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spk03: Okay, thank you, everybody, and it's a pleasure to have you here. I retired as Executive Chairman. I'm now the CEO and Board Member of the company, but I'm sitting here together with our CFO, Randi Navdal-Beklund, and we have some really good numbers to share with you today. It's quite sunny here in Oslo, probably close to 25 degrees, so we will do this rather shortly, and I think the numbers speak for themselves, so let's jump into our Now you have to go to the disclaimer, the ordinary disclaimer. Yeah, the ordinary disclaimer, of course, we are providing some expectation, forward-looking statements, and some non-GAAP measures. So just be cautious about that, and I would recommend reading the presentation together with the earnings release. Next slide. This time, we also added a special caution. The dividend in this presentation is so strong. that we also have to have a medical warning because there is some risk of, you know, shortness of breath, increased blood pressure, general ovaria, impulsive spendthrift, and I forgot to also add here that there might be some PTDS, post-traumatic dividend syndrome. So let's start with the highlights of the quarter, being, of course, the dividends. You know, last year was a fantastic year for Avans Gas. We delivered our second best numbers ever, $163.6 million in total on the bottom line. And of course, given the healthy cash balance we had, we also paid out slightly in excess of that, 101% payout ratio, $165 million in dividends for those four quarters. Last year, on top of that, we also announced that we were selling quite a few ships, four ships we announced selling higher to year end with delivery of those ships to new owners in Q1 and Q2. So we had three ships being delivered to new owners in Q1, where we booked substantial profits. And then we just had one last ship being sold last week, 9th of May, which is adding additional profits and cash release to the numbers for the second quarter so with all these sales transactions and also very good numbers which I will come into we decided to really hit the button on the dividend for this quarter so we talked to each other and you know why not pay out the dividend for Q1 similar to the whole dividend for last year and given our cash position and numbers we are a easily able to do so, and we are just declaring a dividend of $2.15, equal to $165 million for Q1 in total. When we also sold the ships, or we announced the sale of the two new builds for delivery this year, December last year, we also said that our aim was to distribute this money most tax-efficient to our investors. So for those who paid attention, we also asked the annual general meeting, which we were at in Bermuda about two and a half weeks ago, to also authorize a reduction in our share capital. So this dividend of $2.15, we are dividing this into two different types of returns. It's $0.99 is a reduction in the par value of the share, which depending on your tax jurisdiction could be counted as then return of capital rather than return on capital, which in some tax jurisdiction should then give you zero tax. The remainder $1.16 is ordinary dividend return on capital. So hopefully a lot of our shareholders, especially here in Norway, will benefit from having a very tax efficient distribution. But this might also apply to US, where typically the dividend is compared to the earnings per share, and we are paying our dividend in excess of our earnings, given the asset sales we have been completed. So that should hopefully give you some better tax treatment of your dividend, but of course, You know, we are not tax advisors. We are shipping people and we try to make this as good as possible for our shareholders. So let's jump into the other highlights. And actually, there's quite a few of them. But, you know, I guess the most focus this time would be on the dividend. But we delivered stellar numbers for first quarter. First quarter wasn't an easy quarter. You know, we had this all-time high levels in Q4, a booming market. and then the market fell off a cliff early in the year, and this was further magnified by the cold snap in the U.S., which resulted in a lot of increase in demand for LPG in the U.S., resulting in much higher prices, inventory draws, which really took down the arbitrage which was like close to $400 per ton down to close to $100 per ton, 115-ish, I believe, was around the low point, which