Dorian LPG, a leading owner and operator of modern very large gas carriers (“VLGCs”), today reported its financial results for the three months and fiscal year ended March 31, 2021.
Highlights for the Fourth Quarter Ended March 31, 2021
- Revenues of $99.6 million.
- Time charter equivalent (“TCE”)(1) per operating day rate for our fleet of $49,474.
- Net income of $44.0 million, or $0.93 earnings per diluted share (“EPS”), and adjusted net income(1) of $40.8 million, or $0.86 adjusted diluted earnings per share (“adjusted EPS”)(1).
- Adjusted EBITDA(1) of $65.0 million.
- Repurchased 8.4 million shares, or approximately 16.8% of our then outstanding common shares, pursuant to our previously announced tender offer.
- Expect to take delivery in March 2023 of an 84,000 cubic meter dual fuel VLGC from Kawasaki Heavy Industries under a Japanese financing arrangement.
Highlights for the Fiscal Year Ended March 31, 2021
- Revenues of $315.9 million.
- TCE(1) per operating day rate for our fleet of $39,606.
- Net income of $92.6 million, or $1.86 EPS, and adjusted net income(1) of $85.4 million, or $1.71 adjusted EPS(1).
- Adjusted EBITDA(1) of $188.6 million.
- Repurchased over $124.8 million of our common stock, or approximately 9.6 million shares, between our previously announced tender offer and common share repurchase program
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(1) |
TCE, adjusted net income, adjusted EPS and adjusted EBITDA are non-GAAP measures. Refer to the reconciliation of revenues to TCE, net income to adjusted net income, EPS to adjusted EPS and net income to adjusted EBITDA included later in this press release. |
John Hadjipateras, Chairman, President and Chief Executive Officer of the Company, commented, “Though the past year presented major challenges relating to the pandemic, the commitment of our nearly eight hundred seafarers, five hundred presently at sea, as well as the dedication of our shore-side staff, we believe has put Dorian LPG in its strongest position to date. Upsizing our $100 million self-tender offer by 13.5% to repurchase 8.4 million shares demonstrates our strong commitment to returning shareholder capital.”
Fourth Quarter Fiscal Year 2021 Results Summary
Our net income amounted to $44.0 million, or $0.93 per share, for the three months ended March 31, 2021, compared to net income of $29.4 million, or $0.56 per share, for the three months ended March 31, 2020.
Our adjusted net income amounted to $40.8 million, or $0.86 per share, for the three months ended March 31, 2021, compared to adjusted net income of $42.3 million, or $0.81 per share, for the three months ended March 31, 2020. We have adjusted our net income for the three months ended March 31, 2021 for an unrealized gain on derivative instruments of $3.3 million. We adjusted our net income for the three months ended March 31, 2020 for an unrealized loss on derivative instruments of $12.9 million. Please refer to the reconciliation of net income to adjusted net income, which appears later in this press release.
The $1.5 million decrease in adjusted net income for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 is primarily attributable to (1) increases of $5.4 million in general and administrative expenses (inclusive of a contingent liability and corresponding expense of $4.0 million during the three months ended March 31, 2021), $1.4 million in vessel operating expenses, $0.8 million in charter hire expenses from our chartered-in VLGCs and $0.3 million depreciation and amortization; and (2) an unfavorable change of $1.5 million in realized gain/(loss) on derivatives; partially offset by an increase in revenues of $4.4 million and a decrease in interest and finance costs of $2.5 million.
The TCE rate for our fleet was $49,474 for the three months ended March 31, 2021, a 4.7% decrease from the $51,888 TCE rate for the same period in the prior year, as further described in “Revenues” below. Please see footnote 6 to the table in “Financial Information” below for other information related to how we calculate TCE. Total fleet utilization (including the utilization of our vessels deployed in the Helios Pool) increased from 91.7% in the three months ended March 31, 2020 to 95.3% in the three months ended March 31, 2021.
Vessel operating expenses per day increased to $10,198 during the three months ended March 31, 2021 from $9,407 in the same period in the prior year. Please see “Vessel Operating Expenses” below for more information.
