Dorian LPG - Earnings Call - Q2 2026

Executive Summary

• Q2 FY26 delivered a sharp sequential improvement on freight strength: Revenues $124.06M, Diluted EPS $1.30, Adjusted EPS $1.31, Adjusted EBITDA $85.72M; management declared an irregular $0.65 dividend (~$27.8M) payable Dec 2, 2025.
• Versus prior quarter (Q1 FY26), revenue rose ~47% (to $124.06M from $84.21M), TCE increased to $53,725/day from $39,726/day, and Adjusted EBITDA more than doubled (to $85.72M from $38.58M) on stronger spot rates and lower bunkers.
• Versus prior year (Q2 FY25), revenue grew ~51% (from $82.43M), TCE rose 45% to $53,725/day, while daily vessel OpEx increased modestly to $10,705 due to dry-dock related items; G&A fell $4.5M YoY on lower bonuses.
• Against S&P Global consensus, results were below: EPS $1.31 vs $1.50*, revenue $124.06M vs $130.13M*, EBITDA $85.72M vs $91.45M*; management cited timing effects (load-to-discharge) and drydocking for TCE variance vs bookings.
• Near-term catalysts: irregular dividend, bookings for the Dec quarter >75% fixed at ~$57K/day TCE in Helios Pool, and easing U.S.–China tariff/port fee uncertainty supporting freight fundamentals.

What Went Well and What Went Wrong

What Went Well

• Strong freight and TCE performance: Q2 TCE $53,725/day, with sequential monthly improvement; Helios Pool spot/COA TCE ~$53,500/day in the quarter.
• Significant profitability expansion: Adjusted EBITDA $85.72M and Adjusted EPS $1.31, driven by higher spot rates and lower bunker prices; CEO highlighted “record” global seaborne LPG volumes underpinning freight.
• Capital return and balance sheet strength: Irregular dividend $0.65 (~$27.8M); CFO cited $268.4M cash, debt-to-cap ~33.2%, net debt-to-cap ~16.4%, undrawn $50M revolver.

What Went Wrong

• Miss versus Street: EPS and revenue came in below S&P Global consensus*, with EBITDA also below; bookings/TCE recognition impacted by timing (load-to-discharge), off-hire from dry docks, and charter option changes.
• Drydock-related operating cost pressure: Daily vessel OpEx rose YoY to $10,705 per vessel/day primarily due to non-capitalizable drydock expenses.
• Derivative gains softened: Realized gain on derivatives fell to $0.53M vs $1.65M YoY, while interest income decreased $1.5M YoY on lower rates and cash balances.

Transcript

Operator (participant)

Good morning and welcome to the Dorian LPG second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. Additionally, a live audio webcast of today's conference call is available on Dorian LPG's website, which is www.dorianlpg.com. I would now like to turn the conference over to Ted Young, Chief Financial Officer. Thank you. Mr. Young, please go ahead.

Ted Young (CFO)

Thank you. Chelsea, good morning, everyone, and thank you all for joining us for our Second Quarter 2026 results conference call. With me today are John Hadjipateras, Chairman, President, and CEO of Dorian LPG Limited; John Lycouris, Head of Energy Transition; and Tim Hansen, Chief Commercial Officer. As a reminder, this conference call webcast and a replay of this call will be available through November 13, 2025. Many of our remarks today contain forward-looking statements based on current expectations. These statements may often be identified with words such as expect, anticipate, believe, or similar indications of future expectations. Although we believe that such forward-looking statements are reasonable, we cannot assure you that any forward-looking statements will prove to be correct. These forward-looking statements are subject to known and unknown risks and uncertainties and other factors, as well as general economic conditions.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove to be incorrect, actual results may vary materially from those we express today. Additionally, let me refer you to our unaudited results for the period ended September 30, 2025, that were filed this morning on Form 10-Q. In addition, please refer to our previous filings on Form 10-K, where you'll find risk factors that could cause actual results to differ materially from these forward-looking statements. I also encourage you to review the investor highlights posted this morning as we go through our remarks. With that, I'll turn over the call to John Hadjipateras.

