to a 75% payout for our shipping profits. For the period end, our balance sheet reported shareholders' equity of $1.9 billion. The annualized return on equity and on capital employed for Q1 were 14% and 10%, respectively. Our Q1 OpEx was $8,400 per day, largely in line with previous periods. For '25, we estimate our own fleet operating cash breakeven to be $19,300, and total fleet operating cash breakeven, which included the time charter-in vessels to be $21,700. All in cash breakeven is estimated to be $25,000, some improvement than our previous estimate, but still elevated than last year, driven by 2025's dry-dock program and higher financing costs. Next slide, please. On the liquidity side, as end of Q1, we continue to maintain an ample position of $633 million, supported by $262 million in cash and $371 million in undrawn revolver facilities. This position was attributed to our meticulous financing planning to replenish liquidity as growth continues. Our recently concluded JOLCO financing contributed $65 million while we took delivery of BW Kizoku. The repayment profile is sustainable with major repayment only kicking in after 2029. We are also in the process of concluding a $380 million bank financing on a competitive term. Once it's done, it will replace the shareholder loan from BW Group, which was arranged during the fleet acquisition, and further enhance our liquidity. This financing is not expected to increase the current leverage ratio. On the product services side, trade finance utilization stood at a moderate level of $224 million or 28% of our available credit line given very efficient room for future trading needs. With that, I would like to conclude my updates. And back to you, Aline. A - Aline Anliker : Thank you, Samantha, and thank you, Kristian. We would now like to open the call for your questions. [Operator Instructions] And I see a question here from Kushal. If you could please unmute yourself. Unidentified Analyst : Can you hear me? Aline Anliker : Yes. Unidentified Analyst : Just wanted to understand our broader strategy on the India LPG terminalling business. I just noted that we are moving out of the contract with Ganesh Benzoplast, as well as Confidence Petroleum, where we wanted to set up this LPG import terminal. Why was this decision taken specifically given the fact that now volumes are moving from U.S. to India directly, the LPG volumes, which I'm referring to? That is my first question. Thank you. Kristian Sorensen : Thank you. The terminal investment for BW LPG is -- was estimated somewhere between $10 million and $15 million, which is compared to the balance sheet, a relatively modest investment for our company. And like in any other greenfield infrastructure projects, there is a certain complexity, of course when you construct a terminal. And given the challenging market environment and geopolitical turmoil, the management has had to make the decision to focus on the core value drivers of our company, which are shipping and trading. So it is not an easy decision we have made, but it's simply because of the circumstances where we have to focus our attention and resources and time on our shipping and trading activities. Aline Anliker : Thank you. Anyone else who would like to raise his/her hand, Yes, I have next up, John Dickson, if you might unmute yourself, please. Unidentified Analyst: Good morning Kristian, good morning Samantha. Can you all hear me okay? Aline Anliker : We can, yes. Unidentified Analyst: Kristian, I wanted to ask a question about the share buyback. I know you said that it was concluded. But of course, things here in the United States on the United States market, a very simple announcement by the President can have a huge impact on the stock market and on the stock prices as we've seen. Are you guys still open to continuing to buy back shares should they fall to a lower level as they did prior? Kristian Sorensen : Thanks John. The main way we return value to our shareholders is through the dividends and that's something which is not going to change. But if you look at the Annual General Meeting last week, we renewed share buyback program, which is to be reactivated when the directors find it timely. So I guess the answer to your question is that, yes we do have a new share buyback program in place, but our main way of returning value to our shareholders will remain the dividend payouts. Unidentified Analyst : Sounds good. Thank you. Aline Anliker : Thank you. We have also a question by Clement, if I pronounce your name correctly? Unidentified Analyst : Hi, correct. Thanks for taking my question. I wanted to start by asking about your time charter portfolio. Do you have extension options on your existing time charter contracts? And if so, are those included on Slide 21? And secondly, as you think about your time charter portfolio, would you prefer to increase the number of TCEs or routes amid current market conditions? Kristian Sorensen : Thank you, Clement. When it comes to options on our time charters, some of the time charters do have options. But they are on the charter side. So we do not include these optional periods because they are to be declared by the charters. And that is on the Indian fleet primarily. So on our side, we do not have any options to extend the period on the time charters that we have in our fleet at the moment. We -- like I said before, we have an aim to increase the share of time charters in our shipping portfolio. So we are constantly working to try to increase the number of time charters and also its share of the fleet exposure that we have. And as I have mentioned before, I think if we can come back to a level around 40% we had before the Avance Gas transaction, I think we will be quite happy with doing so. But it is not like we're rushing into securing time charters at levels we don't find attractive. So this is something we are working on constantly, but it has to be done and conducted in the right way, so to say. Unidentified Analyst : That's helpful. Thank you. My second question was on the trading segment. Could you