Ardmore Shipping Q3 Earnings Call Highlights

Key Points

• Ardmore earned $16.3 million, or $0.40 per adjusted share, in Q3 and declared a $0.27-per-share dividend. Adjusted EBITDA was $28.8 million, with vessel utilization at 99%.
• Freight rates accelerated into Q4: MR tankers averaged $57,600 per day to date, versus $27,000 in Q3, and recent bookings exceeded $80,000 per day. Management cited geopolitical disruptions, longer routes and low product inventories as demand supports.
• Ardmore sold a 2013-built MR tanker for $34.3 million and expanded its Handysize newbuilding orderbook to six vessels, with deliveries starting in 2028. Management plans to balance dividends and other shareholder returns with fleet renewal and growth.

Ardmore Shipping NYSE: ASC reported third-quarter adjusted earnings of $16.3 million, or $0.40 per share, as the tanker operator said geopolitical disruption and changing trade routes continued to support freight rates. The company declared a quarterly dividend of $0.27 per share, consistent with its policy of distributing two-thirds of adjusted earnings.

Chief Executive Officer Gernot Ruppelt said the company’s third-quarter results reflected a firm tanker market despite what is typically a seasonally slower period. He said momentum strengthened into the fourth quarter, with recent vessel bookings pointing to substantially higher rates.

“Geopolitical dislocation continues to reshape trade patterns, absorbing tonnage and boosting TCE rates,” Ruppelt said. He added that Ardmore continues to balance shareholder returns with investments in fleet renewal and growth.

Fourth-Quarter Rates Accelerate

Ardmore’s medium-range, or MR, tankers earned average time-charter equivalent, or TCE, rates of $27,000 per day during the third quarter. For the fourth quarter to date, the vessels had earned $57,600 per day, with 45% of available days booked, management said. Recent MR bookings were above $80,000 per day, according to Ruppelt.

The company’s chemical tankers earned $23,300 per day in the third quarter and $30,100 per day in the fourth quarter to date, with 60% of days booked. Ardmore said its Handysize chemical tankers have secured average charter rates nearing $50,000 per day over the past month.

Ruppelt said the company’s operating cash breakeven is $10,800 per day, providing substantial operating leverage as rates rise. President Bart Kelleher said the breakeven level is $11,700 per day when dry-docking and capital expenditures are included.

Ardmore reported adjusted EBITDA of $28.8 million for the third quarter and on-hire utilization of 99%. Kelleher said the utilization level reflected active ship-to-shore coordination and operational efficiencies.

Fleet Actions and Capital Allocation

During the quarter, Ardmore agreed to sell a 2013-built MR tanker for $34.3 million. The vessel was delivered to its buyer in mid-October. The company also exercised options for two Handysize tanker newbuildings, bringing its total orderbook to six vessels, with deliveries set to begin in 2028.

The newbuildings are designed to transport mainstream oil and refined products, as well as advanced chemical cargoes, edible oils and alternative fuels, according to management. Ardmore said it sold two older vessels during the year, while it acquired three modern secondhand MRs in the prior year at prices it said were about 30% below current market levels.

Looking ahead, the company expects fleet capital expenditures of $2 million for the remainder of the year and $13 million in 2027. Including commitments tied to the newbuilding program, Ardmore said its effective leverage stood at 32%.

In response to an analyst question about whether unusually strong cash flows could alter the company’s strategy, Ruppelt said Ardmore would continue to use several capital-allocation tools through the shipping cycle, including dividends, share buybacks, secondhand acquisitions, newbuildings and potential sales of older vessels.

He said the company is “very happy” with its current position, citing a modern eco-spec fleet and roughly 85% spot-market exposure entering the winter season. While Ardmore is prepared to operate its existing vessels through future cycles, Ruppelt said management would consider vessel sales if buyers offer attractive prices.

Market Outlook Centers on Inventories and Supply

Kelleher said product tanker demand is being supported by refining activity, low product inventories and longer shipping routes caused by changes in global trade patterns. The International Energy Agency forecasts global refining throughput will increase by more than 1 million barrels per day in the fourth quarter, with additional growth expected through 2027, he said.

Management pointed to low inventories in several key markets. European jet-fuel inventories are about half their level at the start of the year and below their five-year range, Kelleher said, while U.S. gasoline and diesel stocks were also below five-year lows. Ardmore estimated that the decline in global product inventories equates to more than 600 MR-equivalent cargoes of potential restocking demand.

The company also cited supply constraints in both the MR and Handysize tanker segments. Ardmore said the MR orderbook represents 18% of the current fleet, while half of existing MRs are expected to be more than 20 years old within five years. In Handysize tankers, the orderbook represents 6% of the fleet, while 75% of vessels are projected to be more than 20 years old within five years.

Older ships can face greater scrutiny from top-tier charterers on safety, environmental and compliance grounds, reducing effective vessel supply even before ships are scrapped, Kelleher said.

Ruppelt said the company expects near-term disruption, inventory restocking and longer-haul trade patterns to remain important market drivers. “The barrels are back, but the efficiency is not,” he said, referring to the need for product tankers to connect increasingly dislocated commodity markets.

About Ardmore Shipping (NYSE:ASC)

Ardmore Shipping Corporation NYSE: ASC is a maritime transportation company that owns and operates a fleet of product and chemical tankers. The company provides seaborne transportation services for refined petroleum products, such as gasoline, diesel and jet fuel, as well as certain chemicals and other liquid cargoes.

Ardmore's vessels primarily serve international trade routes, transporting cargoes between major energy and industrial markets. Its operations include commercial management, chartering and technical management of its fleet, with an emphasis on safe, efficient and environmentally responsible maritime transportation.

Founded in 2010, Ardmore Shipping is headquartered in Hamilton, Bermuda.

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