BW LPG Limited

Welcome to BWLPG's fourth quarter 2023 financial results presentation. Bringing you through the presentation today are CEO Christian Sorensen and CFO Samantha Shee. We are pleased to answer questions at the end of the presentation. Should you have any, please type them into the Q&A function in your Zoom panel. You may also use the raise hand option. Before we begin, we wish to highlight the legal disclaimers shown on the current slide. This presentation held on Zoom is also recorded. I now turn the call over to Christian.

Thank you, Lisa, and hi, everyone. Welcome to our 2023 Q4 presentation. I'm joined today by our CFO, Samantha, and together we'll take you through the slides. Q4 ended the strongest year on record for BWLPG. We achieved a time charter equivalent income per available day of $76,000 in a steaming hot VLDC market. And together with a strong performance from our product services team, we had a net profit after tax of $162 million for a quarter. And a full year impact of $493 million, our highest ever. After the first full calendar year in operation, as the new and expanded trading team, Product services generated a net accounting profit of $18 million in Q4. This is after adjusting for G&A and tax provisions from the earlier announced $27 million quarterly profits. We've also scheduled to return $30 million to the shareholders in Q2 this year, following a substantial cash generation during 2023. Given the strong quarter for our company, our board has declared a dividend of 90 cents per share which brings our year-to-date dividend per share to $3.46, representing 98 payouts of our annual earnings and an annualized dividend yield of 28%. The quarter was eventful also in other fronts. We're moving forward with our dual listing in New York, which likely will take place in second quarter this year on the New York Stock Exchange. We had roadshows in the U.S., where we received strong interest in our companies and the sector's story. and we're confident that the listing in New York will expand our investor universe in the future and increase the liquidity in our share. Our company also made a milestone announcement on the 30th of November with the announcement of a signed joint venture with our Indian partners Confidence Petroleum and Ganesh Benzo Plus to invest in the development of a new LPG import terminal in India. In addition, and as part of the agreement, We have just concluded a $30 million investment in Confidence Petroleum, which gives us a strategic 8.5% ownership in the company to participate and get a foothold in the distribution of LPG in India. As we move into 2024, the VLGC market has again proven itself as exceptionally volatile, with rates dropping more than 90% in three weeks due to the cold weather in the U.S., which increased U.S. LPG prices and halted the U.S. exports. At the same time, the sudden availability of more Panama Canal transit slots reduces sailing distance and put pressure on rates. However, since January, rates have increased sharply and we're currently seeing rates in the $40,000 per day range in the Middle East, as well as the US Gulf, and with a contango in the FFA market for 2024. And on the back of this, we maintain our positive view for the year, backed by sound fundamentals. Those are the highlights. Next slide, please. The massive volatility is something we have experienced previously. And if we move to slide six, we have compared this year's drop and recovery in rates with year 2022 and 2023. And the story has repeated itself, starting with a cold front in the U.S., which closes the LPG price arbitrage between the U.S. and the Far East, and a willingness to pay for shipping. On top of this, we had a surprising turnaround in the availability of Panama Canal transits, as mentioned. We should use the sailing distance and increase the supply of ships. However, like previous years, when the temperatures in the U.S. Gulf Coast normalizes, the prices recalibrate and exports are restarted, which again puts shipping rates up. We are also now seeing a busier transit program in the Panama Canal driven by more container ships, which takes up capacity and is expected to reintroduce more inefficiency to the VLDC fleet. Turning to slide seven, the US exports for February are record high and driving the recovery of the rates together with the fleet inefficiencies absorbing capacity. And looking at the FFA market illustrated by the red line, on the left-hand side of the slide. It is pricing second half 2024 in the 50 to $60,000 per day range. The new billing deliveries have been a focus point over the last years and the pace in new vessels hitting the water is coming off sharply after the first quarter this year and remains limited for the next 24 months. We do, however, monitor the large number of VLAC new billing orders this quarter for 2027 delivery which may bring uncertainty to the development of the VLDC market in the longer term if the ammonia export projects do not materialize or are delayed. Turning to slide nine, we have reduced our forecast for North American exports for the year following the cold snap in January. In the Middle East, we anticipate Middle East and exports to be stable this year before they start growing on the back of the massive LNG expansion in the region from 25, 26, 27 onwards. And to sum up, we maintain our positive view for 2024 based on solid underlying fundamentals and added by returning inefficiencies in the fleet, especially around the Panama Canal and abating new building deliveries. Turning to slide 12, please. So moving on to the financial performance for our core shipping segment. We achieved a historical high TCE performance of $76,000 per available day for the fourth quarter. This figure includes fixed time charters and derivative hedges. The spot fleet achieved a TCE of $108,300 per day, excluding the waiting days. For the first quarter this year, around 93% of our available days are fixed at an average of $55,000 per day. As highlighted earlier, we saw a sharp decline in spot rates down to less than $10,000 per day in January, which impacts the guidance rate together with a number of previously fixed ships ending up sailing transatlantic voyage from the US after long ballast from the Far East. We anticipate that we will recoup this ballast cost for the voyages in the next quarter. Looking at their coverage for 2024, 23% of our feed is already fixed on the time charter with an average daily rate of $41,500. We balanced our TC-in and TC-out commitments for 2024 and have already secured a $23 million profit. And additionally, 14% of our days are hedged with derivatives at an average of $56,500 per day. And with this, I'm pleased to let Samantha take you through product services update and our financials. Over to you, Samantha.

