Market Overview

Navigator Holdings Ltd. Preliminary Results for the Three and Six Months Ended June 30, 2019

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LONDON, Aug. 8, 2019 /PRNewswire/ --

Highlights

  • Navigator Holdings Ltd. (the "Company", "we", "us" and "our") (NYSE:NVGS) reported operating revenue of $73.6 million for the three months ended June 30, 2019, an increase from $73.2 million for the three months ended June 30, 2018.
  • Net loss was $7.7 million (resulting in a loss per share of $0.14) for the three months ended June 30, 2019 compared to a net loss of $3.2 million for the three months ended June 30, 2018.
  • Adjusted EBITDA1 was $23.2 million for the three months ended June 30, 2019 compared to $27.2 million for the three months ended June 30, 2018.
  • On May 8, 2019, a third long term throughput agreement was signed for the ethylene export marine terminal at Morgan's Point, Texas (the "Marine Export Terminal").

Ethylene Marine Export Terminal 

On May 8, 2019, a third long term throughput agreement was signed for the Marine Export Terminal related to our 50/50 joint venture, with strong indications of demand for the remaining capacity. Commercial operations continue to be scheduled to begin in the fourth quarter of 2019, with the refrigerated storage tank expected to be completed in late 2020. It is anticipated that the Marine Export Terminal's throughput capacity during the first year of operation and prior to the cryogenic tank becoming operational will be between 60% to 75% of the total expected annual capacity of 1.0 million tonnes.

As of June 30, 2019, the Company had contributed $90.5 million of our expected $155.0 million share of the capital cost of the Marine Export Terminal construction from the Company's available cash resources and the 2018 Bonds. In July 2019, we contributed a further $12.5 million. We are scheduled to contribute an additional $31.0 million this year and to contribute the remaining $21.0 million of our expected share of the capital cost for the construction during 2020.

Appointment of Chief Executive Officer

On June 25, 2019, the Board of Directors (the "Board") of the Company. appointed Dr. Henry "Harry" Deans as Chief Executive Officer, effective August 22, 2019. David Butters, the Company's current President and Chief Executive Officer will relinquish that role to Dr. Deans on that date. Mr. Butters will continue as Executive Chairman of the Board. Dr. Deans was appointed a member of the Board in November 2018 and will continue as a member of the Board after the effectiveness of his appointment as Chief Executive Officer.

From 2006 to 2015, Dr. Deans held a series of positions as the chief executive officer of multiple affiliates and directly owned subsidiaries of INEOS Group Holdings S.A., a chemical company. From August 2015 to December 2017, Dr. Deans was the Senior Vice President of Agrium Inc., a fertilizer producer and distributor, prior to its merger with Potash Corporation of Saskatchewan to form Nutrien Ltd., where he served as the Executive Vice President and President of the nitrogen division from January 2018 to May 2018. From August 2015 to December 2017, he also served as a member of the board of directors of Canpotex Potash Export Company. Most recently Dr. Deans was Chief EHS and Operations Officer at Johnson Matthey PLC. Dr. Deans holds a Ph.D. and M.Phil. in chemistry from Strathclyde University as well as a B.Sc. in chemistry from Glasgow University.

Trends and Outlook

The headwinds from the first quarter carried into the second quarter with the global handysize spot market slowly incorporating the six vessels released from the Venezuelan cabotage trade as a consequence of sanctions the U.S. imposed upon Petroleos de Venezuela S.A. or "PdVSA". Such an increase in the supply of ships, especially in a segment with a total of 118 vessels on the water and with more than half trading under time charters, has restricted handysize market rates from increasing alongside other sectors. Continued European chemical plant turnarounds reduced traditional long-haul petrochemical exports to Asia and the import of U.S. ethylene which typically heads trans-Pacific, cutting handysize-ton mile demand.

