Dorian LPG Ltd. — Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended September 30, 2021; comparison with the periods ended September 30, 2020. Filed November 2, 2021. Dorian owns and operates very large gas carriers (VLGCs), transporting LPG worldwide. At quarter-end, its fleet comprised 22 VLGCs, including one time-chartered-in vessel; 12 ECO-VLGCs had scrubbers.
Financial performance and liquidity
| Metric | Three months ended September 30 | Six months ended September 30 |
|---|---|---|
| Revenue, 2021 | $63.1 million | $126.0 million |
| Revenue, 2020 | $54.7 million | $127.9 million |
| Operating income, 2021 | $19.1 million | $32.4 million |
| Net income, 2021 | $14.1 million | $20.0 million |
| Net income, 2020 | $0.5 million | $12.7 million |
| Diluted EPS, 2021 | $0.35 | $0.49 |
| Adjusted EBITDA, 2021 | $37.9 million | $67.7 million |
| Operating cash flow, 2021 | Not provided separately for the quarter | $73.7 million |
Quarterly net margin was approximately 22.4%, versus 1.0% in the prior-year quarter; six-month net margin was approximately 15.8%, versus 9.9%. Adjusted EBITDA is a non-GAAP measure. TCE rate was $30,996 per day for the quarter and $31,280 for the six months; fleet utilization was 95.7% and 95.9%, respectively.
- Cash and liquidity: Cash and cash equivalents were $98.1 million at September 30, plus $5.4 million of restricted cash. Current assets were $146.3 million and current liabilities $96.5 million. Cash, cash equivalents and restricted cash totaled $103.5 million at period-end.
- Debt: Gross debt obligations were $576.2 million; debt net of deferred financing fees was $566.9 million, including $66.5 million due within 12 months. The company reported compliance with all financial covenants.
- Cash flows: Six-month operating cash flow was $73.7 million; investing activities provided $32.2 million, including $43.4 million net proceeds from a vessel sale; financing activities used $87.1 million, including a $40.2 million dividend, $25.9 million of debt repayments and $20.9 million of share repurchases. Cash and restricted cash increased $18.8 million.
- Other balance-sheet changes: Total assets were $1.512 billion, down from $1.582 billion at March 31, 2021. Shareholders’ equity was $906.9 million, down from $946.8 million.
Changes versus the prior comparable periods
- Quarterly revenue rose 15.3%, while six-month revenue declined 1.4%. Quarterly TCE increased to $30,996 from $26,015; six-month TCE declined to $31,280 from $33,002.
- Quarterly operating income increased to $19.1 million from $5.4 million, and net income increased to $14.1 million from $0.5 million. Six-month net income rose to $20.0 million from $12.7 million, despite slightly lower revenue.
- Management attributed quarterly revenue growth primarily to higher average TCE rates, including a greater allocation of pool profits, partly offset by lower fleet utilization, weaker LPG benchmark rates and higher bunker prices. For the six-month period, lower TCE rates were partly offset by utilization improving to 95.9% from 89.8%.
- Six-month interest and finance costs fell 28.9% to $11.2 million, reflecting reduced average debt and lower financing-cost amortization. Vessel operating expense per vessel-day was broadly stable for the six months; COVID-related crew travel and medical costs contributed to higher crew expenses.
- The company sold the 2006-built VLGC Captain Markos NL, recognizing a $3.5 million gain and receiving $43.4 million net proceeds. It also paid an irregular $1.00-per-share dividend totaling $40.4 million.
Outlook, risks and unusual items
- Management stated that cash on hand and operating cash flow are expected to meet liquidity needs for at least the next 12 months. No specific earnings or revenue guidance was provided. Management noted that additional financing might be needed if resources prove insufficient; availability and acceptable terms are not assured.
- Capital commitments include approximately $17.0 million remaining for a newbuilding dual-fuel VLGC under a 13-year bareboat charter, expected for delivery in March 2023. Three dual-fuel Panamax LPG vessels were also chartered in for seven years each, with delivery expected in the second and third quarters of 2023. Aggregate time-charter-in commitments disclosed were $248.3 million.
- After quarter-end, a one-year time-chartered-in VLGC was delivered in October 2021. The company also gave notice to exercise its repurchase option for Captain Nicholas ML, involving approximately $17.8 million in cash and application of a $27.9 million retained deposit. It had already given notice to repurchase Captain John NP for approximately $15.8 million in cash and application of a $25.2 million retained deposit.
- Market and operating risks include LPG shipping demand and charter-rate volatility, bunker prices, fleet supply, customer and pool counterparty performance, vessel age and maintenance, environmental compliance costs, COVID-19 impacts, and interest-rate exposure. The company had hedged $346.7 million of amortizing principal under its 2015 facility; a hypothetical 20-basis-point LIBOR movement was estimated to change interest expense on unhedged debt by $0.2 million over the following 12 months.
- A disputed charterer claim relating to vessel readiness remains outstanding; a $4.0 million contingent liability was included in accrued liabilities. No vessel impairment charge was recorded. The company reported effective disclosure controls and no material change in internal control over financial reporting.
- The $1.00 dividend was described as irregular; future dividends are at the board’s discretion. The share-repurchase program had $27.5 million of authorization remaining at September 30, 2021.
Important facts for investors to verify
- Whether Helios Pool distributions and related-party receivables are collected on schedule; quarter-end net receivables from the pool were $50.7 million, and maximum loss exposure was stated to be limited to those receivables.
- Debt repayment requirements, covenant headroom, interest-rate and LIBOR-transition exposure, and the cash impact of the planned vessel repurchases and charter commitments.
- How charter rates, utilization, bunker costs and the mix of pool versus fixed-rate employment affect future revenue and margins.
- The outcome and potential cash cost of the $4.0 million disputed charter claim, along with vessel sale, purchase-option and newbuilding execution details.
- Whether future dividends or buybacks are pursued, given the board’s discretion, capital needs and debt restrictions.