Dorian LPG Ltd. — Form 10-Q Summary
Reporting period: Quarter and six months ended September 30, 2022; filed November 1, 2022. Comparisons are with the corresponding 2021 periods. Dorian owns and operates very large gas carriers (VLGCs) transporting LPG worldwide. At quarter-end, its fleet comprised 22 VLGCs, including two chartered-in vessels; 20 of the fleet’s vessels were in the Helios Pool.
Financial results and liquidity
| Metric | Three months ended September 30, 2022 | Three months ended September 30, 2021 | Six months ended September 30, 2022 | Six months ended September 30, 2021 |
|---|---|---|---|---|
| Revenue | $76.0 million | $63.1 million | $152.8 million | $126.0 million |
| Operating income | $28.1 million | $19.1 million | $57.1 million | $32.4 million |
| Net income | $20.3 million | $14.1 million | $45.2 million | $20.0 million |
| Diluted EPS | $0.51 | $0.35 | $1.12 | $0.49 |
| Adjusted EBITDA (non-GAAP) | $46.2 million | $37.9 million | $93.1 million | $67.7 million |
| Operating cash flow | Not presented for the quarter | Not presented for the quarter | $83.3 million | $73.7 million |
Quarterly operating and net margins were approximately 37.0% and 26.7%, respectively, compared with 30.3% and 22.4% a year earlier; these are calculated from reported revenue and income. For the six-month period, operating and net margins were approximately 37.4% and 29.6%, compared with 25.7% and 15.8%.
- Cash and liquidity: Cash and cash equivalents were $141.3 million at September 30, versus $236.8 million at March 31. Cash, cash equivalents and restricted cash declined by $95.5 million over the six months.
- Debt: Debt obligations totaled $648.6 million before $6.6 million of deferred financing fees; reported debt net of those fees was $642.0 million, including $52.0 million due within 12 months. The company reported compliance with financial covenants.
- Cash uses: Six-month investing cash outflow was $9.1 million. Financing cash outflow was $169.1 million, including $140.4 million of dividends, debt repayments and share repurchases.
- Margins and operating performance: Quarterly TCE rate rose to $40,632 from $30,996, while fleet utilization fell to 90.7% from 95.7%. For six months, TCE rate was $40,109 versus $31,280 and utilization was 93.3% versus 95.9%.
Material changes versus the prior comparable period
- Quarterly revenue increased 20.4%; management attributed the increase mainly to higher average TCE rates and spot rates, partly offset by lower utilization. Six-month revenue increased 21.2% on similar factors.
- Quarterly net income increased about 44%; six-month net income more than doubled. Higher operating income contributed, alongside derivative gains, while financing costs also rose materially.
- Interest and finance costs increased to $12.0 million for the quarter from $5.6 million, and to $20.0 million for six months from $11.2 million. Drivers included higher interest expense, increased average indebtedness and accelerated amortization of financing costs from debt refinancing and repayment.
- Vessel operating expenses declined in total, partly because the fleet had fewer vessel-days following vessel sales. Per-vessel daily operating costs were $9,541 for the quarter, up from $9,210; six-month daily costs were $9,460, down from $9,670.
- Operating cash flow improved by $9.6 million for six months, which management primarily attributed to working-capital timing, including Helios Pool distributions.
Outlook, risks and unusual items
- Management said it expects cash on hand and operating cash flow to meet liquidity needs for at least the next 12 months. It may also access a $20 million revolving facility or seek other financing; availability and acceptable terms are not assured.
- The company refinanced debt through a new $260 million facility, including a $240 million seven-year term loan and a $20 million revolving facility. The term loan bears interest at SOFR plus a margin then reduced to 2.15% under an efficiency adjustment. Dorian hedged $207.7 million of amortizing principal; unhedged floating-rate debt remains exposed to rate increases.
- Management reported that a 20-basis-point movement in SOFR and LIBOR would change interest expense on non-hedged interest-bearing debt by approximately $0.3 million over the 12 months following September 30, holding other factors constant.
- The board declared irregular dividends of $2.50 and $1.00 per share during the period, totaling approximately $140.6 million; a further $1.00-per-share dividend, totaling about $40.4 million, was declared after quarter-end. Dividends are discretionary and subject to financial, legal and contractual restrictions.
- A newbuilding dual-fuel VLGC is expected to be delivered in March 2023 under a 13-year bareboat charter. The filing also reports $235.3 million of future time-charter-in commitments, including three dual-fuel Panamax LPG vessels expected in 2023.
- Key risks include volatile LPG freight rates and fuel costs, lower utilization, counterparty and Helios Pool exposure, rising interest rates, vessel operating and drydocking costs, regulatory and environmental requirements, geopolitical disruption, and COVID-19-related operational impacts. The filing reports no vessel impairment and no material legal claim requiring disclosure or provision.
- Disclosure controls were assessed as effective; no material change in internal control over financial reporting was reported. The filing provides no formal earnings or rate guidance.
Important facts for investors to verify
- Whether stronger spot rates and TCE performance persist and offset continued utilization weakness and elevated fuel costs.
- The amount and terms of floating-rate debt remaining unhedged, and the effect of higher SOFR on interest expense and covenant headroom.
- Collection timing and credit exposure for Helios Pool and other related-party receivables; the company reported $74.4 million of net Helios Pool receivables at quarter-end.
- Funding and operational implications of the newbuild and substantial charter-in commitments, including delivery timing and future hire costs.
- Whether discretionary dividends and any future repurchases remain supportable given cash balances, debt service, capital needs and covenant restrictions.