BW LPG Q2 2021 Analysis – Navigating a Challenging Quarter

A Challenging Quarter for the LPG Shipping Segment.

BW LPG Q2 2021 Financial Results Highlights

Q2 2021 Highlights

  • Generated Q2 net profit after tax of USD 23.1 million
  • Achieved Q2 VLGC freight rates of USD 24,500 per calendar day, or USD 27,500 per available day
  • Retrofitted four VLGCs with LPG dual-fuel propulsion engines in Q2
  • Declared Q2 cash dividend of USD 0.10 per share amounting to USD 13.8 million
  • Increased equity share in our Indian joint venture to 88.4%, leading to a net gain of USD 9.8 million
  • Secured USD 45 million financing for the retrofitting of six LPG dual-fuel propulsion engines
  • Concluded the sale and delivery of one vessel in April, one vessel in July, and two vessels in August
  • Exercised the purchase option on one time charter-in VLGC, with purchase expected to generate a ROCE of 8%


The second quarter of 2021 was challenging. VLGC freight rates fell below opex for several months, before staging a modest recovery. We navigated the market with a returns-focused mindset – we sold older vessels to generate attractive returns, secured our first ESG-related loan facility, and made good progress on our LPG retrofitting program.

Covid Implications on Operations

We completed approximately 30 inspections and safely embarked and disembarked more than 500 crew with no delays to port operations. Our operations and crew changes continue to be challenged by travel restrictions. We thank port authorities and health facilities around the world who have set aside resources to vaccinate our crew. Without our crew, our ships cannot sail; and if our ships cannot sail, we cannot deliver cleaner energy to the world.

A Commitment to Decarbonization – Now Well-Underway

We are more than halfway through our retrofitting program, BW LPG’s keystone project for decarbonization representing an investment of over USD130 million. We now have nine Very Large Gas Carriers (VLGCs) on water serving customers with the sector’s lowest emissions profile, one at yard and with five more VLGCs to go.

Pioneering Technology, Innovative Approach

Showcasing an innovative approach to increasing operational efficiency, BW Balder was the first VLGC to receive LPG bunker via ship-to-ship transfer (STS) with LPG carrier Epic St. Martin. Our retrofitted vessels refuel as they load, saving turnaround time and increasing operational efficiency. Read more here.

The infrastructure for distribution and bunkering is already largely available to serve potential marine market demand. There are many LPG storage facilities that can be used for LPG bunkering, as well as small-size LPG carriers that can be used for STS bunkering.

Strong Commercial Performance

Q2 2021 VLGC freight rates were USD 24,500 per calendar day, or USD 27,500 per available day with 96% commercial utilization. Time Charter Equivalent (TCE) income decreased to USD 94.0 million for Q2 2021, mainly due to lower LPG spot rates and lower fleet utilization, the latter due to the retrofitting of four VLGCs with LPG dual-fuel propulsion engines.

We concluded the sale and delivery of BW Empress in April which generated USD 40 million in liquidity and resulted in a USD 10 million net gain. Another gain of USD 10 million materialized after we increased our share in our Indian subsidiary from 50% to 88%. Our equity investment is now accounted for as a subsidiary.

After the end of the second quarter, we sold and delivered BW Confidence, BW Boss and BW Energy. These three transactions added USD 81 million to our liquidity and resulted in a net gain of USD 9 million. We also exercised our purchase option for the Yuricosmos, which we have now renamed BW Niigata. This purchase is expected to generate a return on capital employed (ROCE) of 8%.

Solid Finances

We reported a Q2 2021 net profit after tax of USD 23.1 million, yielding an annualised return on equity of 7.1% with USD 80.8 million of free cash flow. EBITDA was USD 54.8 million for Q2 2021, representing an EBITDA margin of 58.3% for the quarter. Earnings per share was USD 0.16. Our net leverage ratio continues down from 42% at the end of the first quarter, to now 40% at the end of Q2; the lowest in five years.

The Board declared a Q2 2021 cash dividend of USD 0.10 per share amounting to USD 13.8 million.

Our First ESG-Related Finance Facility

In August, BW LPG secured a USD 45 million transition revolving credit facility to finance the retrofitting of six VLGCs with dual-fuel LPG propulsion engines at a margin of LIBOR + 1.7%. This is an upsize of our existing USD 290 million term loan facility whose terms remain unchanged, and is our first transition financing done in tandem with our journey towards net zero carbon emissions.

Market Outlook

VLGC freight rates showed strong improvement in Q2 2021. Nevertheless, the market remains volatile, with rates declining in June and falling below cash breakeven in early July. For the rest of 2021, we expect VLGC freight rates to average above cash breakeven, and for volatility to remain high. In the medium term, we remain optimistic for 2022, but the high number of recent newbuild orders has increased the uncertainty for 2023.

Read More

– Read about LPG and its benefits at The World LPG Association.
– Read about the benefits of LPG as marine fuel.
– Read about our Q1 Analysis here.

Topics: earnings, market review, financial analysis, LPG market, liquefied petroleum gas trends, emissions reduction, carbon reduction,community involvement, community contribution, local interactions, CSR, Sustainability, environmental protection, technology