BW LPG Limited

Good morning, good afternoon, good evening, everyone. And thank you for joining us today. My name is Aline Andliker and I'm the head of corporate communications at BWLPG. On behalf of the management team, I'd like to extend a warm welcome to all of our shareholders, investors, analysts, and valued stakeholders joining us for our quarterly earnings presentation. We appreciate you taking the time to be with us and for your continued interest and confidence in our company. Joining me today are our CEO, Christian Sorensen, and our CFO, Samantha Xu, who will walk you through the quarter's performance, key market developments, and our strategic priorities moving forward. Following the presentation, we will open the floor for a Q&A session. You are welcome to submit questions throughout the Q&A chat, throughout the presentation, Or alternatively, raise your hand to ask your question directly during the Q&A part. Before we begin, I would like to draw your attention to the legal disclaimers shown on the current slide. Please also note that today's presentation is being recorded. And with that, it is my pleasure to hand over to our CEO, Christian.

Thanks, Alina. Hi, everyone. Thanks for dialing in as we review our first quarter financial results and recent developments, including our announced new buildings and the Middle East situation, which is still overshadowing the market. Let's turn to slide four, please. The first quarter was another one with significant geopolitical volatility, marked by increased inefficiencies from the Middle East conflict, driving higher shipping demand from the US and resulting in extraordinarily high freight rates, which we will cover in more detail in the market overview section. In addition, as disclosed over the weekend, we are pleased to announce that we have signed the contract for eight 90,000 cubic meter Panamax new buildings with HHI with expected delivery from start 2029 until the second quarter of 2030. Further details will be covered on the next page. Moving on to the Q1 results, we reported a TCE income of $55,500 per available day, above our guidance of $54,000 per day and $51,300 per calendar day. The Q1 profit after minority interests was $164 million, equivalent to an EPS of $1.08. Our trading branch, BW Product Services, reported a gross profit of $127 million and a profit after tax of $98 million for the quarter. The extraordinary high results are mainly driven by a large unrealized market-to-market valuation gain over the portfolio. Provided no delays, we expect a large part of this to be realized by end of Q2. For the second quarter of 2026, we're guiding on about $81,000 per day, fixed for 85% of our available days. These are solid levels above our all-in cash break-even of $24,500 per day. The figure includes the fixed time-sharded coverage in the second quarter of 40% of our available days at $44,000 per day. Please see in the appendix in this presentation for the full breakdown of time charted delays and levels. The board of directors has declared a dividend of 67 cents per share with 56 cents representing 100% of our shipping and pathing Q1 and 11 cents per share from product services final dividend from 2025. Following the front heavy dry docking activity in 2026, with 257 days related to dry docking in Q1 alone, the majority of the dry docking is now behind us. We expect off-fire days to reduce to approximately 105 days in the second quarter. In other subsequent events during the first quarter, we fixed the BW Brage and the BW Gemini for five and three-year time charter out agreements in the low $40,000 per day. We also fixed the BW Pampero, which is part of our India fleet, for a one-year time charter out at high $60,000 per day with delivery in August. As the Middle East tensions have persisted and the Strait of Hormuz remains closed, we still have one vessel from our India-flagged fleet inside the Persian Gulf on time charter. The two other vessels transited the Strait of Hormuz safely back in April. Turn to slide five, please. Okay, during the weekend, we announced that we had signed a contract for the construction of eight 90,000 cubic Panamax civil disease with an average new building price of approximately $117.5 million per vessel. This is subject to final technical specifications of the respective vessels. The new buildings are expected to be delivered from start 2029 until the second quarter of 2030. This new building series underpins our ongoing fleet renewal program, reducing the average age of the current fleet by about three years after the last new building delivery. Furthermore, the Panamax new buildings represent the most flexible design, future-proofing our fleet composition. New building prices have eased from peak levels around 125 million some years ago, while shipyard capacity remains constrained for the foreseeable future in a high energy price environment. This is likely to increase the inflationary pressure the way we see it. Against this backdrop, the timing of the new billing order is supported by a strong balance sheet, enabling fleet renewal and capital structure optimization by balancing shareholder returns with long-term value