Revenues
Revenues, which represent net pool revenues—related party, time charters and other revenues earned by our vessels, were $99.6 million for the three months ended March 31, 2021, an increase of $4.4 million, or 4.6%, from $95.2 million for the three months ended March 31, 2020. The increase was primarily attributable to an increase in fleet utilization, which increased from 91.7% during the three months ended March 31, 2020 to 95.3% during the three months ended March 31, 2021. Increased utilization was partially offset by slightly reduced TCE rates, which were $49,474 for the three months ended March 31, 2021 compared to $51,888 for the three months ended March 31, 2020. During the three months ended March 31, 2021, we recognized a reallocation of prior period pool profits based on a periodic review of actual vessel performance in accordance with the pool participation agreements. This reallocation resulted in a $55 increase in our fleet’s overall TCE rates for the three months ended March 31, 2021 due to adjustments related to the relative speed and consumption performance of all vessels participating in the Helios Pool. This compares to a $1,019 increase in our fleet’s overall TCE rates for reallocation of prior period pool profits during the three months ended March 31, 2020. Excluding this reallocation for both periods, TCE rates decreased by $1,450 when comparing the three months ended March 31, 2021 to the three months ended March 31, 2020, primarily due to a reduction of spot market rates. The Baltic Exchange Liquid Petroleum Gas Index, an index published daily by the Baltic Exchange for the spot market rate for the benchmark Ras Tanura-Chiba route (expressed as U.S. dollars per metric ton), averaged $54.260 during the three months ended March 31, 2021 compared to an average of $66.662 for the three months ended March 31, 2020.
Charter Hire Expenses
Charter hire expenses for vessels time chartered-in from third parties were $4.5 million for three months ended March 31, 2021 compared to $3.7 million for the three months ended March 31, 2020. The increase of $0.8 million, or 22.5%, was caused by an increase in time chartered-in days, which increased from 151 for the three months ended March 31, 2020 to 180 for the three months ended March 31, 2021.
Vessel Operating Expenses
Vessel operating expenses were $20.2 million during the three months ended March 31, 2021, or $10,198 per vessel per calendar day, which is calculated by dividing vessel operating expenses by calendar days for the relevant time period for the vessels that were in our fleet. This was an increase of $1.4 million, or 7.2%, from $18.8 million, or $9,407 per vessel per calendar day, for the three months ended March 31, 2020. The increase in vessel operating expenses was primarily the result of an increase in crew wages and related costs of $0.9 million, or $532 per vessel per calendar day, and an increase of $0.7 million, or $382 per vessel per calendar day, in repairs and maintenance costs.
General and Administrative Expenses
General and administrative expenses were $11.1 million for the three months ended March 31, 2021, an increase of $5.4 million, or 95.7%, from $5.7 million for the three months ended March 31, 2020. The increase was driven by the recording of a contingent liability of $4.0 million related to a disputed claim relating to one of our VLGCs readiness to lift a cargo scheduled by a charterer and increases of $1.1 million in salaries, wages and benefits, and $0.3 million in higher insurance premiums.
Interest and Finance Costs
Interest and finance costs amounted to $5.8 million for the three months ended March 31, 2021, a decrease of $2.5 million, or 30.9%, from $8.3 million for the three months ended March 31, 2020. The decrease of $2.5 million during the three months ended March 31, 2021 was mainly due a decrease of interest incurred on our long-term debt, primarily resulting from a decrease in average indebtedness and a reduced margin from the refinancing of the commercial tranche of the 2015 AR Facility. Average indebtedness, excluding deferred financing fees, decreased from $659.8 million for the three months ended March 31, 2020 to $612.8 million for the three months ended March 31, 2021. As of March 31, 2021, the outstanding balance of our long-term debt, excluding deferred financing fees, was $602.1 million.
Unrealized Gain/(Loss) on Derivatives
Unrealized gain on derivatives amounted to approximately $3.3 million for the three months ended March 31, 2021, compared to a $12.9 million loss for the three months ended March 31, 2020. The favorable $16.2 million difference is primarily attributable to an increase of $12.0 million in the fair value of our interest rate swaps caused by changes in forward LIBOR yield curves and $4.2 million in favorable variances related to our forward freight agreement (“FFA”) positions settled prior to the three months ended March 31, 2021.
Realized Gain/(Loss) on Derivatives
Realized loss on derivatives was $0.9 million for the three months ended March 31, 2021, compared to a realized gain of $0.6 million for the three months ended March 31, 2020. The unfavorable $1.5 million change is primarily attributable to (1) fluctuations in floating LIBOR resulting in a $1.1 million unfavorable variance on realized losses in the current period on our interest rate swaps and (2) prior period settlements on our FFA positions of $0.4 million that did not recur as our FFA positions were all settled prior to the three months ended March 31, 2021.
Fiscal Year 2021 Results Summary
Our net income amounted to $92.6 million, or $1.86 per share, for the year ended March 31, 2021, compared to net income of $111.8 million, or $2.07 per share, for the year ended March 31, 2020.
