BW LPG Limited

Good morning, afternoon, evening everyone. Thank you for joining us today. My name is Aline Anliker and I'm the Head of Corporate Communications at BW LPG. On behalf of the management team, I'd like to extend a warm welcome to 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, Kristian 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 through the Q&A chat throughout the presentation, or alternatively, you can click the raise hand button 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 Kristian.

Thanks, Aline. And hi, everyone. Thanks for joining us as we take you through our second quarter financial results and latest market developments. But before we start, I would, together with my fellow Norwegians listening in, like to pay tribute to our late King Harald, who passed away this morning. Throughout his life, he fulfilled his royal duties and roles as Prince, Crown Prince and King impeccably for nine decades. He was also a great supporter of the Norwegian maritime community and his wife, Queen Sonja, was a godmother of two of our former VLGCs, the Berger Rachel and the Berger Racine. May King Harald rest in peace and long live our new King Haakon. Now, back to today's earnings release. The VGC market experienced extreme volatility in the first half of 2026. The Middle East war and the subsequent closure of the Strait of Hormuz shifted LPG arbitrage economics. New trade routes are driving pronounced changes in the global LPG trade flows and vessel supply. I will revisit these developments later in the market section. Moving on to the Q2 results, we reported a shipping TCE income of $74,000 per available day below our guidance of $81,000 per day. and the discrepancy from our guidance is primarily due to negative IFRS 15 and FFA adjustments of 16.4 and 12 million dollars respectively corresponding to approximately 7,500 dollars per available day. The Q2 profit after minority interest was 120 million dollars equivalent to an EPS of 79 cents. Our trading business, BW Product Services, generated a strong realized trading gain of $127 million during the quarter, while reporting a loss after tax of $31 million, primarily reflecting a large negative change of $145 million in the unrealized mark-to-market valuation of open positions. For Q3, we are guiding on about $88,000 per day, fixed for 92% of our available days. This is against our current all-in cash break-even of $24,900 per day. The figure includes the fixed time-sharded coverage in the third quarter of 41% of our available days at $44,300 per day. But please see the appendix in this presentation for the full breakdown of time-sharded days and levels. The board of directors has declared a dividend of 95 cents per share, representing 100% of our shipping impact, exceeding the guidance set by the dividend policy. Further, it's still a busy dry docking period for us, and we report 99 dry dock days during the second quarter, with a total of 58 dry dock days expected in the third quarter. As for subsequent events, The commercial team has been busy with second-hand sales and fixing attractive time-sharp agreements. Since our first quarterly update back in June, we have sold the 2007 built BW Elm and BW Birch. They are both sold at a similar price level and as announced the sale of the BW Birch will generate net proceeds of about 64 million dollars. This is equivalent to a new building price of about 248 million dollars. The BWN was delivered to the new owners in July and the BW Birch is expected to be delivered by mid-November latest. We also announced the sale of the 2015 built BW Levant, scheduled for delivery to the new owners by mid-November. We continue building a robust time charter portfolio and we have fixed out one of our 2016 built LPG dual fuel retrofit vessels for a five-year time charter in the mid-high 40,000s per day with delivery end 2026. And we're also working on various other time charter opportunities, which we will announce later, providing successful conclusions of the negotiations. Now let's take a further look at the markets. The first half of 2026 was one of the most volatile periods on record for the VLGC markets. Following the outbreak of the US-Iran war, the closure of the Strait of Hormuz has caused significant disruption to regional LPG pricing and global VLGC trade patterns. With the Strait of Hormuz remaining closed and Middle Eastern exports constrained, the US Gulf has continued to serve as a key source for LPG supply to Asia, as US export infrastructure continues to operate at high utilization to compensate for lower Middle Eastern export volumes. Towards the end of June, the LPG price differential, the arbitrage, between the US and the Far East narrowed considerably as expectations for a sustained reopening of the Strait of Hormuz grew. More recently, however, spot VLGC rates have strengthened alongside a widening US-Far East LPG arbitrage as tensions in the Middle East re-escalated. Declining water levels have further led to increased congestion and transit restrictions in the Panama Canal, prompting more VLGCs to reroute via the Cape of Good Hope. This consumes considerable shipping capacity and the resulting longer voyages have reduced effective vessel supply in the US Gulf and supported freight rates. In addition, several second-hand sales to Middle Eastern players serve new AG trades, including ship-to-ship transfers of cargoes in the Indian Ocean, which in turn reduces the shipping capacity for loading in the US and Canada. As briefly mentioned on the previous slide, US LPG exports growth has continued to surprise on the upside, with exports increasing by approximately 16% year-on-year in the first half of 2026, supported by higher LPG production and continued expansion of export terminal capacity. During the same period, Middle Eastern LPG exports declined by 46%, as exports remained heavily constrained by the continued closure of the Strait of Hormuz. However, as mentioned on the previous slide, a number of vessels have remained idle in the Arabian Sea, awaiting the reopening of the strait, further tightening effective vessel supply in the US Gulf. And at the moment, we count in excess of 30 vessels employed or idling inside the Arabian Gulf or in the Indian Ocean. While the Panama Canal was already experiencing increasing congestion despite operating at full capacity, persistently low water levels due to drought have more recently forced the canal to operate at reduced capacity. This is further restricting daily transits and tightening available canal capacity. With increased competition for slots, This provides additional support to VLGC shipping as more vessels are forced to seek alternative routes. In recent days, we have seen more than $5 million being paid in auction fees to secure northbound transit slots. And remember that this is in addition to the canal fee of about $500,000 for a VLGC in Ballast. The constrained Panama Canal capacity and high transit costs increase the push for more VLGCs sailing the longer haul around South Africa to and from the US and Asia. This is a very similar situation like we experienced in 2023 and the longer sailing distances will in turn require additional shipping capacity. Over the past four months, stronger US LPG exports activity to India and China has added further momentum to long-haul LPG trade flows. And we believe it's likely to assume that countries in the Indian subcontinent and Southeast Asia will increasingly source its LPG from the US for strategic reasons, maintaining the trade pattern around the Cape of Good Hope also in the future. India saw the most pronounced growth, with US LPG exports to India increasing by 212% in the first half of 2026, compared with the same period last year. US exports to China also recovered, reaching monthly levels not seen since the onset of the US-China trade war. And as a result, the US LPG exports to China increased by 2% year-on-year in the first half of 2026. If you look at the LPG exports forecasts, and starting with the North American exports, new capacity is expected to support continued structural growth in the VLGC trade. North American exports are forecasted to increase by 18% in 2026 versus 2025, supported by strong oil and gas activity, expanding export infrastructure, and the need to replace constrained Middle Eastern volumes. Turning to the Middle East, exports are expected to fall approximately 20 million tons short of pre-war forecasts for 2026. The shortfall reflects both lost volumes and growth that was previously expected this year, but has now been pushed out in time rather than permanently lost. Assuming the Strait of Hormuz reopens, Middle Eastern export volumes are expected to recover gradually. There are obviously lots of uncertainties, but a full recovery is likely to take approximately 12 to 36 months, depending on local conditions and the extent of infrastructure damage. Additional US LPG export capacity is expected to come online in the coming years, including recently announced expansions by AltaGas in 2027 in Canada and energy transfer in 2028 in the US Gulf. While flexible terminals have supported LPG growth so far this year, they are expected to increasingly pivot towards Ethernet exports, making the continued expansion of dedicated LPG capacity increasingly important. Taking a look at the current fleet and order book, New building contracting activity has been significant in recent months and the total order book is now counting 157 VLDCs with delivery stretching all the way to the end of 2030. The fleet has grown in the last three months and now stands at 437 VLDCs on the water. And while we're now entering a period with higher pace of new building deliveries, it's important to highlight the aging VGC fleet, with 127 vessels expected to be 20 years or older by year-end 2030, compared to 68 vessels by year-end 2026. So to summarize the market outlook, geopolitics and weather are causing considerable market inefficiencies, which in turn are generating additional ton miles for wheeled disease, driving the freight market to unprecedented levels. With Middle Eastern LPG exports severely constrained by the closure of the Strait of Hormuz, US cargoes have increasingly replaced lost Middle Eastern volumes into Asia. and the resulting shift towards longer haul US Far East voyages has generated additional ton miles and supported the wide US Far East arbitrage. The timing of reopening of the Strait of Hormuz remains uncertain. Following a reopening, we expect the recovery of Middle Eastern LPG export volumes to be gradual as production and export infrastructure will require time to be repaired. The Panama Canal remains a wildcard, and declining water levels are tightening transit restrictions, while several shipping segments are competing for a limited number of slots. We expect this to divert more wheel disease via the Cape of Good Hope, further reducing the implicit vessel supply. And that concludes our market segment. Over to you, Samantha.