talk a bit about how the tariff turmoil affected operations, and whether you have any visibility on Q2 results? Kristian Sorensen : Yes. Thanks. When it comes to Product Services trading portfolio, that's shifting day by day and week by week. So I would rather refrain from commenting specifically on that. And we will have, as you may know, a new trading update in like -- in the middle of July, I think it is. And we will provide you with a status for the second quarter by that time. But I think it is difficult for us to comment on that since the portfolio is like any other trading portfolio is shifting on a daily and weekly basis. Aline Anliker : Make sense. That’s all from me. Thank you for taking my questions. Anyone else who would like to raise the hand. We have a few questions in the chat as well, but let's see if someone else wants to ask a question verbally. [Operator Instructions] So first one is from Vasilis. Would you say that the recent VLGC spot rate strength is partly attributed to front-loading relating to U.S.-China 90-day trade truce? Kristian Sorensen : Thank you, Vasilis. The strength in the spot market today is, like I also mentioned in the presentation, due to the strong fundamentals of the market with very good export levels from the Middle East, supporting continued growth in exports from the U.S. But of course, when you have a tariff relief, like we are currently having, it does definitely impact the market -- the freight market and the activity in the market positively. So I would say that it's contributing. Aline Anliker : Thank you. We have some more hands raised. Let's go with Marcus, if you could please unmute your yourself. Marcus, we can't hear you just now maybe try to unmute yourself. Unidentified Analyst : Can you hear me? Aline Anliker : Yes. Now we can hear you. Unidentified Analyst : Thank you very much. This is Marcus in Germany. Just a quick question on the finishing the business with the Indian terminal investment. Is there any impact in quarter 2 on onetime cost? Thank you. Samantha Xu : Thank you for your question. So it is a very early stage for our involvement in the terminal in India project. So at this point in time, there is no significant some cost that we need to account for. Aline Anliker : Thank you. We have another question in the chat on product services from Arne. Congrats on the quarter. What is the confidence level for the product service VAR, please? Samantha Xu : Thanks, Arne. I need to double check on that, just to answer to you accurately. So if you don't mind, I'll reach out to you on an e-mail. Aline Anliker : And then we have another question from Axel. Can you please explain the year-over-year increase in SG&A? Samantha Xu : Thank you for the question. So as we have mentioned as part of the Product Services performance, we'll gradually accrue for the bonuses related expense based on the realized trading results. As for the year of 2023 and '24, we have seen year-on-year improvement of the trading result and also the same you can observe in Q1 '25 as well. So the G&A increase is largely attributed to the accrued reflected as part of G&A. Aline Anliker : Thank you, Samantha. And actually, there has been another question from Arne, which I would also like to read out, of course. Could you give some more color on the decision to limit the share buybacks to only $2.7 million compared to a capacity of $20 million, if I remember correctly? Kristian Sorensen : Thanks, Arne. We -- as you know, there are certain limitations when you execute on the share buybacks and how much you can buy every day. And that is one reason for it. And the other reason was that the shares started to increase quite shortly after we activated the share buyback program. And we also had to end it because we were entering our blackout period where we are very much restricted to continue our share buyback program as we enter the blackout period, which is a month ahead of the earnings release. Aline Anliker : Thank you, Kristian. And I would just like to hand back to Samantha on Arne's first question. Samantha Xu : Arne, thank you for your patience. Just to quickly check with the team and confirmed my initial answer, which I know is accurate to that the confidence level of the Product Services bar is a 95%. Aline Anliker : All right. Thank you. There is another question in the chat from Peter. Last year, the terminals were taking a larger share of the arbitrage and putting pressure on rates, but it seems that owners are again getting a more appropriate share. Do you expect this to continue? Kristian Sorensen : That's a very good question, Peter. I think the answer to that is that every day, as I used to say, there is this arm wrestling between cargo owners, shipowners and the terminals on how much of the profit in the LPG supply chain they can obtain. And the relative bargaining power of the shipping part of the value chain depends on the supply and demand of the vessels at that specific time. For this year going forward, we see very little growth in the VLGC fleet. And with the continued export expansion plans from the U.S., which we believe will mean more volumes for export from the U.S., it should be a good environment for shipping going forward simply because the supply demand balance is hopefully playing in the owner's favor. Aline Anliker : Thank you Kristian. Do we have any more questions either verbally or in the chat? So please put them forward. It doesn't look like. Let me just double-check. No, nothing so far. Then I’ll hand back to Kristian to conclude the call. Kristian Sorensen : Thank you, everyone, for joining us this quarter, and we look forward to seeing you again next quarter. Bye-bye, everyone. Aline Anliker : Thank you very much, and this concludes BW LPG's Q1 2025 Earnings Presentation. The call transcript and recording will be available on our website shortly. And thank you all for dialing in. We wish you a good rest of your day.
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BW LPG Limited (BWLP) Surpasses Earnings Estimates with Strong Performance

