Dorian LPG Ltd. (NYSE:LPG) Q3 2025 Earnings Call Transcript

Dorian LPG Ltd. (NYSE:LPG) Q3 2025 Earnings Call Transcript January 31, 2025

Dorian LPG Ltd. misses on earnings expectations. Reported EPS is $0.501 EPS, expectations were $0.82.

Operator: Good day, and welcome to the Dorian LPG Third Quarter 2025 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. Additionally, a live audio webcast of today’s conference call is available on Dorian LPG’s website, which is www.dorianlpg.com. I would now like to turn the conference over to Ted Young, Chief Financial Officer. Thank you, Mr. Young. Please go ahead.

Ted Young: Thank you, Nagy. Good morning everyone and thank you all for joining us for our third quarter 2025 results conference call. With me today are John Hadjipateras, Chairman, President and CEO of Dorian LPG Limited; John Lycouris, Head of Energy Transition and Chief Executive Officer of Dorian LPG USA; and Taro Rasmussen, Vice President of Chartering. As a reminder, this conference call webcast and a replay of this call will be available through February 27, 2025. Many of our remarks today contain forward-looking statements based on current expectations. These statements may often be identified with words such as expect, anticipate, believe or similar indications of future expectations. Although we believe that such forward-looking statements are reasonable, we cannot assure you that any forward-looking statements will prove to be correct.

These forward-looking statements are subject to known and unknown risks and uncertainties and other factors as well as general economic conditions. Should one or more of these risks or uncertainties materialize or should underlying assumptions or estimates prove to be incorrect, actual results may vary materially from those we express today. Additionally, let me refer you to our unaudited results for the period ended December 31, 2024, that were filed this morning on Form 10-Q. In addition, please refer to our previous filings on Form 10-K where you’ll find risk factors that could cause actual results to differ materially from those forward-looking statements. Finally, I would encourage you to review the investor highlight slides posted this morning on our website.

With that, I’ll turn over the call to John Hadjipateras.

John Hadjipateras: Thank you, Ted. Good morning and thank you for joining us today. Before passing back to Ted and my colleagues John and Tar, who will provide you with detailed comments or financial results on the market and our outlook, I’d like to highlight the following. Our dividend of $0.70 per share is consistent with our irregular dividend policy of aligning shareholder returns with market realities. Our current voyage bookings reflect the improved market and our confidence in paying a dividend exceeding our current EPS, despite a heavy dry docking schedule, underscores our positive outlook. I would like to note that we are achieving fuel savings higher than 10% from the energy saving devices and silicon paints we’re installing during these dry dockings, resulting in payback periods of less than a year and continuous fuel and cost emissions saving.

We expect production growth and terminal expansions at Targa and Nederland by second half 2025 and deliveries of only 11 ships this year will support a healthy freight market in the foreseeable future. We are mindful of a volatile political environment, but we’re hopeful that our trade will not be disrupted by a possible tariffs tit for tat considering that the U.S.’s share of LPG imports to China was 44% in 2024 compared to 22% in 2015, and China’s share of U.S. exports was 60% in 2024 compared to 30% in 2015. We’re confident in the LPG trade with growth prospects in pet chem, as well as domestic consumption. Expected deliveries in the latter part of 2026 and in 2027 are substantial and give pause as a percentage of the existing fleet, they are more modest than past delivery cascades.

On production some evolving policies of the U.S. have the potential to unleash its oil and gas industry. We are mindful of the challenges posed by many uncertainties on the geopolitical front, including developments in Ukraine, Iran and the Middle East, which may strongly influence our market. To navigate this environment, we will focus on prudent capital allocation and operational excellence, doing what we know best, serving our customers by providing safe, reliable, clean and trouble free transportation, while maintaining a solid balance sheet. We are preparing our operations and fleet to be able to bid on emerging ammonia projects. We already have the Captain John NP on the water, fully ammonia capable. We recently retrofitted one of our 2015-built VLGCs to be ammonia capable and plan to retrofit another two ships this year.

