Ardmore Shipping Corporation · NYSE:ASC
Ardmore Shipping — Q4 2022 Earnings Presentation
49 slides from Ardmore Shipping's earnings presentation, Feb 14, 2023
Slide 1: Earnings Presentation | Fourth Quarter and Full Year 2022 & Investor Day 2023
Earnings Presentation | Fourth Quarter and Full Year 2022 & Investor Day 2023
Slide 2: To Submit Questions for the Q&A Session
To Submit Questions for the Q&A Session Ardmore@IGBIR.com 2
Slide 3: Disclaimer
Disclaimer This presentation contains certain statements that may be deemed to be “forward-looking statements” within the meaning of applicable U.S. federal securities laws. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, a
Slide 4: Ardmore Team
Ardmore Team Name History Curtis Mc Williams ▪ Director of Ardmore since 2016 and appointed Chairman of the Board effective January 2019 ▪ President and CEO of CNL Real Estate Advisors, Inc. and President, CEO and Director of Trustreet Properties Inc. Chair of the Board ▪ MBA Chicago Booth School of
Slide 5: Contents
Contents 5 I. Earnings Presentation Fourth Quarter and Full Year 2022 II. Strategy Overview III. Commercial Platform IV. Market Outlook V. Summary VI. Appendix 5
Slide 6: Highlights
Highlights 6 ▪ Reporting the most profitable year for Company thus far, with adjusted Strong Build in EPS(1) earnings of $143.5 million, or $3.74 per share $3.74 ▪ 4Q 2022 performance reflected continued strength in product and chemical tanker markets, with adjusted earnings(1) of $54 million, or $1
Slide 7: Product and Chemical Tanker Outlook
Product and Chemical Tanker Outlook 7 Outlook remains positive as we continue to see upside volatility ▪ Market outlook remains strong: Refinery Utilization Recovering Sharply(2) 100% o Pronounced re-ordering of global trades due to Ukraine / Russia conflict 95% with the EU Refined Product Embargo a
Slide 8: Dividend Payment
Dividend Payment 8 Ardmore is now pursuing all capital allocation priorities simultaneously as it declares a dividend ▪ Ardmore introduced its Capital Allocation Policy in March 2020 with Annualized Current Yield of 11% following priorities: Three Months Ended Dec 31, 1. Maintain fleet over time (nu
Slide 9: Continued Focus on Financial Strength
Continued Focus on Financial Strength 9 Positioned to capitalize on value-enhancing opportunities through the cycle ▪ Net leverage reduction from 54.5% in 4Q 2021 to 25.5% in 4Q 2022, with Meaningful De-levering of Balance Sheet Continues total net debt of $160.8 million at the end of December 2022
Slide 10: Financial Highlights
Financial Highlights Earnings strength driven by strong TCE performance alongside effective cost control ▪ Adjusted earnings of $54 million, or $1.30 per share, for 4Q 2022 Fleet TCE(3) for 4Q22 Up 241% YOY and $143.5 million, or $3.74 per share, for FY 2022 (1) 4Q 2022 4Q 2021 2022 2021 MR(4) $43,1
Slide 11: Fleet and Operational Highlights
Fleet and Operational Highlights Continuing to reinvest in the fleet to optimize performance ▪ Expect to complete eight drydockings and seven ballast water Eight Drydockings Scheduled for 2023 installations in 2023 4 4 o Represents total capex spend of approximately $20 million 3 ▪ Carbon capture-re
Slide 12: Significant Operating Leverage
Significant Operating Leverage YTD TCE rates equates to free cash flow generation of $200mln (or ~30% of current market cap) on an annual basis (1)(2) EPS: Impact of Higher TCE Rates(2) NAV Accretion: Incremental Impact of Higher TCE Rates(2)(3) $25.0 $15.00 + $13.82 $20.16 $20.0 + $9.82 $10.00 Incr
Slide 13: Contents
