Avance Gas Holding Ltd., a leading player in the international shipping of liquefied petroleum gas (LPG), reported a strong financial performance in its first quarter, with a total bottom line of $163.6 million, marking its second-best earnings to date. The company also announced the sale of four ships, contributing to significant profits and cash release for the upcoming quarter.
Avance Gas declared a substantial dividend of $2.15 per share for Q1, amounting to $165 million. Despite volatile market conditions, the company achieved a record net income of $146 million, driven by freight and asset sales. Looking ahead, Avance Gas has contracted for the delivery of four medium-sized gas carriers in 2025 and 2026, and has extended the time charters for some of its fleet.
Key Takeaways
- Avance Gas reported a strong Q1 with a bottom line of $163.6 million and a net income of $146 million.
- A dividend of $2.15 per share has been declared, totaling $165 million.
- The company sold four ships, adding to Q2 profits and cash release.
- Avance Gas has booked 83% of Q2 days at $48,000 and expects to book the remainder at higher rates.
- The fleet now consists of 15 equal class ships, six equipped with scrubbers.
- Four medium-sized gas carriers are on order for delivery in 2025 and 2026.
- Avance Gas is ahead of IMO and Poseidon emission targets, with a 20% reduction in annual efficiency ratio since 2020.
Company Outlook
- Avance Gas plans to focus on spot exposure in the coming years.
- The company has one hedge in place for 50% of one ship at $70,000 per day.
- Drydocking for more ships is scheduled for 2022.
- The market outlook for VLGC is positive, with a good supply-demand balance expected.
Bearish Highlights
- The freight market is volatile, influenced by a cold snap in the US and inventory drawdown.
- Older ships may continue to trade beyond their economic life but carry the risk of accidents and pollution.
Bullish Highlights
- Strong growth in US exports and healthy levels in the Middle East and India.
- Avance Gas has a low cash break-even point, ensuring profitability.
- The company has seen muted fleet growth, with fewer ships being delivered.
Misses
- Retrofitting vessels for ammonia is uneconomical due to the abundance of VLGCs and VLACs.
- Congestion issues at the Panama Canal due to increased container ship traffic.
Q&A Highlights
- Avance Gas discussed its environmental sustainability efforts and compliance with emission targets.
- The company addressed the demand for LPG in China and the oversupply of PDH plants.
- Details about the dividend payout were provided, with a press release issued on May 22 and a payout date expected around May 31.
Avance Gas is set to continue its growth trajectory with strategic ship sales and an emphasis on environmental sustainability, while navigating a volatile freight market. The company's strong Q1 results and proactive measures suggest a positive outlook, with Q2 numbers anticipated to be released in August.
Full transcript - Avance Gas Holding Ltd (AVACF) Q1 2024:
Oystein Kalleklev: Okay. Thank you, everybody. And it's a pleasure to having you here. I just have the Executive Chairman. I'm not the CEO and Board Member of the company, but I'm sitting here together with our CFO, Randi Navdal Bekkelund, and we have some really good numbers to share with you today. Quite suddenly had an auto probably close to 25 degrees, so we will do this rather shortly, and I think the numbers speak for themselves. So let's jump into ordinary -- I have to go through the disclaimer -- the ordinary disclaimer. Yeah, the ordinary disclaimer, of course, we are providing some expectation, forward-looking statements, and some non-GAAP measures. So just be cautious about that and I would recommend reading the presentation together with the earnings release. Next slide. This time, we also have added a special caution. The dividend in this presentation is so strong that we also have to have a medical warning because there is some risk of shortness of breath, increased blood pressure, general of it [indiscernible] impulses. I forgot to also add here that there might be some PTDS, post-traumatic dividends syndrome. So let's start with the highlights of the quarter being, of course, the dividend and our last year was a fantastic year for Avance guests. We delivered our second-best numbers ever, $163.6 million in total on the bottom line. And of course, given the healthy cash balance we had, we also paid out slightly in excess of that, 101% payout ratio, almost $165 million in dividends for those four quarters. Last year on top of that, we also announced that we were selling quite a few ships, four ships. We announced selling higher through year end with delivery of those ships to new owners in Q1 and Q2. So at face, it's being delivered to new owners in Q1, but it will be a substantial profit. And then we just had one last ship being sold last week, May 9, which is adding additional profits and cash release to the numbers for the second quarter. So with all these sale transactions and also what are good numbers which really come into, we decided to really hit the button on the dividend for this quarter. So we talk to each other and now why not pay out a dividend for Q1 similar to the whole dividend for last year. And given our cash position and number three, easily able to do so and we are just -- declaring a dividend of $2.15 equal to $165 million for Q1 in