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StealthGas Inc. (GASS) Q4 2022 Earnings Call Transcript

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StealthGas Inc. (NASDAQ:GASS) Q4 2022 Earnings Conference Call February 21, 2023 11:00 AM ET

Company Participants

Harry Vafias - President & CEO

Konstantinos Sistovaris - IR

Conference Call Participants

Tate Sullivan - Maxim Group

Climent Molins - Value Investor's Edge

Operator

Good day, and convey you for opinionated by. Welcome to nan StealthGas Q4 2020 Results Call and Webcast. At this time, each participants are successful listen-only mode. After nan speaker’s presentation, location will beryllium a question-and-answer session. [Operator Instructions] Please statement that today's convention is being recorded.

I would now for illustration to manus complete to your speaker, Mr. Harry Vafias, CEO. Please spell ahead.

Harry Vafias

Good morning, everyone, and invited to our 4th fourth and 12 months 2022 net convention call. This is Harry Vafias, CEO of StealthGas, and I'm going to talk marketplace and institution outlook. And pinch maine is Mr. Sistovaris, handing Investor Relations to talk nan financial aspects.

Before we commence our presentation, I would for illustration to punctual you that we'll beryllium discussing forward-looking statements, which bespeak existent views pinch respect to early events and financial performance. At this stage, if you could each return a infinitesimal to publication our disclaimer connected Slide 2. Risks are further disclosed successful StealthGas filings pinch nan Securities and Exchange Commission.

I'd for illustration besides to constituent retired that each amounts quoted unless different clarified are U.S. dollars. Today, we released our net results for nan 4th fourth of '22, completing a afloat twelvemonth of trading arsenic a axenic LPG company. Following nan 2021 spin-off, and we are happy to study yet again a beardown profitable 4th and grounds profits for nan year.

So let's proceed to talk nan results and what we spot successful nan marketplace successful general. In Slide 3, nan 4th fourth is typically a seasonally beardown 4th for LPG trading. We had conscionable vanished drydocking each nan vessels that were due, truthful we had our afloat fleet disposable for chartering. Our purpose was to charter astir of our vessels connected play wise reducing nan spot exposure, and we did by reducing spot days from 843 to 596.

On a yearly basis, we person reduced our spot vulnerability to conscionable 17% of our fleet days. We kept seeing charter liking successful lodging play sum truthful we proceed entering into play charters astatine improving rates. We frankincense managed to person secured full today, 55% of our 2023 days contracted out. We person locked successful astatine astir $105 cardinal for consequent periods.

In position of our waste and acquisition activity, we proceed to look for opportunities to waste immoderate of nan older vessels successful a rising market. Since nan past announcement and up until now, we participate into agreements to waste 3 of our oldest vessels, 23 twelvemonth aged aliases more, nan Gas Prodigy, nan Gas Spirit and nan Gas Galaxy, 2 already delivered past period and nan 3rd 1 is pending, earning america a full proceeds of astir $12.5 million.

As an update regarding nan MG Senior (ph) building vessels owed to nan AR constraints, we now expect nan associated task alloy to beryllium delivered successful Q3 of this year, nan adjacent StealthGas alloy successful Q4 and nan past alloy successful Q1 '24.

Looking concisely astatine our financial highlights, we request to support successful mind that nan 4 tankers astatine nan portion of nan rotation of past December were included successful nan past year's comparative results. Voyage revenues came successful astatine a very beardown $42.7 cardinal compared to $36.1 cardinal past year, an 18.3% summation successful spite of nan smaller fleet.

Overall, for nan afloat year, our revenues came successful astatine $152.8 million, nan highest gross fig since 2018 compared to $150.2 cardinal for nan aforesaid play past year, a 1.7% summation year-on-year. In statement pinch nan inclination successful caller quarters, we had important decreases successful OpEx and depreciation arsenic good owed to nan smaller fleet, but we besides saw a emergence successful Voyage costs that was owed to a operation of precocious spot vulnerability compared to Q4 '21, an summation successful bunker costs owed to nan emergence successful crude lipid prices.

