BW Epic Kosan, an owner and operator of 70 LPG carriers, delivered third-quarter results described by analysts as solid and said it expects continued positive profit momentum over the coming months.
In the longer term, however, inflation, high energy prices and negative margins in the petrochemical industry — a large client — are casting uncertainty, the Singapore-based company said in its latest set of financial results.
Net income more than doubled in the third quarter to $9m from $4.4m in the same period last.
Chief executive officer Charles Maltby attributed the result to lower operating costs and tighter LPG shipping markets that helped improve revenue and timecharter equivalent earnings.
Revenue climbed to $94.9m from $92.2m.
Norne Securities, which has a “hold” recommendation on the company’s stock trading in Oslo, expressed satisfaction with the earnings.
“Improving revenues and declining costs is always a good recipe for solid results and we saw a record-high Ebit of $14.4m reported,” Norne analyst Mindaugas Cekanavicius said in a note.
But he added there was some uncertainty in the market looking forward due to high energy prices, inflationary pressure and negative margins in the petrochemical industry.
BW Epic Kosan, which manages ships with a capacity between 3,000 cbm and 12,000-cbm said it expected to sustain profit going forward as demand for the LPG, petrochemicals and specialty gases carried on its ships traditionally rises in the winter months.
The market for smaller LPG vessels remains tight, it said.
According to its presentation, LPG seaborne trade is set to increase by 3.5% in 2022, a faster pace than the 2.2% at which the global fleet of smaller gas vessels expanded over the same period.
“Flexibility of our vessels provides the potential for improved fleet utilisation and earnings,” the company said in its outlook.
BW Epic Kosan is the product of a merger last year between Lauritzen Kosan and BW. Following that deal, the company is controlled by the BW Group and Lauritzen owns a 28.8% stake.
Norway’s Odfjell, another shareholder, is considering disposing of about 4% of BW Epic Kosan stock it received after selling its last two ethylene/LPG carriers to the company.
Out with the old
In its earnings statement on Tuesday, the company revealed it sold one of its oldest ships during October, as it shakes out such vessels to renew its fleet while benefiting from rising secondhand prices.
BW Epic Kosan didn’t identify the ship sold but said it’s a 6,300-cbm pressurised vessel built in 2000, which it had under a bareboat charter contract. The company exercised a purchase option to buy the ship and then immediately sold it on at a premium to book net cash proceeds of $5.2m.
A comparison of BW Epic Kosan’s current fleet list with a previous one suggests the ship divested is the 6,300-cbm Epic Balta (built 2000). Brokers reported that the vessel sold at the end of October for a gross price of $6m to Thailand’s Siam Lucky Marine.
Japan’s Sugahara Kisen had been listed as its previous owner. The Epic Balta is already trading with Siam Lucky Marine as Schumi 8.
The company said on Tuesday it has also agreed to sell of one of its smaller pressurised vessels, with delivery scheduled by the end of the year.
None of these ship sales has a material impact on its future earnings.
