Stainless Tankers ASA (ZC0.F) Q3 FY2025 Earnings Call Transcript & Summary

Good morning, and welcome to the third quarter 2025 Results Presentation for Stainless Tankers. Andrew Hampson and Irene Michael here, both in London this time to run you through the third quarter presentation. I'll take the first bit and go through the highlights, and I'll talk a little bit about the market and Irene will fill in after me in a little bit more detail on the financial side. [Operator Instructions] So without further ado, let's just turn to the highlights page, and I'll take you through that. We're pleased to report a third quarter NAV total return up at 1.3%. And that now we have 54% total return, including distributions since inception. The NAV per share is at just under $5, just over NOK 50, which is, if you recall, is back where we issued that a few years back. EBITDA for the quarter is up at $4.4 million despite the fact that Gwen has not been in the fleet for roughly half of the quarter. The revenues were slightly higher at $10 million versus $9.6 million last quarter, not due to higher rates, due to higher utilization because of less planned and unplanned off-hire days. The poor results have not been as strong as we had hoped and we're averaging $16,800 in the third quarter versus about $1,000 a day higher during Q2. And November and -- October and November have also been trending slightly softer at just under $16,000 a day. We're still optimistic about the future, and we expect a small -- a slight improvement in the rates during the latter part of Q4 and as we move forward into 2026. I think we have a fairly balanced market. We're projecting annual fleet growth over the next few years of around about 4%. It's going to be slightly higher in '26 if the scheduled deliveries do actually deliver, but we'll talk about that in a minute and slightly lower in the latter part of the coming few years. But I think overall, on average, over '26, '27 and into '28, we are roughly balanced in terms of fleet growth and demand. Turning to the dividends, which are the important thing that we really wanted to discuss today. You will recall in September that we paid an ordinary dividend at $0.275, and we also topped that up following the sale of Gwen with a special dividend at $0.335, both of which were paid during September. 54% of the initial capital raised has now been returned to investors since inception. That 54% is, of course, the same figure as the total NAV return since inception because the NAV share price is the same as the issue share price. So that's sort of coincidental that those two figures are turning out the same for that reason. Clearly, we now have six vessels left in the fleet, whereas previously, we had nine vessels within the fleet, and we're also now handling an average pool earnings in the high teens figures versus $22,000 a day that we were experiencing at the peak just over a year ago. Clearly, that means that the current dividend level at $0.275 a share going forward is not sustainable at that level. We've got 2/3 of the ships remaining, and we're also having the lower freight rates. The company, however, does not intend to change its dividend payout policy, and we will continue full cash flow payouts, clearly with an eye on the CapEx and the forecast earnings coming up. And that we -- what we intend to do going forward is to fix a minimum level of dividend, which we're currently pegging at $0.135 per share per quarter and that we will look during the course of next year when we have greater visibility on the pool earnings and also on the progress with the last two dockings that we've got coming up over the next few months, and we will look at topping up that dividend periodically during the course of next year. So $0.135 a share being declared for Q3. That will be our target level going forward, and we will top that up during the course of next year, freight rates and pool earnings permitting. From an outlook point of view, as I say, we remain optimistic about the supply-demand balance. Clearly, the geopolitical environment, which has created so much uncertainty this year, is not something that we have a lot of control over, but I think things are quieting down slightly in that area, and hopefully, therefore, we have some positive input from that going forward. Just turning to the next slide. I think we've been through this before. This is just a development of the NAV in terms of share price -- sorry, in terms of NAV per share and book value per share. You'll note from the chart on the left, the dark blue bars, the NAV per share, now back at $4.99 per share. The light blue bar, the book value per share, is currently at $4.18. And bearing in mind that this is following the disposal of three of the nine ships that were previously in the fleet. The gap chart on the right just shows us the development since inception of the NAV per share. The net proceeds being slightly under $5 a share at $4.73 that having been topped up with the operating profit and the overall increase in vessel values over the period. And then after allowing for $2.70 in dividend total payout brings us down to the $4.99 per share figure, which we are reporting today. Just turning to the market. The chart on the left is showing the spot index in the blue bars, as we can see, has been falling over the last year, year and a bit, from its peak of just above $24,000 a day. The dark blue line is the Clarksons