Overall, our nett profit for nan 4th was $7.7 cardinal compared to a nett nonaccomplishment of $38.7 cardinal for nan 2nd 4th successful '21, and a very beardown $10.6 cardinal adjusted income fig that is excluding impairments compared to $2.8 cardinal for nan aforesaid 4th successful 2021, almost 4 times higher.

But nan number I'd for illustration to accent is nan afloat twelvemonth nett income that went from $35.1 cardinal nonaccomplishment for '21 to a $34.3 cardinal summation successful '22. This is nan highest yearly profit since nan company's inception and listing backmost successful 2005. That brings our EPS for nan 4th to $0.20 and $0.90 for nan 12 months. We stay patient successful managing prudently our liquidity, and truthful our full cash, including restricted rate and short-term investments, much than doubled to $95.7 cardinal compared to $45.7 cardinal astatine nan extremity of past year. We proceed to beryllium good capitalized, maintaining a debased indebtedness ratio of 36%.

On Slide 4, we spot our fleet employment update for February. Last time, we announced 11 caller charters. This time, we announced 8 caller charters and charter description s astatine akin aliases amended levels, and we proceed to activity charters willing successful locking successful longer than accustomed periods, ever a bully motion for nan early market. As such, we accrued our contracted guidelines from 40% antecedently to 55% for nan remainder of '23 and person secured astir $80 cardinal successful revenue. Our full contracted revenues for each periods person accrued to $105 million.

I would besides for illustration to accent thing that we really spot that arsenic of today, each our vessels are fixed connected play short aliases longer term. We person nary vessels disposable successful our afloat owned fleet. If a charter needs to move a spot cargo today, and that tin only beryllium seen arsenic a favorable business to beryllium -- from our side. Lastly, we person 3 vessels. We expect to drydock successful nan 2023, nan 3 Handy Sized ones, different alloy that was owed for drydock was 1 of nan vessels we sold for further trading.

On 5 -- Slide 5, I'd for illustration to supply you an update connected our 2 JVs comprising of a full of six vessels connected our first JV, which comprises of mini LPG vessels aft nan waste of nan Nebula past year, we fixed 2 of nan alloy connected a one-year and a six-month charter, respectively. A azygous alloy is operating successful nan spot market. Three of nan vessels are owed for drydock this year, though we whitethorn hold 1 of nan drydocks to adjacent year.

Our 2nd JV comprises of 2 mean state carriers, positive 1 much nether construction. Both of these vessels person their charters expiring shortly, but nan marketplace for these larger vessels stay strong. As antecedently discussed, we do not intend to money nan caller building acquisition pinch our ain equity. The JV has capable rate earmarked for this together pinch immoderate finance proceeds that are arranged.

In position of our fleet surface science connected six -- connected Slide 6, our institution focuses connected location waste and acquisition and section distribution of gas. And this chart is simply a snapshot of nan positioning of our vessels, excluding nan JV ones arsenic of February 22. The distribution of our fleet has not really changed since our past telephone arsenic we proceed to person half of our fleet successful Europe and nan remainder mostly successful Asia. Currently, we person 16 vessels trading West of Suez peculiarly successful North Europe, 11 vessels successful nan Middle East, Far East, mostly Singapore and China and 3 vessels trading successful nan U.S. and Caribbean, and finally, 2 successful Africa.

I'd for illustration to move complete nan telephone to Mr. Sistovaris for our financial performance.

Konstantinos Sistovaris

Thank you, Harry, and bully greeting to everyone. I will talk our financial capacity for nan 4th fourth and 12 months of 2022. Let america move to Slide 7, wherever we spot nan income connection for nan 4th fourth and afloat twelvemonth of 2022 against nan aforesaid play of 2021. Net revenues came successful astatine $36.2 cardinal for nan 4th and $130.5 cardinal for nan 12 months, a flimsy summation by 2% complete nan 12-month play contempt nan alloy income and astir an 18% simplification successful nan full fleet days.

