BW LPG Limited - Update on BW LPG’s Product Services Q3 2024 Segment Performance

Rhea-AI Summary

BW LPG has released an update on its Product Services segment performance for Q3 2024. BW Product Services reported an estimated gross profit of approximately USD 71 million for the quarter ended 30 September 2024. This profit primarily resulted from:

• USD 86 million in unrealised marked-to-market value of open cargo contracts and hedging transactions
• USD 16 million in realised trading gains
• Offset by USD 31 million in hedging losses on realised positions

The segment's estimated net profit was approximately USD 60 million after expenses and taxes. The average Value-At-Risk (VAR) for the quarter was about USD 5 million. BW LPG's CEO, Kristian Sørensen, noted that the high accounting profit doesn't immediately increase the company's dividend capacity due to unrealised positions.

Positive

• Estimated gross profit of USD 71 million for Q3 2024
• Estimated net profit of USD 60 million for Q3 2024
• USD 86 million in unrealised marked-to-market value of open cargo contracts and hedging transactions
• USD 16 million in realised trading gains

Negative

• USD 31 million in hedging losses on realised positions
• High accounting profit doesn't represent immediate increase in dividend capacity

Insights

Financial Analyst

BW LPG's Product Services segment has reported impressive financial results for Q3 2024, with an estimated gross profit of $71 million and a net profit of approximately $60 million. The performance is largely driven by unrealized gains from open cargo contracts and hedging transactions, amounting to $86 million.

Key points to consider:

• The $86 million unrealized gain will be gradually revalued and realized over the next 12 months, which could impact future quarterly results.
• Realized trading gains of $16 million were offset by a $31 million hedging loss on realized positions, indicating some volatility in the market.
• The average Value-At-Risk (VAR) of $5 million suggests a relatively controlled risk exposure.
• The CEO's statement indicates that softer freight rates have shifted profit opportunities within the LPG value chain, benefiting BW LPG's business model.

Investors should note that while the accounting profit is high, it doesn't immediately translate to increased dividend capacity due to the unrealized nature of the gains. This performance demonstrates the company's ability to adapt to market conditions but also highlights the importance of monitoring how these unrealized gains materialize in future quarters.

Market Research Analyst

The Q3 2024 performance of BW LPG's Product Services segment reflects a significant shift in market dynamics within the LPG industry. The company's ability to generate substantial profits despite softer freight rates indicates a well-diversified business model that can capitalize on various segments of the LPG value chain.

Key market insights:

• The pressure on freight rates in August and September has redistributed profits within the industry, favoring terminal operators and term cargo owners.
• BW LPG's success in this environment suggests a competitive advantage in adapting to market fluctuations.
• The 86% contribution of unrealized gains to the gross profit highlights the importance of mark-to-market accounting in the industry and the potential for volatility in reported earnings.
• The company's hedging activities, while resulting in a loss this quarter, demonstrate a proactive approach to risk management in a volatile market.

For investors, this performance underscores the importance of understanding the complexities of LPG trading and the potential for significant swings in reported profits based on market valuations. The company's ability to generate profits in challenging freight environments may indicate resilience, but the reliance on unrealized gains also suggests caution in projecting future performance.

SINGAPORE--(BUSINESS WIRE)-- BW LPG Limited (“BW LPG” or the “Company”, OSE ticker code: “BWLPG.OL”, NYSE ticker code: “BWLP”) today provides an update on its Product Services’ (“BW Product Services”) Q3 2024 segment performance. For the quarter ended 30 September 2024, BW Product Services reported an estimated gross profit of approximately USD 71 million. This gross profit was mainly a result of USD 86 million of unrealised marked to market value of open cargo contracts and hedging transactions, realised trading gains of USD 16 million, offset by hedging loss of USD 31 million on the realised positions. The open cargo value is reflected in the overall trading book value and will be gradually revalued and realised in the next 12 months, as per standard methodology.

After general and administrative expenses and income taxes, BW Product Services reported an estimated net profit of approximately USD 60 million for the quarter.

The average Value-At-Risk (VAR) for the quarter was approximately USD 5 million.

BW LPG will release its Q3 2024 financial report on 2 December 2024.

Says Kristian Sørensen, Chief Executive Officer, “As freight rates came under pressure in August and September, more of the profit in the US-Far East LPG value chain moved to terminals and term cargo owners. Today’s trading update demonstrates how our business model benefits from increased value creation in wider parts of the LPG value chain during times of softer freight rates. It is however important to note that the high accounting profit does not represent an immediate uplift to the Company’s dividend capacity as it stems from MtM valuation of unrealised positions which will fluctuate as we move towards realisation of these positions.”

About BW LPG

BW LPG is the world’s leading owner and operator of LPG vessels, owning and operating Very Large Gas Carriers (VLGC) with a total carrying capacity of over 3 million CBM. With five decades of operating experience in LPG shipping, an in-house LPG trading division and a growing presence in LPG terminal infrastructure and distribution, BW LPG offers an integrated, flexible, and reliable service to customers along the LPG value chain. More information about BW LPG can be found at https://www.bwlpg.com.

BW LPG is associated with BW Group, a leading global maritime company involved in shipping, floating infrastructure, deepwater oil & gas production, and new sustainable technologies. Founded in 1955 by Sir YK Pao, BW controls a fleet of over 450 vessels transporting oil, gas and dry commodities, with its 200 LNG and LPG ships constituting the largest gas fleet in the world. In the renewables space, the group has investments in solar, wind, batteries, biofuels and water treatment.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241009084317/en/

Kristian Sørensen

Chief Executive Officer

Samantha Xu

Chief Financial Officer

E-mail: investor.relations@bwlpg.com

Source: BW LPG Limited

FAQ

What was BW LPG's (BWLP) Product Services segment gross profit for Q3 2024?

BW LPG's Product Services segment reported an estimated gross profit of approximately USD 71 million for Q3 2024.

How much net profit did BW LPG's (BWLP) Product Services segment generate in Q3 2024?

BW LPG's Product Services segment reported an estimated net profit of approximately USD 60 million for Q3 2024.

When will BW LPG (BWLP) release its full Q3 2024 financial report?

BW LPG will release its Q3 2024 financial report on 2 December 2024.

What was the average Value-At-Risk (VAR) for BW LPG's (BWLP) Product Services segment in Q3 2024?

The average Value-At-Risk (VAR) for BW LPG's Product Services segment was approximately USD 5 million in Q3 2024.