dragged down the TC rates all the way from top of market $140,000 to less than $10,000. So this was a quite volatile quarter. But however, we had booked a lot of long voyages prior to this cold snap. So when we guided on Valentine's Day, 14th of February, we already guided that we were booked 70% at $70,000 on average on TCE numbers and kind of said that, okay, if we are booking the rest of the days, we should be around $60,000. And we ended up $61,000 on the discharge to discharge numbers, which we think are the most relevant numbers because it's our own typical economics. Some might recall that analysts or media was a bit disappointed about the numbers Q3 last year when the market really took off, because the auditors have decided that we follow the accounting standard IFRS 15, where we book in the official numbers. We book our numbers on a load-to-discharge basis, which gives a bit of a timing effect. And when the market is such volatile, these timing effects are being quite big. The timing effect for Q1 is $21 million in total, which actually drags up our reported numbers to 78,800, which is the highest reported number we have had since 2015 and 14. But it's a long time, you know, 78,800 is a very high number. That is the actual IFRS TCE number. So these strong numbers together with this $85 million profit in the quarter from sale of ships resulted in a blockbusting quarterly profit of $146 million, or $1.91, highest ever by far, of course. But what I like about it is it's not really only driven by the asset sales, of course, we're generating $85 million, but actually the underlying profits from freight is very sound, despite we had this volatile market. The market, of course, come back again. Rates today are in the $60,000, and the freight forward rates for the second half of the year are yesterday being quoted at $66,000. So, you know, very firm condition for the The market, the cold snap wasn't very long. Inventory levels in the US, which I will come back to, are back to very high levels. So we have a very good outlook for the market. And that's also one of the reasons for paying this good dividend. And then in terms of Q2, we elected to do some short voyages when the market was in the dom rules. going AG Japan and then eventually as the market recovers we'll be doing more of the longer voyages and we booked already now 83% of the second quarter at $48,000 of course it's lower than Q1 but still you know we have a cash break even in the low $20,000 so still super profit also to expect it in Q2 and given where the market is today we do expect to book the remaining 17% of the days at higher levels, which will give also strong numbers for Q2. On top of that, we also have, as I mentioned, sold one ship with a substantial profit. Advanced PolarX was sold on last week, 120 million, giving us a profit of 36 million and a cash release of 62 million. So let's look at the guidance then. Yeah, so as I mentioned, 60,000 earnings, and then we have some hedges, which will increase the rates by $1,000 to $60,900. Spot vessels actually outperforming the TC vessels, even in Q1 with the volatile market, but this given the fact that we booked a lot of ships on long voyages, and if you are doing Cape, US Cape, Asia, Cape, you know, typically we are booking a quarter in advance. So that's one of the reasons why we are delivering such strong numbers in Q1 despite market volatility. And then, as I mentioned, Q2 books at very decent levels as well. Spot rates in line with TC rates, 47,000 and 48,000 respectively. 17% of days still open where we, you know, given the market today, expect to book at better levels. So around 48,000 then on guidance, including the FFA hedge, which I will come back to. So looking at our fleet today, it's been a lot of transaction the last couple of years. Our aim was to renew the fleet. So we contracted six dual fuel large VLGCs in order to replace the older ship. And we started selling the 2008-09 ships. And during the quarter, we sold the two last ships, Venus and Iris Glory. Iris Glory for $60 million, Venus Glory for $66 million. Altogether, $126 million sales price for these ships being slightly above 15 years. We, Avans Gas, bought those ships in 2010 when they were two years old at $140 million. So during that period of ownership, stretching out more than 13 years, almost 14 years, we have a kind of economic loss on the ship of $14 million. That said, we did book those ships on some