total. When we also sold the ships in this -- we announced the sale of the two newbuilds for delivery this year, December last year. We also said that our aim was to distribute this money, most tax-efficient to our investors, so for those who have paid attention, we also asked the Annual General Meeting, which we were at in Bermuda about 2.5 weeks ago to also authorize our reduction in our share capital. So this is a dividend of $2.15. We are dividing this into two different types of returns is $0.99 is a reduction in the par value of the share, which depending on your tax jurisdiction, could become the best return of capital rather than return on capital, which in some tax jurisdiction should then give you a . The remainder $1.16 is ordinary dividend return on capital. So hopefully a lot of our shareholders, especially here in Norway, will benefit from having a very tax-efficient distribution, but this might also apply to US where typically the dividend is compared to the earnings per share. And we are paying our dividend in excess of our earnings, given the asset sales we have been completed. So that should hopefully give you some better tax of your dividend. But of course, we are not tax advisors; we are shipping people; and we try to make this as good as possible for our shareholders. So let's jump into the other highlights and actually there's quite a few of them, but I guess the most focus this time would be on the dividend, but we delivered the low numbers for first quarter. First quarter wasn't an easy quarter. We had this all-time high levels in Q4, our booming market, and then the market fell off a cliff early in the year. And this was further magnified by the cold snap in US, which resulted in a lot of increase in demand for LPG in the US, resulting in much higher prices, inventory draws, which really took down the arbitrage, which was like close to $400 per ton down to close to $100 per ton, $115-ish, I believe, was around the low point, which dragged down [indiscernible] all the way from top of market, $140,000 to less than $10,000. So this was a quite volatile quarter. But however, we had booked a lot of long voyages prior to this cold snap. So when we guided on Valentine's Day, 14th of February, we already guided that we were booked 70% at $70,000 on average on TCE numbers and said that the okay, if we are booking the rest of the days, we should be around $60,000 and we ended up $61,000 on the discharge to discharge numbers, which we think are the most relevant numbers because it's our own economics. Some might recall that analyst or media was a bit disappointed about our numbers Q3 last year when the market really took off because the auditors have decided that we follow the accounting standard IFRS 15, where we book in the official numbers, we book our numbers on a load to discharge basis, which gives a bit of a timing effect. And when the market is such volatile, these timing effects are being quite big. Timing effect for Q1 is $21 million in total which actually dragged up our reported numbers to $78,800, which is the highest reported number we have had since -- is it 2015 or '14, but it's a long time, $78,800 is a very high number. That is the actual IFRS TCE number. So these strong numbers together with this $85 million profit in the quarter from sale of ships resulted in our block bursting quarterly profit of $146 million or $1.91 highest ever by far. Of course, but it's -- what I like about it is it's not really only driven by the asset sales. Of course, for January, I think $85 million, but actually the underlying profits from freight is very sound despite we had this volatile market. The market, of course, come back again. Rates today are in the $60,000 and the Fed forward rates for the second half of the year are -- yesterday being quoted at 60 -- $66,000, so [indiscernible] condition for the market, the cold snap was real low inventory levels in the US, which I will come back to are back to very high levels. So we have a very good outlook for the market, and that's also one of the reasons for paying this good dividend. And then in terms of Q2, we elected to do some short voyages when the market was in the [indiscernible] going Asia, Japan, and then eventually at the market recover, we will be doing more of the longer voyages and we booked already now 83% of the second quarter at $48,000. Of course, it's lower than Q1. But still we have our cash breakeven in the low $20,000. So it's still super profit also expected in Q2. And given where the market is today, we do expect to book the remaining 17% of the days at higher level, which really give also strong numbers for Q2. On top of that, we also have, as I mentioned, sold one ship without substantial profit. Say Avance Castor was sold on last week, $120 million, giving us a profit of $36 million, and a cash release of $62 million. So let's look at the guidance then. So as I mentioned, 61,000 -- 60,000 earnings. And then we have some hedges which are in case the rates by $1,000 to $60,900. Spot vessels actually outperforming the TCE vessels even in Q1 with the volatile market. But this given the fact that we booked a lot of ships on long voyages and if you are doing Cape, US Cape, Asia Cape typically we are booking our quarter in advance. So that's one of the reasons why we are delivering such strong numbers in Q1 despite market volatility. And then as I mentioned, Q2 booked at very decent levels as