Highlights and Subsequent Events
- Strongest quarterly performance on record with daily TCE of USD 61,800 per calendar day and USD 63,100 per available day.
- Generated NPAT of USD 122.3 million or an earnings per share of USD 0.85.
- Declared a Q3 cash dividend per share of USD 0.80, representing a 103% quarterly shipping earning payout and YTD payout ratio of 107%.
- From Q3, dividend policy is revised to reflect BW LPG’s shipping core. The dividend payout will be based on Shipping’s NPAT and company leverage, adjusted for Product
- Service’s performance and anticipated cash and capital requirements.
- Taking delivery of one vessel in Q4. Also entered an agreement to sell one vessel; and added three vessels to the overall operated fleet, including two mid-size vessels.
- Dual listing in the US is progressing as planned, with an expected listing in Q2 2024[1].
Financial Performance
BW LPG Limited reported a Q3 2023 Net Profit After Tax (NPAT) of USD 122.3 million, yielding an annualised return on equity of 32% with USD 75 million free cash flow. Q3 EBITDA was USD 183.9 million after a downward IFRS adjustment of USD 24 million, and earnings per share was USD 0.85.
The net leverage ratio remained low at 22% in Q3 2023, mainly due to solid cash flows from operations, but this was offset by short-term effects on cash flow and increased trade finance borrowings from Product Services. Available liquidity was USD 486 million at the end of the quarter. On the back of another strong quarter, the Board has declared a cash dividend of USD 0.80 per share, amounting to USD 104.9 million. This translates to a 100% payout from our Q3 shipping earnings, plus an upward adjustment of USD 0.02.
Product Services recorded an accounting net profit of approximately USD 12 million for the quarter from profits generated from Q2’s unrecognised trading positions and its increased trading activity.
Commercial Performance
Q3 2023 VLGC freight rates averaged USD 61,800 per calendar day, or USD 63,100 per available day, with 99% commercial utilisation. Time Charter Equivalent (TCE) income was USD 195.4 million for the quarter. In addition, our India subsidiary continues to contribute a stable TCE income of USD 32.3 million for Q3 2023.
BW LPG will take delivery of BW Kyoto (2010-built MHI Nagasaki Shipyard, Japan) in Q4, following the declaration of an attractive purchase option in Q1. The vessel will be on a six-year time charter from Q1 2024 and secure a ROCE of ~18% over the said period. BW LPG entered into an agreement to sell BW Princess (2008-built, Hyundai Heavy Industries, Korea) in Q4, with estimated delivery in Q1 2024. In a strong second-hand market, the sale will generate approximately USD 64.0 million in liquidity and a net book gain of about USD 20.0 million. Lastly, the BW LPG pool welcomes Sinogas with one dual-fuel VLGC (Gas Venus) to be added in Q4 2023.
Product Services has increased its trading activity with more LPG contracts from both the USA and the Middle East in combination with worldwide delivery contracts. Additionally, the division has increased its shipping exposure with two Medium Gas Carriers (Eco Sorcerer and Astor) at favourable terms.
Corporate Update
Preparatory work towards a dual listing of BW LPG shares in the US is progressing as planned, with the listing expected in Q2 2024.
Market Outlook
For the remainder of 2023 and into 2024, we reiterate our positive view of the market amid high volatility. We regard the VLGC supply to be reasonable and the current energy price level to encourage increased oil and gas exploration driving steady export growth from the US and the Middle East. Anticipated growth in demand from new PDH plants in China, increased use of LPG in the Asian residential market, and factors such as increased Panama Canal restrictions are expected to underpin firm market fundamentals. Nevertheless, we are mindful of the current uncertain macroeconomic environment and how this can impact both investments in and demand for LPG.
Q3 2023 Earnings Presentation and Interim Financial Report
Please see the attachments for the Q3 2023 Earnings Presentation and Interim Financial Report.
- BW LPG Q3 2023 Earnings Presentation
- BW LPG Q3 2023 Interim Financial Report
BW LPG will present the financial results at 13:00hrs CET today. The presentation will be hosted by Kristian Sørensen (CEO), Samantha Xu (CFO) and Niels Rigault (EVP Commercial).
Source: BW LPG