reported 1-year TC rate, which they're currently reporting round about $17,000, $18,000 a day. I would just note on that, that there are very, very few 1-year fixtures in this J19 class, and therefore, that figure maybe needs to be taken with a little bit of skepticism. And the red line and the dotted line for the forecast going forward is the historical Womar J19 pool results which, as you can see in the past, in the rising markets has been considerably better than the reported TC rate as one would expect. And we have fallen slightly below that reported line over the recent quarters. Expectations from the pool are that there is an average earnings of around about $14,000 -- sorry, $18,000 a day during the course of 2026, and that is denoted by the dotted line going forward, gradually increasing. As I said before, pool results, TCE for the quarter is at $16,800. And we're seeing a little bit of pressure on that during the October figures. In the near term, I think we've had demand growth, has been challenged a lot, mainly by uncertainty coming about through the tariffs and consequently, we've had to lower our rate forecast, as I've reported. The U.S. sort of China trade tariffs has been going a bit tit and tat, backwards and forwards, but it's clearly had an impact on the chemical trade demand so far this year, particularly generally on overall confidence. I think it has led to a tightening market. And clearly, the trade route reconfiguration, particularly issues around Suez and not transiting through Suez has caused quite a lot of trade route reconfiguration, which I think has been marginally positive during 2025. And we think that these issues will stabilize during 2026. Sanctions, we will just come on to, but the sanctions remains a big issue more in the crude and product markets but that flows through as we know to the chemicals at the end of the day. Overall, chemical tanker demand tends to trend very closely to overall GDP growth over the longer term. The chart on the top left is looking at the tonne mile demand. Overall compound annual growth rate of approximately 4%, but there's clearly periods where things stall slightly in that, in particular, the more recent geopolitical tariff issues that we've had during 2025 and also a bit of a stall during COVID, where we see lower periods of demand growth. We're confident that we've got about a 3% demand growth going forward, and that is in line with IMIF -- sorry, IMF forecast for GDP growth. We've added a slide and on the right, just all looking at the speed overall of the chemical tanker fleet. This is something we look at quite closely across all sectors. But interesting to note over the last decade that we've had an ongoing decline in average fleet speed and that this continues -- this appears to be continuing. Whilst one could always say that that's a sort of escape safety valve, if you like, that things could speed up if things get better. I think that the -- despite what's happening at IMO at the moment, I think there is ongoing environmental pressure to keep emissions low. And the easiest way to keep emissions low is to reduce speed. So we don't see that changing in direction anytime soon. I mentioned the geopolitics before and the sanctions, and we've just tried to take a few high-level figures here. On the left is just looking at various selected cargoes and looking at the tariff impact on those to just look at the percentage in tonnes of global trade, which has been tariffed or freshly tariffed, new tariffs in 2025. The biggest impact, I think, as we're all aware, has been very much in the car carrier trade and also in the gas and container trades, but chemicals are there with about 8% of chemical tonne transportation is now freshly tariffed during 2025. A lot of this just creates uncertainty and creates artificial changes in the demand scene. And also clearly, from a trade route configuration that changes and has increased tonne miles during the course of the year. On the sanctions side, we have the chart on the right is showing progressively percentage of tankers, which were sanctioned from 5 years ago, the gray bar, the light blue bar being a year ago and the dark blue bar being where we are today. I think the message is quite clear that there is an increasing number of vessels in the world fleet which are now falling under various sanctions, majority of this being Russia based in terms of the newer vessels or the vessels more recently sanctioned. Clearly, when -- as and when sanctions are more relaxed, I think there is a big issue as to what happens to these vessels. A lot of them are not as well maintained as the core trading international fleet. And there is a big question mark as and when these vessels are, if you like, released back into the market, if they will actually be able to be operated back in the internationally traded fleet. Our expectation is that they won't be and therefore, there is potential for around about 4% of the tanker fleet to be permanently excluded from the international trade that we operate in. And although these when looking here at crude and product, we know that there is a cascading effect into the chemicals as well, which we believe to be positive news for the overall supply side of the market. So I think we will -- sorry, one more, fleet growth supply side. I nearly forgot to talk about the supply side. We've got -- we're looking here only at the 10,000 to 25,000 stainless steel chemical