well. Spot rates in line with TCE rates, $47,000 and $48,000, respectively, 17, they still -- 17% of day still open where we -- given the market today expect to book at better levels. So around $48,000 then on guidance, including the FFA hedge, which I will come back to. So looking at all the fleet today, it's been a lot of transaction in the last couple of years. Our aim was to renew the fleet, so we contracted six dual-fuel, large met VLGCs in order to replace the older ships the 2008 and 2009 and we started selling the 2008 and 2009 ships. And during the quarter we sold the two last steps, Venus and Iris Glory, Iris Glory for $60 million, Venus Glory for $66 million. Altogether $126 million sales price for these ships being slightly above ? Avance Gas bought those ships in 2010 when they were 2-year-old at $140 million. So during that period of ownership, stretching out more than 13 years, almost 14 years, we have a economic loss on the ship of $14 million. That said, we did book those ships on some very good spot voyages prior to redelivery to new owners. So actually, the number adjusted for that is like $10 million of economic loss during there about 14 years ownership of the ship. So very good asset value, so and that's why we decided also to sell some of the new buildings which we didn't intend to sell. So it's all cost [indiscernible] we announced this in December. Castor was delivered to new owners of [indiscernible] in March and then followed last week [indiscernible] in May, $120 million, they were contracted for $78 million. We upgraded them by $2 million, $3 million. So we basically have about 50% increase in the value of the ships prior to delivery because the new owners taking delivery of the ships delivery from the yard. So that means we have booked quite a few profits, $509 million in proceeds, gains close to $140 million, $257 million of cash release. So that leaves us with a fleet of [indiscernible] 215 equal class ships, 6 of them with scrubbers. The two ships without scrubber we have on TC. And then for due large 91,000 cubic wheel [indiscernible] and then as some of you might recall, we contracted for MGCs last summer. These are medium-sized gas carriers being able to transport 40,000 cubic of LPG or ammonia because these are what we can also call a MAC, medium-size ammonia carrier, that can carry fuel ammonia cargo, 98% billing ratio, which we think are the ideal ships for the ammonia paid and these are for delivery in '25 and '26, being contracted that are very low, price point $61.5 million. If you go into Korea these days, building similar ships, you are paying close to $80 million for delivery in 2027. So I think we've done a good acquisition, recycling some of the proceeds into these ships for delivery later on. Okay. Let's look at the employment of the year. As I mentioned, we have some ships on TC. We have Chinook which is a non-scrubber ship. We recently announced that we extended the variable higher time charter for the ship until middle of 2025 when she is due for her 10-year docking. So this fits very nicely together with the drydocking schedule where we will have the ships redelivered from the charter in Asia, close to the suitable docking places. Similar for Pampero. This ship we fixed a while back. Just on a Time Charter. We have announced that the rate there is around $45,000 per day until Q3 2025 when she is also due for her docking, and she is also being redelivered in a [indiscernible] relevant yard. So we are minimizing downtime on the docking. [indiscernible] is Polaris (NYSE:PII), where we also have the one1year -- we had the two-year variable, higher charter, and we have added our one-year variable Time Charter on this ship until end of Q1 2025. And this is a index we find very favorable where we get the benefit from these ships being more modern, more efficient than the typical ships. Castor and Pollux, we should have had delivered this year. With those ships have been sold, so the next ships for delivery are the MGCs coming in Q4 '25 and onwards. In terms of hedging, we only have one hedge in place now. It's 50% of one ship for the remainder of the year at about $70,000 per day for scrubber ships. So that's the fleet profile. We have a lot of spot exposure, which we like today, given where the spot market is and where the forward rates are. Next year even more exposure to the spot market. But that said, we have all the 2015 ships for drydocking next year. So we are starting to plan for that. And I will actually come back to that because there's a lot of ships going in for drydock next year. And then last slide before handing over to Randi, it's the dividend slide, one more slide on this. We've been paying our dividend $0.02, $0.05, $0.20 and then $0.50. Last quarter, we increased to $0.65. And then Norway really ramping it up $2.15. We had to find [indiscernible] in order to be able to pinpoint where this number is on the scale. The rationale for the dividend, though we have this traffic lights. We have discussed in the past as well. We caution you about the market being a bit slumpy in Q1 and market outlook and backlog where we took down to yellow. We are now increasing those to green lights again, given where the market has stabilized and the fact that there were a few ships for delivery in the next two years. So going live on the dividend for the criteria and a very healthy cash balance, which Randi will talk more about shortly.
