BW Epic Kosan, the world’s largest owner of ships carrying LPG and specialty gases, has reported a narrow profit for its first full business quarter after entering the business.
Net income in the three months to June came in at $3.3m. That was 28% below the combined $4.6m that the company’s two constituent entities, Lauritzen Kosan and Epic Gas, earned separately in the corresponding period of 2020.
BW Epic Kosan took shape after the two outfits merged in March this year to create an owner of 76 ships, which is controlled by the BW Group and listed on Oslo's Euronext Growth market.
Weighed by the effects of the Covid-19 crisis, BW Epic Kosan’s operating costs climbed at a faster pace than its time charter equivalent earnings did.
Expenses for crew changes rose and the company had more off-hires as it positioned vessels to facilitate such changes. Freight forwarding costs for spares increased as well.
During the second quarter, the fleet experienced 340 technical off-hire days, which included the impact of six routine dry-dockings, and 82 days due to Covid-19-related delays and associated crew transfers, the company said.
BW Epic Kosan's merger also created some one-off administrative expenses. A change to its fleet make-up to include semi-refrigerated and ethylene vessels, which are more expensive to operate, increased costs as well, said the company’s chief executive Charles Maltby in an earnings statement.
“For the balance of 2021, we expect the challenges of 2020 to remain with us,” Maltby said.
However, he saw silver linings in the market.
“There are strong pockets of residential LPG demand and increased activity in European refining and petrochemical plants,” he said.
“Expectations of growth remain buoyant,” the company added in an overview of gas markets.
LPG seaborne trade is expected to grow by 3.9%m, while fleet growth of smaller gas carriers is forecast to increase at a slow pace of 1.4%, before scrapping.
BW Epic Kosan has further growth in its sights.
One day after revealing the purchase of a pair of 9,000-cbm ethylene carriers from Odfjell, the company said it continues to focus on a strategy to grow the size of its fleet while maintaining a low average age.
Some analysts reacted well to the results. Norne Research, which has a 'buy' recommendation on BW Epic Kosan's stock, described the company's revenue performance of $81.7m in the second quarter as "very solid" and above its expectations.
"As the long-term outlook remains unchanged and positive... our positive stance towards the stock is likely to be reiterated," Norne analysts said in a flash note.
