Ardmore Shipping(US:ASC)2023-08-01 19:15Financial Data and Key Metrics Changes - Ardmore Shipping reported adjusted earnings of $23.7 million or $0.57 per share for Q2 2023, reflecting strong market conditions [6][17] - The cash breakeven rate has been reduced to $14,000 per day, down by $2,500 due to effective cost control and reduced debt levels [5][16] - Net leverage at the end of June stood at 18% with total net debt of $110 million, indicating a strong financial position [16] Business Line Data and Key Metrics Changes - MR tankers earned $27,500 per day in Q2 2023, with 45% booked for Q3 at $26,100 per day [6] - Chemical tankers earned $27,500 per day on a capital adjusted basis in Q2, with 63% booked for Q3 at $23,000 per day [6] Market Data and Key Metrics Changes - Global oil demand is forecast to grow by 2% in 2023, with significant contributions expected in the second half of the year [10][15] - The EU embargo is positively impacting the charter market, leading to a reordering of trade and increased tonne miles [9][10] - The product tanker order book is low at 9%, with only 16 million deadweight tonnes on order compared to nearly 70 million deadweight tonnes within the scrapping age profile in the next five years [14] Company Strategy and Development Direction - Ardmore Shipping is focused on capital allocation, including maintaining fleet quality, reducing carbon emissions, and returning capital to shareholders through dividends [8][21] - The company plans to invest in performance-enhancing technologies and carbon capture-ready scrubbers, with expected IRRs ranging from 20% to over 100% [18] - The near-term outlook remains positive, with expectations for market strength to build through the second half of the year [9][20] Management's Comments on Operating Environment and Future Outlook - Management highlighted that the market is set up for a seasonal increase in demand, with low inventory levels in Europe ahead of winter [20][28] - The company anticipates prolonged market strength due to minimal net fleet growth and increasing tonne miles [12][15] Other Important Information - Ardmore declared a quarterly cash dividend of $0.19 per share, consistent with its policy of paying out one-third of adjusted earnings [7] - The company has a strong liquidity position with $50 million in cash and $200 million in undrawn revolving facilities [16] Q&A Session Summary Question: Capital allocation policy and stock valuation - Jonathan Chappell inquired about the potential for share buybacks given the company's low leverage and high liquidity, suggesting that the stock may be undervalued [22] - Bart Kelleher responded that the company is focused on sustainable dividends and will consider additional capital returns if cash positions allow [23][24] Question: Investment opportunities in the current market - Chappell asked about the company's view on tanker asset values being "too expensive" and whether it affects investment decisions [25] - Anthony Gurnee acknowledged that while pricing is high, the company continues to seek opportunities for fleet investment [26] Question: Market conditions heading into winter - Chappell questioned how the market is positioned for the upcoming winter with sanctions in effect and low inventories [27] - Gurnee indicated that the market is likely tighter than last winter due to seasonal demand increases and low inventory levels [28] Question: Q3 performance and capital allocation - Omar Nokta asked about the company's Q3 performance and how it relates to capital allocation decisions, particularly regarding special dividends [30][32] - Gurnee stated that the company is pleased with its current leverage and would consider special dividends under the right conditions [33]