StealthGas, Inc.

Good morning, everyone, and welcome to our third quarter 2024 earnings conference call and webcast. I am Michael Jolliffe, Chairman of the Board of Directors, and joining me on our call today, as usual, is our CEO, Harry Vafias, to discuss the market and the company outlook, and Konstantinos Sistovares to discuss the financial aspects. Before we commence our presentation, I would like to remind you that we will be discussing forward-looking statements which reflect current views with respect to future events and financial performance. So if you could all take a moment to read our disclaimer on slide two of this presentation, I shall be grateful. Risks are further disclosed in the Stealth Gas Filing with the Securities and Exchange Commission. So let's proceed to discuss these results and update you on the company's strategy and the market in general, starting with slide three for some highlights. Today we released our results for the third quarter and nine months 2024. It was admittedly a successful quarter, despite the seasonally weaker summer months. We did not manage to break the previous quarter's record, but we have reported the most profitable nine months ever. Revenues came in at a solid $40.4 million, slightly down by 3% from the previous quarter, but considerably higher by 17% than a year earlier. The reported net income on an adjusted basis for the third quarter was $14.2 million compared to $12 million last year, 18% higher. Adjusted profit for the first three quarters of this year reached a record $61 million. In terms of earnings per share on an adjusted basis, these were $0.38 for the quarter, 23% higher, and $1.67 for the nine-month period, marking a 61% increase over the nine-month period. This was also assisted by the reduced share count as a result of share repurchases over the last one year. We did not buy back any shares during the third quarter, so there is about $5.5 billion left authorized for share repurchases. Our strategy for the time being remains focused on deleveraging and optimizing cash generation. While we did enter a new debt facility of $70 million in the beginning of the year, We have also made $108 million in repayments up to today, reducing the debt to below $100 million for the first time. In terms of our fleet, strategy is to conservatively diversify and renew. We have previously discussed the sale of two smaller LPGs and the delivery of two medium gas carriers in the beginning of the year, as well as the subsequent sale of one medium gas carrier by our joint venture in the second quarter. We are still looking for opportunities in the sale and purchase market, and towards the end of the third quarter, our joint venture entered into an agreement to sell one of the smaller vessels with delivery early in 2025. At the same time, we agreed to take over a second vessel that was jointly owned. Let us move on to slide four, for some more details on our fully owned fleet employment as of November. Since our last call in September, we were reasonably active on the chartering front. We concluded five new charters of short to medium term duration, the longer one being one and a half years. We did not conclude any long term charters as we did in the previous period. The company's chartering strategy is to fix on period charters when possible and profitable, so there were only two vessels operating in the spot market. Including the latest charters, we have increased our contracted days for 2025 to 65%, already securing about $100 million in revenues. Total revenues secured up to 2027 are steady at $220 million. During the third quarter, we had a rather heavy dry docking schedule. Four vessels were dry docked, and one vessel has just entered dry dock, while in the fourth quarter, two more vessels have been scheduled for dry dock. Since most vessels are in Europe, we are usually forced to perform the dry dockings at a higher cost than could potentially be achieved at cheaper Far Eastern shipyards. In terms of our fleet geography presented in slide five, Our company mainly focuses on regional trade and local distribution of gas, so most of our vessels are not likely to travel long distances and often do voyages that may last as short as a couple of days from loan port to destination, while the fewer larger vessels often engage in intercontinental voyages, for example, the United States Gulf Coast to continent. This graph is a snapshot of the positioning of the fleet including the joint venture vessels, as of mid-November. We currently have five vessels trading in the US and Caribbean, and five in Africa in some specialized trades, and only three vessels trading in the Middle East and the Far East. The majority of our fleet, some 19 vessels or 60%, currently trade in Europe, particularly in the Northwest and in the Mediterranean. It is not always the case, as in the past the fleet used to be evenly split between Europe and the Far East, but we have strategically focused over the last several quarters on this area as the freight rates west of Suez continue to command a premium over east of Suez. We believe that in the short term we will continue to enjoy higher rates. west of Suez as there continues to be a shortage of suitably well maintained vessels in Europe. Since it is unsafe to navigate in the Red Sea due to the Houthi attacks, it would mean that most vessels would have to travel the long distance around the Cape of Good Hope to move from east to west. And due to the short distance trade routes for small LPG carriers, it is rare that cargoes are found for these types of long distance routes to make such a voyage profitable. It is therefore less likely that these