creation. Furthermore, the new billing deliveries follow the peak of the order book in 2027 and 2028, coinciding with additional US and Middle East LPG export capacity coming online. Various financing options are currently being considered with 30% of total new building price to be paid within the next six months. Next slide, please. Now let's take a look at the markets. Increasing inefficiencies are reshaping LPG shaping economics and driving a historically strong VLDC markets. The LPG shipping market entered 2026 on a strong footing, supported by solid US LPG production growth and accelerated ramp up in export capacity. Following the geopolitical disruptions, the market has experienced simultaneous reactions that are reshaping trade dynamics, increasing inefficiencies, absorbing shipping capacity, and ultimately supporting higher freight rates. Heading into 2026, US propane inventory stood well above historical norms at around 100 million barrels versus 85 million barrels a year earlier. Strong production combined with stable domestic demand created a persistent export surplus. At the same time, infrastructure developments added further momentum with the energy transfer, targa and enterprise terminal expansions ramping up VLGC loading capacity in the US Gulf. The outbreak of the U.S.-Iran war end of February and the effective closure of the Strait of Hormuz introduced a structural disruption to Middle East LPG exports. This removed a significant portion of LJC loading volumes almost immediately and triggered a forced relocation of trade flows with longer sailing distances as vessels increasingly sold cargoes from the U.S. Gulf. With Middle Eastern exports remaining constrained, the U.S. Gulf has effectively become the supplier of LPG to Asia, operating close to maximum utilization as it compensates for the loss of Middle Eastern export volumes. At the same time, high spot fixture activity in the U.S. has tightened vessel availability and supported elevated freight rates. In addition, a larger number of ill disease than expected has remained idle in the Arabian Sea waiting for the Strait of Hormuz to reopen rather than seeking US cargoes. And this has further tightened shipping supply. As all the shipping segments with high willingness to pay also experienced change in trade flows, the traffic and congestion in the Panama Canal have increased. This has resulted in more VLDCs sailing via the Cape of Good Hope, significantly extending voyage distances between the US and Asia, and thereby absorbing additional shipping capacity from the global fleets. And this long-haul trade pattern via Cape of Good Hope has been bolstered even further, as India and Southeast Asian countries are now importing basically all their LPG from the US. Next slide, please. Looking at the North American exports, the expansion is taking place somewhat earlier than anticipated as US exporters are racing to replace lost Middle East volumes. Consequently, North American exports forecast is raised significantly for 2026 on the back of high oil and gas activity and demand for Middle East replacement volumes. Provided a reopening of the Middle East exports market, volumes from the region will contribute more to overall growth in global shipping volumes. In our forecast, we assume reopening of the Hormuz during Q2 2026 and then a gradual normalization, but this is obviously hard to know for sure. More US exports capacity is set to come online the coming years. Well, we conservatively anticipate most of energy transfer and enterprise flex exports capacity being allocated for ethane exports when the very large ethane carriers are delivered over the next years. Next slide, please. Looking at the current fleet and order book, we can see that the fleet has grown in the last three months and now stands at 429 VLDCs on the water. The order book is made up of 130 VLDCs currently under construction, with delivery stretching all the way to the beginning of 2030. We've seen a significant ramp up in contracting of vessels in recent months. And while we expect more new buildings to be delivered going forwards, we also keep in mind that 9% of the fleet is older than 25 years. So as a summary, there are several factors driving the BGC freight market to unprecedented heights. Sharp increase in US LPG exports, coinciding with the Middle East exports being choked, has created a long-haul trade pattern where the sailing distances are compensating for the lost Middle Eastern volumes. As mentioned, it's impossible to have a clear view on when the state of Hormuz is reopened, but when it does open, we expect repairs or production and export infrastructure to take time before the LPG exports reach pre-war levels. And as said before, the Panama Canal remains a wild card in our markets, and we believe the congestion will increase as several shipping segments are competing for the limited number of transit slots. While the order book is substantial, the fleet continues to age, with more than 40 vessels equivalent to 9% of the fleet, already exceeding 25 years of age. Also keep in mind that 53 wheeled GCs are considered part of the shadow fleet. And that concludes our market segment. Over to you, Samantha.

