Ardmore Shipping(ASC) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Ardmore Shipping reported a net income of $22 million or $0.63 per share for the second quarter, with an annualized return on book equity of 30% [8][27] - The average daily TCE (Time Charter Equivalent) for the first quarter was $15,600, which increased to $25,500 for the second quarter, and further rose to $34,400 in the last two weeks [7][8] - Asset values for five-year-old MRs are now valued at $32.5 million, reflecting an 18% year-on-year increase [8] Business Line Data and Key Metrics Changes - The product tanker market has seen a significant uptick in demand due to changes in oil market dynamics, with product tanker ton-mile demand expected to grow 3% to 4% annually until 2026 [16] - The chemical tanker market is also experiencing high spot rates driven by urgent demand for liquid fertilizers and vegetable oils, with trade expected to grow by 3% in 2022 and 5% in 2023 and 2024 [17] Market Data and Key Metrics Changes - Global refinery throughput is expected to be 5% higher year-on-year in the third quarter, with significant increases in throughput in the U.S. Gulf and the Middle East [15] - The ongoing trend of refinery dislocation is positively impacting product tanker demand, with a projected increase in seaborne volumes of refined products due to refinery closures in various regions [15][16] Company Strategy and Development Direction - The company has shifted to full spot exposure as of February, positioning itself to benefit from a strong market [7] - Ardmore Shipping is focused on maintaining financial strength while exploring growth opportunities and potential returns of capital to shareholders [27][36] Management's Comments on Operating Environment and Future Outlook - Management noted that the market environment has changed significantly due to the war and its impact on oil markets, with no clear end in sight [27] - There is a renewed appreciation for the role of oil products in energy security, suggesting a turning point for the product and chemical tanker sectors [27] Other Important Information - Ardmore Shipping has not undertaken any voyages from Russia since the outbreak of the conflict and is focused on optimizing commercial performance elsewhere [8] - The company has sold three 2008-built MRs with a time charter back for two years, maintaining its commercial scale and earnings power [8][26] Q&A Session Summary Question: Impact of the war on market fundamentals - Management discussed the tightening of market fundamentals due to the war and the potential long-lasting effects on trade flows and commodity trading houses [30][32] Question: Capital allocation and balance sheet strength - Management emphasized the importance of balance sheet repair and the potential for capital returns as market conditions improve [36][40] Question: Leverage targets - The company aims to reduce its debt-to-capital ratio below 40%, currently around 50%, with the potential to achieve this quickly given the current rate environment [40] Question: Chartering strategy - Management indicated a focus on maintaining flexibility in chartering strategies, balancing between spot and time charters based on market conditions [48][50] Question: Chemical tanker market resilience - The chemical tanker market is currently experiencing disruptions, but management believes it will recover as the market stabilizes [52][54] Question: Scrapping dynamics - Rising rates may negatively impact scrapping, but management does not expect a complete disappearance of scrapping activity [60][61] Question: Lockdowns in China - Current lockdowns in China have led to lower consumption levels, resulting in increased exports, which may provide a tailwind once restrictions are lifted [62]