arbitrages between East and West will quickly fade by an influx of vessels in the area. Meanwhile, the attack in the Red Sea by the Houthis have escalated. This also means less Middle East exports on larger vessels destined for Europe and replaced by US exports to Europe. Our handy-sized vessels, particularly, do increased transatlantic trades between the United States and Europe. Finally, I would also like to note that we have been increasingly engaged in ammonia trades that our handies and medium gas carriers can carry. In slide six, I will update you on our joint venture investments. That is the interest we had as of September 30th in five vessels. four pressurized LPG carriers, and one medium gas carrier through two joint venture structures. These are presented separately, as we do not consolidate these vessels in our results, but use the equity method of accounting. The book value of our investments as of September 30th stood at $30.9 million close to the previous quarter. There was not much activity in terms of chartering of these vessels, and most of these have charters which are close to expiry that we will then have to renew. At the end of the quarter, together with our partners, we agreed to sell the gas shuriken to a third party. That vessel is expected to be delivered very early next year, depending on its trading schedule. Next, we agreed to buy back from that joint venture the gas defiance, that we then chartered out for a one-year charter. Prior to this, the debt on both vessels was repaid, so we added a debt-free vessel in our fully-owned fleet. For the remaining two smaller vessels, as the joint venture enters its sixth year, we are looking at opportunities to sell these. The remaining three vessels are all financed with the debt on the two smaller ones maturing next year, while the medium gas carrier that belongs to our second joint venture, as you may recall, was acquired and financed just last year. Lastly, the dry dock on the one pressurized vessel that was originally scheduled for early 2025 was brought forward, and the vessel is undergoing dry dock as we speak. I will now turn the call over to Constantino Sistrovaris, who will give details of our financial performance. Thank you.

Thank you, Michael. I will discuss the financial results that were released today. Let's turn to slide 7, where we have a snapshot of the income statement for the third quarter and nine-month period of 2024 against the same period of 2023. Due to vessel sales that were placed last year, there was a corresponding reduction in fleet days of 2% for the quarter, and 10% for the nine-month period. Net revenues after voice expenses came in at $37.5 million for the quarter, an increase of 16%, and at $115.3 million for the nine months, a similar increase of 16%, mainly the result of recharging investors at high rates throughout the past year. and also the addition of two larger vessels in the fleet with higher earnings capacity. Net revenues would have been higher this quarter if it wasn't for the lower operational utilization as a result of having to dry dock four vessels during the quarter. Operating expenses were $12.3 million for the quarter, at the same level as last year, and $36.2 million for the nine months down 10%, that corresponds about to the reduction of the fleet. Overall, a good performance in containing expense so far in 2024, despite the inflationary pressures throughout the economy. The main drag for this quarter results were the dry docking expenses at $2.9 million as four vessels and partially a fifth one, had to undergo their statutory five-year special survey and dry dock. The cost for these dry docks, that involve also lost time and revenues, are expensed as incurred and not amortized. So there was a hit in the third quarter, especially when compared to last year, when there were no vessels to be dry docked at the time. In the third quarter, there was also an increase of $1 million in G&A costs as a result of an increase in stock-based compensation expenses. There were no impairments nor any gains or losses from sale of vessels during the third quarter of this year, while interest costs decreased by $0.7 million as a result of the debt reduction. Net income for the third quarter was $12.2 million compared to $15.7 million for the same quarter last year, a 23% decrease. However, this is reversed when looking at adjusted net income that excludes in particular the non-recurring gain from the vessel sales and the non-cash stock compensations and was $12 million last year, compared to $14.2 million this year, an 18% increase, which is more reflective of the improving profitability of the company. For the nine-month period, adjusted net income was $16.8 million, a 52% increase compared to last year's. Likewise, adjusted earnings per share for the third quarter were $0.38, a 23% improvement, and $1.67 for the nine months, a 61% improvement compared to last year. While the third quarter profit, as expected, did not surpass the second quarter's record, the company has now marked its best nine months ever and is on track for a record year. Looking at the balance sheet in the next slide, slide eight, the company continues to maintain strong liquidity. Cash, including restricted cash, was at the end of the quarter $77.4 million, reduced by just 8% compared to December 31st, despite the sizable debt repayment. We do not have and do not use any revolving red lines, as there is no need at this moment. Vessels held for sale were $34.9 million as of December 31st, were nil as of September 30th, as there were no vessels contracted to be sold. Also, deposits for vessels that were 23.4 million as of December 