Operating expenses were $14.5 cardinal for nan 4th and $54.8 cardinal for nan 12 months, an 11% simplification successful nan 12-month period. A akin inclination to what we saw successful nan erstwhile quarters, that was owed chiefly to nan simplification successful nan fleet size. In position of drydocking costs, we had $3 cardinal successful 2022 versus $5.2 cardinal successful 2021. We drydocked 4 vessels past year.

Depreciation is different point that saw a ample alteration to $6.8 cardinal for nan 4th and $27.8 cardinal for nan 12-month period, a 25% alteration year-on-year, and that was besides owed to nan alteration successful nan number of vessels. Interest and finance costs accrued to $3.4 cardinal owed to increases successful liking rates. But overall, during nan year, they were really lower.

Impairment nonaccomplishment was $44 cardinal successful 2021 and which was nan write-down for nan tanker vessels that were portion of nan spinoff. Whereas successful 2022, conscionable $3 million, which relates to nan vessels that were held for sale.

Equity income successful indices is our shares successful nan profits of our JV structures and came successful astatine $1.2 cardinal for nan 4th and $10.9 cardinal for nan 12 months. some our JV structures operated profitably. So we tin spot that for nan twelvemonth 2022 income successful each categories accrued and expenses crossed nan committee were reduced.

As a consequence of each nan points analyzed above, we ended nan 4th fourth of 2022 pinch a nett income of $7.7 cardinal and $34.3 cardinal for nan 12-month period. This was nan champion ever afloat twelvemonth nett income for StealthGas. Even connected a nett income adjusted basis, that if we were to exclude nan $40 cardinal write-off from nan tankers successful 2021, StealthGas reported for nan afloat twelvemonth 2022, $36.8 cardinal much than 2.6 times nan erstwhile years.

Looking astatine our equilibrium expanse successful Slide 8, our liquidity, including restricted rate and short-term investments, that is fundamentally clip deposits was astatine nan extremity of nan twelvemonth successful nan bid of $95.7 million, doubling from nan $45.7 cardinal successful Q4 2021. The summation successful liquidity came from nan refinancing, nan alloy income and from improved operating rate flow.

Advance of $23.4 cardinal related to nan payments made for nan MGC vessels nether construction. Our vessels nett book worth decreased from $681.3 cardinal to $628.3 cardinal owed to regular depreciation and nan waste of nan vessels. The full worth of our investments successful our JV is $46.6 million. It was reduced compared to past twelvemonth owed to nan $16.5 cardinal successful distributions we received aft nan waste of nan Eco Nebula. The wide outstanding indebtedness was $277 cardinal from $300 cardinal astatine nan extremity of past year. As a consequence of nan coagulated results being reported, we accrued shareholders' equity by $43 cardinal during nan twelvemonth to $821 cardinal (ph) arsenic of December 31, 2022.

Concluding our financial commentary pinch Slide 9, we will concisely reiterate our indebtedness floor plan and superior structure. Following nan refinancing we did successful nan past mates of years, we person extended nan maturity of nan loans to 2025 and beyond, frankincense securing nan institution from immoderate refinancing risks successful nan mean term. We person besides signed a committedness missive pinch 1 of our existing financiers for nan financing of nan 2 caller building vessels, whereby we expect to person up to $70 cardinal successful finance proceeds for nan transportation of these vessels taxable to customary closings.

We expect to reason nan indebtedness statement earlier nan extremity of nan quarter. Overall, we proceed to support debased leverage pinch a indebtedness ratio beneath 40%, and we proceed to person six unencumbered vessels. As antecedently mentioned, nan successive raises of liking rates by nan Fed person started showing into a rising liking complaint expenses. Our mean LIBOR costs went from beneath 20 ground points a twelvemonth agone to complete 4% astatine nan extremity of Q4.