tanker segment. We had 15 deliveries in the year-to-date. The order book is currently 15% of the global fleet. It's slightly down. There haven't been any further orders and the vessels are slowly delivering. There does appear to be quite a bulge of deliveries in 2026. We are very cautious that, that figure will actually play out as reported. When we look at the Chinese yards building a lot of these ships now, there's only really one out of the five main yards who are building them, who have a consistent track record of delivery of stainless tankers. The other four are all new at it. And we think it most likely that, that delivery bulge in 2026 will, in fact, not happen, and it will cross over with a lot of slippage into 2027. And in addition to that, some of '27 will swap over into 2028. So we're looking more of the average deliveries coming up over the next 2 to 3 years rather than the individual annual numbers. We've had slightly less vessels scrapped than we might have expected, but we've had two vessels out so far in the year, and we recon there may be potential for four more during. And as I say, orders now are down dramatically. There's only one vessel ordered in this size range during Q3. We've seen that across all shipping segments with new orders falling quite dramatically. A lot of it on the back of the USTR threats for port fees on Chinese vessels. And so that has had a big impact, I think, not just in the chemical tanker sector but across the other fees as well. So our forecast fleet growth is around about 4% over the foreseeable future. And we believe that there are opportunities on the upside in asset values from the various geopolitical events happening. So I think I will pass over to Irene to run us through the financials. Irene, over to you.

Thank you. So turning to the financial performance for the third quarter and starting with some information around the fleet. All vessels, including the Gwen, which is the time of [indiscernible], operated in the Womar pool throughout the quarter with the available ship days, total ship days following the sale 609 and revenue ship days 594, lower than the available by 15 days, reflecting all prior days. Utilization at 97.5%, higher than -- and improved than the previous quarter, reflecting also the reduced of hire days following the second quarter dry dock and repairs for the City Island and Lavraki. Net revenue slightly below $10 million and higher than the previous quarter, with -- and as already mentioned, an average net pool TC rate of $16,800 per day compared to approximately $17,800 per day. Vessel operating expenses, slightly higher than the previous quarter, mainly due to costs associated with the sale of the Gwen. And SG&A costs are below the previous quarter total expenses. Resulting in EBITDA, $4.4 million higher than the $3.9 million in the second quarter, mainly driven by the higher utilization and the impact on the lower SG&A cost. Moving on the sale of Gwen was completed on the 26th of August and realizing a book gain of $1.5 million and a net profit of $1 million compared to $2.8 million in the second quarter, primarily due to the book gain realized on the sale of the Gwen of $3 million and a higher depreciation for this quarter. Following an adjustment to the amortization schedule for dry docking for the 3rd intermediate surveys. This is a catch-up because of the adjustments on the amortization schedule and dates, and will smooth out in the following quarter. Moving on to the -- some selective balance sheet items. We will note that cash at the end of the quarter was $7.6 million. And following the sale of the Gwen, total fleet market value was decreased from $116,000 to -- $116 million to $99.3 million, resulting in a third quarter NAV at $67.4 million or $4.99 per share. LTV reduced also from 41.7% in the second quarter to 40.3% in this quarter. Other highlights to note that the warrant holder exercised Tranche 1 in September, and the company resolved that this will be cash settled, and they were settled during the same period. Throughout the -- also, the company paid a Q2 dividend of $0.275 per share and following the sale of Gwen, the company paid a special dividend of $0.335 per share, both paid in September. Finally, the company declared a Q3 dividend of $0.135 per share, which represents an annualized yield of 12.5% on current share price of NOK 44.2. To note that this was the yesterday's share price and the dividend is payable on or about the second of December. Taking into account this dividend, this reflects the total return of $2.83 per share, which is equivalent to over 57% the IPO proceeds. We can now conclude on our presentation and move on to any questions. Thank you.

Irene, thanks very much. Thanks very much for that. We haven't got any questions on the screen at the moment. So I can only assume, therefore, that we've covered everything that was possible in the presentation. So unless there are any questions, happy to take them now if anybody wants to type any, but equally happy if you want to message Stainless or Irene and myself personally if there's any further clarification that any of you need. So in the absence of any questions, we'll call it a day. We'll look forward to talking to you in the early part of 2026. And hopefully, we have more stable markets and good news to impart to you at that time. So thanks very much for your time and your attention, and we will talk soon. Thank you.