BW LPG's Q2 2025: Contradictions Emerge on Terminal Investment in India, Time Charter Strategy, and Share Buyback Program

The above is the analysis of the conflicting points in this earnings call

Date of Call: August 26, 2025

Financials Results

• EPS: $0.23 per diluted share; no prior-period comparison provided

Guidance:

- Q3: ~90% of available days fixed at about $53,000/day.- Dry-docking days expected: 143 in Q3 and 135 in Q4 2025.- H2 2025 coverage: 34% secured via fixed-rate time charters (~$45,200/day) and FFA hedges (~$51,700/day).- Time charter out-fleet expected to generate ~$9M profit over TC-in; remaining fixed TC-out portfolio estimated at ~$74M.- 2025 operating cash breakeven per day: own fleet ~$19,100; total fleet (incl. TC-in) ~$21,700; all-in (incl. dry-dock) ~$24,800.- Market indicator: VLGC FFAs price balance of 2025 in low-$60,000/day MEG–Japan (not company guidance).

Business Commentary:

Market Volatility and Financial Performance:* - BW LPG reported a TCE income of $38,800 per available day and $37,300 per calendar day in Q2, exceeding guidance. - The Q2 profit was $35 million, and a dividend of $0.22 per share was declared. The strong financial performance was driven by market volatility and the time charter portfolio's protective role in safeguarding against low market conditions.

• LPG Market Dynamics and Trade Inefficiencies:
• Global demand for LPG increased, with U.S. export volumes to India rising significantly from less than 100,000 tonnes in 2024 to over 1 million tonnes in Q2 2025.

• Inefficiencies in LPG trade patterns, such as the redirection of U.S. volumes to India and Southeast Asia, absorbed shipping capacity, pushing rates up.

• Panama Canal Congestion and Market Impact:

• Panamax vessels can transit through both the old and new Panama Canal locks, while VLGCs are not prioritized, leading to rerouting around South Africa and increased ton-mileage.

• The Panama Canal's limited capacity, particularly for container ships, contributed to the congestion, impacting VLGC market rates.

• Fleet Growth and Market Absorption:

• The current VLGC fleet consists of 409 ships, with 111 new vessels expected by year-end, but this growth aligns with increasing LPG volumes from the U.S. and Middle East.
• The market efficiently absorbed the fleet growth due to inefficiencies in trade patterns and increased shipping demand.

  Sentiment Analysis:

  • TCE exceeded guidance ($38.8k/day vs $35k guided); Q3 is ~90% fixed at ~$53k/day; net profit after tax $43M and EPS $0.23; dividend of $0.22/share declared (110% of quarterly shipping profit); liquidity strong at $708M. Management cites robust U.S. LPG exports, tight VLGC supply, and Panama Canal inefficiencies supporting rates, while flagging the canal as the key wildcard.

  Q&A:

  • Question from Thomas Christiansen (N/A): With 111 vessels in the orderbook, is fleet growth a concern and how will you mitigate it?
  • Response: Demand growth and trade inefficiencies should absorb supply; BW LPG will lift time-charter coverage toward ~40% to protect downside.
  • Question from Thomas Christiansen (N/A): Panama flag no longer registering >15-year vessels—impact on VLGC market and BW LPG?
  • Response: Minimal; owners can flag elsewhere, so no material commercial impact expected.
  • Question from Clement (N/A): Do you still have purchase options on time chartered-in vessels?
  • Response: Yes, one option later in the decade; none in the near term.
  • Question from Clement (N/A): Why is Q3 guidance softer than spot levels—was much fixed before rates rose?
  • Response: Time-charter portfolio, dry-dockings, and voyage positioning dilute realized TCE; detailed split to be provided later.
  • Question from Clement (N/A): How many ships will dry-dock and is there yard congestion?
  • Response: Another ~6–7 ships this year; no congestion observed.
  • Question from John (N/A): Do U.S. flag/naval priorities affect Panama Canal congestion?
  • Response: No; congestion is mainly from container traffic and rising ethane carrier transits.
  • Question from Andreas (N/A): Why has SG&A declined and is this a new run-rate?
  • Response: G&A fluctuates due to Product Services incentive true-ups tied to realized profits; not a stable base.
  • Question from Andreas (N/A): Why are BW LPG’s achieved/guided spot rates lower than peers?
  • Response: Guidance includes time charters and dry-dock impacts plus positioning effects, not pure spot.
  • Question from Peter (N/A): How do VLACs affect VLGC market and when will scrapping start?
  • Response: VLACs trade like VLGCs until ammonia demand materializes; scrapping unlikely near term given strong markets and alternative uses for older ships.
  • Question from Olaf (N/A): Will you extend current time charter-in contracts?
  • Response: Decisions will be made closer to expiry; updates to follow in H2.
  • Question from Unidentified Analyst (N/A): Is the ton-mile upside from U.S.–China tensions still present?
  • Response: Unclear; U.S.–China flows are normalizing, while Q2 saw a temporary U.S.–India surge; needs more time to quantify.
  • Question from Unidentified Analyst (N/A): Ethane/LPG optionality at U.S. Gulf expansions—expected split?
  • Response: Nederland to start LPG then phase ethane in 2026 (~50/50); Enterprise expansions include ethane-only capacity, implying significant ethane share.
  • Question from Chandan (N/A): What’s driving higher containership congestion at Panama?
  • Response: Likely broader trade dynamics and more ships competing for limited canal slots; no precise read from management.
  • Question from John (N/A): Are ~$70k/day VLGC spot rates sustainable into H2 2025?
  • Response: Current fundamentals support them, but Panama Canal conditions remain the main volatility risk.
  • Question from John (N/A): How are Q4 days booked and what’s the impact?
  • Response: About 30% locked near ~$45k/day; ~70% remains spot-exposed.