In addition, we have one VLGC, VLAC delivering in 2026. With a strong balance sheet, the company is well-positioned to continue being a leader in the VLGC, VLAC market. And now I’d like to pass you back to Ted.

Ted Young: Thanks John. My comments today will focus on capital allocation, our financial position, liquidity and our unaudited third quarter results. At December 31, 2024 we reported $314.5 million of free cash, which was sequentially down from the previous quarter. The change in cash from the quarter was essentially $10.9 million in cash flow to equity, offset by $42.6 million irregular dividends paid and $2.8 million in vessel CapEx. As disclosed last week, we will pay a $0.70 per share irregular dividend or roughly $30 million in total on or about February 27, 2025 to shareholders of record as of February 5. With a debt balance at quarter end of $570.3 million, our total debt – our debt-to-total book capitalization stood at 34.8% and net debt to total cap at 15%.

We have well-structured and attractively priced debt capital with a current all-in cost of about 4.7%, an undrawn $50 million revolver and one debt-free vessel and coupled with our strong free cash balance, gives us a comfortable measure of financial flexibility. Looking ahead, we expect our cash cost per day for the coming year to be approximately $26,000 per day, excluding capital expenditures for dry docking. I would note that our lowest cost hedges, which were at 0.92% for three-month SOFR are rolling off at the end of this quarter, which will result in about a 30 basis point increase in our all-in debt cost beginning in the first fiscal quarter of 2026. The discussion of our third quarter results, you may also find it useful to refer to the investor highlight slides posted this morning on our website.

I’d also remind you that my remarks will include a number of terms such as TCE, available days and adjusted EBITDA. Please refer to our filings for the definition of these terms. Looking at our third quarter chartering results, we achieved the TCE revenue per available day of about 36,100 though marginally lower than the prior quarter’s results, the monthly trend was quite good with November and December results showing strong improvements over the October level. As our entire spot trading program is conducted through the Helios Pool, its reported spot results are the best measure of our spot churning performance. For the December 31 quarter, the Helios Pool under TCE per day for its spot and COA voyages of $33,200 reflecting the improving monthly trend I just mentioned.

The overall results benefited from the strong time charter out portfolio in the pool. On Page 4 of our investor highlights material, you can see that we have five Dorian vessels on time charter in the pool – within the pool, indicating spot exposure of slightly over 80% for the 29 vessels in the Helios Pool. I’d like to note that the Corsair, which had been on a long-term time charter outside the pool has now entered the Helios Pool. Looking ahead to the quarter ending March 31, 2025, we currently estimate that we have fixed just over 53% of the available days in the quarter, and we estimate for the quarter that will yield a TCE in excess of $37,000 per day. That read includes both spot fixtures and time charters in the Helios Pool. Please note that given the difficulty in predicting loading dates, which obviously had a huge effect on revenue recognition disport options and some charters and the fact that our COAs were priced on average Baltic rates, the estimates we quote during these calls and the rates actually realize can vary.

Daily OpEx for the quarter came in at 10,161 excluding drydocking related expenses, which was marginally up from the prior quarter’s $9,767. This quarter saw nearly $1,000 a day difference between the reported OpEx that includes expense drydocking amounts and our preferred measure of OpEx that excludes those costs. Our time charter rate expense for the four TCN vessels came in at $10.6 million or slightly less than $29,000 per day. Thus those vessels contributed positively to our quarterly profits. Total G&A for the quarter was $7.5 million and cash G&A, that’s G&A excluding non-cash compensation expense was about $5.8 million which reflects what we consider to be our core G&A at a level which is consistent with our expectations. Those amounts netted a reported adjusted EBITDA for the quarter of $45.2 million.

Total cash interest expense for the quarter was $6.9 million, again reflecting our 4.7% all-in cost of debt. As a reminder, in the first fiscal quarter of 2026, that’s the April to June 2025 quarter, our total interest cost will increase a bit to about 5% following the roll off of those hedges I mentioned. For the current fiscal year, we have completed three drydockings and will be drydocking four more of our vessels before the end of March, including some upgrades. Year-to-date, we have incurred roughly $12.5 million in cash outlays for those drydocks, and we anticipate about an additional $7 million through year-end, which includes both payments for the drydocks already completed and advanced payments related to coming drydocks. Days in drydock should be consistent with our previous disclosures.

