Dorian LPG Ltd. — FY2021 Form 10-K
Reporting period: Fiscal year ended March 31, 2021, filed June 2, 2021. The filing also reports the quarter ended March 31, 2021. Although the request metadata says “2020 Q4,” the filing covers FY2021; the fiscal fourth quarter was January–March 2021.
Business context and reporting period
Dorian owns and operates very large gas carriers (VLGCs) transporting liquefied petroleum gas. It operates as one reportable segment and earns most revenue through the 50%-owned Helios LPG Pool, whose vessels serve spot, contract-of-affreightment and shorter-term time-charter markets. At March 31, 2021, the filing described 24 VLGCs, including two chartered-in vessels; by June 1, it described 23, including one chartered-in vessel. Its owned or bareboat-operated fleet had approximately 1.84 million cbm of capacity.
Financial and operating metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $315.9 million | $333.4 million |
| Operating income | $116.1 million | $161.1 million |
| Net income | $92.6 million | $111.8 million |
| Diluted EPS | $1.86 | $2.07 |
| Adjusted EBITDA (non-GAAP) | $188.6 million | $233.2 million |
| Operating cash flow | $170.6 million | $169.0 million |
| Fleet utilization | 92.8% | 95.4% |
| Average TCE rate | $39,606/day | $42,798/day |
Revenue declined 5.2%; operating income fell 27.9% and net income fell 17.2%. Approximate operating margin decreased to 36.7% from 48.3%, and net margin to 29.3% from 33.5% (calculated from reported revenue and income). The company attributed lower revenue mainly to lower average TCE rates and utilization. Spot-market benchmark rates also weakened.
For the quarter ended March 31, 2021, revenue was $99.6 million, operating income $46.3 million, net income $44.0 million and diluted EPS $0.93. In the comparable quarter of FY2020, those figures were $95.2 million, $49.8 million, $29.4 million and $0.56, respectively.
Cash and cash equivalents were $79.3 million at March 31, 2021, with $5.4 million of restricted cash. Current assets were $153.3 million and current liabilities $82.1 million. Gross debt was $602.1 million ($591.5 million net of deferred financing fees), including $51.8 million of principal due within one year. The company reported compliance with debt covenants. Approximately $534.3 million of debt was hedged or fixed; exposure to LIBOR and the transition to replacement benchmarks remains relevant.
Net cash used in financing was $174.5 million, including $126.3 million of common-stock repurchases and $99.4 million of debt repayments, partly offset by $55.4 million of borrowings. Investing activities provided $1.0 million, after $9.5 million in vessel-related capital expenditures and proceeds from maturing investments.
Material changes versus the prior comparable period
- Revenue decreased $17.5 million, as TCE rates fell to $39,606 from $42,798 per day and fleet utilization declined to 92.8% from 95.4%.
- Vessel operating expenses increased 9.4% to $78.2 million, or $9,741 per vessel per calendar day, primarily reflecting repairs, maintenance, spares and stores.
- General and administrative expenses rose 45.1% to $33.9 million, including a $4.0 million disputed-claim accrual, higher compensation costs and higher insurance premiums.
- Interest and finance costs declined $8.5 million to $27.6 million, principally due to lower average debt and refinancing terms.
- Derivative results improved year over year: an unrealized gain of $7.2 million versus a loss of $18.2 million. The company also recorded a $4.6 million realized loss, versus a $2.8 million gain in FY2020.
- Operating cash flow remained broadly stable, increasing to $170.6 million from $169.0 million. Vessel market values improved relative to carrying values; no impairment charge was recorded in either year.
Outlook, risks, contingencies and unusual items
- Management said cash on hand and operating cash flow were expected to meet liquidity needs for at least the next 12 months. It may also seek debt or equity financing, but gave no assurance that additional financing or amendments would be available on acceptable terms.
- The company entered a 13-year bareboat agreement for a newbuilding dual-fuel VLGC expected in March 2023. Predelivery, specification and supervision commitments total approximately $25 million; $8 million was paid in April 2021.
- A January 2021 dispute over a vessel’s readiness to lift scheduled cargo resulted in a $4.0 million contingent-liability accrual and expense. The claim’s facts remain disputed.
- The company completed a tender offer for 8.4 million shares, approximately 16.8% of then-outstanding shares, at $13.50 per share, for approximately $113.5 million. It had not paid dividends since inception; debt terms and board discretion constrain potential distributions.
- Key risks include volatile LPG shipping rates and vessel values, dependence on the LPG sector and Helios Pool (93% of FY2021 revenue), customer and counterparty concentration, substantial secured debt and covenant exposure, and possible LIBOR-transition costs.
- COVID-19 caused crew-change disruption, added costs and an approximately 60-day drydock delay for one vessel in China. Management said there had not been a significant overall operating effect to date, but the future impact remained uncertain.
- Environmental rules may require further investment. Three VLGCs were expected to receive ballast-water systems during 2021–2024 at about $0.8 million each; IMO emissions and other climate requirements may add costs. The company reported 11 scrubber-equipped vessels at the filing date, with further installations planned.
- The filing states that management considered disclosure controls and internal control over financial reporting effective at March 31, 2021; the auditor gave unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Reconcile the fleet count and chartered-in vessels at March 31 versus June 1, 2021, and confirm the status and timing of the 2023 dual-fuel newbuilding.
- Track Helios Pool performance, customer concentration, receivable collection and the effect of spot rates on TCE and utilization.
- Review debt maturities, covenant headroom, collateral values, hedging coverage and the company’s LIBOR-transition arrangements.
- Monitor the $4.0 million disputed claim, remaining repurchase authorization and any subsequent capital returns or dividend decisions.
- Confirm actual spending and completion timing for scrubbers, ballast-water systems, drydockings and related regulatory compliance.