very good spot voyages prior to re-delivery to new owners. So actually, the number adjusted for that is like $10 million of economic loss during about 14 years. ownership of the ship. So very good asset values. And that's why we decided also to sell some of the new buildings, which we didn't intend to sell. So we sold Castor and Pollux. We announced this in December. Castor was delivered to new owners, Pertamina, in March. And then Pollux last week to Pertamina in May. 120 million. They were contracted for 78 million. We upgraded them by two, $3 million. So basically you have about 50% increase in the value of the ships prior to delivery because the new owners taking delivery of the ships at the delivery from the yard. So that means we have booked quite a few profits, 509 million in proceeds, gains close to 140 million, 257 million of cash relief. So that leaves us with a fleet of a very, Equal fleet of 8, 215 Eco-class ships, six of them with scrubbers. The two ships without scrubbers we have on TC. And then four dual-fuel, large 91,000 cubic wheel GCs. And then, as some of you might recall, we contracted four MGCs last summer. These are medium-sized gas carriers being able to transport 40,000 cubic of LPG or ammonia, because these are what we can also call a MAC, medium-sized ammonia carrier. They can carry full ammonia cargo, 98% filling ratio, which we think are the ideal ships for the ammonia trade, and these are for delivery 25, 26. Being contracted at a very low price point, $61.5 million. If you're going to Korea these days building similar ships, you are paying close to $80 million for delivery in 2027. So I think we've done a good acquisition, recycling some of the proceeds into these ships for delivery later on. Okay, let's look at the employment overview. As I mentioned, we have some ships on TC. We have Chinook, which is a non-scrubber ship. We recently announced that we extended the variable hire time charter for this ship. until middle of 2025 when she is due for her 10-year docking. So this fits very nicely together with the dry docking schedule where we will have the ship re-delivered from the charter in Asia close to the suitable docking places. Similar for Pampero, this ship we fixed a while back. She's on our time charter. We have announced that the rate here is around $45,000 per day until Q3 2025, when she is also due for her docking. And she is also being re-delivered in Asia close to the relevant yards. So we are minimizing downtime on the docking. Last deal is Polaris, where we also had a one-year, we had a two-year variable higher charter, and we have added a one-year variable time charter on this ship until end of Q1 2025. And this is an index we find very favorable, where we get the benefit from these ships being more modern, more efficient than the typical kind of ships. Castor and Pollux, we should have had delivered this year. Those ships have been sold, so the next ships for delivery are the MGCs coming in Q4 2025 and onwards. In terms of hedging, we only have one hedge in place now. It's 50% of one ship for the remainder of the year at about $70,000 per day for a scrubber ship. So that's the fleet profile. We have a lot of spot exposure, which we like today, given where the spot market is and where freight forward rates are. Next year, even more exposure to the spot market. But that said, you know, we have all the 2015 ships for dry docking next year. So we are starting to plan for that. And I will actually come back to that because there's a lot of ships going for dry dock next year. And then last slide before handing over to Randy. It's the dividend slide. One more slide on this. You know, we've been paying a dividend two cents, five cents, increased to 20 cents. and then 50 cents. Last quarter, we increased to 65 cents. And then, now we're really ramping it up, $2.15. We had to find Al Gore's scissor lift in order to be able to pinpoint where this number is on the scale. The rationale for the dividend, we have these kind of traffic lights we have discussed in the past as well. We cautioned you about the market being a bit slumpy in Q1 and market outlook and backlog, we took down to yellow. We are now increasing those to green lights again, given where the market has stabilized and the fact that there are very few ships for delivery in the next two years. So green lights on all the dividend criteria and a very healthy cash balance, which Randy will talk more about shortly.