The irregular dividend declared last week of $0.70 a share brings to $15.20 per share irregular dividends that we have paid since September 2021. The modest reduction of the dividend is consistent with our previous discussions around the topic. It reflects a balanced mix between current results and the long-term need and prospects of the business. The VLGC business is by no means of utility, and we don’t think our dividend policy should be either. Including the dividend to be paid next month, we’ve returned approximately $850 million in cash. $230 million through open market repurchases in our self-tender offer and $620 million in dividends. Those dividends compare favorably to our net income since June 30, 2021, which is the quarter immediately prior to our first irregular dividend of $633 million.

As we’ve said, our Board weighs current earnings, our near-term cash forecast, future investment needs and the overall market environment among a number of factors in making its determination of the appropriate level, if any, for our dividends. Thus, the $0.70 per share dividend reflects a constructive market view when considering last quarter’s earnings in cash flow and our heavy drydock schedule this year. We continue to be on the lookout for fleet renewal opportunities. We’ll be judicious with our free cash flow, working to balance shareholder distributions, debt reduction in fleet investment. With that, I’ll pass it over to Taro Rasmussen.

Taro Rasmussen: Good day, everyone, and thank you for dialing in. The quarter ending December 31, 2024 saw freight market in recovery from the challenges witnessed the quarter prior, but without a winter spike as had been seen the previous four years. Export volumes from major export regions remained high, but a warm winter and tepid demand for petrochemicals in the Far East halted any booms from emerging. The high inventory levels and record high production levels in the United States created favorable market conditions for exports during October, but physical liftings from U.S. Gulf terminals were hampered on export capacity was priced into the west to east arbitrage, which limited speculative buying for any potential cold snaps in the Far East.

Although, spikes in VLGC fixing demand were elusive, the fundamentals of high inventory levels and high production ensured stable export volumes through October and the Western Market traded at a continued premium to the east for the duration of the quarter. The relative attractiveness of the Western Marketto the East drew significant VLGC supply to U.S. loading areas and supported a then record export month for VLGCs from the United States in November. In terms of reported exports on VLGCs, the previous record was about 4.67 million tons exported in August of 2024 and November was about 4.76 million tons. With negligible delays at the Panama Canal in November, vessel supply was effectively programmed and rates were held sideways. The average freight rates in December for the Western Market were slightly higher than November, owing mostly to the many vessels laden en route to the Far East from the month prior, reflecting the situation of continued positive fundamentals of high inventory and production levels, but fewer vessels available to export was, as during the previous quarter, characterized by inquiries by Indian public sector undertakings.

The limited number of pure fixtures to the Far East made assessment of the freight market difficult for brokers with rates mostly subject to the pull of vessels to the west and reduced availability for loading in the Arabian Gulf. Although, there were periods with sudden fixing inquiry reported in the market, it was often to cover for late running vessels rather than catering to new export tons. The recovery in the freight is welcomed by all market players, even if a firmer freight market through the fourth calendar quarter 2024 was likely anticipated by most. Nonetheless, our expectations remain positive for VLGC shipping, despite some analysts seeing a challenged petrochemical market in the Far East due to oversupply. Propane continues to remain the competitive feedstock for steam cracking.

PDH plants continue to come on stream in China, increasing overall propane demand. Also, the Panama Canal’s utilization has reached maximum efficiency during 2024, creating upside potential if congestion increases. Moreover, the limited delivery schedule of new builds in 2025, expected high export supply from North America and roughly 13% capacity expansion at U.S. Gulf terminals during the second half of 2025 are positive factors moving forward. Thank you. I will now pass over to Mr. John Lycouris.