Contents 13 I. Earnings Presentation Fourth Quarter and Full Year 2022 II. Strategy Overview III. Commercial Platform IV. Market Outlook V. Summary VI. Appendix 13
Slide 14: Ardmore Shipping: Executing on a Consistent Strategy
Ardmore Shipping: Executing on a Consistent Strategy 14 NYSE listed with market cap of $680mln and ADTV of $12mln(1) Fleet of 29 Ships 22 5 2 Owned on Time under Charter-In Commercial Management Fully Integrated Company Commercial Platform and Technical Management(2) Product Comprehensive Founded IP
Slide 15: Our Philosophy: Combining Performance & Progress
Our Philosophy: Combining Performance & Progress 15 Driving performance today while simultaneously pursuing progress gives meaning to what we do Performance Annualized Cash Breakeven ROE = Dividend Yield of $14,500 46% 11% Cost efficiencies and reduced Basis 4Q 2022 run Declared a dividend of $0.45
Slide 16: Evolution of Ardmore
Building Organizational Capability: The Long Game 16 Ardmore is exceptionally well positioned to build on its performance track record and continue to generate long-term shareholder value Fully Integrated Company 2011 2021 2023 One of the first to order Launched the Ardmore Energy Payment of Quarter
Slide 17: Balancing The Energy Transition with "Energy Realism"
Balancing The Energy Transition with “Energy Realism” 17 Ardmore’s Energy Transition Plan (”ETP”) drives performance today while positioning Ardmore for the long-term ▪ In February 2021, Ardmore announced its ETP (an extension of its current Recent Initiative: Variable Speed Drives strategy), focuse
Slide 18: Capital Allocation Policy: Anchoring Ambition in Reality
Capital Allocation Policy: Anchoring Ambition in Reality 18 Building and returning value to shareholders in a cyclical industry Maintain fleet over time Continue to invest in fleet to optimize performance Sustain leverage below 40% Net leverage down to 25%, from 55% at the start of 2022 Ardmore will
Slide 19: Contents
Contents 19 I. Earnings Presentation Fourth Quarter and Full Year 2022 II. Strategy Overview III. Commercial Platform IV. Market Outlook V. Summary VI. Appendix 19
Slide 20: Commercial: Key Messages
Commercial: Key Messages Thriving in Volatile Markets Continuous TCE Optimization Culture & Trading Focus 20
Slide 21: Broad Access to Global Trading Options
Broad Access to Global Trading Options Covering large, diversified base of high-quality customers across segments Houston Cork Singapore ▪ Freight Trading ▪ Executive Management ▪ Freight Trading Asia & Americas ▪ Commercial Operations Middle East ▪ Commercial Operations ▪ Freight Trading Europe ▪ C
Slide 22: Team Culture: Embracing Volatility
Team Culture: Embracing Volatility Purposeful & performance-focused ▪ Globally connected trading team continuously operating across three hubs ▪ Proven performance record relative to market levels across all cycles ▪ Staff carefully selected with diverse cultural and professional backgrounds enablin
Slide 23: Intentional Commercial Strategy Across Cycle
Intentional Commercial Strategy Across Cycle 23 Ardmore’s excellent TCE performance resulting from a dynamic team with strong culture Performance TCE Trading Culture Optimization Book Exposure Highly Responsive Product and Management and Nimble Chemicals Overlap Throughout Cycle Creative Voyage Stro
Slide 24: Timely Pivot: From Charter Coverage to Market Exposure
Timely Pivot: From Charter Coverage to Market Exposure24 Time charter book (in and out) dynamically managed through the cycle 6 Cumulative returns vs. spot TCE = $32mln since January 2021(1) $60,000 4 $50,000 2 $40,000 Avg. TC-In Rate No. of Vessels TCE ($ / day) $13,150 / day - $30,000 (2) $20,000
