Operator: Good morning, ladies and gentlemen, and welcome to Ardmore Shipping’s First Quarter 2025 Earnings Conference Call. Today’s call is being recorded, and an audio webcast and presentation are available in the Investor Relations section of the company’s website, ardmoreshipping.com. We will conduct a question-and-answer session after the opening remarks. Instructions will follow at that time. A replay of the conference call will be accessible anytime during the next two weeks by dialing 1-888-660-6345 or 1-646-517-4150 and entering passcode 70822 followed by the pound key or hash symbol. At this time, I will turn the call over to Gernot Ruppelt, Chief Executive Officer of Ardmore Shipping.

Gernot Ruppelt: Good morning, and welcome to Ardmore Shipping’s first quarter 2025 earnings call. First, let me ask our President and CFO, Bart Kelleher, to discuss forward-looking statements.

Bart Kelleher: Thanks, Gernot. Turning to Slide 2, please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause the actual results to differ materially from those in the forward-looking statements is contained in the first quarter 2025 earnings release, which is available on our website. And now I’ll turn the call back over to Gernot.

Gernot Ruppelt: Thank you, Bart. Let me first outline the format of today’s call, which you can see here on Slide 3. I’ll start by discussing our first quarter highlights and our capital allocation policy. I will then hand the call over to Bart, who will cover the market outlook and provide an update on our financial and operational performance. Thereafter, I will conclude the presentation before opening up the call for questions. However, before we jump into the presentation, I want to pause for just a moment and acknowledge that since we convened with many of you during our investor day about three months ago, we all have witnessed an exceptionally busy new cycle and lived through volatile equity markets. There is much debate and speculation about what this means in terms of economic impact.

Therefore, we want to highlight three key points about Ardmore and our industry at the start of this call, and we will cover this in greater detail during the presentation. For one, Ardmore’s balance sheet and our low break-even make us more robust than ever across a wide range of economic scenarios. Secondly, although broader markets experience turmoil, product freight markets have remained resilient. Already strong refining margins should be further supported by OPEC oil production increases, and the global tanker fleet is the oldest in decades. Third, our fleet composition, our lean operating platform, and our capital structure are the results of deliberate strategic choices, always guided by industry-leading governance and a balanced approach to allocating capital through the cycle.

And with that, we return to our usual format and direct your attention to Slide 4. We are pleased to announce our first quarter results, delivering adjusted earnings of $5.6 million, or $0.14 per share. Overall, market fundamentals remain constructive despite macro headwinds with positive supply side dynamics. Meanwhile, our financial strength allows us to dynamically execute on our capital allocation policy. Today, we declared another quarterly cash dividend consistent with our policy of paying out one-third of adjusted earnings. Furthermore, we are continuing to invest in our fleet. We have upgraded the tank holdings on our chemical tankers to further expand revenue opportunities by increasing cargo flexibility. Past quarter, we delivered MR earnings of $20,900 per day, and we remain focused on tight cost management with a low cash break-even level of $11,500 per day.

Moving to Slide 5, our TCE performance reflects continued strength, defying typical seasonal norms. Rates remain significantly above our cash breakeven level. Our MRs earned $20,900 per day for the first quarter and $22,100 per day so far in the second quarter with 50% booked. Meanwhile, our chemical tankers are experiencing a significant step-up, having earned $15,000 per day for the first quarter and earning $19,500 per day for the second quarter with 60% booked. Turning to Slide 6, where we discuss our longstanding capital allocation policy, which reflects our strategic through-the-cycle approach. We are committed to dynamically balancing the return of cash to shareholders with reinvestment in our fleet in order to enable sustainable value creation through the cycle.

In the first quarter, we declared our 10th consecutive dividend since the reinitiation of our dividend policy in 2022. We continue to invest in efficiency projects across our fleet, achieving low payback periods and IRRs ranging from 20% to over 100%. We upgraded the coatings on four of our chemical tankers with the remaining two to be completed this quarter. This aligns with Ardmore’s trading strategy. It offers the flexibility to move deeper into the premium end of the cargo slate, boosting earnings accordingly. And while we always track and evaluate potential transactions, we have taken the opportunity to significantly reduce our debt levels over the past years. With that, I’d like to hand it over to Bart.