Thank you, Christian. And hello, everyone. Let's zoom in on our financial performance for the quarter. Start with our shipping performance. We deliver a quarter with a TCE at $51,300 per calendar day or $55,500 per available day. The fee utilization was 92% after deducting technical off-hire and waiting time. The healthy performance was underpinned by a strong spot market full of uncertainties and a continuous disciplined execution of our commercial strategy built on time charter portfolios and FFA at a healthy level. In Q1, we have fixed a time charter portfolio at 53%, out of which 41% was fixed rate time charters. Looking ahead for Q2, we have fixed 85% of the available fee dates at an average rate of about US$81,000 per day. This also included index-linked time-charter contracts, which could fluctuate with the spot market changes. Looking at full-year 2026, we have secured 42% of our portfolio with fixed-rate time-charter and FFA hedges. at US$44,800 and $48,100 per day, respectively. Altogether, our time-chartered hour portfolio is expected to generate around US$245 million. Next slide, please. Product Services posted the realized loss of US$10 million in Q1. Separately, Product Services also reported the US$145 million increase in mark-to-market on our cargo position, offset by a US dollar 8 million decrease in paper position. After accounting for general and administrative cost and other expenses, product services reported a net profit after tax of 98 million US dollar for the quarter, with net asset value of 150 million US dollar at quarter end. As we highlighted previously, this market to market movement, which fluctuate regularly, are largely driven by the gradual phasing in of our multiple year term contract as reflected in a volatile market. While the periodic value adjustments are significant, they reflected delta between the balance sheet dates and will continue to see fluctuations before the positions are realized. We will continue to report our future trading performance, including the market to market changes via our quarterly trading updates. It's also important to note that trading gains and losses are realized across different financial periods. They cannot be extrapolated from past performance as unrealized position will vary depending on the end period valuations. Our trading model is designed to create value by combining cargo, paper, and shipping positions. With that in mind, we would like to remind you that the reported net asset value does not include the unrealized physical shipping position of $69 million, which is based on our internal valuation. In Q1, our average VAR value at risk was $6 million, reflecting a well-balanced trading book, including cargo, shipping, and derivatives. The VAR is expected to increase as we continue to account for the increased term contract volumes that will start from the end of 2026 and continue to accumulate into mid-2027 and beyond. While this also reflects a volatile market in the meantime. Next slide, please. OK. Going on to our financial highlights. We reported a net profit after tax of $187 million, including a profit of $9 million from BWLPG India and $98 million profit from product services. Profit attributable to equity holders of the company was $164 million. which translate into earnings per share of $1.08 per share for the quarter. And an annualized earning yield of 25% when compared against our share price at the end of March. We reported a net leverage ratio of 26.3% in Q1, down from 28.4% at the end of 25. The reduction reflects principal repayments made during the quarter. The board declared a dividend of $0.67 per share, representing 100% payout of our quarterly shipping profits, and $0.11 per share, 20, 25 final dividends from BW Product Services. The 100% shipping profit payout is beyond the 75% payout ratio as guided by our dividend policy. obey the newly announced fleet renewal program to invest up to 940 million US dollar for eight Panamax vessels. The dividend decision is a reflection of a continuous forward leaning principle to give back to our shareholders in a good market. We are also pleased to see such principle is supported by our healthy liquidity and positive market outlook. For the period end, our balance sheet reported shareholders' equity of $2 billion. The annualized return on equity and on capital employed for Q1 were 38% and 30% respectively. Our Q1, 2026 OPEX was concluded at $7,300 per day, a reduction than previously reported. For 26, we expect our own fleets operating cash break even to be about 19,000 US dollar and $21,300 for the whole fleet, including time charter vessels. The all-in cash break even is estimated to be 24,500, slightly up from last reported due to pre-delivery funding cost for the new buildings. Next slide, please. Finally, as of end Q1, we maintain a healthy liquidity position of $680 million, which consists of 176 million in cash and 442 million undrawn credit facilities, providing a strong base to support our new building project. Looking ahead, our liquidity stays strong. Repayment profile remains sustainable with major repayment starting from 2030. We're confident of maintaining a healthy liquidity and repayment profile to support our new building project. On product services, trade finance utilizations stood at $161 million or 22% of our available credit line, leaving ample headroom for future trading needs. And with that, I'd like to conclude my update. Thank you for listening and get back to you, Aline.

