Navigator Holdings Ltd. Q2 FY2025 earnings call

• Geopolitical backdrop in Q2 was unusual and difficult, with challenges like U.S. port tariffs, import tariffs, ethane export licenses, and military conflicts affecting trade volumes but also presenting opportunities like ambient temperature LPG exports from Iraq and share buybacks at a discount to NAV.
• Optimized capital structure in Q2, with a strong balance sheet, $300 million refinancing at low margin, and return of capital including a $0.05 fixed dividend and share buybacks (completed $30 million in Q2 and remainder in July, buying back 3.4 million shares).
• Commercially, average TCE rates were $28,216 per day, utilization 84%, with ethylene spot fleet most impacted and semi-ref fleet better. Ethylene Export Terminal throughput rebounded to 268,000 tons in Q2.
• Ordered two 51,500 cubic meter dual-fuel ammonia vessels with associated 5-year time charter contracts, which is accretive to shareholders and part of fleet renewal, alongside sale of older vessels like Navigator Venus.

In Q2 2025, Navigator Holdings generated revenues of $130 million, down 12% compared to the same period last year. EBITDA was $72 million, and adjusted EBITDA (excluding a $12 million book gain from selling Navigator Venus) was $60.1 million. Earnings per share was $0.31. Average TCE rates were $28,216 per day, with utilization at 84%. The ethylene spot fleet was most impacted, while the semi-ref fleet fared better. Throughput at the joint venture Ethylene Export Terminal rebounded to 268,000 tons in Q2, more than 3x Q1. The balance sheet was strong with a cash position of $287 million at quarter end, supported by a $300 million refinancing. Revenue contribution: The $130 million revenue was affected by customer halts/cancellations of new business/committed fixtures, but EBITDA and adjusted EBITDA showed resilience.

• Q3 has come off to a robust start with normalization of operating environment expected, and if no further geopolitical surprises, expected to be back on previous trajectory driven by growth of U.S. natural gas liquids production and export infrastructure build-out.
• Third quarter likely to return to levels prior to Q2, with terminal contracts having new developments and expecting additional longer-term offtake contracts to be signed in coming months.
• Expectation that most Q2 headwinds are gone, with global trade in commodities transporting restoring, and LPG exports from Iraq to Asia, ethylene exports from U.S. to Europe, and ethane exports from U.S. to Asia continuing.

• Geopolitical uncertainties such as U.S. port tariffs, unprecedented high import tariffs on commodities transported, ethane export licenses (effective export bans), and new military conflicts which caused customer halts/cancellations of new business/committed fixtures and lower trade volumes during Q2.
• Market volatility affecting different vessel segments differently, and potential impacts of IMO新规 on new vessels, although new ammonia carriers are dual fuel and flexible.

Q: How do you think 3Q as a whole can return to how things were prior to the second quarter?

A: Mads Peter Zacho said Q3 has come off to a robust start with normalization of operating environment, utilization back up at just above 90% for July and rates reacting similarly, so Q3 as a whole is expected to be back to levels prior to Q2 and see normalization.

Q: Can you give a sense of what portion of the terminal expansion contracts are now contracted and how much of the total capacity is contracted?

A: Randall Giveans said they don't want to go into too many details as still having commercial conversations, but it's a large portion with 4 existing offtake customers and multiple term sheets out to new customers, expecting additional longer-term offtake contracts in coming months.

Q: Does the Enova grant come with strings attached? Or could this be repeated in the future?

A: Mads Peter Zacho said there are strings attached linked to technology features like ammonia propulsion and energy efficiency upgrades, but the grant is attractive without major downsides, and the answer to whether it can be repeated is yes as Norwegian authorities are interested in green shipping.

Q: How do tariff announcements in trade news impact your business, specifically U.S. commodity exports going forward?

A: Mads Peter Zacho said tariff announcements bring wanted clarity to the customer base and trading environment, providing stability and ability to forecast for the business, giving a more positive outlook for U.S. commodity exports with overall framework of trade deals in place.