Bart Kelleher: Thanks, Gernot. Turning now to the market outlook and supply dynamics, starting with Slide 8. Here we contrast an aging MR fleet and its natural replacement needs with the current order book. The chart on the left illustrates changes in the MR fleet over time. Currently, there’s an exceptionally old fleet. Actually, it’s the oldest fleet since the turn of the century, with an average age of over 14 years. Now moving to the chart on the right, more than half of this fleet will be over 20 years old and scrapping candidates within the next five years. In contrast, the current order book, delivering over the same time period, represents only 14% of the fleet. So the aging fleet is nearly 4 times the current order book.

In addition, the pace of ordering has meaningfully decelerated since mid-2024. In fact, only 4 MR orders were placed in the first quarter of this year. Turning to Slide 9. The pie charts on the left further depict the aging MR fleet. As mentioned in the previous slide, more than 50% of the fleet will be over 20 years old within the next five years. These older vessels trade at significantly lower utilization levels. The chart on the right highlights how they are typically empty over half of the time. While we do expect an increase in scrapping regardless of this, the aging fleet will reduce effective supply even without actual vessel removals. Moving to Slide 10. Both the U.S. trade representative proposal to impose fees on Chinese vessels and the further expansion of Western sanctions are limiting supply.

The USTR proposal is practically halting ordering activity in China and could impose a significant cost burden on Chinese tankers. Fortunately, in this evolving situation, this is not a concern for Ardmore. Our Korea and Japan built fleet continues to perform well and has full trading flexibility. In parallel, the additional step-ups in sanctions are also benefiting the compliant fleet. The sanctioned fleet has increased by 80% since the start of the year. Over 2,000 tankers are currently either sanctioned and or operating in the dark fleet. These vessels are not properly insured, no longer available for compliant trades and would have difficulty ever returning to the mainstream fleet. The Aframax segment is most impacted, encouraging more LR2 product tankers to enter the crude trade.

These supply side dynamics are reinforcing a two-tier market, where Ardmore in our fully compliant fleet stand to benefit. Moving to Slide 11, where we address demand fundamentals in greater detail. While U.S. tariffs and countermeasures have created uncertainty across the wider macro economy, underlying tanker demand fundamentals remain supportive. As shown in the chart on the upper right, refinery margins have been rising. Meanwhile, OPEC+ is set to ratchet up production starting this month. Looking ahead, market projections indicate continued demand growth for oil products to meet global mobility and energy security needs. It’s also important to note that global oil consumption has historically been more resilient through economic cycles than other areas of the economy.

In addition, dislocation of oil refineries remains an enduring trend. Refining and petrochemical production has been shifting East, which combined with closures in the West continues to drive incremental ton miles. Now moving to Slide 13 and turning our attention to Ardmore’s operating and financial performance. The company continues to build upon its financial strength. Once again, the chart on the bottom left highlights our focus on successfully reducing our cash breakeven level to $11,500 per day. In fact, it’s actually $10,500 per day when excluding pro forma CapEx. This has been achieved in an elevated interest rate environment, driven by effective cost control, lower debt levels and access to revolving credit facilities. As always, Ardmore remains focused on optimizing performance, closely managing costs and preserving a strong balance sheet.

Turning to Slide 14 for financial highlights. For the first quarter, we reported EBITDAR of $18.5 million, and as mentioned earlier, earnings per share of $0.14. We continue to frame EBITDAR as an important comparable valuation metric against our IFRS reporting peers. And full reconciliation details can be found in the appendix on Slide 25. Also, please refer to Slide 26 in the appendix for our second quarter guidance numbers. Moving to Slide 15 for fleet operations. We nimbly executed on some opportunistic chartering trade, including locking in a $2 million time charter in outspread over 12 months, while also fixing two seasonal time charter outs to cover the summer period at an average rate of $22,000 per day. As you can see from the chart on the right, we’re making great progress on our required dry dockings.