Our adjusted net income amounted to $85.4 million, or $1.71 per share, for the year ended March 31, 2021, compared to adjusted net income of $130.0 million, or $2.41 per share, for the year ended March 31, 2020. We have adjusted our net income for the year ended March 31, 2021 for an unrealized gain on derivative instruments of $7.2 million. We have adjusted our net income for the year ended March 31, 2020 for an unrealized loss on derivatives of $18.2 million. Please refer to the reconciliation of net income to adjusted net loss, which appears later in this press release.
The unfavorable change of $44.6 million in adjusted net income for the year ended March 31, 2021 compared to the year ended March 31, 2020 is primarily attributable to (1) a decrease in revenues of $17.5 million; (2) increases of $10.5 million in general and administrative costs (inclusive of a contingent liability and corresponding expense of $4.0 million during the year ended March 31, 2021), $8.2 million in charter hire expenses from our chartered-in VLGCs, $6.7 million in vessel operating expenses, and $2.2 million in depreciation and amortization; and (3) an unfavorable change of $7.4 million in realized gain/(loss) on derivatives; partially offset by a decrease of $8.5 million in interest and finance costs.
The TCE rate for our fleet was $39,606 for the year ended March 31, 2021, a 7.5% decrease from the $42,798 TCE rate from the prior year, as further described in “Revenues” below. Please see footnote 6 to the table in “Financial Information” below for other information related to how we calculate TCE. Total fleet utilization (including the utilization of our vessels deployed in the Helios Pool) decreased from 95.4% in the year ended March 31, 2020 to 92.8% in the year ended March 31, 2021.
Vessel operating expenses per day increased to $9,741 in the year ended March 31, 2021 from $8,877 in the prior year. Please see “Vessel Operating Expenses” below for more information.
Revenues
Revenues, which represent net pool revenues—related party, time charters and other revenues, net, were $315.9 million for the year ended March 31, 2021, a decrease of $17.5 million, or 5.2%, from $333.4 million for the year ended March 31, 2020. The decrease is primarily attributable to a reduction of average TCE rates and decreased fleet utilization. Average TCE rates of $39,606 for the year ended March 31, 2021 decreased from $42,798 for the year ended March 31, 2020. During the year ended March 31, 2021, we recognized a reallocation of prior period pool profits based on a periodic review of actual vessel performance in accordance with the pool participation agreements. This reallocation resulted in a $707 decrease in our fleet’s overall TCE rates for the year ended March 31, 2021 due to adjustments related to the relative speed and consumption performance of all vessels participating in the Helios Pool. This compares to a $240 increase in our fleet’s overall TCE rates for reallocation of prior period pool profits during the year ended March 31, 2020. Excluding this reallocation for both years, TCE rates decreased by $2,245 when comparing the year ended March 31, 2021 to the year ended March 31, 2020, primarily driven by a reduction in spot market rates. The Baltic Exchange Liquid Petroleum Gas Index, an index published daily by the Baltic Exchange for the spot market rate for the benchmark Ras Tanura-Chiba route (expressed as U.S. dollars per metric ton), averaged $55.703 for the year ended March 31, 2021 compared to an average of $67.050 for the year ended March 31, 2020. Our fleet utilization decreased from 95.4% during the year ended March 31, 2020 to 92.8% during the year ended March 31, 2021.
Charter Hire Expenses
Charter hire expenses for the vessels chartered in from third parties were $18.1 million for the year ended March 31, 2021 compared to $9.9 million for the year ended March 31, 2020. The increase of $8.2 million, or 83.9%, was caused by an increase in time chartered-in days, which increased from 426 for the year ended March 31, 2020 to 740 for the year ended March 31, 2021.
Vessel Operating Expenses
Vessel operating expenses were $78.2 million during the year ended March 31, 2021, or $9,741 per vessel per calendar day, which is calculated by dividing vessel operating expenses by calendar days for the relevant time period for the vessels that were in our fleet. This was an increase of $6.7 million, or 9.4%, from $71.5 million, or $8,877 per vessel per calendar day, for the year ended March 31, 2020. The increase in vessel operating expenses was primarily the result of a $6.0 million, or $755 per vessel per calendar day, increase in operating expenses related to repairs and maintenance, spares and stores, and coolant costs, which is inclusive of an increase of $0.4 million, or $54 per vessel per calendar day, in operating expenses related to the drydocking of vessels.
General and Administrative Expenses
General and administrative expenses were $33.9 million for the year ended March 31, 2021, an increase of $10.5 million, or 45.1%, from $23.4 million for the year ended March 31, 2020. This was driven by the recording of a contingent liability of $4.0 million related to a disputed claim relating to one of our VLGCs readiness to lift a cargo scheduled by a charterer and increases of $2.0 million in annual cash bonuses to certain employees, $3.1 million in salaries, wages and benefits, and $1.4 million in higher insurance premiums.