31st were nil as of September 30th, as the two medium gas carriers were delivered to the company and there were no vessels contracted to be bought. Vessels' book value increased from 504.3 million to 605 million a significant 20% increase as a result of the addition of the two medium gas carriers in January. The book value of our investments in our joint ventures was $30.9 million, an $8.9 million reduction due to the sale of the one medium gas carrier and subsequent return of capital that happened during the second quarter. and we expect it to be reduced further in the come quarters following the exit of the two smaller vessels that were previously mentioned. Total assets as of September 30th increased 3.3% to $720.7 million compared to December 31st. Moving on to the liability side, the current portion of the long-term debt was half to $6.2 million. while the long-term portion of the debt stood at 106.9 million as of December 31st, then 145.4 million as of March 31st, and was reduced to 80.2 million as of September 30th. As a result, with a total debt of just 86.4 million versus cash in hand of 77.4 million, The company is close to being net debt-free and will probably be so in the following quarter. Shareholders' equity increased 11%, or $60.5 million, over the nine months. Moving on to slide 9 to update you on the debt structure. The leverage has been the name of the game for the past couple of years, allowing for significant interest cost savings over this period. It is worth noting that in the third quarter, the company has for the first time managed to reduce its total debt to levels below 100 million. During 2023, the company very aggressively halved its outstanding debt with over 154 million of debt repayments. In 2024, in the first nine months, 70 million eight-year facility were added in January. and $106.6 million of debt repayments took place, $21 million of which during the third quarter. As a result, the debt cash flow amortization is now reduced to $6.4 million per annum, compared to $30 million just two years ago, and that, we believe, will allow for significantly faster cash flow accumulation going forward. There are only three mortgage vessels out of 28 in the fleet, and that means much lower cash flow break-even for our vessels, making them more competitive. Finally, we have eliminated refinancing risks. There is only one $15 million balloon at the end of 2025, and the next balloon of $35 million is from the facility just recently concluded, which matures in 2032. Thank you, and I will now hand you over to our CEO, Haris Mafias, who will discuss the market and company outlook.

Moving on slide 10, our brief insight on the LPG market. Over the last three years, global LPG exports are on a steady upward path. After making a 4.3% increase in 2023, the latest data show that over the first nine months of 2024, they increased slightly higher at 5.5%. Data coming out of the U.S. showed that for the first nine months of this year, propane exports from the world's number one exporter, the U.S. continued to grow, marking an impressive 12% year-on-year increase. There was a slight dip over the summer as a result of Hurricane Beryl, but exports have resumed their upward path after that. We expect the rate of growth to slow in the coming quarters, and as UMass capacity expansion projects are completed by 26, to allow volumes to increase by another 20 cents. The Panama Canal situation now results, and crossings are back to normal, leading to a downward adjustment in VLGC rates, also affecting the medium gas carry rates. In the second largest exporting market, Middle East, Volumes have moderated over the last couple of years since OPEC implemented production cuts, and the area has been losing market share. We will be waiting to see if the forthcoming administration change in the U.S. is going to have any effect in lifting the self-imposed production cuts. Although increasing volumes are sent from the U.S. to Europe, LPG demand in Europe continues to remain flat. Although in the important inter-regional trade, there has been some activity with pet cam cargos of late. We're waiting to see the advent of the colder weather as so far the weather has been relatively mild with temperatures below average and that does not help demand for domestic heating consumption. On a more localized level, we mentioned last time the April ban on Russian volumes starting this December. As a more immediate effect, we're seeing some increasing seaborne volumes destined for Poland, replacing the now-bound railroad option. Since Poland does not yet possess adequate port facilities for larger LPG vessels, they had to rely on smaller pressurized ships during more voyages, thereby reducing the number of available ships. On the other side of the globe in Asia, where the major importers of LPG are located, we expect to see 8% LG CBOE import growth in 2024. For the first nine months of this year, volumes going to China have marked an almost 12% year-on-year growth. In India, the second major LPG market, following elections in the summer, the import growth continues to be resilient, coming in at 7.1% year-on-year for the nine-month period. In China, the weakening economy has led to the government to take measures and to reaffirm its commitment to keeping the economy growing at a 5% rate. Regardless, the expansion of PDA capacity for the production of poplin used for plastics continues at a massive scale. During 23, nine new PDA plants came on stream, adding 5.4 million tons of capacity. So far this year, seven new plants have started, adding over 5 million tons. So far, and more plants are under construction that are expected