Andreas Sohmen-Pao and Martin Ackermann believe the LPG market has entered 2018 with new momentum after two tough years.
Spot rates hit the lowest level since 2009 last year and Oslo-listed BW LPG closed 2017 with a deeper than expected fourth quarter loss.
Chairman Sohmen-Pao and chief executive Ackermann said last year was a test of the company’s strategy given the very challenging year for the industry.
“While there has been little exuberance in the LPG segment in 2017, the fundamentals for LPG trade remain reasonable, and we should start to see renewed momentum in 2018,” the pair wrote in the company’s annual report.
“The supply overhang is expected to ease, especially with possible acceleration in recycling of older vessels with an eye on upcoming environmental regulations, and the global fleet growth should stabilise.
“The strengthening of VLGC demand should provide some relief to freight rates. Demand is expected to increase in Asia, led by India and China.”
BW LPG rang up a loss of $19m in the final quarter of 2017, deeper than the $11.7m consensus, according to DNB Markets.
Ackermann said both lower rates and utilization impacted the performance, with 40% of the revenue coming from fixtures penned in the second and third quarters.
"In a rising market you are always lagging a little bit behind," the executive explained.
DNB analysts led by Nicolay Dyvik said: “Spot rate performance of $12.2k per day for the fourth quarter did not defend the earnings premium to VLGC peer Avance Gas over the past seven quarters, and EBITDA fell below Bloomberg consensus expectations.”
BW LPG completed the takeover of nine new ships from Aurora LPG in January of 2017 and sold five vessels for $185m during 2017.
Ackermann said on a conference call the ships were sold above long term parity value and generated additional free cash.
At the same time, it sold two vessels to a new joint venture to ship LPG to India.
“The joint venture allows us to create a strong base in India to serve customers in the region,” Sohmen-Pao and Ackermann said.
“We have also enhanced our customer coverage model through the establishment of a commercial presence in Oslo and a technical office in Houston.
“The establishment of these offices should enhance the quality of our service, improve our ability to capture growth opportunities and differentiate us from our competitors.”
