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BW LPG confident on the long-term VLGC market

BW LPG has announced Financial Results for Q4 and FY 2021:

Highlights

– Generated Q4 2021 net profit after tax of USD 62.9 million. Declared a Q4 2021 cash dividend of USD 0.18 per share.
– Achieved Q4 2021 VLGC freight rates of USD 31,000 per calendar day, or USD 32,400 per available day with 97% commercial utilisation.
– Maas Capital became a minority shareholder in BW LPG India, a subsidiary of BW LPG.
– Upsized the existing USD 221 million facility with a USD 40 million sustainability-linked loan.
– Initiated a USD 50 million share buy-back programme, with approximately 1.4 million shares purchased.
– Concluded the sale and delivery of BW Sakura.
– Invested approximately USD 92 million on fleet upgrades and digitalisation in 2021. Through smart operations, realised approximately USD 10 million in savings over the year.

Financial Performance

BW LPG Limited (“BW LPG”, the “Company”, OSE ticker code: “BWLPG.OL”) reported a Q4 2021 net profit after tax of USD 62.9 million (FY2021: USD 186.4 million) or an earnings per share of USD 0.45 (FY 2021: USD 1.33), yielding an annualised return on equity of 14% with USD 330 million of free cash flow. The Company’s available liquidity of USD 453 million is its highest since 2013; and a net leverage ratio of 35% is its lowest in seven years.

The Board has declared a Q4 2021 cash dividend of USD 0.18 per share amounting to USD 25 million. This brings total dividends declared for FY 2021 to USD 0.56 per share, amounting to USD 77.1 million, and translates to a payout ratio as a percentage of NPAT of 82% for the quarter and 51% for FY2021, excluding vessel impairment write-back. The shares will be traded ex-dividend on and from 4 March 2022. The dividend will be payable on 18 March 2022 to shareholders on record as of 7 March 2022.

Q4 2021 VLGC freight rates were USD 31,000 per calendar day, or USD 32,400 per available day with 97% commercial utilisation. Time Charter Equivalent (“TCE”) income decreased to USD 116.7 million for Q4 2021 (FY2021: USD 465.6 million), mainly due to a decrease in LPG spot rates and lower fleet utilisation; the latter due to two VLGCs undergoing retrofitting with LPG dual-fuel propulsion engines during the quarter.

In December 2021, Maas Capital signed an agreement to purchase a minority share in BW LPG India, a subsidiary of BW LPG. In January 2022, Maas Capital subscribed for USD 50 million of new shares in the subsidiary and following this transaction, BW LPG owns approximately 67% in BW LPG India.

BW LPG upsized the existing USD 221 million facility with a USD 40 million sustainability-linked loan (SLL). Simultaneously, USD 70 million of this term loan was converted to a revolving credit facility. BW LPG’s first SLL demonstrates the Company’s commitment to decarbonising shipping, and its continued access to competitive financing.

BW LPG initiated a USD 50 million share buy-back programme in December 2021. As at 31 December 2021, approximately 1.4 million shares (14.6%) were purchased at an average price of USD 5.33. This program allows BW LPG to return value to shareholders and invest in the Company by buying shares which are trading at a significant discount to shareholders’ equity value.

The sale and delivery of BW Sakura (2010-built, Mitsubishi Heavy Industries) for further trading was concluded in December 2021. It generated approximately USD 22.0 million in liquidity and a net book gain of USD 2.7 million.

To-date, 12 VLGCs have been retrofitted with LPG dual-fuel propulsion engines. In 2021, BW LPG invested over USD 92 million in fleet upgrades. Retrofitting and digitalising the fleet maximise the value of assets and, together with smart operations and fleet transactions, these initiatives have translated to approximately USD 10 million in savings, and over 12% reduction in greenhouse gas emissions from our 2019 baseline.

Market Outlook

Geopolitical uncertainty clouds 2022 VLGC market. Near term rate volatility could be triggered by factors such as bunker price shocks, changing trading patterns, unexpected LPG inventory management and changes to shipping inefficiencies.

For 2023 onwards, despite the uncertainties from the heavy newbuilding delivery schedule and the implementation of IMO EEXI regulations, we remain confident on the long-term VLGC market as LPG remains a viable transition fuel towards decarbonisation and the use of cleaner energy.

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