spk01: Thank you, Esten. Let's go to slide 10 and have a look at our income statement and key financial figures. Just to recap our TCE numbers, we sailed in at 78,800 in TCE for the quarter, compared to 71,900 from previous quarter. And as we have a significant low-to-discharge adjustment, I just want to notify you that the reported figures are low-to-discharge in accordance with IFRS accounting standards, while our commercial performance is based on a round-trip voyage discharge-to-discharge, which came in at a rounded $61,000 a day for the first quarter compared to $76,000 a day for the Q4 quarter. The positive IFRS adjustment of 21 million, adding $18,000 a day to our TCE rate, is basically explained by our reversal from previous quarter, combined with spot voyages over the quarter, which were mainly US voyages with longer sailing distances, fixed at elevated freight levels, while the spot voyages over the first quarter were primarily Arabian Gulf or AAT voyages with shorter sailing distances at lower freight levels compared to the previous quarter. Further, we continue to hold a relatively low operating expenditure, which came in at 8,200 a day, and administrative expense at 1,300 for the quarter. And thus, we reported an operating profit before depreciation, or EBTA, of 81 million, and is ahead of previous quarter, despite less operating days following the vessel sales. So, as Ethan already covered, we also successfully completed three vessel sales during the quarter. In January this year, we completed the sale of Iris Glory 2008 for a cash consideration of 60 million less broker commission, which resulted in a gain on sale of 21 million. And in March, we completed the sale of Venus Glory for a cash consideration of 66 million less broker commission. And the company recorded a gain on sale of 27 million. Also, a few weeks later in March, we completed the sale of Avans Castor for a cash consideration of 120 million. And thereby, we recorded a gain on sale of 36 million. So in total, we recognize 85 million in gain on sale in the P&L. And actually, last Thursday on the May 9th, we completed the sale of our last bill to see, Advanced Pollux, where we expect to record another gain on sale of 36 million and get net cash proceeds of 62 million for the second quarter. Moving further down in our P&L, net finance expense of 9 million was 5 million higher than previous quarter, which is explained by non-recurring items representing write-off of debt petition cost of 2.3 million. It's a non-cash item and accounting exercise, basically, which relates to repayment of debt prior sales and refinancing. and additional 2.3 in termination fee of sale leaseback agreements for Iris, Gloria and Papero. And thereby we recorded a net income at 146 million or earnings per share of $1.91. Net profit adjusted for gain on sale for the first quarter was 62 million or 80 cents per share, slightly ahead of previous quarter. So moving to slide 11, as you can see, we've recorded $1.2 billion in total assets at quarter end. It's 6% up from year end, which is primarily driven by increased cash balance, which I will come back to, combined with solid results, which is offset by the recognition of vessel sold. Now we have 67% of our balance sheet and March consists of 12 VLGCs, one dual fuel VLGC, which was sold last week, and four mid-size gas carriers under construction for delivery in 2025 and 2026. Looking at the credit side, we have a book net equity ratio of 58%, which will move closer to 50% after payment of dividends and the final sale in May. And further, we have a relatively balanced loan-to-value of 49 percent, while the net debt over net assets adjusted to cash is 17 percent. And we will now move to slide 12 to explain the cash movement. during the quarter. We started the year with a cash balance of 132. And as we received freight payments for spot voyages commencing in the fourth quarter at very high freight levels, exceeding $100,000 a day, we recorded in total 116 million in cash flow from operations, including changes in networking capital. And the high incoming freight payments was partly shared with our shareholders through dividends for the fourth quarter of 50 million. And we repaid scheduled debt installment of 10 million. Further, and probably the most important driver for the cash increase, is the three vessel sales, boosting our cash by 127 million after repayment of debt and transaction costs. And also, we finalized the refinancing of three vessels, resulting in a net cash release of 45 million. million, bringing the total cash balance to 360. And as we have already commented, by adding the cash proceeds from sale of Avant Pollux of 62 million and the announced dividend of 165, we will have a pro-pharma cash of 257 million. As commented, we have completed the refinancing of three vessels. The first one, the VGC Pampero, 2015 built. Also, Avant Polaris and Capella, both 2022 built. For Pampero, we refinanced the sale leaseback arrangement to a bilateral term facility of 43 million. which improved the margin from 325 basis points to 190. And for Polaris and Avanza Capella, we refinanced from a bank financing to a sale-leaseback arrangement with Bokom in a 135 million deal, which was intended to finance the new building sold Kastor & Pollux, and the refinancing extends maturity from 2027 to 2034. and improved the age adjustment profile for these ships from 20 years to 24 years. As commented on previous slides, these transactions had resulted in a net cash release of $45 million in the first quarter. So following these refinancing and sale of vessels, we have a relatively simplified financing structure where 74% of our financing is provided by a bank syndicate in a 555 million sustainability-linked term loan facility, and 26% is provided by a sale-de-spec arrangement with BOKOM. And when it comes to interest rate hedges, we have covered all the average outstanding debt for the year 2024 by excluding the revolving capacity, which is mainly undrawn during the year, at an average SOFA rate at 3%. And the interest rate hedges currently hold some market to market of 11 million, of which most will be collecting collected the following year. So let's go to slide 14. In April, we published our six ESG reports. And as shown in the graph on the left, we are well ahead of IMO and Poseidon emission targets. We reported an annual efficiency ratio, or AER, of 6.64. for the year 2023 marking a 20% reduction since 2020. This achievement is largely due to the fleet renewal where we have divested five of the vessels and invested in dual fuel technology and new design with lower emissions. So currently we are 8% ahead of IMO trajectory and 14% of Poseidon trajectory. which is expected to be updated in line with the revised targets of reducing welterweight greenhouse gas emissions by 20% in 2030. So with that, I leave it to you, Esten, for a few comments on the market.