We person successful spot liking complaint hedges for 36% of our indebtedness astatine an mean of 1.76 that mitigate nan effect of rising liking rates somewhat. Rates look to person plateaued and nan economical statement has precocious shifted to erstwhile nan Fed will do its pivot. We expect to proceed to trim our existing indebtedness done regular repayments arsenic good arsenic prepayments arsenic nan lawsuit whitethorn be, successful bid to trim expenses. Overall, indebtedness has been reduced from $303 cardinal a twelvemonth agone to $279 cardinal astatine nan extremity of Q4 2022.

I will now manus you complete to our CEO, Harry Vafias, who will talk marketplace and institution outlook.

Harry Vafias

On Slide 10, we are providing immoderate penetration connected nan LPG marketplace and really waste and acquisition partners style nan shipping markets for our product. We person laid retired these themes antecedently and 2022 information coming successful to support our views. The 1 affirmative alteration from nan erstwhile telephone being nan resurgence of Chinese demand.

According to information from Banchero Costa during 2022, LPG exports accrued 4.5%, somewhat amended than was expected. The main exporters of LPG being nan U.S. and Middle Eastern countries, some managed important increases successful exports past twelvemonth pinch nan U.S. expanding exports by 9% and expanding volumes destined for Europe.

European exports continues to beryllium muted arsenic European countries proceed to diversify their sourcing distant from Russian supplies and importing a 3rd of nan supplies from further away, that is chiefly nan U.S., frankincense expanding ton mile demand. Apart from Europe, nan largest importers of LPG are India, China, Korea and Japan, each accrued their imports.

The past 4th of '22 showed nan lifting of COVID policies successful China, and while location was an first interest of nan emergence successful COVID infection numbers, it seems that nan reopening has yet started boosting LPG imports. And while import information alteration widely, each constituent that Chinese imports grew importantly astatine nan extremity of nan year, making nan year-on-year alteration yet affirmative compared to antagonistic successful nan erstwhile telephone that we had.

We truthful stay optimistic connected Chinese LPG demand, supported by expected economical betterment that despise successful China's GDP maturation to 5.5% for this year. A main catalyst for Chinese LPG request will beryllium nan expanding capacity of its PDH plants that usage imported propane arsenic feedstock. These plants person been flagged by start-up delays and debased accumulation tally rates owed to nan unfavorable margins, but nan accelerated description of PDH capacity successful China complete nan past fewer years is unquestionable.

To understand nan scale, existent home accumulation capacity of astir 10.3 cardinal tons was little than 5 cardinal tons successful 2018. There are 12 caller plants scheduled for '23, perchance expanding capacity by much than 20% and much projects beyond that.

On Slide 11, we coming immoderate cardinal fundamentals successful our shipping marketplace commencing pinch nan marketplace complaint evolution. During Q4 '22, clip charter rates roseate connected nan backmost of expanding demand, while connected a year-over-year basis, location continues to beryllium patient maturation betwixt 5% and 18%, depending connected nan size and location.

At nan smaller LPG trade, West of Suez pursuing nan softer summertime months, nan last months of 2022 and opening of '23 person connected mean been reasonably tight and astatine times moreover truthful tight that cargoes person gone unfixed owed to nan deficiency of disposable ships. There has been a adjacent spot of activity connected nan play side, and rates proceed to push upwards, though astatine a mean pace.

As of now, we spot constricted tonnage disposable for clip charter and we cannot spot immoderate awesome reasons for a drastic turnaround successful sentiment successful nan adjacent future. East of Suez, for illustration successful Atlantic, to show a adjacent spot of activity connected nan play side, nan spot marketplace has been little progressive than accustomed considering nan clip of nan year, but it's besides explained by nan precocious clip charter sum amongst nan main charters successful this market.

Rates person trended marginally upwards. For nan Handy Size vessels, nan spot marketplace has been tight aliases very tight to nan last months of ‘22 and during nan opening of '23. A important number of Handy Size ships were fixed for short-term ammonia, clip charters, and this resulted successful little tonnage being disposable for nan LPG and pet-chem trades.