We’re almost done with most of this work and will have minimal dockings from mid-2025 onwards, boosting revenue days and enhancing earnings power. Capital expenditures for the fleet in 2025 are currently forecasted approximately $35 million. This includes $15 million of elective CapEx related to tank coatings and efficiency upgrades. As Gernot already mentioned, we are upgrading tank coatings on all of our chemical vessels to increase cargo versatility and further expand revenue opportunities, with an expected return of conservatively over 20%. As we shared in greater detail at our Investor Day earlier this year, we continue realizing benefits from our investments in AI and digitalization tools, supporting commercial and operational execution.

And as the new EU fuel regulations, effectively pass-through voyage expenses have come into force, they are creating opportunities to further optimize fleet deployment and drive TCE levels. Moving to Slide 16, where we highlight the power of our strong operating leverage. To frame this in a simple manner for every $10,000 per day increase in TCE, we would make an additional $2.30 in EPS. That’s a boost of nearly $100 million in free cash flow generation. Our modern high-quality fleet is well positioned to take full advantage of this earnings power. With that, I’m happy to hand the call back to Gernot and look forward to answering any questions at the end.

Gernot Ruppelt: Great. Thank you, Bart. Moving to Slide 18. Allow me to summarize three key points: Ardmore has a robust balance sheet, a strong operating platform and a modern, highly efficient fleet, all built in Korea and Japan. Great markets have shown resilience and our TCEs have remained significantly above our cash breakeven of $11,500 per day. And finally, our most deliberate and sensible strategic choices have been well matched to the business cycle and are underpinned by industry-leading corporate governance. Now before I open up the call to questions, I would like to briefly draw your attention to internal leadership progression at Ardmore that we referenced this morning in our earnings release. For one, we have announced the long-planned and well-deserved retirement of our COO, Mark Cameron, which will be effective January 1.

Mark has been with Ardmore since its inception in 2010 and has been instrumental in developing our technical management and operations platform, contributing countless strategic achievements for Ardmore. We are grateful for Mark’s many years of service and wish him the very best. Following a structured transition process, Mark will be succeeded by Robert Gaina, currently, our SVP commercial. Robert has been with Ardmore for 10 years in multiple leadership and commercial roles. He previously sailed as Master Mariner on the Ardmore fleet before coming ashore in 2015 and in the years following, completed an executive MBA from Erasmus University in Rotterdam. In his new role, Robert will hold the responsibilities of the existing COO role and the previous CCO role, thereby combining under one leadership umbrella, our integrated business activities across chartering, commercial operations and fleet management.

And finally, we are pleased to announce the completion of our CFO process announced during last year’s leadership transition at Ardmore and Bart stepping up as President. Effective July 1, John Russell, presently Ardmore’s Finance Director, will take on the broader responsibility of CFO working closely with Bart. John has served Ardmore for seven years and has been involved with Ardmore’s leadership team on all finance matters. He is a chartered accountant and holds multiple degrees in finance. We are pleased that, once again, Ardmore was able to promote from within as we continue to develop talent in-house and build on our strong dynamic company culture. And with that, we now welcome your questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jon Chappell from Evercore ISI. Please go ahead.

Jon Chappell : Thank you, good afternoon. Gernot or Bart, fleet update question as it relates to some of the announcements you made today. So on that $2 million spread time charter in time charter out, I’m assuming that’s the Matterhorn extending that contract for a year. Are there any other opportunities above and beyond that with the time charter in fleet? I know that the other three expire this summer. Do they have options and as you contemplate exercising potentially those options, do you see other spread opportunities like that?

Gernot Ruppelt : Yeah, hi, Jon. Thanks for the question. Probably not going to be able to go into a whole level of detail here because some of those are commercially sensitive, but we are constantly in touch with opportunities on both charter in and charter out, as you will have seen also in some of those seasonal charters out. And it is a fragmented market where we will hopefully find other opportunities to create interesting spreads by putting together different pieces in creative ways. On the other chartered in ships, currently, no options as such, but we’ve developed a really good and long-standing operating relationship with the head owner. And we’re certainly always find — try to find a way to continue those relationships.