John Hadjipateras (Chairman, President, and CEO)

Thank you, Ted. Good morning, and thank you for joining Ted, John, Tim, and me. My colleagues will provide you with detailed comments on our financial results, our market outlook, and our emissions reduction and operational progress. First, I'd like to highlight the following. Our dividend declared today of $0.65 per share, totaling $27.8 million, reflects our commitment to returning capital to shareholders in a manner that is disciplined and aligned with market conditions. This will be our 17th dividend payment, bringing total dividends distributed to over $695 million and a total capital of almost $925 million returned to shareholders. The VLGC market improved in the third calendar quarter. The Baltic Index averaged $68,000 per day, up from $48,000 in the second quarter and $33,000 in the first quarter, more than doubling from the start of the year.

The index peaked at just under $80,000 per day in mid-August and then eased back toward the mid-50s by the end of September. Global seaborne LPG liftings made a record high at 37.21 million tons, underpinned by record quarterly exports from North America and from Saudi Arabia. We believe that modern fuel-efficient VLGCs like ours are well-positioned to benefit from the constructive freight environment. Tim will elaborate on the fundamentals driving the VLGC market and our outlook. On the operational side, we're almost done with 10 of our 12 dry dockings planned for 2025. This year, we had an unusually large number of dry docks, as our ships reached their five and seven-and-a-half-year docking cycles. During the quarter, we also published our 2024 corporate responsibility report. John Lycouris will provide an update on the progress made in our docking program and ammonia retrofits.

Ted will now present our quarterly financial overview. Ted?

Ted Young (CFO)

Thanks. Today, I'll focus on our unaudited second quarter results, capital allocation, and our financial position and liquidity. For discussion of our second quarter results, you may find it useful to refer to the investor highlights slides posted this morning on our website. I remind you that my remarks will include a number of terms such as TCE, available days, and adjusted EBITDA. Please refer to our filings for the definitions of these terms. Looking at our second quarter chartering results, we achieved TCE revenue per available day of $53,725, which reflected the strong rate environment. Interestingly, each month's TCE during the quarter was sequentially better than the prior months, again underscoring the favorable market dynamics. We generated over $30 million in free cash flow to equity during the quarter.

As our entire spot trading program is conducted through the Helios Pool, Helios's reported spot results are the best measure of our spot chartering performance. For the September 30 quarter, the Helios Pool earned a TCE of $53,500 per day for its spot and COA voyages. On page four of our investor highlights material, you can see that we have two Dorian vessels on time charter within the pool, indicating spot exposure of about 90% for the 30 vessels in the Helios Pool. Turning to the quarter ending December 31, 2025, we currently estimate that we have fixed just over 75% of the fixable days in the quarter at a TCE of about $57,000 per day. The rate includes both spot fixtures and time charters in the Helios Pool only.

Given the difficulty in predicting loading rates, which has a huge effect on revenue recognition, this port options in some charters, and the complexity of some of our COAs, these estimates we quote during these calls and the rates actually realized can vary. Daily OpEx for the quarter was $9,474, excluding dry docking-related expenses, which was down over 6% from the prior quarter's $10,108. Virtually all major cost categories declined, which was certainly a good effort by our technical management team. Our time charter inexpense for our TCE vessels came in at $13.7 million, or slightly less than $30,000 per day. The quarter's TCE inexpense reflected the addition of the Crystal Asteria at the end of June, while the BW Tokyo entered on the last day of the quarter to minimal P&L effect.

For the December quarter, we estimate TCE expense to be approximately $18 million, reflecting full quarter contribution from the Crystal Asteria and the BW Tokyo. Total G&A for the quarter was $12 million, and cash G&A, that's G&A excluding non-cash compensation expense, was about $7 million, reflecting our core G&A. We had noted last quarter that we expected an approximately $3 million increase in stock comp expense due to the share grants made during the quarter. That will not recur for the rest of the year. Our reported adjusted EBITDA for the quarter was $85.7 million. Total cash interest expense for the quarter was $7 million, of which we capitalized about $600,000. Our current debt cost is about 5.1%, reflecting the heavily hedged and fixed nature of our various pieces of debt.

