BW LPG Limited reported a Q2 2021 net profit after tax of USD 23.1 million, yielding an annualised return on equity of 7.1% with USD 80.8 million of free cash flow. EBITDA was USD 54.8 million for Q2 2021, representing an EBITDA margin of 58.3% for the quarter. Earnings per share was USD 0.16.
Q2 2021 VLGC freight rates were USD 24,500 per calendar day, or USD 27,500 per available day with 96% commercial utilization. Time Charter Equivalent (“TCE”) income decreased to USD 94.0 million for Q2 2021, mainly due to lower LPG spot rates and lower fleet utilisation, the latter due to the retrofitting of four VLGCs with LPG dual-fuel propulsion engines. There are eight LPG-powered VLGCs on water to-date.
The Board has declared a Q2 2021 cash dividend of USD 0.10 per share amounting to USD 13.8 million. The shares will be traded ex-dividend on and from 31 August 2021. The dividend will be payable on 17 September 2021 to shareholders on record as of 1 September 2021.
BW LPG increased our equity share in our Indian joint venture from 50% to 88.4%. Our equity investment is now accounted for as a subsidiary and the remeasurement of our existing equity interest was a gain of USD 9.8 million.
The sale and delivery of BW Empress (2005-built, Mitsubishi Heavy Industries) for further trading was concluded in April, generating a net gain of USD 9.9 million.
Subsequent Events
BW LPG secured a USD 45 million transition loan (revolving credit facility) in August, for the retrofitting of six VLGCs with LPG dual-fuel propulsion engines at LIBOR + 170bps. This is an upsize of the existing USD 290 million term loan facility whose terms remain unchanged.
The sale and delivery of BW Confidence (2005-built, Mitsubishi Heavy Industries) for further trading was concluded in July. The sale and delivery of BW Boss (2002-built, Kawasaki Heavy Industries Ltd.) and BW Energy (2002 built, Kawasaki Heavy Industries Ltd.) for further trading were concluded in August. These generated USD 81.0 million in liquidity and a net gain of USD 9.0 million.
BW LPG exercised the purchase option for Yuricosmos (2010-built, Mitsubishi H.I) in August. Renamed BW Niigata, its purchase is expected to generate a return on capital employed (ROCE) of 8%.
Market Outlook
VLGC freight rates showed strong improvement in Q2 2021. TCE rates increased from OPEX levels in early March to over USD 40,000 per day in mid-May. This was supported by strong recovery in U.S. LPG exports after an extremely cold winter, gradual easing of production cuts from the Middle East, and opening geographical LPG price arbitrage between the U.S. and the Far East.
Nevertheless, the market remains volatile, with rates declining in June and falling below cash breakeven in early July. This was largely driven by diminishing LPG price arbitrage from the U.S. to Asia due to strong U.S. LPG prices and fractionator-related production issues in Saudi Arabia.
For the rest of 2021, we expect VLGC freight rates to average above cash breakeven. This is driven by continued growth in U.S. LPG exports and recovering volumes from the Middle East. However, freight rate volatility is expected to remain high, as strong U.S. LPG prices and low U.S. LPG inventory may put pressure on the price arbitrage needed to drive exports out of the U.S. in the winter. In the medium term, we remain optimistic for 2022, but the high number of recent newbuild orders has increased the uncertainty for 2023.
Source: BW LPG