Randi Bekkelund: Thank you, Øystein. Let's go to slide 10 and have a look at our income statement and key financial figures. Just to recap our TCE numbers. We failed in at $78,800 in TCE for the quarter compared to $71,900 from previous quarter. And as we have a significant load to discharge adjustment, I just want to notify you that the reported figures are load-to-discharge in accordance with IFRS accounting standards. While our commercial performance is based on a round-trip voyage, discharge to discharge, which came in at around $61,000 a day for the first quarter compared to $76,000 a day for the Q4 quarter. The positive IFRS adjustment of $21 million adding $18,000 a day to our TCE rate is basically explained by our reversal from previous quarter, combined with spot voyages over the quarter, which were mainly US voyages with longer sailing distances fixed that elevate the trade levels while the spot voyages over the first quarter were primarily Arabian Gulf or AG voyages with shorter sailing distances at lower freight levels compared to the previous quarter. Further, we continue to hold a relatively low operating expenditure, which came in at $8,200 a day and administrative expense at $1,300 for the quarter. Thus, we reported operating profit before depreciation or EBITDA of $81 million is ahead of previous quarter, despite less operating days following the vessel sales. So as Øystein already covered, we also successfully completed the three-vessel sales during the quarter. In January this year, we completed the sale of Iris Glory in 2008 for a cash consideration of $60 million less broker commission, which resulted in a gain on sale of $21 million. And in March, we completed the sale of Venus Glory for a cash consideration of $66 million less broker commissions and the company recorded a gain on sale of $27 million. Also a few weeks later, in March, we completed the sale of Avance Castor for a cash consideration of $120 million, and thereby we recorded a gain on sale of $36 million. So in total, we recognized $85 million in gain on sale in the P&L. And actually, last Thursday on the May 9, we completed the sale of our last VLGC, Avance Pollux, where we expect to record another gain on sale of $36 million and net cash proceeds of $62 million for the second quarter. Moving further down in our P&L. Net finance expense of $9 million was $5 million higher than previous quarter, which is explained by non-recurring items representing write-off of debt issuance cost of $2.3 million. It's a non-cash item, an accounting exercise basically which relates to repayment of debt prior sales and refinancing and additional $2.3 million and termination fee of sale leaseback agreements for Iris Glory and Pampero. And thereby we recorded a net income at $146 million or earnings per share of $1.91. Net profit adjusted for gain on sale for the first quarter was $62 million or $0.80 per share, slightly ahead of previous quarter. So moving to slide 11, as you can see we recorded $1.2 billion in total assets at quarter-end. It's 6% up from year end, which is primarily driven by increased cash balance, which I will come back to, combined with solid results, which is offset by the recognition of vessels sold. And now we have 67% of our balance sheet and March consists of 12 VLGCs, one dual fuel VLGC, which was sold last week, and 4 midsized gas carriers under construction for delivery in '25 and '26. Looking at the credit side, we have a book equity ratio of 58%, which will move closer to 50% of the payment of dividends and the final sale in May. And further, we have a relatively balanced loan-to-value of 49% while the net over -- net debt over net assets adjusted to cash is 17%. And we will now move to slide 12 to explain the cash movements. During the quarter, we started the year with a cash balance of $132 million, and as we receive freight payments for spot voyages commencing in the fourth quarter at very high freight levels, exceeding $100,000 a day, we recorded in total $116 million in cash flow from operations, including changes in net working capital. And the high incoming freight payments was partly shared with our shareholders through dividends for the fourth quarter of $50 million, and we repaid scheduled debt installment of $10 million. Further and probably the most important driver for the cash increase is the three vessel sales boosting our cash by $127 million after repayment of debt and transaction costs. And also, we finalized the refinancing of three vessels, resulting in a net cash release of $45 million bringing the total cash balance to $360 million. And as we have already commented by adding the cash proceeds from the sale of Avance Pollux of $62 million and the announced dividend of $165 million, we will have a pro forma cash of $257 million. And as