StealthGas, a US-listed owner of small and mid-sized LPG carriers, unveiled the purchase of two newbuildings on Wednesday, amid some of its best financial results in years.
The Harry Vafias-led company said it bought two 40,000-cbm LPG newbuildings currently under construction in South Korea.
The ships, which cost about $117m in total, are expected to be delivered in the second half of 2023.
That came as the company reported net income increase almost eightfold to $12.2m in the second quarter, from $1.6m in the same period of 2021.
Looking at the entire first half of the year, profit rose at a similar pace to $19.8m from $2.4m.
“I am very pleased with the results we announced today, as it has been the most profitable six months for our company for over a decade,” said the company’s board chairman Michael Jolliffe.
Demand for StealthGas’s 40 ships was “robust” in the second quarter, Jolliffe said. “All vessel sizes in our fleet showed improving results and particularly the handysize vessels boosted our bottom line,” he added.
Positive trends
A turnaround has been seen in the world's largest LPG importer, China, which bought more of the stuff as Covid-19 restrictions there eased, Vafias explained to analysts in a conference call on Wednesday.
Another boost is coming from Europe, a key market for the small LPGs StealthGas is specialising in. Long-haul imports from the US increased there following conflict in Ukraine.
“We expect this trend to continue in the near term,” Vafias added.
As a sign of that robust demand, StealthGas announced that five of its ships concluded new charters over the past three months, or extended existing ones “at similar or better vessels”, increasing total contracted revenue to $72m.
That amount increases when including deals for another two vessels StealthGas holds in cooperation with joint venture partners.
Despite global geopolitical challenges and inflationary pressures, the company said it remained optimistic for the LPG shipping market.
This stance is probably also reflected in the company’s decision last month to buy the two LPG newbuildings. StealthGas said they are being acquired from a related party.
Brave Maritime, the Vafias family’s private arm, is known to have ordered five such vessels at Hyundai Mipo in South Korea between late 2020 and in early 2021, when newbuilding prices were lower, at levels below $50m apiece.
“If we were to place a new order today we would expect delivery of these vessels in 2025,” Vafias told analysts in a conference call to explain the rationale of the resale.
StealthGas said it expects to finance the acquisition of its two newbuildings from its existing cash and the arrangement of a new bank facility, subject to customary closings.
StealthGas will own 100% of the two newbuildings. A third vessel the company already has under construction is owned through one of its two existing joint ventures.
Any fresh orders, however, don't seem to be on the cards.
“As [newbuilding] prices are today, we would refrain from ordering newbuilds,” Vafias said at the conference call.
Confirmed asset play
StealthGas also confirmed on Wednesday the lucrative sale of a secondhand ship by one of these joint ventures earlier this year.
TradeWinds reported last month that the ship is the 38,500-cbm Eco Nebula (built 2007), which went for about $27.75m and has been renamed Manta Salacak.
This compares with the $20m that Vafias and his joint venture partners spent to acquire the vessel three years ago.
Commenting on the profit margin from the Eco Nebula deal, Vafias said it was a shade below $10m, and generated at least $16m in cash.
“The company expects that the net proceeds from the sale after debt repayment, along with any trading profits and remaining capital will subsequently be distributed to the partners,” StealthGas said on Wednesday.