Thank you, Samantha. And thank you, Christian. We would now like to open the call for your questions. So please either type your questions into the Q&A channel, or you can also click the raise hand button to ask your question verbally. But please note that participants have been muted automatically. So kindly press unmute before speaking. We will start with the verbal questions first before then moving on to the chat. Let's see if we have anyone in the call who would like to ask a question. Yes, we have Jostein Aschiem. If you can please unmute yourself. Jostein, we can't hear you yet.

Yeah, hopefully you can hear me now.

Yeah, all good. Thank you.

Yeah, perfect. So this is Jostein Aschen from DNV Carnegie. I just had a question regarding product services. So as Samantha also mentioned during the presentation, you had a very strong Q1 figures, which was also driven by the mark-to-market effect on the contract portfolio. Currently, it looks like the FOB premium has come down somewhat. Have you taken any actions in order to secure some of the profits? Or how should we think about the product services results going forward?

Hi, Ossian. Thanks for the question. I can start. So, like you say, the... The arbitrage is somewhat narrower than it was at the peak. But as you may know, the business model that product services is having is based very much on hedging positions and ensuring that you can actually capture the profits. as through the paper market by locking in the margins so um as mentioned by me in the presentation we we do hope and expect that the large part of the Mark-to-market gain will come to realization in the second and probably also into the third quarter. But we will come back with the trading update as per normal in between the earnings presentations and can shed some more light on it. Samantha, anything you'd like to add?

No, that's correct, Christian. And I think it's also about where the portfolio's positions in the curve, although the positions has changed as we speak, we do expect there's some realisation or the reclassification from open position to be realised to come through by Q2.

Yeah, so the realized position should be good going forward as well. But how about the market to market? Should that be more normal or potentially negative as the terminal fees has come somewhat down?

Well, since you're coming from a very high level, it's a little bit like the freight market as well. I don't think it's... completely unnatural if you see a correction in the market reflected in the mark-to-market and the valuation in the portfolio because you're coming in from a very high level. So relatively... there could be a correction on the back of that, if that answers your question.

Yeah, thank you very much. And if I just have one last question. So I saw the charter hire expenses come up some 7 million from the last quarter. Is it any sort of profit sharing mechanism on the charter hire contracts or anything else explaining the difference? It doesn't look like you have added any time charter vessels into your portfolio.

It sounds like you have covered shipping long enough and you're spot on.

Would it be possible to give any indication on the mechanism?

You know, it's down to the, it's a profit split on some of the time charters. So I prefer not to go into detail on the specific deals that we have done.

I fully understand. Thank you very much for your time.

Thank you. Next up, we have Clément Moulin. Please, if you want to proceed.

Hi, good afternoon, and thank you for taking my questions. I wanted to start by asking a follow-up on the vessel that is trapped inside the strait. The vessel is on a time charter, but when does the contract end? And secondly, should the vessel still be trapped when the contract end date arrives? How would you proceed? Would you still receive a daily hire, or how would that work?

Hi, Clement. The ship is on time charge. It's with a cargo on board. So, of course, the chargers would like to sell and discharge the cargo before redelivering the ship. So that's something we'll have to get back on. But the situation is that the ship is... still on time charter and when the Strait of Hormuz opens, we hope that we can ensure a safe transit for the ship so she can finally discharge her cargo.

Okay, makes sense. Thanks for the call. And I also wanted to ask about your assumptions for Middle Eastern volumes on slide nine. Christian, you show 2027 volumes down a bit relative to 2025. And I was wondering, what are the key assumptions behind that? Is it damage to infrastructure facilities in the region?

Well, as you know, there isn't much LPG flowing out of the Middle East at the moment. Of course, you will then have a reduction simply because there isn't any exports from the Middle East taking place as we speak. If you go back to some of our previous presentations, we had forecasted about 44 million tons up from 3940 last year to be exported from the Middle East. And obviously this is reduced now that there is basically no exports taking place.

But Christian, I meant 2027, not 2026.

Sorry, I misunderstood you. That's the ramp-up which is gradually taking place as we believe it will take probably a year, even longer, to finalize repairs on production and export infrastructure.