commented, we have completed the refinancing of three vessels. The first one, the VLGC Pampero, 2015 built; also Avance Polaris and Capella, both 2020 build. For Pampero, we refinanced the sale leaseback arrangement to a bilateral term facility of $43 million which improved the margin from 375 basis points to 190. And for Polaris and Avance Capella, we refinanced from a bank financing to a sale leaseback arrangement with the in a $135 million deal, which was intended to finance the new building sold Castor and Pollux and the refinancing extends maturity from '27 to 2034 and improve the age adjustment profile for these ships from 20 years to 24 years. As commented on previous slides, these transactions have resulted in a net cash release of $45 million in the first quarter. So following these refinancing and sale of vessels, we have a relatively simplified financing structure where 74% of our financing is provided by a bank syndicate in a $555 million sustainability-linked term loan facility and 26% is provided by a sale leaseback arrangement with BOCOM. And when it comes to interest rate hedges, we have covered all the average outstanding debt for the year 2024 by excluding the revolving capacity, which is mainly undrawn during the year at an average SOFR rate at 3%. And the interest rate hedges currently hold some market to market of $11 million of which most will be collected following the following year. So let's go to slide 13 or 14. In April, we published our six ESG report and as shown in the graph on the left, we are well ahead of IMO and Poseidon emission target. We reported an annual efficiency ratio or AER of 6.64 for the year 2023, marking a 20% reduction since 2020. These achievements is largely due to the fleet renewal, where we have divested five older vessels and invested in dual-fuel technology, a new design with lower emissions. Currently, we are 8% ahead of IMO trajectory and 14% of Poseidon trajectory, which is expected to be updated in line with the revised targets of reducing well to way quick greenhouse gas emissions by 20% in 2030. So with that, I leave it to you, Øystein, for a few comments on the market.
Oystein Kalleklev: Okay, great. Thanks. Yeah, let's look at the market usually resolved with the export and import which is -- it is raises off our market discussion. Despite the cold snap in US, quite surprisingly, for most people not familiar with it, you have very strong growth from US, even though the cold snap and people were drawing the inventories, it's really didn't shut down the exports. So instead, you had continue to have the exports while drawing the inventories which I will come back to shortly. The inventories has been filled up because US is in shale gas or NGLs, and most of it in terms of LPGs are -- is being exported. Also Middle East, despite the OPEC cuts being sustained, we do see healthy growth in the Middle East, not by Saudi, which is the major oil producer, but from other like United Arab Emirates and also Iran. This continues to grow the export levels. Imports, it's good all over the scene, a big major region, this quite conductive China a bit on the low side, maybe being a result of the huge ramp-up in new plant, which have resulted in lower margins and lower utilization rate. So only 4.4% growth in China, but also positive to see a very healthy growth in India, which is the second biggest market. Let's go back to US exports. So what you see is that production is keep on ongoing. We have touched upon this in the past, I believe in Q3, we spend a bit more time describing the dynamics of the US exports. The goal being the fact that the gas fields in the US shale fields are getting more gaseous. So the gas ratio is going up. More of the NGLs is being collected given the fact that more production is turning into being Permian. Permian is also area in Texas where you are also getting more licenses in order to build the necessary infrastructure to get those molecules [indiscernible] which is resulting in a very high export call from the US. And as I mentioned, we have a big drawdown in inventories in US. It didn't disrupt and the exports from the US and actually in our inventories are back at very high levels given the production levels in the US. So lets head into the freight market. So as I've touched upon already, it's quite volatile. We touched upon this also in the past. If you look at the freight rate, you do see some big swings. However, our cash break-even is in the low 20s. So even though there are very volatile freight rates, it's rarely that rates are below cash break-even levels. And if they are sold usually for our initial period of time, which was also the fact in early this year when rates slumped from $140,000 down to $10,000, bounce back now at a very conductive level off in the $60,000, which