Navigator Holdings Ltd. Q2 FY2026 earnings call

Geopolitical and Market Tailwinds

• Navigator Gas has no vessels operating in or transiting the Strait of Hormuz, with no material direct operational impacts from the regional conflict.
• The conflict has created meaningful commercial tailwinds: reduced Middle East supply has shifted demand to North American exports, creating longer shipping routes that reduce effective vessel supply and lift rates, especially for ethylene carriers.

Portfolio and Balance Sheet Updates

• Completed sale of the Navigator Pegasus vessel in April 2026 for $30.5 million in proceeds, generating a $15.3 million book gain.
• Signed a definitive agreement to divest 8 Unigas pool vessels for a combined $183 million, with sales expected to close in Q3 2026 and an expected net book gain of $65-70 million.
• Financing is now fully in place for all six new-build vessels (4 Panda ethane/ethylene carriers, 2 Coral ammonia new builds) on the most competitive terms in company history, with the latest ammonia vessel financing executed at a record low margin of 135 basis points plus SOFR.
• As of June 30, 2026, the company held $274 million in cash/restricted cash, growing to $362 million by August 3, 2026. Net debt to trailing 12-month adjusted EBITDA fell to 2.2x, from 2.5x at the end of Q1 2026, with a loan-to-fleet-value ratio of ~31% (below 30% including the Morgans Point terminal value).

Terminal and Strategic Updates

• Signed a fourth new off-take contract at the Morgans Point terminal in Q2 2026, with ongoing discussions for additional contracts. Growing demand for U.S. ethylene from Europe and Asia is driven by low-cost U.S. ethane and structural shifts in global cracker feedstock sourcing.
• The Sane Fuel Solutions ammonia bunkering terminal project (three terminals on Norway's west coast) is progressing toward a final investment decision, supported by a large Norwegian government grant that will cover 80% of project capital costs upon FID.
• The company continues to upgrade its fleet with energy-saving technologies and roll out AI programs to improve operating efficiency. Post-Unigas sale, the remaining fleet will have an average age below 12.5 years and an average size of ~23,000 cubic meters.

Capital Return Updates

• Maintained the existing 7 cents per share dividend for Q2 2026, and will return 35% of Q2 net income to shareholders (comprising the $4.3 million dividend and ~$14.2 million in share repurchases).
• Raised the fixed quarterly cash dividend to 8 cents per share starting in Q3 2026, while retaining the policy that total return (fixed dividend + variable buybacks) equals 35% of net income attributable to shareholders.

Navigator Gas reports all-time record results for Q2 2026: net income of $53.0 million (86 cents per share), up from $21.5 million (31 cents per share) in Q2 2025; EBITDA of $101.6 million, up from $71.9 million in Q2 2025 and $80.3 million in Q1 2026; adjusted EBITDA of $86.4 million, up from $60.1 million in Q2 2025 and $65 million in Q1 2026. The shipping segment recorded an average Time Charter Equivalent (TCE) rate of $33,946 per day, up from $29,684 in Q1 2026 and $28,216 in Q2 2025, with fleet utilization of 90.8%, up from 90.6% in Q1 2026 and 84.2% in Q2 2025. Vessel operating expenses came in at $47.1 million for the quarter, with depreciation of $31.5 million, down year-over-year due to reduced fleet size from vessel sales. The Morgans Point Ethylene Export Terminal segment hit a new record throughput of 374,278 tonnes in Q2 2026, contributing $7.1 million in equity method investment income, up from $4.8 million in Q2 2025.

• TCE rates and fleet utilization are expected to moderate from Q2 2026's record levels in Q3 2026, consistent with normal seasonal patterns and a tighter ethylene arbitrage following the restart of European crackers, but results are expected to remain robust at pre-Hormuz conflict levels that are still strong.
• Morgans Point terminal throughput is expected to decrease in Q3 2026 due to narrower arbitrage, global ethylene inventory destocking, seasonal hot weather impacting Houston-area operations, and off-takers pulling forward volume into Q2 2026. Volumes are expected to rebound in later quarters as arbitrage widens and inventory restocking begins.
• Full-year 2026 all-in cash break-even is estimated at $21,990 per vessel per day, up from $21,230 last quarter due to the reduced average fleet size following the upcoming Unigas vessel sale. Full-year 2026 operating and depreciation expense guidance is materially unchanged after adjusting for the reduced fleet size.
• The full annual nameplate capacity of the Morgans Point terminal is 1.55 million tonnes, with monthly output varying seasonally (slightly higher in colder months, slightly lower in warm summer months), and full-year annual throughput is expected to hit the 1.55 million tonne target.

• Ongoing geopolitical uncertainty around the Strait of Hormuz has created conflicting signals that have led market participants to adopt a wait-and-see approach, reducing near-term contracting activity for longer-term voyages and cargo contracts.
• Elevated spot rates and geopolitical uncertainty have widened bid-ask spreads for vessel acquisition, delaying potential consolidation transactions.
• Panama Canal transit uncertainty and high auction fees create inefficiencies for shipping routes transiting the canal, though these inefficiencies also increase effective ton-mile demand and lift shipping rates.
• Geopolitical volatility creates uncertainty for global commodity trade patterns and customer investment planning, which can impact near-term shipping demand.

Q: The company drew $91 million from its revolving credit facility as a precaution during the early Hormuz crisis. Is the full amount still drawn, and what are the near-term plans for this cash? / A: The full $91 million drawdown remains outstanding as of the call. Management expects to repay the drawn revolver balance over the next couple of months, funded by the upcoming proceeds from the sale of the 8 Unigas pool vessels, following an assessment of ongoing market conditions.

Q: After completing financing for all new builds and wrapping up the current phase of fleet renewal, what are the company's next strategic steps with its excess liquidity? / A: The core strategy remains unchanged: Navigator will continue seeking consolidation opportunities in the handy-size and MGC gas carrier segments, looking to add modern tonnage at attractive prices to leverage commercial synergies. Management is patient, as geopolitical uncertainty has widened bid-ask spreads for acquisitions, and will prioritize waiting for the right opportunities that align with its policy of consistent, increasing capital return to shareholders. The company will retain financial flexibility to pursue attractive deals when they make sense in 2027 and 2028.

Q: What is the long-term impact of the Hormuz conflict on customer behavior and Navigator's business? When will customers return to longer-term contracting? / A: The conflict has shifted customer priorities to supply chain reliability, rather than just lowest cost or shortest shipping routes. This has increased underlying interest in U.S.-sourced LPG, ethane, and ethylene, which benefits Navigator's position. While near-term uncertainty has kept customers from committing to long-term contracts right now, the underlying structural shift toward U.S. supply is permanent, and the company has already signed a new off-take contract at its ethylene terminal post-conflict, demonstrating growing demand.

Q: Can you outline the capital costs and grant coverage for the Sane Fuel Solutions ammonia bunkering project, and how will Unigas sale proceeds be allocated? / A: The Norwegian government has awarded a $45 million grant that covers 80% of the total capex for the three planned Norwegian ammonia terminals, leaving only 20% of capex to be funded by the project partners. A 35% return on the expected $65-70 million gain from the Unigas sale will be distributed to shareholders via the company's existing capital return policy. The remainder of the proceeds has not been earmarked, and will be retained to support potential consolidation acquisitions and new infrastructure projects aligned with the company's strategy.