spk03: Okay, great, thanks. Yeah, let's look at the market. Usually we start with the export and import, which is the easiest way to start our market discussion. Despite the cold snap in the US, quite surprisingly for most people not familiar with the industry, you have very strong growth from the US. Even though the cold snap and people were drawing the inventories, it really didn't shut down the exports. Instead, you had continued healthy exports while drawing the inventories, which I will come back to shortly. The inventories have been filled up because the US is Drowning in shale gas or NGLs, and most of it in terms of the LPGs, it's being exported. Also, Middle East, despite the upper cuts being sustained, we do see healthy growth in the Middle East, not by Saudi, which is the major oil producer, but from the other, like United Arab Emirates, and also Iran continues to grow their export levels. Import, it's kind of a good quote all over the scene. Every big major region is quite conductive. China, a bit on the low side, maybe being a result of the huge ramp up in new PDA plants, which have resulted in lower margins and lower utilization rates. So only 4.4% growth in China, but also positive to see a very healthy growth in India, which is the second biggest market. Let's go back to US exports. So what you see is that production is keep on growing. We have touched upon this in the past. I believe in our Q3 presentation, we spent a bit more time describing the dynamics of the US export growth being the fact that Gas fields in the U.S., shale fields, are getting more gaseous, so the gas ratio is going up. More of the NGL is being collected, given the fact that more production is turning into being Permian. Permian is also an area in Texas where you are also getting more licenses in order to build the necessary infrastructure to get those molecules on alkyl. which is resulting in very high export growth from the U.S. And as I mentioned, we had a big drawdown in inventories in the U.S. It didn't disrupt any exports from the U.S., and actually now inventories are back at very high levels, given the production levels in the U.S. So let's head into the freight market. As I touched upon already, it's quite volatile. We touched upon this also in the past. If you look at the kind of freight rates, you do see some big swings. However, you know, our cashback even is in the low 20s. So even though there are very volatile freight rates, it's very rarely that rates are below cashback even levels. And if they are so, usually for a very short period of time. which was also the fact in early this year, when rates slumped from $140,000 down to $10,000, bounced back now at a very conductive level in the $60,000, which is supporting freight, the major freight routes there being Baltic One, Rastanura to Japan, $80 per tonne, equates to around $60,000 per day. We do have a typing error here, because Baltic 2 is used to... Ah, you corrected it, Randi. Yes, okay. Baltic 2 is then used to Netherlands flushing. This is a route which is associated with more weighting risk, because if you go from US to Netherlands to flushing, $84,000, it seems like, why the hell are you not just trading this route? But of course, after discharging, you might be a bit ahead of the load window in the US, and you have to factor in some waiting time, which will drive down your time charter equivalent earnings. Then Baltic Tree, used into Chiba, these days it's more used into China, but still $142 per metric ton equates to around $67,700. So then you might think, why are you not doing Baltic 3 instead of Baltic 1? But Baltic 3 then assumes that you are going Panama both ways. As I will touch upon shortly, Panama clogging is starting again and auction fees are up. So most ships going this route will go We are Cape of Good Hope on the ballast leg. Until recently, I would say 75% going that route on the ballast leg. And then close to 75% going Panama on the laden leg southbound to Asia. However, that ratio will go down as the fees of getting to Panama has skyrocketed. So that will also drag down your TCE levels, more in line with the Baltic one being around $60,000. But as mentioned, cash break even low 20s, we are making a killing even with $60,000 per day. And then it's positive to see that there are some upside in the rate. The arbitrage is $226 per metric ton. The charters are only paying $140,000. $142 per metric ton, so there is still room for rates to move up and getting closer converged to the arbitrage. Looking at Panama on the next slide, as mentioned, auction fees have really gone up a lot the last week or so. We break a million dollars, then we went to 1.2, 1.7, and then earlier this week, $1.8 million. And of course, these high fee levels for going through Panama, and as I mentioned, mostly