Thank you, Christian. Good morning, good afternoon to everyone. Let me continue to add some colors to the product services performance. The net asset value of the product services increased by $18 million to $62 million at the end of December. The increase comes from positive gross profit after netting off other expenses. In Q4, products generated a gross profit of $32 million, which includes $50 million of unrealized cargo and derivative schemes, offset by $17 million realized loss during the quarter. The loss includes the depreciation from product services leased in vessels. Other expenses of the 14 million US dollars largely comprised of G&A expenses, including bonus provision and income tax provisions. The reported net profit does not include the unrealized mark-to-market valuation of physical shipping position, which was excluded from the accounting result. Our internal valuation of these TC-IN contracts at the end of December was 84 million US dollars. This positive value reflects the continuous strong development in the 12-month forward freight market for BLGCs, which is the period we used to evaluate freight position in product services. Due to an increased volatility in the LPG product and freight market back in Q4, we reported a higher average VAR of $8 million on a well-balanced trading book, including cargoes, shipping, and derivatives. We continue to see good collaboration and synergy between product services and our shipping business through improved information flow, optionalities, and enlarged footprint. Focusing on the profit, Product Services is also progressing in expanding the fiscal presence in key markets as we aim to broaden the platform and trading portfolio. Please go to the next slide, please. So, moving to the financial highlights. In Q4, we reported a net profit after tax of 162 million U.S. dollars on a consolidated basis. This includes $16 million in profit from BWLPG India and $18 million in profit from product services. The net profit also includes a downward adjustment of $4 million related to the effect of IFRS 15 for the quarter. As the TCE for the strangling voyage over the quarter end is recognized on a low to discharge basis. We reported an earnings per share of $1.14 this quarter, mainly contributed by our core shipping segment. This translates into an annualized earning yield of 31% when compared against our year end share price. We reported a net leverage ratio of 21% in Q4. The board declared a Q4 dividend of 90 cents per share, We have in total declared $3.46 per share, including Q1 to Q3, or a 98% payout ratio in year 2023. The dividend payout reflects our commitment to return value to our shareholders as we continue to deliver a high dividend yield of 28% when calculated on our share price at yesterday's closing. Our balance sheet ended the quarter with a shareholders equity of 1.6 billion US dollars. We continue to see a healthy headroom for more than $400 million comparing broker valuation with our fleet of book values. Our annualized Q4 return on equity and capital employed were 42% and 33% respectively. In Q4, our daily OPEX came in at $8,200 per day, due to slightly higher than expected maintenance and repair expenses. For 2024, we expect our own fleet operating cash break even to be about $17,600 per day. And this is $1,000 per day lower than previous quarter, driven by early debt repayment. On slide five, it provides a summary of our liquidity and financing structure. Excuse me. On a consolidated basis, we ended the year with close to half a billion in liquidity, consists of 162 million in cash, net of 126 million held in broker margin accounts, and 295 million in undrawn revolving credit facilities. As of end December, SHIB financing debt outstanding was $311 million, of which $257 million was term loans and revolving credit facility of $54 million. Looking at trade finance, $319 million, or 48% of our $660 million line has been used as of end Q4. with 85 million related to trade advances drawdown and 234 million in letter of credit, leaving a healthy headroom for further growth. As of January 2024, we upsized our trade finance line to 746 million with the two additional lenders, increasing our headroom further to support future growth. In terms of the overall repayment profile, Excluding short-term trade advances, settlements are well spread out with no major repayment until 2026. So with that, I'd like to conclude our Q4 update. Give it back to you, Lisa.