The fundamentals for our halfway fleet of mini unit vessels proceed to look promising arsenic almost a 3rd of nan fleet is complete 20 years old. As that marketplace remains strong, scrapping activity remains subdued. Even nan vessels that we precocious sold were destined for further trading. However, upcoming biology regulations connected EXI and c strength will make it harder for older vessels to trade, and we expect to spot expanding scrapping activity aliases vessels being removed from world trading to do restricted superior trades successful little demanding areas.

The ordering activity continues to beryllium subdued pinch only a fistful of ships being ordered. As per caller published orders, location are 24 ships connected bid to beryllium delivered up until nan adjacent mates of years. We proceed to judge that nan consequence of seeing bulk ordering of utilized vessels that could support nan supply-demand equilibrium is improbable. A sub 2% yearly summation successful nan fleet earlier scrapping is 1 of nan smallest, if not nan smallest successful each shipping segments.

On Slide 12, we are showing nan improvement of our LPG fleet. In this descent for comparison purposes, we person excluded nan tanker vessels that we held up until 2021, and we person focused connected nan axenic LPG fleet successful position of cubic capacity, including our JV vessels. We person ever been progressive successful nan waste and acquisition marketplace buying and trading vessels.

Recently, we person been shedding rather a fewer older ships, 4 successful 2022 and 3 much this year. This is portion of our strategy to support renewing our fleet successful bid to support its competitiveness. We frankincense person reduced nan mean leverage of our fleet to beneath 9 years. In our associated ventures, we whitethorn person a small much opportunistic attack successful position of trading and buying. However, successful our halfway fleet, we expect that pinch nan summation of nan 40,000 cubic metre successful caller builds starting successful precocious '23, we will erstwhile again summation our capacity successful position of cubic meters while being capable to amended work nan divers needs of our customers.

In Slide 13, we are examining (ph) immoderate cardinal variables that will impact our capacity for nan quarters ahead. Obviously, nan astir important improvement that we person mentioned earlier is nan reopening of China aft a agelong awaited 2 years. With nan Chinese system backmost connected track, we should spot accrued LPG trading.

On nan different hand, nan recessionary fears should beryllium a interest for each of us. The latest belief is that nan world economy, particularly nan U.S. is faring amended than primitively imagined. And recently, nan IMF moreover revised somewhat upwards its projections. But pinch persistent ostentation and precocious liking rates, economies are much vulnerable than what they've been for a agelong time.

To sum up, I'm very pleased to support -- to study champion ever yearly profit for StealthGas successful a difficult situation pinch rising liking rates and a smaller fleet, we managed to gain full nett income of astir $34 cardinal aliases $0.9 per share. Our adjusted EPS for Q4 was 4 times higher than nan adjusted EPS for Q4 '21.

Our full rate doubled from $45.7 cardinal astatine anterior twelvemonth extremity to $95.7 cardinal astatine nan extremity of '22, while our full assets were $821.5 cardinal astatine nan extremity of past twelvemonth pinch only $303 cardinal successful full liabilities. These results springiness america nan energy. We each request to proceed to push for much not worthy results and to fortify nan institution and our equilibrium expanse moreover further. We dream to support nan momentum growing, and we expect different beardown 4th for nan opening of nan year.

We person now reached nan extremity of our position and would for illustration to unfastened nan level for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We are now going to proceed pinch our first question, and nan mobility travel from nan statement of Tate Sullivan from Maxim Group. Please inquire your question.

Tate Sullivan

Thank you. Thank you, Harry for nan comments. And I mean, pinch nan rate and restricted rate and short-term investments expanding to $96 cardinal astatine nan extremity of 4Q, up from $86 cardinal and you paid down debt. Can you talk astir superior allocation priorities going guardant pinch that building cash? Are you going to money much of your 2 caller build deliveries successful rate versus indebtedness aliases -- and tin you besides remark connected your erstwhile imaginable clip statement to repurchase this, please?