  • BW LPG Limited (BWLP) reported an EPS of $0.30, surpassing the estimated $0.20, driven by robust TCE income.
  • The company declared a cash dividend of $0.28 per share, showcasing its commitment to shareholder value.
  • BWLP's financial metrics reveal a healthy financial standing, with a P/E ratio of 4.49 and an earnings yield of 22.25%.

BW LPG Limited (NYSE:BWLP), trading as "BWLP" on the NYSE, is a prominent player in the liquefied petroleum gas (LPG) shipping industry. The company is known for its extensive fleet and global operations. BWLP competes with other major shipping companies in the LPG sector, focusing on efficient and reliable transportation services.

On May 20, 2025, BWLP reported earnings per share (EPS) of $0.30, exceeding the estimated $0.2074. This strong EPS performance is supported by the company's robust Time Charter Equivalent (TCE) income, which averaged $39,800 per available day and $38,800 per calendar day. Despite the lower-than-expected revenue of $158.7 million, BWLP's ability to surpass EPS estimates highlights its operational efficiency.

BWLP's financial health is further underscored by its decision to declare a cash dividend of $0.28 per share for the first quarter of 2025. This dividend represents 75% of the company's net profit after tax, reflecting its commitment to returning value to shareholders. The record date for this dividend is set for May 30, 2025, with distribution in Norwegian Krone for shares registered with Euronext VPS.

The company's valuation metrics provide additional insights into its financial standing. BWLP has a price-to-earnings (P/E) ratio of approximately 4.49, indicating a relatively low valuation compared to its earnings. Its price-to-sales ratio of about 0.49 suggests modest market valuation of its sales. The enterprise value to sales ratio is 0.74, while the enterprise value to operating cash flow ratio is 3.54, reflecting its cash flow generation capabilities.

BWLP maintains a debt-to-equity ratio of 0.65, indicating a moderate level of debt compared to equity. The current ratio of 1.11 suggests a slightly higher level of current assets compared to current liabilities, which is a positive sign for short-term financial health. With an earnings yield of 22.25%, BWLP offers a strong return on investment for shareholders.