Interest and Finance Costs
Interest and finance costs amounted to $27.6 million for the year ended March 31, 2021, a decrease of $8.5 million from $36.1 million for the year ended March 31, 2020. The decrease of $8.5 million during the year ended March 31, 2021 was due to a decrease of $10.6 million in interest incurred on our long-term debt, primarily resulting from a decrease in average indebtedness and a reduced margin from the refinancing of the commercial tranche of the $758 million debt facility that we entered into in March 2015 with a group of banks and financial institutions, partially offset by a reduction of $2.2 million in amortization of deferred financing fees and loan expenses. Average indebtedness, excluding deferred financing fees, decreased from $683.9 million for the year ended March 31, 2020 to $633.7 million for the year ended March 31, 2021. As of March 31, 2021, the outstanding balance of our long-term debt, excluding deferred financing fees, was $602.1 million.
Unrealized Gain/(Loss) on Derivatives
Unrealized gain on derivatives amounted to approximately $7.2 million for the year ended March 31, 2021 compared to an unrealized loss of $18.2 million for the year ended March 31, 2020. The favorable $25.4 million difference is primarily attributable to an increase of $20.2 million in favorable fair value changes to our interest rate swaps resulting from changes in forward LIBOR yield curves and $5.2 million in favorable variances related to the settlement in the current period of our FFA positions.
Realized Gain/(Loss) on Derivatives
Realized loss on derivatives was $4.6 million for the year ended March 31, 2021, compared to a realized gain of $2.8 million for the year ended the year ended March 31, 2020. The unfavorable $7.4 million change is primarily attributable to (1) fluctuations in floating LIBOR resulting in a $6.2 million unfavorable variance on realized losses in the current period on our interest rate swaps and (2) additional realized losses incurred related to settlements on our FFA positions of $1.2 million.
Market Outlook Update
Global seaborne LPG volumes during the first calendar quarter of 2021 decreased 1.7% year-over-year to 26.5 million tons. U.S. seaborne LPG exports, however, grew by 7.1% over the same period to 11.8 million tons. Elevated U.S. exports were balanced by slightly declining Middle Eastern export volumes. Exports from the Middle East totaled 8.6 million tons of LPG during the quarter, a 6.6% year-over-year decrease.
During the quarter, Indian LPG imports reached a record high of 4.5 million tons, a 17.4% year-over-year increase, due in part to government plans to expand LPG connections by 10 million households in the east of the country. In China, the startup of three PDH plants with 1.9 million tons of annual throughput contributed to year-over-year growth of 14.6% to 4.6 million tons for the quarter. Import demand in Japan and South Korea, however, decreased following increased inventories resulting from heightened weather-related demand in the previous quarter.
For the first calendar quarter, the Baltic VLGC Index averaged $54 per metric ton, reaching a quarterly high of $119 per metric ton in early January. For the second calendar quarter to date, the Baltic Index has averaged $55 per metric ton.
Currently the VLGC orderbook stands at approximately 20% of the current global fleet. An additional 62 VLGCs, equivalent to roughly 5.5 million cbm of carrying capacity, are expected to be added to the global fleet by calendar year-end 2023. The average age of the global fleet is now approximately ten years old.
The above market outlook update is based on information, data and estimates derived from industry sources, and there can be no assurances that such trends will continue or that anticipated developments in freight rates, export volumes, the VLGC orderbook or other market indicators will materialize. This information, data and estimates involve a number of assumptions and limitations, are subject to risks and uncertainties, and are subject to change based on various factors. You are cautioned not to give undue weight to such information, data and estimates. We have not independently verified any third-party information or verified that more recent information is not available.
Seasonality
Liquefied gases are primarily used for industrial and domestic heating, as a chemical and refinery feedstock, as a transportation fuel and in agriculture. The LPG shipping market historically has been stronger in the spring and summer months in anticipation of increased consumption of propane and butane for heating during the winter months. In addition, unpredictable weather patterns in these months tend to disrupt vessel scheduling and the supply of certain commodities. Demand for our vessels therefore may be stronger in the quarters ending June 30 and September 30 and relatively weaker during the quarters ending December 31 and March 31, although 12-month time charter rates tend to smooth these short-term fluctuations and recent LPG shipping market activity has not yielded the expected seasonal results. To the extent any of our time charters expire during the typically weaker fiscal quarters ending December 31 and March 31, it may not be possible to re-charter our vessels at similar rates. As a result, we may have to accept lower rates or experience off-hire time for our vessels, which may adversely impact our business, financial condition and operating results.