to bring the total production At over 30 million bonds, a 77% rise from 20 to 3 levels. The addition of all these plans for property production that use LPG as a feedstock will underpin demand for the years to come. On slide 11, we discussed the state of the LPG shipping market and its fundamentals. Overall, the summer months being the time of the year when there is a pullback in demand, saw a weaker spot market while the period market was abled. Looking at small pressurized vessels that comprise of the majority of our fleet, there continues to be a divergence in market between east and west. In the west, the spot market during QT was keeping reasonably active with rates at firm levels, considering the season. Especially positions on the larger pressurized vessels have been tight. Both LPG and PECMS have been active. On the period side, we have continued to see strong interest in chartreuse, especially 5,000 cubic meters and 7,500 cubic meters. Rates have continued to rise upwards and are definitely at historically high levels. The spot market east of Suez was slower than the west. Owners with open positions would in most cases have to factor in some mile time and spot rates were suffering as a consequence. As the order book is still rather light next to three years with rapidly aging fleet, it would seem chances are reasonably good that owners will be enjoying a firm market for some time. The spot market for the Handys held reasonably well through the summer, mostly due to an active patent market. On the peer side, peer rates remained relatively stable, although the market was pretty inactive through the quarter. Petcams is usually a spot-focused market, while the LPG, which normally attracts decent interest from charts, was very quiet. The order book for Handys remains very slim, with no delivery scheduled for 2025, and this would largely support the period market going into next year. On the MGC's spot market, remains soft and owners find themselves competing with trader relets more often than not. On the time chart aside, owners with available tonnage have in general kept their TCIDS firm. This has again resulted in investors not being renewed due to breachable gaps between owners and charters' ideas. The order book provides for only a handful of deliveries in 2025, which will support PC rates for the year. However, longer term, the order book for MGCs is worrisome. We've seen even more orders be placed since our last call, driving the order book ratio to 50% of the existing fleet. We see new entrants and existing players ordering MGCs as well as VLGCs, at record high prices with deliveries two and three years from now. Admittedly, betting that ammonia will be the next generation of fuel choice, hoping for a surge in demand. We, of course, would welcome such a development, having already the seven larger vessels in our fleet able to carry ammonia. But that being said, we believe that ordering these vessels now at these record prices is quite a risky proposition. On the other hand, the order situation is quite different in the overlooked handy-sized fleet. where there are no vessels leaving over the next year, and the order book remains healthy beyond that, although since our last call there were a few more orders being paced. As far as our core freight and fresh air ships, the situation has not changed much. We continue to see only a handful of vessels being ordered, and most of these in Chinese yards, destined for Chinese trades, with the order book ratio at a low 5% for the next three years. and we would like to repeat what is shown in our graph. According to the age profile of the pressurized fleet, over 30% of the existing vessels are over 20 years old, meaning that the fleet is not being renewed fast enough. Scrapping continues to remain subdued given the strong charting market, but even without scrapping, it's increasingly getting more difficult for the vessels to trade in the international markets, especially in Europe, given the safety and environmental regulations. On our last slide, we are outlining some of the key variables that may affect our performance in the quarters ahead. Our company had another quarter of high performance during the seasonally weaker summer months. We managed to increase our revenues by 17% compared to last year, even though there was a heavy dry dock schedule during the third quarter that reduced our fleet utilization. So far this year, we have announced record profits, and with the markets strengthening during the winter, We are on track for another record year. There is continuing interest from chapters on period coverage, and we have now contract coverage of 65% for 2025, securing approximately $100 million in revenue just for next year. Particularly in Europe, where the majority of our fleet is located, period rates for pressurized ships are at historically highs. Currently, 25 vessels in our fleet are unencumbered. We have focused on our strategic goal to deleverage And as of the end of the third quarter, we had 86 million loans and 77 million cash attested to the company's strong financial position. As we continue to improve our revenues and profitability, setting the bar higher every time, we believe we continue to be a sound and undervalued investment for anyone sharing our thesis. We have so far been producing strong results but continue to trade at a discount in terms of price-to-nav and price-to-earnings. We have now reached the end of our presentation. I'd like to thank you for joining us at our conference call today and for your interest and trust in our company. We look forward to having you with us again at the next conference call for our Q4 results.