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Navigator Holdings sees profits soaring in Q2

Navigator Holdings Ltd. has announced Financial Results for the Three and Six Months Ended June 30, 2022.

Highlights

  • Navigator Holdings Ltd. reported total operating revenues of $123.9 million for the three months ended June 30, 2022, an increase from $85.7 million for the three months ended June 30, 2021. Total operating revenues were $243.7 million for the six months ended June 30, 2022, an increase from $171.4 million for the six ended June 30, 2021.
  • Net income was $14.0 million (earnings per share of $0.18) for the three months ended June 30, 2022, an increase from $0.3 million (earnings per share of $0.01) for the three months ended June 30, 2021. For the six months ended June 30, 2022, net income was $41.1 million (earnings per share of $0.53) compared to $3.1 million (earnings per share of $0.06) for the six months ended June 30, 2021.
  • EBITDA1 was $55.0 million for the three months ended June 30, 2022 compared to $28.8 million for the three months ended June 2021. For the six months ended June 30, 2022, EBITDA was $110.5 million for the six months ended June 30, 2022 compared to $59.8 million for the six months ended June 30, 2021.
  • Maintained strong fleet utilization of 87.4% for the three months ended June 30, 2022, an increase from 85.4% for the three months ended June 30, 2021
  • Debt reduced by $45.9 million during the three months ended June 30, 2022, with cash, cash equivalents and restricted cash standing at $151.2 million as of June 30, 2022.

Ethylene Export Terminal

Ethylene throughput for the second quarter of 2022 at the Ethylene Export Terminal totaled 268,444 metric tons, a slight increase from the 267,110 metric tons from the previous quarter, and dramatically up from the throughput of 155,428 metric tons during the second quarter of 2021. The ethylene export volumes were primarily discharged in Europe due to the wide pricing arbitrage. Asia has yet to re-start their traditional ethylene imports across the Pacific, as demand is hampered, in particular, by Chinese covid restrictions, reducing consumption and production in the region.

Shipping Trends

The handysize semi-refrigerated and fully-refrigerated 12 month time charter rate assessment increased by $35,000 per calendar month (“pcm”) and $15,000 pcm, respectively, during the second quarter of 2022, to $720,000 pcm and $650,000 pcm, respectively. Recent shipbroker reports are indicating a semi-refrigerated reduction to $700,000 pcm and a slight increase for fully-refrigerated to $655,000 pcm, with the most recent weekly shipbroker reports showing a further increase to $705,000 pcm and $650,000 pcm, respectively. The handysize ethylene 12 month time charter assessment remained unchanged at $900,000 pcm.

Europe continues to import energy, feedstocks, petrochemicals and ammonia from wherever the region can source supply. According to Kpler, approximately 80% of U.S. ethylene exports were transported for European consumption during the second quarter of 2022. This European share declined from a high of 92% during first quarter of 2022, which had increased from a more usual level during the fourth quarter 2021 of 51%. Apart from absolute volumes of U.S. ethylene exports, the final destination has a major impact on the demand for ethylene ship capacity. An Atlantic crossing compared to Pacific crossing halves ethylene vessel demand. The arbitrage remains open to both continents however demand and consumption in China remains challenged following lingering COVID restrictions with the resultant effect on the country’s GDP. We expect an increasing percentage of the ethylene exports to be transported across the Pacific during latter part of the year.

Ethane exports from the U.S. reached record levels in June 2022 of 684,000 mts. The competitiveness of ethane compared to naphtha as a feedstock for the production of ethylene remains and we believe will continue. Our ethylene fleet can be employed in ethylene or ethane as both products require special nickel steel tanks to enable vessels to carry both products at low temperatures. North American LPG exports also reached record levels during the month of June 2022 with 5.1 million tons departing its shores for international markets. The handysize portion of the total natural gas liquids and petrochemical export volumes are approximately 7%, the upward trend in volumes is beneficial as it ultimately increases vessel demand for handysize vessels.

Ammonia continues to grow in importance for the Company. During second quarter of 2022 we increased the number of vessels employed on ammonia charters to seven vessels. This now constitutes 15% of our earnings days which we anticipate will continue to increase.

Reconciliation of Non-GAAP Financial Measures

The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2021 and 2022:

Three months ended
Six months ended
June 30,
2021
June 30,
2022
June 30,
2021
June 30,
2022
(in thousands) (in thousands)
Net income $ 654 $ 14,370 $ 3,863 $ 41,764
Net interest expense 8,584 11,359 17,514 22,235
Income taxes 190 671 335 1,064
Depreciation and amortization 19,473 31,477 38,746 62,819
EBITDA(1) $ 28.901 $ 57,877 $ 60,458 $ 127,882
Foreign currency exchange gain on senior secured bonds (330) (8,218) (338) (7,441)
Unrealized loss/(gain) on non-designated derivative instruments 269 5,346 (278) (9,896)
Adjusted EBITDA(1) $ 28,840 $ 55,005 $ 59,842 $ 110,545

1 EBITDA and Adjusted EBITDA are not measurements prepared in accordance with U.S. GAAP (non-GAAP financial measures). EBITDA represents net income before net interest expense, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA before foreign currency exchange gain or loss on senior secured bonds and unrealized gain or loss on non-designated derivative instruments. Management believes that EBITDA and Adjusted EBITDA are useful to investors in evaluating the operating performance of the Company. EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives to consolidated net income, cash generated from operations or any measure prepared in accordance with U.S. GAAP, and our calculation of EBITDA and Adjusted EBITDA may not be comparable to that reported by other companies.

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