Okay, that's what I was looking for. Thank you for the call. Okay, thanks.

Thank you. Any more questions verbally before we move on to the Q&As in the chat? If not, then maybe, you know, let's turn to the written Q&As. The first one would be from Arne. Can you provide some color on TC fixings going forward? For example, is the plus minus 30% coverage in 2027 meant to remain stable, or will the company aim to maintain about 40% coverage as in Q1 26?

Thanks for the question, Arne. more or less an outspoken aim to have approximately 40% at least on time charters. So you should expect us to increase that cover ratio as we get closer to 2027. But it also depends on what time charter levels we can see in the market. Because obviously we also want to... We also need to fix vessels for period business at the level we find attractive. But provided... the rate level, the time shot level is attractive, we will work to increase that coverage ratio up towards the 40% we are talking about.

There is a follow-up question from Arne.

Could you provide some additional information regarding the decrease in cargo and delivery expenses? as well as voyage expenses. Additionally, could you elaborate on the factors driving the increase in chartering expenses during the period? Yeah, Samantha, I think this is probably one for you.

Anna, can you point in a little bit closer which part you're referring to? Just before you come up with a more specific reference of numbers, I could say that some of the voyage-related costs could also be because the product services as part of a risk management process have a reduced cost. CFR cargoes and the increase to some of the FOB deals, which then naturally reduced the voyage expenses. In the meantime, if you can follow up with more details in terms of a specific what numbers you're looking at, that would be very helpful.

Meanwhile, let's move on to a question from Anders. With respect to the currently very elevated VLGC rates and LPG inventories seemingly plateauing in the US, could you offer some views on future ARP situation?

Well, I think I also replied somewhat along the same lines earlier. Of course, the ARB was wide, wider than ever probably, back some weeks and months ago. And it's not natural that the... arbitrage is narrowing as people have filled up their storage, at least for a short period of time, and then the ARB typically widens again. So this is typically what we see when you also have a a normal market functioning, um, uh, where you have, uh, wide arbitrage, uh, periods with wide arbitrage followed by more narrow arbitrage, because simply because people have in the consuming markets stocked up and they are not as willing to pay up for additional cargoes any longer. So I don't know if that replied, uh, answered the question, but, um, yeah.

Thanks, Christian. We have another question from Gregory regarding the VLGCs waiting off Hormuz. Do you expect some to migrate to the U.S. market after receiving U.S. Coast Guard regulatory approval? And if so, to what extent?

Yes, we do see more of the ships ballasting to the US for cargoes, more of the Indian-controlled tonnage, for instance. So the answer to this is yes. It's a number which is hard to specify here and now on the spot, but it's clear that there are more ships which have the US Coast Guard approval for loading in the States. And I've also taken the decision to ballast into the Atlantic Basin for cargoes out of the US.

Thank you. We have a couple of more questions, actually. So someone is referring to page nine. Are the new enterprise and Atlas gas terminals already at full run rate? And when did this start? Or how much more do they have to ramp up? And why do you show minimal growth in US exports in your 27, 28 forecast, despite the new terminal startups?

Yeah, so the flattish growth that we are showing is due to our, like I said, rather conservative assumption that most of the flex capacity, which is currently going at full steam allocated to LPG exports, will be allocated to ethane exports from energy transfer and enterprise as more of the VLECs, ethane carriers, are delivered in the coming years. Then you will see that on the same slide, there is... Another expansion taking place with a pure LPG export terminal facility from Enterprise and AltaGas, which is going to take place somewhat later this year. And then you have Targa and OneOak also expanding towards the end of the decade. Some may say we are a little bit conservative in this assumption, but we like to take that approach since we also see that this is linked to the deliveries of all the ETHN carriers in the coming years.

And then we have a follow-up from Arne on his earlier question directed to Samantha. So it's regarding the voyage expenses. He was referring to the decrease from 92.9 million in Q1 25 to 59 million in Q1 26. The difference in charter in expenses has already been addressed. So thank you for that clarification as well. Is there anything you would like to add here, Samantha?