September 30, 2025, we reported $268.4 million of free cash, which was down about $10 million from the prior quarter, largely due to the payment of a new building installment in September. As John touched on, and as we disclosed this morning, we will pay a $0.65 per share irregular dividend, or roughly $28 million in total, on or about December 2nd, to shareholders of record as of November 17. With a debt balance at quarter-end of $530 million, our debt-to-total book capitalization stood at 33.2% and net debt-to-total cap at 16.4%. With an undrawn $50 million revolver and a $100 million accordion feature in our existing loan agreement, strong free cash balance, and one debt-free vessel, we feel well capitalized for fleet load growth and renewal or for whatever challenges may arise.

During the prior quarter, we completed three dry dockings and anticipate two more dry dockings during November and December. That will complete the dry docking program for our 2015-built vessels. Also, in addition to the new building payment we made in September, we will make an additional roughly $12 million payment during the quarter ending December 31, 2025. The irregular dividend declared last week brings to $16.95 per share in irregular dividends that we have paid since September 2021. Again, some investors and analysts like to suggest that these dividends are no longer irregular. We underscore that they are indeed irregular and subject to the discretion of our board. VLGC rates are not regular. Neither is the geopolitical environment, as recent weeks have shown. Thus, we do not think our dividend policy should be either.

Looking at our dividends in a more traditional context, our net income since June 30, 2021, that's the quarter immediately prior to our first irregular dividend, has been cumulatively about $700 million, while including the dividend to be paid next month, we have returned approximately $695 million in dividends in total to our shareholders, and cumulatively, including share buybacks and our open market or tender offer, over $925 million. We will continue to maintain a steady balance between dividends, deleveraging, and fleet investment. With that, I'll pass it over to Tim Hansen.

Tim Hansen (CCO)

Thank you, Ted. Good day, everyone. The quarter ending September 30th, 2025, saw an average freight market improvement compared to the quarter prior, with less volatility. VLGC market fundamentals remained firm through the quarter, with a high inventory build in the United States, keeping on value prices attractive for Far East importers and supporting the West to East arbitrage. U.S. monthly exports of LPG and VLGCs were in the 4.6 million tons-5.1 million tons per month range, an improvement on the quarter prior. Middle East VLGC exports for the quarter also improved compared to the quarter prior, growing by about 200,000 metric tons for the third calendar quarter. The VLGC market fundamentals were impacted in the third calendar quarter by two factors. One was positive for freight and one negative. The freight positive factor was a sudden spike in Panama congestion and a subsequent increase in auction fees to transit.

That was seen from the end of July to early August. Although the increased congestion added cost to the industry and complicated voyage planning, delays absorbed capacities from the market and prompted more VLGCs to ballast via the Cape of Good Hope to the U.S. Gulf, tightening vessel supply for the loading in September and October. Although a definite answer to why the Panama Canal saw a sudden congestion remains elusive, several market commentators have suggested that front-loading on container ships prior to the tariffs coming into effect. The factor pressuring the VLGC market was brought about by actions on repositioning vessels for those preparing for the U.S. port service fees effective on October 14th. Around the start of September, VLGC owners and operators, considering the risk of being deemed related to China by USTR Section 301 regulations.

With tonnage embedded to the U.S. load ports, began to discount freight to ensure locking in cargos that would allow the vessels to load and sail from the U.S. before the 14th of October. The discount offers put a downward pressure on the West to East freight market. Meantime, the same owners and operators also stopped ballasting more ships towards the U.S. Gulf, and those vessels added VLGC supply to the Middle East, and the increased supply imbalanced the market in the East. If the second quarter tested the resilience of the LPG market fundamentals, the third quarter reaffirmed that it was not a one-off. Export from the United States continued to flow to a more diverse range of import countries, and Chinese importers were able to find some alternatives to cover the reduced imports from the United States.