Slide 25: Case Study I: Global Combination Trades
Case Study I: Global Combination Trades 25 Combination of inter-regional jet, diesel, 30% premium to market over 5.5 months 9:1 laden to ballast ratio soybean oil voyages Ballast Laden 25
Slide 26: Case Study II: Grade Crossover Trades
Case Study II: Grade Crossover Trades 26 Combination of edible oil, chemicals and 45% premium to market over 5.5 months 9:1 laden to ballast ratio petroleum products Ballast Laden 26
Slide 27: Case Study III: "The Whole Hog"
Case Study III: “The Whole Hog” 27 Combination of short and long runs, plus 20% premium to market over 8.5 months 8:1 laden to ballast ratio long back-hauls Ballast Laden 27
Slide 28: Contents
Contents 28 I. Earnings Presentation Fourth Quarter and Full Year 2022 II. Strategy Overview III. Commercial Platform IV. Market Outlook V. Summary VI. Appendix 28
Slide 29: EU Embargo and G7 Price Cap
EU Embargo and G7 Price Cap 29 29
Slide 30: EU Embargo: Diesel Dislocation
EU Embargo: Diesel Dislocation(1) 30 Lack of self-sanctioning on diesel and other refined products likely to lead to immediate tonne-mile impact Self-Sanctioning on Russian Crude Exports ahead of Embargo…. ….while Russian Diesel Exports have Remained High 4.0 1.4 Ukraine / Russia Conflict on Februar
Slide 31: Voyage Distances Multiplying
Voyage Distances Multiplying 31 EU Refined Product Embargo forecast to meaningfully increase tonne-mile demand Potential tonne-mile demand increase of 7-8%(1) Russian Ports – Rotterdam 4 – 6 Days China – Rotterdam 40 – 42 Days Houston – Rotterdam 19 – 21 Days MEG / West India – Rotterdam 24 – 26 Day
Slide 32: Russian Diesel: New Buyers in Remote Markets
Russian Diesel: New Buyers in Remote Markets 32 Shadow fleet expected to further decrease global efficiency Old Russian diesel trade flows Potential new Russian diesel trade flows 32
Slide 33: Industry Outlook
Industry Outlook 33 33
Slide 34: Widening Supply-Demand Gap
Widening Supply-Demand Gap 34 Even without factoring in the recent EU Embargo, product tonne-mile growth forecast to outstrip vessel supply Product and Chemical Tanker Net Fleet Growth(1)(2)(3)(4)(5) 4.5% Lack of net fleet growth combined with increased tonne-miles supports prolonged market strength
Slide 35: Consumption Above Pre-COVID Levels
Consumption Above Pre-COVID Levels 35 Underlying commodity consumption continuing to increase; chemical demand growth leading the way Oil Demand: IEA has Increased its Forecast for 2023(1) Positive Chemical Consumption Growth(2)(3) Chemical consumption highly correlated to GDP 105 1,200 $140 $120 1,
Slide 36: Robust Long-Term Demand Drivers
Robust Long-Term Demand Drivers 36 Favorable structural shifts converging in product and chemical markets ▪ Further demand growth forecast for already strong chemical tanker market Refinery Dislocation Boosting Tonne-Mile Demand(1)(2) (7.7% in 2023 vs. -3.4% in 2022), with several new petrochemical
Slide 37: Aging Fleet & Generationally Low Orderbook
Aging Fleet & Generationally Low Orderbook 37 Strongly increasing shift in fleet age distribution Orderbook for Product Tankers at Record Lows(1) Global Product Tanker Fleet Aging Aggressively(1) 180 70% 16 38% of fleet > 20 years old in 5 years 160 14 60% 140 12 50% 120 10 Orderbook as % Fleet Flee
Slide 38: Regulation to Amplify Supply-Side Gap
