Segments of the BW entity are reporting today - both BW LPG & Hafnia.
Quick glance at BWLP
Will dig in more later …
03/07
Busy week dealing with work, market developments and tariff impacts.
As noted in prior BWLP threads, BW LPG (BWLP) is a complicated entity. But, what I have learned in the last couple of BWLP presentations and earnings calls, don’t focus on the revenue. BWLP has two segments - trading and shipping. The trading side generates a lot of revenue, but has slim margins. In addition, trading income is recognized over several quarters. On the flip side, shipping generates lower revenue, but higher margins. Among the factors that help the shipping side - the charterer pays for the fuel on the shipping side.
The big event for BWLP in Q4 2024 was the completion of the Q3 2024 announced event - the acquisition of 12 VLGCs from Avance Gas. Although the deal was over $1B, a decent chunk of the deal was financed via issuance of BWLP shares to Avance Gas. Also, the major owner provided a shareholder loan to cover a portion of the purchase. Side item, the acquisition does impact developments going forward.
Specifically, the fact that 8 of the 12 VLGCs were built in China does complicate things. During the earnings call, BWLP CEO did a good job fending off the tariff + US port concerns. Given that he (or anyone else, for that matter) doesn’t know what the final US trade stance is going to be, there is no way of knowing the real impact at this time. It might be a more relevant question in the next CC.
The dividend payout surprised me. I mean, the payout has a leverage dependency. And since BWLP had higher gearing due to the Avance Gas transaction, my dividend outlook was more muted. I was thinking of a dividend payout may 25c - 32c (per share). If there was a seasonal shipping uptick, maybe 35c/sh. What happened?
Well, it doesn’t appear that it was from a shipping uptick. From the numbers, it looks like only about half the payout came from the shipping rate/segment. There is the trading side which, is black-box in nature (it has various factors and the recognition of gains is spread-out). That was possibly some of it. There is a second factor - gains on the sale of an older VLGC. A good chunk of the gains could have been allocated to the dividend. In any case, BWLP board opted for a dividend payout higher than I was expecting.
BWLP has a charter-in fleet. In some cases, BWLP has a purchase option on a charter-in vessel. In 2025, BWLP has exercised the purchase option on two of its charter-in vessels at very reasonable prices (around $70M each). Each vessel is less than 10 years old. Based on recent sale prices of other VLGCs, I think this is a very positive development for BWLP.
BWLP mgmt mentioned that the Energy Transfer LPG facility is coming online in 2025. IIRC, the BW conglomerate has a percentage of the facility output. While the products are LPG-related, the products are not all shipped via VLGC. So Ethane or Ethylene output would be shipped by a different type of vessel (BW Group has other vessels that can handle that type of cargo).
BWLP CFO did provide the stats for Q1 2025. About $36K daily with 91% done. Seems decent for a lower rate qtr (Last year’s Q1 did have a spike that helped rates. But, I don’t think events cause a repeat). OTOH, share price has retreated enough that I think share buybacks are a consideration (will have to parse the transcript again - I think it was mentioned)
https://seekingalpha.com/article/4762822-bw-lpg-limited-bwlp-q4-2024-earnings-call-transcript