Harry Vafias

Thanks, Tate. As we said connected nan erstwhile quarter, nan Board wanted to spot 2 to 3 bully quarters earlier they let america to usage nan rate much opportunistically. They show nan 2nd bully quarter. Hopefully, if each going well, we're going to spot a bully Q1. And therefore, aft that, we will talk nan different opportunities for nan cash. For sure, 1 opportunity is buying backmost stock. Another opportunity is paying down indebtedness now that liking rates are rising aliases a operation of nan two, which is thing that I would ballot for.

Tate Sullivan

And financing nan newbuild deliveries for nan adjacent twelvemonth aliases so, I saw 1 of your slides you pointed to nan disposable financing connected those, will you finance those astatine a 40% indebtedness to value, 60% aliases what is your accustomed financing connected caller builds to level?

Harry Vafias

Yeah, 60% debt. The equity requirements are not overmuch arsenic we person already paid a 20% deposit. Therefore, nan caller money that needs to beryllium injected is really very little.

Tate Sullivan

And past a follow-up, if I may. You mentioned immoderate delays successful shipyards, and I person not heard galore different companies mentioned delays from nan shipyards. Were these circumstantial to nan shipyards wherever you're getting your Medium Gas Carriers built aliases person you seen different delays for different companies successful nan marketplace if you tin remark connected that, please?

Harry Vafias

As a very celebrated shipyards, nan mostly of them are each facing delays. Thank God, delays are minimal arsenic we want nan ships to beryllium progressive nan soonest arsenic nan marketplace is strong.

Tate Sullivan

Okay. And past connected nan vessel income aliases did you opportunity $12.5 cardinal of proceeds from a three-ship sales. And past nan impairment -- truthful nary gains aliases income gains aliases losses connected those income because you already took nan impairment connected 1 of nan vessels? Is that correct?

Harry Vafias

$12.5 cardinal full arsenic these were nan smallest and oldest by acold vessels successful our fleet. Imagine, 1 of nan vessels is '97 build, which would usually spell for demolition, but we managed to get a higher value and waste it for guardant trading.

Tate Sullivan

Thank you, Harry.

Harry Vafias

Thank you.

Operator

[Operator Instructions] We are now going to proceed pinch our adjacent question, and nan mobility travel from nan statement of Climent Molins from Vale Investor Edge. Please inquire you question. Your statement is opened.

Climent Molins

Good morning. Thank you for taking my questions. I wanted to commencement by asking astir your associated ventures. You mentioned they vanished nan 4th pinch a mixed rate guidelines of $30 cardinal -- but could you supply immoderate penetration connected nan magnitude of indebtedness outstanding connected those structures?

Harry Vafias

Sure, I did -- your statement is not very clear. The magnitude what?

Climent Molins

Sorry, nan magnitude of indebtedness connected nan JVs.

Harry Vafias

It's region $40 million. But if you want, you tin nonstop america an email and cheque it retired precisely arsenic we don't person this number successful beforehand of us.

Climent Molins

Sounds fair. And pursuing up connected that superior allocation mobility and though stock repurchases should beryllium very tight present fixed nan extracurricular discount to NAV arsenic good arsenic to erstwhile evaluations. Has nan Board fixed immoderate thought to possibly instituting a dividend policy?

Harry Vafias

Very bully question. As you said very rightly, arsenic we're trading to a discount to NAV, nan stock buyback is preferred versus dividends astatine nan moment.

Climent Molins

That’s each from me. Thank you for taking my questions.

Harry Vafias

Thank you very much.

Operator

[Operator Instructions] We person nary further questions astatine this time. I will now manus backmost nan convention to Mr. Harry Vafias for closing comments.

Harry Vafias

We would for illustration to convey you for joining america astatine our convention telephone coming and for your liking and spot successful our company, and we look guardant to having you again pinch america for our Q1 results convention telephone successful May. Thank you very much.

Operator

Ladies and gentlemen, this concludes today's convention call. Thank you for participating. You whitethorn now disconnect your lines. Thank you.

Editor: Naga



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