Regulation to Amplify Supply-Side Gap 38 Lack of clarity on how regulations, propulsion technology and fuels may evolve is slowing new order investment Environmental Regulations(1) Propulsion Technology & Fuel Types 2030: up to 40% reduction in carbon intensity 2050: 70% reduction target in carbon i
Slide 39: Contents
Contents 39 I. Earnings Presentation Fourth Quarter and Full Year 2022 II. Strategy Overview III. Commercial Platform IV. Market Outlook V. Summary VI. Appendix 39
Slide 40: Summary
Summary 40 Market: ✓ Second-half market strength continuing into first quarter ✓ Near-term outlook strong given re-ordering of product tanker trades ✓ Medium-term outlook positive for both products and chemicals based on strong fundamentals Company: ✓ Record annual earnings ✓ Thriving in volatile ma
Slide 41: Contents
Contents 41 I. Earnings Presentation Fourth Quarter and Full Year 2022 II. Strategy Overview III. Commercial Platform IV. Market Outlook V. Summary VI. Appendix 41
Slide 42: Key Environmental Regulations
Key Environmental Regulations 42 ▪ IMO initiative and now mandatory to report carbon intensity (Annual CO2 Emissions / (Dwt * Distance Sailed)) on an annual basis CII ▪ Small number of exclusions / correction factors that can be made (incl. deduction of emissions related to cargo (Carbon Intensity I
Slide 43: Development of Ardmore's Commercial Platform
Development of Ardmore’s Commercial Platform 43 2010 – 2012 2013 – 2015 2016 – 2017 2018 onwards ▪ Fleet grows from zero ▪ Fleet grows from eight to ▪ Fleet grows from 24 to ▪ Fleet under commercial to eight ships 24 ships 27 ships control grows up to 31 ships ▪ Employment via one to ▪ Increased end
Slide 44: Ardmore Product and Chemical Tanker Rates
Ardmore Product and Chemical Tanker Rates(1) 44 FLEET AVERAGE TCE MR ECO-DES(2) CHEMICAL(3) $47,026 $43,174 $40,308 $39,500 $38,861 $38,021 $34,800 $32,956 $30,739 $31,300 $27,806 $31,536 $28,544 $27,750 $21,970 $16,513 $20,254 $15,155 $14,801 $12,217 $11,390 $11,024 $13,645 $11,274 4Q21 1Q22 2Q22 3
Slide 45: EBITDA + vessel lease expense component (i.e. EBITDAR)
EBITDA + vessel lease expense component (i.e. EBITDAR) 45 Three months ended Twelve months ended Reconciliation of net income / (loss) to EBITDAR(1) December 31, 2022 December 31, 2022 In thousands of U.S. Dollars Net Income / (Loss) 53,937 138,454 Interest income (251) (471) Interest expense and fi
Slide 46: Fleet Profile
Fleet Profile High Quality Vessels Vessel Name Ownership Type Dwt Tonnes IMO Built Country Flag Specification Ardmore Seavaliant Owned Product/Chemical 49,998 2/3 Feb-13 Korea MI Eco-Design ✓ Modern, highly fuel-efficient Ardmore Seaventure Owned Product/Chemical 49,998 2/3 Jun-13 Korea MI Eco-Desig
Slide 47: Refinery Dislocation Boosting Tonne-Mile Demand
Refinery Dislocation Boosting Tonne-Mile Demand(1) 47 (1) 1. Closures based on announcement periods; some closures scheduled to physically occur in 2023 47
Slide 48: Refinery Summary and Seaborne Product Trade
Refinery Summary and Seaborne Product Trade 48 Regional Refinery Shift(1) Region Closures 2020 - 2026 Openings 2023 - 2026 Europe 1.2 - Australia 0.5 - Middle East - 0.8 Africa 0.2 1.0 America 1.6 0.7 China 0.7 0.7 Asia (excl. China) 1.7 6.0 Total (mbd) 5.9 9.2 Seaborne Product Trade Balances(2) 202
Slide 49: Ardmore Indicative Guidance 1Q 2023
Ardmore Indicative Guidance 1Q 2023 49 MR Eco-Design Spot TCE: $39,500 (55% Fixed) Chemical Tanker Fleet TCE: $27,500 (70% Fixed) Revenue Days: 2,390 Operating Expenses: $14 million Charter-In Expenses: $5.5 million Depreciation and Amortization: $8 million Overhead (Commercial and Corporate): $5.5