John Lycouris: Thank you, Tar. At Dorian LPG we strive to improve the energy efficiency of our vessels with a focus on operational and technical performance and continue to follow the employment of technological advances and innovations commercially available to the marine sector. The Dorian LPG fleet currently exceeds the IMO Carbon Intensity Index or CII requirements by using real time data monitoring to determine mid voyage technical and operational optimizations. Our 2024 annual efficiency ratio or AER, which is a CO2 emissions intensity metric for the industry and grades vessels from A to E with A being best was 10.6% better than the IMO target and grades the fleet with a CIA rating of B. The employment of energy saving devices, advanced engine software modifications, implementation of advanced vessel routing software, and AI engine monitoring systems have resulted in improved fleet performance and in the reduction of emissions and bunker costs.

Our scrubber vessel savings for the fourth calendar quarter of 2024 amounted to $1.6 million, or about $1,346 per calendar day net of all scrubber operating expense. Fuel differentials between high sulfur fuel oil and very low sulfur fuel oil averaged $83 per metric ton, while the differential of LPG as fuel versus very low sulfur fuel oil stood at about $155 per metric ton, making LPG as a fuel quite economically advantageous for our dual fuel vessels. We operate 16 scrubber-fitted vessels and four dual fuel LPG vessels. As mentioned earlier in our call, a second 2015 built vessel is currently undergoing an extensive cargo upgrade for ammonia cargoes during the special survey and dry docking window for that vessel’s regulatory requirements.

There is another ammonia’s cargo upgrade for a vessel planned for dry dock later this year. Upon completion the Dorian LPG – of completion of these projects, the Dorian LPG fleet will have in the water four vessels capable of ammonia cargoes and one new building VLAC VLGC delivering in 2026. We believe these cargo system upgrades for ammonia cargo capability increase the fleet’s commercial optionality and readiness for employment when the first ammonia projects develop and the large ammonia cargo markets are established. MEPC 83 is scheduled to meet in April 2025 with a focus on finalizing the midterm greenhouse gas reduction measures, which are expected to take effect from 2027 onwards. The focus is on emission regulations with the approval of amendments to MARPOL Annex VI and the review of the EEXI and CII measures including the adoption of nitrous oxide’s technical code updates.

We further expect for the MEPC to codify the establishment of technical and economic decarbonization measures and the progression of the Life Cycle Greenhouse Gas Assessment framework. The IMO is also likely to make progress towards a global carbon tax and we may see a proposal for adoption emerge from this meeting. As previously mentioned, wind-assisted propulsion systems offer benefits under the current and upcoming regulatory frameworks. We have undertaken an evaluation and analysis of the weather patterns and conditions encountered during our typical voyage routes, the aerodynamic and hydrodynamic reactors of our vessels so that we can identify suitable wind-assisted propulsion systems solutions for our fleet. The lacking wind technology that is both efficient and straightforward to install and operate can be a pivotal step in the energy transition, delivering a cost effective path towards reduced emissions and seamless regulatory compliance.

We continue to believe that our focus on energy and emission savings makes good business sense for our shareholders and for the environment. Now I would like to pass it over to John Hadjipateras for his closing comments. Thank you.

John Hadjipateras: Thank you very much. Nagy, let’s go and [ph] open questions we have.

Q&A Session

Operator: And with the prepared remarks completed, we will now open the line for questions. [Operator Instructions] We will take our first question from Omar Nokta with Jefferies. Please go ahead. Your line is open.

Omar Nokta: Thanks, operator. Hey guys. Good morning. Thanks for the detailed update as usual. Good to get into everything. I guess you answered a good amount of the question on the dividend with your remarks. So I’ll probably leave it at that. But maybe just wanted to ask first kind of on capital allocation going forward as we think about things. The past couple of years, you’ve taken advantage of a very strong market. You paid down a good amount of debt, built up cash, acquired some ships and clearly paid some big dividends along the way. How do you think about what’s important as we move through and into 2025? Obviously, there’s a good amount of uncertainty. There’s a sense here that maybe freight rates are going to be moderating from what we saw previously. How would you think – or how do you rank your uses of capital moving forward from here?