The spike in Panama Canal congestion demonstrated the tight supply-demand balance for VLGCs when geopolitical factors are not complicating the picture. When a geopolitical or external factor causes shocks, we have seen the VLGC players respond to this with agility. The quarter ending September 30th, 2025, continued the improvements in freight from the quarter prior, with both East and West markets up about 28%. The delivery schedule of new buildings remains limited for the rest of the year, and the agility of the VLGC markets demonstrates an ability to capture upsides that may appear going forward. Furthermore, although the disruptive factor of port fees added freight positive inefficiencies to the market, the later agreed ports to fees, together with the seeming relaxation in trade tensions between the U.S. and China, we believe will be supportive for the fundamentals of the LPG and VLGC freight markets going forward.

With that, I'll pass it over to John Lycouris.

John Lycouris (Head of Energy Transition)

Thank you, Tim. At Dorian LPG, we are committed to continuing enhancing energy efficiency and promoting the sustainability of both our operations and our vessels. Our scrubber vessel savings for the second fiscal quarter of 2026 amounted to $1,363,000, or about $1,140 per calendar day per vessel, net of all scrubber operating expenses. Overall savings were affected this quarter due to the dry docking of several vessels and the heightened market volatility stemming from global tariff announcements and geopolitical uncertainties. Fuel differentials between high sulfur fuel oil and very low sulfur fuel oil averaged $74 per metric ton, while the differential of LPG as fuel versus the very low sulfur fuel oil stood at about $132 per metric ton, making LPG economically attractive for our dual fuel vessels. We now operate 16 scrubber-fitted vessels and five dual fuel LPG vessels.

During the current quarter, two vessels are undergoing special service and dry docking, including one that is also being upgraded for the carriage of ammonia cargoes. Since the beginning of the calendar year, 10 vessels were successfully completed with their special service and dry docking, and this reflects our continued commitment to maintaining a modern, efficient, and environmentally adaptable fleet. Our dry docking program for 2015 built vessels will be largely complete by the end of this calendar year. Driven by stronger market conditions in 2025, vessels in ballast generally operated at higher speeds compared to 2024. Despite the increase in speed, which typically has an adverse effect on CII ratings, the DLPG fleet remains well within compliance limits. The installation of energy-saving devices, the application of premium hull coatings, and continuous performance monitoring combined with operational enhancements have significantly improved the emission profile of our fleet.

Forecasts extending through 2030, based on the IMO's revised CII reduction targets, indicate that our fleet is well positioned to maintain compliance and continue demonstrating strong environmental performance. CII is the Carbon Intensity Index, which assesses the operational efficiency of our vessels and their contribution to greenhouse gas emissions. At Dorian, we leverage advanced digital platforms and dashboards to drive performance and efficiency, enhance data validation and engine analytics support, optimize operations, and result in energy savings. The fleet remains fully compliant with evolving emission frameworks, including EU ETS, CII, EEXI, and Fuel EU Maritime, and our fleet performance team works closely with chartering to optimize fuel consumption during the voyages. The average fleet AER for the third quarter of 2025 was 9.3% lower than the IMO-required target for 2025. AER is the Annual Efficiency Ratio metric, which calculates the carbon intensity of our vessels' operations.

The one-year postponement of the IMO's decision to implement the net-zero framework does not change Dorian's commitment to invest in fuel efficiency, improved performance, and decreased greenhouse gas emissions. This delay may heighten regulatory uncertainty and reinforce reliance on regional schemes, further fragmenting the global regulatory landscape. We are confident that our company and fleet are well equipped and fully prepared to meet any regulatory challenges ahead. I would like to pass it over to John Hadjipateras for his comments.

John Hadjipateras (Chairman, President, and CEO)

Thank you, John, and Tim, and Ted. Chelsea, we can open for questions if anyone is here to ask any questions. We're here.