Thank you, Christian. Hello, everyone. Thank you all for dialing in today. Let's zoom in on our financial performance for the quarter. Our shipping business delivered TCE income of 71,600 US dollar per calendar day or 74,000 per available day. This reported result includes negative IFRS 15 and FFA adjustment of 16.4 million US dollar and 12 million US dollar respectively. The underlying SPORT performance was strong. With SPORT, TCE offered $85,200 per available day, including waiting time and FFA, and $87,600 per day excluding waiting time and FFA. This demonstrates the earning power of our platform in a volatile market. Fleet utilization was 96%, reflecting strong operational execution. The healthy performance was underpinned by a strong spot market and a disciplined commercial execution. As Kristian highlighted earlier, market inefficiency disrupted trade flows and a longer voyage created meaningful upside in the quarter. Among the uncertainties, it's also important that we maintain prudent downside protection through our time charter portfolio and active FAA risk management. In Q2, 53% of our available day were delivered by time charter, out of which 43% was fixed rate time charters. Looking ahead for Q3 26, we have fixed 92% of the available free days at an average rate of about $88,000 per day. This also includes index-linked time charter contracts, so the final rate may still move with the spot market. Looking at second half 26, we have secured 45% of our portfolio through fixed rate time charter and FFA hedges at 44,100 and 48,000 per day respectively. This gives us meaningful contractor earning visibility while preserving exposure to the currently strong spot market. The remaining fixed rate time charted out portfolio is expected to generate approximately 249 million of revenue in second half 26.