is supporting freight. The major freight routes are being Baltic 1 Ras Tanura to Japan, $80 per ton, equates to around $60,000 per day. We do have our piping [indiscernible] because Baltic 2 is used to -- aah, you corrected it, Randi. Okay. Baltic 2 is then used into Netherlands flushing. This is our roots, which is associated with more waiting list because if you go from US to Netherlands, the flushing $84,000 seems like why the hell are you not just trading this route, but of course, also discharging you might be a bit ahead of the load window in US and you have to factor in some waiting time, which will drive down your time charter equivalent earnings. Then Baltic 3 used into the Chiba. These days, it's more used into China, but still $142 per metric ton equates to around $67,700. So then you might think why are you not doing Baltic 3 instead of Baltic 1. The Baltic 3 then assumes that you are going Panama both ways as I will touch upon shortly. Panama clogging is starting again and auction fees are up. So most ships going this route will go via Cape of Good Hope on the ballast leg until recently I would say 75% going that route on the ballast leg and then close to 75% going Panama on the laden leg southbound to Asia. However, that ratio will go down as the fees of getting through Panama has skyrocketed. So that will also drag down your TCE level, more in line with the Baltic 1 being around $60,000. But as mentioned, cash break-even, low 20s, we are making a even with the $60,000 per day. And then it's positive to see that there are some upside in the rate, the arbitrage is $226 per metric ton. The charters are only paying $140, $142 per metric ton so there is still room for rates to move up and getting closer converged to the arbitrage. Looking at Panama on the next slide. As mentioned auction fees has really gone up a lot the last week or so. We blacked $1 million, then we went to $1.2 million, $1.7 million, and then earlier this week $1.8 million. And of course, this high fee levels for going through Panama. And as I mentioned, mostly southbound being laden. It's resulting in charter rather rerouting the ships through Cape of Good Hope also on laden leg, which will drive [indiscernible] rates up arbitrage up as we have seen during the last week or so because while we are out of the El Niño season in Panama, where water levels went down to this record low levels on the left-hand side of the slide, we are at very low levels in Panama. It's probably be more La Niña condition this year. So the projection is for from Panama Canal that water levels will fill up, but still they will be at low levels. So we will have probably a situation with Panama being clogged for some time, especially once we're getting into the winter season. And there's a lot of container ship, possibly LNG ships competing for scarce slots. So just one more slide on the fleet structure before summarizing. We have had [indiscernible] last year going back to 2022, a lot of people was bearish about '23 because we had so many ships for delivery. I think we were a bit lucky in the sense that the Panama congestion situation happened at the perfect time for VLGC owners because that's routing via Cape of Good Hope and also the Suez Canal for that period resulted in which exceeded the supply goal, especially also given that US was exporting more. So we had very good condition last year despite the numerous ships for delivery. This year, it's much less, already more than half the ships have been delivered. So fleet growth will be very muted for the remainder of the year while we do see ton-mile is going up now with less ships going through Panama. Next year, even less ships, very few ships for delivery '25, picking up a bit in '26 but still fairly low fleet growth in '25, '26. And then from '27, we get more ships on the market. But as we also saw how that -- we have had a period with very few scrappings, a lot of the ships are getting older. Usually, people are not scrapping ships in a good market. But there is pent-up scrapping demand, and which typically will happen if you have a downturn, which is like having a insurance on the market. And then as I also mentioned or alluded to in the beginning of the presentation, there is a lot of dockings now because these contracting of ships tends to go in cycles. Once you have a new design, this happened in '14, '15, '16 when you had the new eco design, a lot of people ordered ships for that design and also the fact that the market was better than we have had a new wave of ships with [indiscernible] design. But it means that we will have a lot of ships now being taken out of the market doing drydocking, especially next year when we also have 8 out of our 14 [indiscernible] for drydocking. That would also limit fleet count. Right now the scrubber economics