southbound being laden, is resulting in charters rather rerouting their ships to Cape of Good Hope, also on the laden leg, which will drive town mileage up, rates up, arbitrage up, as we have seen during the last week or so, because While we are out of the El Nino season in Panama, where water levels went down to these record low levels on the left-hand side of the slide, we are at very low levels in Panama. It will probably be a more La Nina condition this year, so the projection is from Panama Canal that water levels will fill up, but still they will be at low levels, so we will have probably a situation with Panama being clogged for some time, especially once we're getting into the winter season and there's a lot of container ships, possibly LNG ships competing for the scarce slots. So just one more slide on the fleet structure before summarizing. We have had a period here now last year. Going back to 2022, a lot of people were bearish about 2023 because we had so many ships for delivery. I think we were a bit lucky in the sense that the Panama congestion situation happened at the perfect time for VLGC owners because that, you know, routing via Cape of Good Hope and also the Suez Canal for that period resulted in ton mileage growth which exceeded the supply growth, especially also given that US was exporting more. So we had very good conditions last year despite the numerous ships for delivery. This year it's much less. Already more than half the ships have been delivered. So fleet growth will be very muted for the remainder of the year while we do see ton mileage going up now with less ships going through Panama next year. even less ships very few ships for delivery 25 picking up a bit in 26 but still fairly low fleet growth in 25 26 and then from 27 we get more ships on on the market but as we also show here we have had a period with very few scrappings A lot of the ships are getting older. Usually people are not scrapping ships in a good market, but there is pent up scrapping demand, which typically will happen if you have a downturn, which is like having an insurance on the market. And then, as I also mentioned or alluded to in the beginning of the presentation, there is a lot of dockings now because these contracting of ships tends to go in cycles. Once you have a new design, So this happened in 14, 15, 16, when you had the new eco design. A lot of people ordered ships for that kind of design. Also the fact that the market was better. Then we had a new wave of ships with the dual fuel design. But it means that, you know, you will have a lot of ships now being taken out of the market doing dry docking, especially next year when we also have eight out of 14 villages for dry docking. So that would also limit fleet growth. Right now, the scrubber economics are also good in the sense that the payback period on a scrubber is fairly short. So it means that a lot of the ships who have not installed a scrubber, they might opt for a scrubber, which means more time in the dock. You might also have younger ships, which might opt for a dual-fuel retrofit, which takes even more time. That means less ships in the market, and we are looking at a period now for at least two years, maybe even more, where we have very good supply-demand outlook for the VGC market. So, okay, to conclude, we delivered stellar results for Q1. TC number $61,000 or $79,000, depending on whether you are a commercial guy or whether you are an auditor. Resulting in net profits Record high, 146 million, $1.91 per share. We are paying out more than that, $2.15. Adjusted for the gains on sale of ships. Profits are still very good. We have another sale of a ship in Q2, which will add more profits to our freight numbers. As I mentioned, we have been guiding now 83% booked at 48,000. which should result in good numbers for Q2 with then a profit from a sale on top of it. And the market is well balanced. There are some good signs there in terms of Panama congestion. There are good arbitrage, healthy export levels from the US. So with our rather substantial cash balance and fairly low LTV now. It's the lowest LTV probably in your career in this company, Randy. That means we can reward the shareholders like we usually do, paying out the dividend. There is more details about the dividend in our separate press release. Ex-date, I believe, 23rd May. Payout date expected to be on or about 31st of May. And as mentioned, 99 cents to be a reduction in power value of the share, giving better tax treatment, hopefully, for most shareholders. and then the remainder to be return of capital or ordinary dividends. So with that, I think we conclude. I said we're going to have a short presentation. I didn't manage to do that, but let's shoot through some of the questions. I do think we have one caller in.