John Hadjipateras: Thanks for that question, Omar. You always ask a very pertinent and deep questions. So it is – I think we continue the same. I mean we don’t – our priorities remain the same. I think that we have – we see the market, as I said in my comments, as being constructive. There are – there may be opportunities for expansion. There may be opportunities for – I think that we are well positioned for that with our debt structure and our cash position for – and we think that the market – we’re hopeful that the market will continue providing the cash surpluses that we’ve seen and that we can continue more or less on the same level, the same mentality that we’ve had so far, which is prudent debt management, prudent cash position and dividends.

Omar Nokta: Very good. Yes. Thanks, John. That’s really helpful. And I guess maybe just kind of talking about the amount of supply coming on, you mentioned in the release the 107 VLGCs on order equaling to about 20% of the fleet. Looking back over the past few years, the trade growth has been very strong and easily could have absorbed that amount of capacity. How do you think about the demand going forward? Do you think that we can still see a good amount of trade growth that can pull in these vessels without a significant impact to the supply demand balance? Maybe that’s the first question. And then maybe like part two of that, there’s also maybe 50 or 60 VLECs coming in to the market. Can you just talk about how those affect the trade going forward? Thank you.

John Hadjipateras: Omar, I think, you know that the ordering boom was caused by optimism on a developing ammonia grade. And currently, there’s a bit of pullback and certainly people are feeling more cautious about it. But I think that the – it’s been discounted, the delays have been discounted and from here forward, the possibility the upside is greater than, so just like in the last few years we absorb a significant amount of ship deliveries. I think the trade – the increase in the trade, both of the LPG, my own feeling is and in the potential of ammonia is going to absorb – is going to be enough to absorb the deliveries that we see coming in 2026 and 2027.

Omar Nokta: Great. All right. Thanks. That sounds good. And maybe just do you mind just touching on the VLECs in terms of how those – are those fully contracted for the most part and by design going into ethane? Or is that something that we should consider as potential oncoming supply as well?

John Hadjipateras: Are you talking about VLEC, the ethane or the AC?

Omar Nokta: Yes, sorry, that’s what I said. Yes, that’s ethane, yes, VLEC.

John Hadjipateras: No. No, no. I think that trade is increasing on its own. I think those ships will be absorbed in that market. I know they have the potential to drop down into the VLGC market, but I don’t think that there will be – that will happen because their exports and then the expansion of that market is significant.

Omar Nokta: Okay, got it. Well, thanks John that makes sense and appreciate it. I’ll turn it over.

Operator: Thank you. And we will move next with Clement Mullins with Value Investors Edge. Please go ahead. Your line is open.

Clement Mullins: Hi, good morning. Thank you for taking my questions. I wanted to start by asking about your booking so far in Q1. Could you talk about what percentage of days you fixed so far and at what rates?

John Hadjipateras: Ted or Tar? Which of you would like to take that? Ted?

Ted Young: I’ll just reiterate what we said earlier in the call. We said that we’ve booked just over 53% of the available days and we estimate that we will achieve a TCE in excess of $37,000 a day for the quarter.

Clement Mullins: That’s helpful. I had missed it. I also wanted to ask about the time chartering vessels with purchase options. Could you provide some commentary on the price? Those are exercisable.

Ted Young: No, we don’t disclose that.

Clement Mullins: All right, and then final question from me. Following up on Omar’s question on capital allocation. You’re now back trading at a substantial discount to NAV. And this is a decision more for the board. But could you comment on how you view the trade-off between share repurchases and dividend distributions?

John Hadjipateras: Well, we have a share repurchase authority. And we are watching the price of the stock, obviously, and it’s definitely not off the table for us to sort of accelerate, perhaps our share repurchase.

Clement Mullins: Makes sense. That’s all for me. Thank you for taking my questions.

John Hadjipateras: Thank you.

Operator: Thank you. And this will conclude our Q&A session. I will now turn the call over to management for closing remarks.

John Hadjipateras: Well, thank you very much, everyone. We look forward to talking to you at our next call. Meantime, have a good time. Thank you. Bye-bye.

Operator: And this does conclude today’s program. Thank you for your participation. You may disconnect at any time.