are also good in the sense that payback period on a scrubber is fairly short. So it means that a lot of the ships we have not installed a scrubber. It might opt for scrubber, which means more time in the dock. It might also have younger ships, which might opt for dual fuel retrofit, which takes even more time. So that means less ships in the market than we are looking at a period now for at least two years, maybe even more where we have very good supply demand outlook for the VLGC market. So okay to conclude, we delivered results for Q1. TCE number $61,000 or $79,000, depending on whether you our commercial guy or whether you are auditors resulting in net profit, a record high $146 million, $1.91 per share. We are paying out more than that $2.15. Adjusted for the gains on sale of ships, profits are still very good. We have another sale of a ship in Q2, which will add more profits to freight numbers. As I mentioned, we have been guiding now 83% booked at $48,000, which should result in good numbers for Q2 within our profit from a sale on top of it. And the market is well balanced. Now some good signs in terms of Panama congestion, good arbitrage, healthy export levels from the US. So with rather substantial cash balance and fairly low LTV now, it's the lowest LTV probably in your career in this company around there. That means we can reward the shareholders like we usually do, paying out the dividend. There is more details about the dividend in our separate press release [indiscernible] date I believe May 22, payout date expected to be on or about May 31. And as mentioned, $0.99 to be a reduction in par value of the shares, giving better tax treatment, hopefully for most shareholders and then the remainder to be able return of capital, ordinary dividend. So with that, I think we conclude. As said, we're going to have a short presentation. I didn't manage to do that, but let's shoot to some questions. I do think we have one caller in.
Operator: [Operator Instructions]. The first question comes from the line of Climent Molins from Value Investor's Edge.
Climent Molins: I wanted to start by asking -- I wanted to start by asking--
Oystein Kalleklev: No, thank you. Good to have you on board again.
Climent Molins: It's a pleasure to be here. I wanted to start by asking about ammonia carriers. Last quarter, you mentioned you were able to retrofit your new builds to be able to carry ammonia for around $2 million. How much would it cost to retrofit a vessel that is already on the water? And I mean both in terms of CapEx and off-hire days?
Oystein Kalleklev: Okay, excellent. I will give you answer here in around [indiscernible] so given this fact we had on the ships, it wasn't very costly to add ammonia features. So we had ammonia notation on the two ships we sold. Meaning that they can carry ammonia. Of course, there are different notation on ammonia gas, those ships could carry not a full ammonia cargo because specific on ammonia is different from LPG. They could carry about 85%, 86% filling ratio. On the new MGCs, as I mentioned, we have done that upgrade, so we can have a 98% filling ratio also on ammonia. Rest all fitting ships to be ammonia carrier, I don't think it makes economic sense. There is plenty of VLGCs that can carry ammonia as we've reviewed in the order book that a lot of these called VLAC, very large ammonia carrier. So there's plenty of the ships, so too many of them in relation to what we expect to be the demand for ammonia carriers. And we do think that ammonia will [indiscernible] smaller ships having a more ideal cargo parcel. That said, there's also a lot of old ships -- older ships that can carry ammonia as well. So the two ships we sold in January and February, Iris Glory and Venus Glory; those ships can also carry ammonia. So there's no lack of the VLGC ships that can carry ammonia. So if you have an ammonia project, you will typically tap into the VLAC, but you can also tap into the older VLGC, like Iris and Venus Glory, which is capable of carrying that. So that means it doesn't really make any economic sense to look at converting our existing ships which not have those capability because there's just so many ships that can do it. So we haven't even done the calculation. If I'm wrong and ammonia demand takes off through the roof, maybe we will do those calculations, but I guess it's much better to use the VLAC and then all the VLGCs instead of converting.
Climent Molins: Makes sense. Thanks. Thanks for the color. I also wanted to ask a bit on the demand side. China's imports of LPG have increased significantly over the past few years as PDH capacity in the region came online. How have PDH margins in the region moved over the past few months? And secondly, do you expect PDH capacity growth to slow down significantly going forward?
