Release Date: May 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dorian LPG Ltd (LPG, Financial) reported its highest ever net income and more than 30% return on book equity for the financial year 2024.
- The company declared its eighth consecutive regular quarterly dividend of $1 per share, contributing to a total return of $730 billion to shareholders since its IPO.
- Dorian LPG Ltd (LPG) expanded its fleet with one owned and three chartered dual-fuel newbuildings, indicating growth and modernization.
- The company achieved a total utilization of 87.7% for the fourth quarter and reported a daily TCE of $72,202 per operating day.
- Dorian LPG Ltd (LPG) has a strong financial position with $294 million in total available liquidity and no refinancings until 2026, providing significant financial flexibility.
Negative Points
- The LPG market has been affected by geopolitical events such as the wars in Ukraine and Gaza, and climate-related issues like the deficit of rain in Panama, which have significantly changed trading patterns.
- The company faces extreme spot market volatility and supply chain disruptions, which have been challenging to navigate.
- Dorian LPG Ltd (LPG) has a large order book to absorb, which could impact future market dynamics and fleet utilization.
- The company’s cash cost per day, including OpEx, G&A, time charter-in expense, and interest, is expected to be approximately $25,000 to $26,000 per calendar day, indicating high operational costs.
- The freight market experienced steep declines in January 2024, highlighting significant imbalances and the impact of newbuilding deliveries and reduced congestion in the Panama Canal.
Q & A Highlights
Q: The market has clearly lifted quite a bit since the bottom in late January, early February. Rates have been climbing despite the fact that Panama Canal restrictions are being lifted. What's driving the strength we're seeing in spot rates?
A: The positive fundamentals in the supply-demand equilibrium have made the market bounce back in a healthy way. Additionally, the congestion in the Panama Canal has come back to some extent, and auction fees have increased, which has also contributed to the market's recovery. (John Hadjipateras, Chairman, President, and CEO; Tim Hansen, Chief Commercial Officer)
Q: Can you provide some color on how the current quarter is shaping up thus far?
A: We have booked 75% of the available days in the Helios Pool for the quarter ending June 30, with a TCE in excess of $40,000 per day on a load-to-discharge basis. (Theodore Young, CFO)
Q: How should we think about the VLGC order book in the future, especially with the potential for ammonia trade?
A: The VLACs should be looked at as part of the VLGC fleet. The expansion of the ammonia trade is expected to absorb the VLACs, but the timing and extent are still uncertain. We remain optimistic despite the large order book. (John Hadjipateras, Chairman, President, and CEO)
Q: Could you provide some color on your financial profile and leverage? Do you plan to continue to organically de-lever going forward?
A: The leverage ratio is a moving target in our business, and it depends on the market conditions. We are happy with our current financial position. (John Hadjipateras, Chairman, President, and CEO)
Q: Is there any appetite to pursue additional fleet renewal? What is your view on underlying asset values?
A: We do not think we need to add new buildings to the order book. Fleet renewal may involve new buildings or secondhand purchases, depending on opportunities. (John Hadjipateras, Chairman, President, and CEO)
Q: Is CO2 transport something that could be considered in the future?
A: CO2 transport is likely to be part of the future of shipping, especially with carbon capture on vessels. We think CO2 will be the next item to be looked at, either on existing ships with special tanks or with purpose-built vessels. (John Lycouris, Head of Energy Transition)
Q: What are the key factors for the declining freight rates in January and the subsequent recovery?
A: The decline was due to the narrowing of the West-East arbitrage, newbuilding deliveries, and reduced congestion in the Panama Canal. The recovery was driven by strong fundamentals in the VLGC market, increased North American exports, and robust demand in the Far East. (Tim Hansen, Chief Commercial Officer)
Q: What are your thoughts on the future of the VLGC market and the impact of newbuild deliveries?
A: We see potential upside in the market with only about nine more VLGCs scheduled to deliver this year. Propane remains the preferred feedstock for steam cracking, and North American exports are forecast to grow. We remain positive about the medium to long-term prospects. (Tim Hansen, Chief Commercial Officer)
Q: How are you addressing the industry's decarbonization pathway and energy transition?
A: We are committed to sustainability and improving energy efficiency onboard our vessels. We are also exploring technological innovations and retrofitting vessels for ammonia as cargo to meet future decarbonization objectives. (John Lycouris, Head of Energy Transition)
Q: Can you provide an update on your capital allocation and dividend policy?
A: We have paid dividends in 11 of the last 12 quarters, totaling $12.50 per share. Our Board remains committed to a sensible capital allocation policy that balances market outlook, operating and capital needs, and risk tolerance. (Theodore Young, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
