(BW, 30.May.2024) — BW LPG Limited (NYSE: BWLP, OSE: BWLPG.OL) reported a Q1 2024 Net Profit After Tax (NPAT) of $150mn, yielding an annualised return on equity of 37% with $468.5mn free cash flow generated. The Q1 operating profit was $157.8mn, and earnings per share was USD 1.07.
The net leverage ratio was at an all-time low at 7% in Q1 with available liquidity at $661mn at the end of the quarter. On the back of another strong quarter, the Board has declared a cash dividend of $1.00 per share, or a total dividend of $132mn. This represents a 93% earnings payout ratio and an annualised dividend yield of 22%.
Highlights and Subsequent Events
– Strong quarterly performance with daily TCE of USD 61,500 per available day and $59,400 per calendar day.
– Generated NPAT of $150mn or earnings per share of $1.07. Declared a Q1 cash dividend of $1.00 per share which represents 106% of earnings from the shipping activity and 93% of total earnings in the quarter.
– For the second quarter of 2024, we have fixed 84% at an average rate of ~$49,000 per available day
– BW Product Services generated a net accounting profit of $21mn in Q1 after adjusting for G&A and tax provisions.
– BW Product Services is pleased to announce a multi-year cargo contract with Enterprise Product Partners, with optionality to double the current cargo volume in the US Gulf. This will significantly improve the combined shipping and cargo trading flexibility.
– Delivered one VLGC to new owners for further trading in February 2024, generating USD 65 million in proceeds.
– BW LPG successfully listed on the New York Stock Exchange (NYSE) on 29 Apr. 2024.
Commercial Performance
Shipping – Q1 VLGC freight rates averaged $61,500 per available day or $59,400 per calendar day, with 95% fleet utilisation. Time Charter Equivalent (TCE) income was $186.5mn for the quarter, and our India subsidiary contributed a stable TCE income of $10mn for Q1.
BW LPG delivered BW Princess (2008-built, Hyundai Heavy Industries, Korea) in February 2024 to new owners for further trading. Her sale generated $65mn in proceeds and a net book gain of $20mn.
Product Services – Product Services reported a $33mn gross profit for Q1. After considering other expenses, comprising mainly of G&A and income tax expenses, Product Services reported a net profit after tax of $21mn for the quarter.
Corporate Update
BW LPG successfully listed on the New York Stock Exchange (NYSE) on 29 Apr. 2024, while maintaining the current listing on the Oslo Stock Exchange (OSE). The company thanks all stakeholders and shareholders for their support and looks forward to increasing the presence in the largest capital market in the world.
The company is in the process of redomiciling from Bermuda to Singapore. A Scheme Meeting will be held in Bermuda on 12 Jun. More information is available in the press release dated 21 May 2024 “BW LPG Limited – Notice of Scheme meeting regarding redomiciling to Singapore”.
Market Outlook
At the start of 2024, VLGC spot rates for the US/Far East route soared to nearly $140,000/day.
However, as in previous years during January and February, a cold snap in the US increased domestic demand for LPG and temporarily reduced production, leading to a significant rise in US LPG prices. Concurrently, demand in the Far East declined resulting in falling LPG prices in Asia. Following a decrease in fixing activity and a rapid collapse of the US/Far East LPG price arbitrage during January and early February, spot rates fell by approximately 90% during that period.
After spot rates bottomed out around OPEX levels in early February, the market experienced a significant recovery, driven by recalibrated product prices and strong US LPG export growth. The EIA reports that YTD average net propane exports from the US have increased by 14% compared to the same period in 2023. The demand side also picked up, and China’s imports of LPG delivered on VLGCs grew by 6% in the first quarter of 2024 compared to the same period last year. By the end of May, spot rates reached the high $60,000s/day.
The futures market reflects continued strength in spot earnings, trading in the low to mid $60,000s/day for the remainder of 2024.
Transit restrictions in the Panama Canal changed more rapidly than anticipated in January, allowing more VLGCs to transit through the Canal. By the end of the first quarter, the number of daily slots had normalized to levels seen in the summer of 2023. However, we anticipate that congestion may occur from time to time, depending on usage by container and LNG vessels, and the canal’s water level.
At the beginning of 2024, the global VLGC fleet stood at 378 vessels. Since then, 16 VLGCs have been added, bringing the current fleet to 394. Over the next 18 months, we observe a sharply abating number of newbuildings for delivery, with six additional VLGCs to be added for the remainder of 2024 and 13 scheduled for delivery in 2025.
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