spk00: Thank you. As a reminder, to ask a question, you will need to press star 1, 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1, 1 again. If you're connected via the webcast and wish to ask a question, please type it into the box and click submit. Please stand by while we compile the Q&A roster. We will now take our first question. Please stand by. And the first question comes from the line of Clement Mullins from Value Investors Edge. Please go ahead, your line is now open.
spk02: Good afternoon, thank you for taking my questions. I wanted to start by asking about ammonia carriers. Last quarter you mentioned you were able to retrofit your new builds to be able to carry ammonia for around 2 million. how much would it cost to retrofit a vessel that is already on the water? And I mean both in terms of capex and in off-air days.
spk03: Okay, I will give you an answer here in a roundabout way. So given the spec we had on the ships, it wasn't very costly to add ammonia features. So we had ammonia notation on the two ships we sold, meaning that they can carry ammonia. Of course, there are different notation on the ammonia carrier, so those ships could carry not a full ammonia cargo, because specific gravity on ammonia is different from LPG. So they could carry about 85-86% filling ratio. On the NUMGCs, as I mentioned, we have done that upgrade, so we can have a 98% filling ratio also on ammonia. Retrofitting a ship to be ammonia carrier, I don't think it makes economic sense. There is plenty of VLCs that can carry ammonia. As I reviewed in the order book, there is a lot of these so-called VLAC, very large ammonia carriers. There's plenty of these ships. There are too many of them. in relation to what we expect to be the demand for ammonia carriers. And we do think that ammonias will probably travel on smaller ships, having a more ideal cargo parcel. That said, there's also a lot of old ships, older ships that can carry ammonia as well. So the two ships we sold in January and February, Iris Glory and Venus Glory, those ships can also carry ammonia. So there's no lack of VLGC ships that can carry ammonia. So if you have an ammonia project, you will typically tap into the VLAC, but you can also tap into the older VLGC like Iris and Venus Glory, which is capable of carrying that. So that means it doesn't really make any economic sense to look at converting a Existing ships would not have those capabilities because there's just so many ships that can do it. So we haven't even done the calculation. If I'm wrong and ammonia demand takes off through the roof, maybe we will do those calculations. But I guess it's much better to use the flux and then older villages instead of converting.
spk02: Makes sense. Thanks. Thanks for the call. I also wanted to ask a bit on the demand side. China's imports of LPG have increased significantly over the past few years as PDH capacity in the region came online. How have PDH margins in the region moved over the past few months? And secondly, do you expect PDH capacity growth to slow down significantly going forward?
