Ardmore Shipping(ASC) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Q1 2024 adjusted earnings were $38 million or$0.92 per share, reflecting robust market conditions [6] - MR tankers earned $38,400 per day in Q1 and$40,500 per day in Q2 with 60% booked [6] - Chemical tankers earned $29,100 per day in Q1 and$39,000 per day in Q2 with 60% booked [6] - Declared a quarterly cash dividend of $0.31 per share, consistent with the policy of paying out one-third of adjusted earnings [7] - Total dividends paid since Q4 2022 amount to$70 million, representing 10% of market cap [10] - Q1 EBITDAR was strong, with full reconciliation provided in the appendix [18] - Total CapEx for 2024 is anticipated to be $17 million, including$11 million for scrubber installations and efficiency upgrades [19] Business Line Performance - MR tankers showed strong performance, with TCE rates increasing sequentially [6] - Chemical tankers also performed well, with rates increasing significantly in Q2 [6] - The company completed the sale of the 2010-built Ardmore Seafarer and acquired the 2017-built Ardmore Gibraltar, which has better fuel efficiency and cargo flexibility [11] - Over 50% of the MR fleet is now outfitted with second-generation carbon capture-ready scrubbers [19] Market Data and Key Metrics - Geopolitical events and disruptions, such as the EU refined products embargo and Red Sea routing changes, are driving higher ton-mile demand [8] - Panama Canal congestion remains 20% below prior year levels, further contributing to ton-mile demand [9] - Global refinery runs are projected to increase by 5% in 2024 to 85 million barrels per day, driven by activity in Asia and the Middle East [9] - The MR order book is at 9% of the existing fleet, with the fleet aging rapidly and close to half of the MR fleet expected to surpass the 20-year age mark in the next 5 years [13][15] Company Strategy and Industry Competition - The company continues to execute its capital allocation policy, focusing on dividends, fleet modernization, and reducing carbon emissions [7][10] - Investments in fleet upgrades and scrubber installations are aimed at improving performance and reducing emissions [19] - The company is focused on reducing cash breakeven levels, with a target of below $11,500 per day, achieved through cost control, debt reduction, and fleet optimization [17][33] - The company is also investing in energy transition projects, including a$10 million investment in E1 Marine, which focuses on hydrogen production technology [40] Management Commentary on Operating Environment and Future Outlook - The near-term outlook remains positive, supported by strong supply/demand fundamentals and geopolitical events [8] - The company expects continued strength in the product and chemical tankers market, driven by long-term demand drivers such as refinery dislocation and increasing oil consumption [16] - Management highlighted the importance of maintaining a strong balance sheet and optimizing performance to capture market opportunities [17][21] Other Important Information - The company has largely completed its scheduled drydockings and upgrades for the year, which will increase revenue days and enhance earnings power [7][19] - The company has significant operating leverage, with every $10,000 per day increase in TCE rates leading to an approximate$2.30 annual increase in EPS and nearly 100 million in free cash flow generation [20] Q&A Session Summary Question: What is driving the strong performance in the chemical tanker market? - The strong performance is attributed to good chartering practices and favorable market conditions [25] Question: What is the plan for financing the purchase of the two leased vessels? - The company plans to draw on its revolving credit facilities for the 41 million outlay [27] Question: How does the company view capital allocation given its strong balance sheet? - The company remains focused on debt reduction, fleet investment, and returning capital to shareholders when appropriate [29] Question: What initiatives are driving the path to a $11,500 cash breakeven? - The company is pursuing multiple initiatives, including sale and leasebacks, cost reductions, and further debt reduction [33] Question: What is the status of the investment in E1 Marine? - E1 Marine is expanding its global scale through licensing agreements across various industries, with significant momentum in licensing revenue [40]