Well, I think part of it is, well, some of our savings on debunkering, due to we have very much increased debunkering to use our LPG field for like basis. Excuse me. Especially in a day like this, it's a cheaper alternative than a conventional fuel. Separately, we also make some savings on the port charge side, as well as other vessel-related costs as captured in the line of voyage costs. So that's pretty much reflected the major change of the voyage cost, Arne.

And Arne comments, thank you for the helpful responses as always. So thank you, Samantha. Thank you. Another question from Anders. Could you share some further views on Panama congestion, the situation as of now, but also considering the fairly high chances of El Niño this year?

Sure. The Panama Canal congestion is basically varying from day to day, so it's hard to give an exact picture today. But just to illustrate, we have over the last couple of weeks, had auctions for available transit slots reaching as high as $4 million just to have access to the Panama Canal. And this is before the canal fees. And then suddenly two days later, you could see in the next auction that it drops down to maybe 400,000 or 300,000. And then two days later, it's up to $3 million again. So this is... Simply speaking, a supply-demand situation on the day of the auctions. But the trend is pretty clear. And especially if you are stuck on the wrong side of the canal, you have to make a transit to not lose the cargo dates in Houston. Of course, people are... willing to pay up quite substantially to get through the canal. And please also keep in mind that the competition from other shipping segments is increasing as more ships are being delivered in the container segments, VLECs from the ethane side, VLGCs and so on. So it's something we believe is going to continue and even strengthen in the years to come. When it comes to El Nino, I can see everyone is talking about 80% chance of El Nino and the lower water levels in the Panama Canal this year. If that plays out, it would be a very similar situation to what we... So in 2023, I think. And obviously that would push more VLDCs and also other ships from other segments around the Cape of Good Hope to and from the US and Asia.

There's a follow-up from Anders. Could you elaborate a little on which type of ships tend to bid their way through the canal when it congests? So like dry, LPG, et cetera. Guessing it varies, but please just some further color on the topic.

LPG vessels definitely have had a high willingness to pay up because the freight levels have been as elevated as they are. Tankers have also from time to time paid up We know, for instance, that Australia was almost running out of diesel. That's at least what the chatter in the market was saying at one point. And of course, then the tankers heading that direction were also willing to pay up quite a lot to secure transit slots. Ethan carriers, container ships are always there also to compete. So it's a good mix, I would say.

And then follow up, El Nino again, will this have a lagging effect or is it coincidentally typically?

Not entirely sure what you refer to on that one, Anders. Could you be a bit more specific, please?

So then maybe let's continue with creases. When you say that 85% of available fleet days fixed at 81K, is that number of available days including or excluding the TC days fixed at 44K?

As mentioned, it's including the time charter portfolio.

All right, the next one would be, does the bookings data of 85% fixed at 81k per day just correspond to the spot bookings or does that also include the TC bookings of 39% at 41.8k and does it also factor in the FFAs or not?

Yeah, I think Christian has previously mentioned basically the 85% has included both of the TC fixed rate, TC coverage as well as the FFA.

And then another one on a different topic, given strength on earnings, is there any consideration for stock repurchases in the open market? This one is from Kevin.

I came in. As you know, we have a share repurchase program, which we activate from time to time. It's typically when we see our share trading quite well below NAV. So it's not something we find attractive and creative or shareholder value creating at the moment because our share prices are is trading at the levels above NAV at the moment.

Thank you, Christian. And then Anders specifies on the El Niño. So his question was related to if El Niño will drive lower water levels in the canal immediately, or does it take some time from the higher temperature until it starts affecting water levels that drives congestion and long-haul effects for transporters?

And this is at the level of detail. I'm not sure I can reply here and now. So I think what we could do is to get back to you after having looked at that with the research team here in our company. So I'll get back to you.

Thanks, Christian. Let me check that we have any more verbally, like any more verbal questions, someone who has raised his or her hands. And then quickly in the chat again. I don't see any more questions right now. All right, so if no more questions, then I would like to say thank you to everyone for joining us today and for your continued interest and support of BWLPG. We really greatly value your time you've spent with us. So this concludes BWLPG's Q1 2026 earnings presentation, a replay of the webcast and together with the call transcript will be made available on our website shortly. On behalf of the entire BWLPG team, thank you once again for participating. We wish you a great rest of your day. Thanks and bye.