spk03: Yeah, I think In terms of China, and this has been well reported even in publications like Financial Times, they've had a period now where they had just a huge ramp up of DDA plant capacity. I think the best way of thinking about this is, if we look at the crude oil, which I think is the most understood shipping segment around. So if you have crude oil, you have tankers, you get them from Las Basta at a high price, You can rent those ships and transport that crude oil. And then typically you transport that crude oil to a refinery and the refinery make the various products out of the crude oil being kerosene, diesel, gasoline, etc. So it's a bit similar with these PDH plants. You take like raw LPG. And you take them to a refinery. So these are refinery and they make polypropylene and those are kind of feedstock for the plastic industry. Issue with the industry in China, it's just been way too many plants being started at the same time. When typically for those who knows economics, if there's a lot of supply, prices will go down. And that's what happened. Plastic prices have gone down and gone down to such a low level that it doesn't even make economic sense to recycle any more plastic. But I think it's more like a limited effect. You know, we have an effect now and it's affecting the demand from China in terms of maybe lower demand in Q1 than what we have seen in the past because the utilization rate of the TDAs plants is lower than in the past as well. I do think, however, this will even out over time. We just have had too many PDA plants opening at the same time, but we don't have the same number of PDA plants being opening later on. So once all the plants are up and running and demands are increasing, I think that market will balance out better. That will probably give some better margins on the PDA plants. which is increasing the utilization rate and hopefully eventually that will also support better ops from US to China.
spk02: Thank you. That's all from me. I will pass it over. Thank you for taking my questions and congratulations for the quarter.
spk03: Okay, great. Thank you. We have two questions on the chat which we can have a look at as well. Are you interested in accruing all the small companies from Richard? with small companies. I don't know. What is our market cap now? I think it's like $1.3 billion. So maybe we're not a small cap company anymore. But, you know, of course, we are business folks. We are selling ships. We are buying ships. We are always interested to do deals that can add value to our shareholders. If we find some ships or companies that can add and be value to this company, being accretive, sure. We are looking at deals all the time. We have been selling seven ships the last three years or so. We have contracted four MGCs. So, you know, we have a very dynamic strategy, I would say. So if there are opportunities, we jump at them for sure. And then by Peter. He has a last question for the day. Do you expect Panama transit rates to remain high? Can you comment on the competitiveness of vessels over 20 years old? So I think that's two separate questions. I think we've said already, you know, Panama is clogged. There are still limitations on the number of daily transit in Panama. Panama is really dependent on a good rain season in order to fill up those water levels. But, you know, the Panama Canal story, I will be talking about that probably next quarter, next year, following year, because it's not really any solution to this. The Panama Canal was expanded a long time ago and it opened in 2016 in order to facilitate the growth of container ship traffic. At that time, US was not an exporter of LNG and LPG. Now they've become by far the biggest LPG exporter in the world and the biggest LNG exporter in the world. So there's not really any more space in Panama. Even if the water levels are filled, there's still a lack of space, especially given the fact that the container order book is pretty big. Container ships have a more valuable cargo. They can pay a higher rate to get through the Panama Canal. And they are also therefore prioritized. Regardless of the water levels in Panama, there will be congestion issues. It just gets even worse when you have periods of drought, which is happening more and more often. Competitiveness of vessels over 20 years. Yeah, this is a bit similar to the tanker game. So we do have two different markets in Vildes Seas. We have the ordinary international compliant market where we are operating. And then we have the dark fleet, typically transporting LPG from Iran to China. And there's a lot of ships active in that trade, about 50 ships doing that trade. And that's why we haven't had any scrapping for a very, very long time. It's very limited scrapping because a lot of these older ships end up somehow in the hands of this trade. and be continuing to trade well beyond the economic life. That's why you see still a lot of older ships in this market. I do think this will endure as long as it's allowed and as long as there are no serious incidents resulting in pollution. I do think there is a high risk that you will have some oil tankers especially breaking being traded well above their life and suddenly if you have one of these accidents where an oil tanker with a cargo is breaking and going down I do think they will be more focused on this dark fleet trade which is gobbling up a lot of older ships which should have been retired so we are not really competing against those ships because those ships are competing in a different market so with that I wish you a A good day, a good dividend. I was hoping to do a short call, but I hope you enjoyed it. And I'm glad a lot of you have stayed on board for the 54 minutes. And we will be back after summer in August with the Q2 numbers, which we already said are also going to be pretty good. Okay, thank you.
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