Operator (participant)

Yes, sir. At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. Our first question will come from Omar Nokta with Jefferies. Please go ahead.

Omar Nokta (Managing Director)

Thank you.

Hi, guys. Morning. Nice quarter, obviously, in terms of how much stronger your realized rate has come up, especially relative to the past maybe four or five quarters. I just wanted to get a sense. The overall rate of, say, $53,000-$54,000 was a bit lower than what we were thinking. I just wanted to ask, I know, Ted, you do a very good job of giving us sort of the bookings on the bookings to date each quarter. If I recall, you had gotten something over $60,000 for 70% of the quarter last time around. I just wanted to get a sense of what caused the final figure to be lower. Because it looked like VLGC spot rates remained fairly firm. Was it just simply an accounting treatment? Is it load to discharge? Is it dry dock? Any color you're able to give would be helpful.

John Hadjipateras (Chairman, President, and CEO)

Yes. We'll do that. I'll let Ted expand on it, obviously. It is really the discrepancy was from timing. In terms, we obviously try to give you the best, and when we give the guidance, it reflects what we have booked. There are often sort of timing discrepancies arising from more off-hire days sometimes, later loadings, slippage from one quarter into the next. Ted, you take it.

Ted Young (CFO)

Okay. Yeah. I mean, I think, Omar, obviously, we were aware of the delta versus guidance. And like John said, bit of load-to-discharge accounting based on timing. Look, there's discord options, as you know, in our sector. And so our guys, we book things based on what we know at the time. If the charterer changes his mind, that can change what we realized during the quarter. Also, the dry docking days affect the, clearly, not only the amount of revenue, but obviously drives that has an effect on the TC rate as well. Like John said, we always try to give the best information. We didn't quite work out as well this quarter. Again, with the end of the dry docking program, largely, we feel like the guidance that we just gave should be.

Much more on target for the coming quarter or the current quarter.

Omar Nokta (Managing Director)

Okay. All right. Thanks, Ted. Yeah. It sounds like a bit of a one-off with a few moving different factors last time around. The $57,000, I think, that you gave us earlier, that, all else equal, that should be a fairly good barometer of what to expect for.

Ted Young (CFO)

We believe so. We believe so, Omar. Yeah.

Omar Nokta (Managing Director)

Okay. Great. Maybe just a second question or follow-up. We've been seeing here spot rates have really got a bit of momentum here. It's maybe at a unique time, I guess, on the calendar. Seems like we're heading into the part of the seasonality where things start to come off and you put downwards pressure on rates. Now we're seeing things pick up. Are you able to give kind of a perspective on what's behind this latest move?

John Hadjipateras (Chairman, President, and CEO)

Yes. Tim?

Tim Hansen (CCO)

Yeah. I think there was a lot of wait and see here before U.S. and China met in Korea. I think there was like an end or hold on fixing activity where you saw the rates drop until recently, and then it is kind of catching up. People were really waiting for this to kind of at least have some direction, what the trade disputes or agreements was going to be. Of course, also the postponement of the port fees have put a relief to the market and give people some room to work and some at least a horizon where they can take decisions going further forward. On top of the coming into the winter, then this helped activities to kickstart again.

Omar Nokta (Managing Director)

Okay. Very good. Thank you. Thanks, Tim. Ted and John, thank you as well.

John Hadjipateras (Chairman, President, and CEO)

Thank you very much, Omar.

Ted Young (CFO)

Thanks, Omar.

Operator (participant)

Thank you. As a reminder, that is star one to ask a question. At this time, there are no further questions in the queue.

John Hadjipateras (Chairman, President, and CEO)

Thank you, Chelsea. Thank you, everyone. Omar, thanks for your questions. We look forward to picking up again next quarter.

Thank you. Bye-bye.

Operator (participant)

Thank you, ladies and gentlemen. This concludes today's program, and we appreciate your participation. You may disconnect at any time.