As the LPG market strengthened, the usually more consistent petrochemical gas market faltered, as a number of unforeseeable elements combined to constrict trade flows. There have been a relatively high number of incidents at major terminals around the world in 2019. Italy, Turkey, the United States Gulf and East Coast, Mexico, Argentina, Malaysia and China have all endured misfortune and setbacks that disrupted product supply, receiving capacity and trade patterns.

In Europe, a larger than average turnaround season to the chemical industry has had both positive and negative effects for the shipping market. The increased demand for propylene in Europe surged, with 85,000 metric tonnes ("mt") shipped to North West Europe and another 5,000 mt to the West Mediterranean in the second quarter of 2019, a 50% increase on the levels in the first quarter of 2019. This propylene has been mainly shipped on handy-size semi-refrigerated vessels. We have also been shipping to Europe the majority of the ethylene lifted from Houston, with the landed pricing more attractive there than Asia. However, with European petrochemical production greatly diminished, the usual excess of butadiene regularly going to Asia has been limited as the poor arbitrage combined weak supply with lack of demand in Asia. Brazil continues to export healthy volumes of butadiene, propylene and ethylene.

The Very Large Gas Carrier ("VLGC") segment experienced increased supply of LPG volumes, especially from the U.S., which started to outweigh the supply of vessels. This surplus supply of LPG volumes relative to vessels ushered in a remarkable increase in rates to levels not seen since 2015. As the VLGC market rates rose, the Medium-size Gas Carrier ("MGC") market, started to see a tightening, with freight rates rising. There is a time-lag for these forces to positively impact the smaller handysize sector which we anticipate will occur later in 2019.

The handy-size (17-22,000 cbm) shipping market has seen many challenges during the first six months of 2019. It has not yet seen the improved charter rates that the VLGC sector currently enjoys, but neither has it suffered the lows of the VLGCs from six months ago. With VLGC spot earnings increasing from $1.0 million per calendar month ("pcm") to $2.1 million pcm over the second quarter and the MGC rates rising from $500,000 pcm to $650,000 pcm over the second quarter, the handy-size market's short-term overcapacity has certainly contributed to a decrease in our earnings in the second quarter as compared to the first quarter of 2019. However, as fully-refrigerated LPG volumes continue to rise at a steady pace, we expect to see the handy-size segment support this rise with the prospect of moving more vessels into the LPG market from the petrochemical market.

Second Quarter 2019 Financial Results Overview

The following table compares our operating results for the three months ended June 30, 2018 and 2019:


Three Months
Ended
June 30,
2018

Three Months
Ended
June 30,
2019

Percentage
Change 


(in thousands, except percentages)

Operating revenue...................................................................................................

$         73,163

$         73,586

0.6 %

Operating expenses:                      




Brokerage commissions................................................................................

1,219

1,233

1.1 %

Voyage expenses.........................................................................................

13,930

16,437

18.0 %

Vessel operating expenses..........................................................................

26,040

27,448

5.4 %

Depreciation and amortization.......................................................................

19,029

18,913

(0.6 %)

General and administrative costs..................................................................

4,812

5,195

8.0 %

Total operating expenses...................................................................

$         65,030

$         69,226

6.5 %

Operating income.....................................................................................................

$           8,133

$           4,360

(46.4 %)

Foreign currency exchange loss on senior secured bonds.........................

(768 )

Unrealized gain on non-designated derivative instruments..........................

861

Interest expense...........................................................................................

(11,353)

(12,209 )

7.5 %

Interest income..............................................................................................

207

205

(1.0 %)

Loss before taxes and share of result of equity accounted joint venture

$         (3,013)

$         (7,551 )

150.6 %

Income taxes............................................................................................................

(146 )

(81)

(44.5 %)

Share of result of equity accounted joint venture...................................................

(101 )

Net loss..........................................................................................................

$         (3,159)

$        (7,733)

144.8 %





 

Operating Revenue. Operating revenue, net of address commission, increased by $0.4 million or 0.6% to $73.6 million for the three months ended June 30, 2019, from $73.2 million for the t

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