Oystein Kalleklev: Yeah, I think in terms of China and this has been well reported even in like publications like Financial Times. They've had a period now where they have just a huge ramp-up of PDH plant capacity. I think the best way of thinking about this is if we look at the crude oil, which I think is the most understood shipping segments around. So if you have crude oil, you have tankers, you get them from [indiscernible] at a high price. We can rent those ships and transport that crude oil. And then typically you transport that crude oil to our refinery and the refinery make the various products out of the crude oil being [indiscernible] diesel, gasoline, et cetera. So it's a bit similar with this PDH plants. You take like raw LPG, and we take them through refineries. So these are refinery and they make polypropylene and those are [Technical Difficulty] for the plastic industry. Issue with the industry in China has just been way too many plants being started at the same time when typically for those who knows economics, if there's a lot of supply, prices will go down and that's what happened. Plastic prices gone down and gone down to such a low level that it doesn't even make economic sense to recycle anymore plastic. But I think it's more like a limited effect. We have FX now and it's affecting the demand from China in terms of maybe lower demand in Q1 than what we have seen in the past because the utilization rate of the PDH [indiscernible] in the past as well. I do think, however, this will even out over time. We just have had too many PDH plants opening at the same time, but we don't have the same number of PDH plants being opening later on. So once solar plants are up and running and demands are increasing, I think that market will balance out better that will give probably give some better margins on the PDH plants, which is increasing the utilization rate and hopefully, eventually that will also support a better off from US to China.
Climent Molins: Thank you. That's all from me. I will pass it over. Thank you for taking my questions and congratulations for the quarter.
Oystein Kalleklev: Okay, great. Thank you. We have two questions on the chat, which we can have a look at as well. Are you interested in accruing of those small cap companies from Richard. Small companies, I don't know. What is our market cap now? I think it's like $1.3 billion, so maybe we're not small cap company anymore. But of course, we are business folks. We are selling ships. We are buying ships. We are always interested to do deals that can add value to our shareholders. If we find some ships or companies that can add and be value to this company, being accretive. Sure. We are looking at deals all the time. We have been selling several ships the last three years or so. We are contracted for MGCs. So we have a very dynamic strategy. And with that, so if the opportunities, we jump at them for sure. And then by Peter. He has a last question for today. Do you expect Panama transit rates to remain high? Can you comment on the competitiveness of vessels over 20 years old? So I think that's two sets of questions. Yeah, I think we've said already. Panama is clogged. There are still limitation on the number of daily transits in Panama. Panama is really dependent on a good rain season in order to fill up those water levels. But the Panama Canal story, I will be talking about that probably next quarter, next year following year because it's not really any solution to this. The Panama Canal was expanded a long time ago and it opened in 2016 in order to facilitate the growth of containership traffic. At that time, US was not an exporter of LNG and LPG, and now they've become by far the biggest LPG exporter in the world and the biggest LNG exporter in the world. So there's not really any more space in Panama. Even if the water levels are filled, still lack of space, especially given the fact that the container order book is pretty big. Container ships have a more valuable cargo. They can pay a higher rate to get through the Panama Canal and they also therefore prioritize. So regardless of the water levels in Panama, there will be congestion issues. It just gets even worse when you have periods of drop, which is happening more and more often competitiveness of vessels over 20 years. This is a bit similar to the tanker game. So we do have two different markets in [indiscernible]. We have the ordinary international compliance market, where we are operating. And then we have the typically transporting LPG from Iran to China. And that's a lot of ships in active in that trade, about 50 ships doing that trade. And that's why we haven't had any scrapping far very, very long time. It's very limited scrapping because a lot of these older ships end up somehow in the hands of this trade and by continuing to trade well beyond the economic life. So that's why you see still a lot of older ships in this market, and I do think this will end as long as it's allowed. And as long as there are no serious incidents resulting in pollution. I do think there is a high risk that you will have from oil tankers, especially braking due to the being traded well above the life. And suddenly, if you have one of these accidents where oil tanker with a cargo is braking and going down, I do think three will be more focused on this [indiscernible] trade, which is gobbling up a lot of older ships, which should have been retired. So we are not really competing against those ships because those ships are competing in a different market.
Oystein Kalleklev: So with that, I wish you have a good day, a good dividend. I was hoping to do this short call, but hope you enjoyed it. And I'm glad that a lot of you have stayed on board for the 54 minutes and we will be back after some in August with the Q2 numbers, which we already said are also going to be pretty good. Okay, thank you.
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