Jon Chappell : Thank you. Just a follow-up. Obviously, a lot of uncertainty, as you touched on at the beginning, asset values have been a little bit volatile. I think there’s a lot of question marks about not just the macro, but also some of the geopolitical events that have been supportive to the industry over the last three years. And that type of uncertain backdrop, are you seeing more opportunity for fleet expansion or modernization, whether it’s through traditional acquisitions? Or whether it’s through other type of time chartering arrangements?

Gernot Ruppelt : Certainly something we’re always tracking and monitoring, Jon, and we are connected through a wide range of sources of deal flow with business that’s available in the market, but we’ve also built a good track record on vessel acquisitions and time charters where we have direct exposure to various counterparties. So far, we have felt it was more prudent to hold off. Because, of course, every transaction needs to be evaluated with appropriate rigor and discipline. There is a correction taking place on asset values, and this is something we’re tracking closely. But so far, we haven’t felt it was the right time to move ahead.

Jon Chappell : Great. Thanks, Gernot.

Gernot Ruppelt : Thank you.

Operator: Thank you so much for that question. [Operator Instructions] And our second question comes from Omar Nokta from Jefferies. Please go ahead.

Omar Nokta : Hi, Gernot and Bart. Just a couple of questions. Maybe just first on the management changes. Just a quick kind of mention of that. Obviously, there’s been a lot of movement. And as you mentioned, it seems like a pretty deep bull pen you’re working with at Ardmore promoting from within. Just wanted to get a sense from you if you’re anticipating any changes strategically or how the business is run going forward with the updated, say, management setup.

Gernot Ruppelt : Yeah, hi, Omar. Thank you for that question. It gives me a chance to just elaborate here a little bit more. With regard to more strong contributor and spent since the inception of the company in 2010 has been a hugely important contributor to Ardmore performance and is also really strongly recognized in the industry and somebody who will surely be missed. We have built incredible amount of talent internally, always giving people a chance to progress and kind of step up and step in. And I think that’s really part of the auto culture, and it’s been kind of part of what you can see throughout the organization. Even though, of course, there are some of those opportunities then for people to progress I like to think there’s also a lot of continuity around Ardmore’s strategy, around Ardmore’s governance, around our values and our approach to performance.

So these things might evolve, of course, with what the market determines and where the opportunity lies, but the foundational principles very much remain the same, even though people, of course, step up into different leadership ranks. So in a way, the greater some of things that Ardmore is greater than any individual.

Omar Nokta : Okay. Thank you, thanks for that. And maybe just more on the market. You mentioned, I think, you were talking about asset values. I believe it was about mentioning the values have come off a bit. I guess there’s been a sort of a jolt of optimism in the sector overall with OPEC bringing production back. Clearly, there’s a view that that’s going to be very supportive to the large crude tankers. But how do you think that filters its way into the MR market and product tankers, I guess, in general?

Gernot Ruppelt : Yeah. Look, overall, I think it’s really important to remember that even though there has been this uncertainty and volatility in broader markets. We referenced at the start of the call that TCEs find their footing at the levels that we’re reporting for the first quarter and guiding for the second quarter, which I believe is positive and if anything — moving against the seasonal trends. OPEC, of course, production increases, there’s an impact on crude tankers, but also an impact on refining margins, which you have seen even week on week, have jumped again and already at strong levels. And of course, with that, refiners have a stronger incentive to produce to refine cargoes. And with that of course, there should be incremental need to transport those cargoes as well.

So that bodes favorably on top of the supply story that we highlighted in the call, but again, all the speed in decades an order book at less than a third of prior peaks. And at the same time, the fleet that’s aging out is 3 times the order book. So very compelling in that sense. As far as market opportunities and pricing of assets is concerned, we are tracking sort of a correction in secondhand values. And as I had mentioned earlier, so far, we are monitoring. But it is a really fragmented market. A lot of players with a wide range of motivations to sell or to buy. And I think there will always be an opportunity with that. And we believe also some of the broad uncertainty that we have registered here at the start of the year is also floating through in some of the price ideas that are out there rightfully.

Omar Nokta : Very good. Thanks for that.

Gernot Ruppelt : Thank you.

Operator: Thank you for all the questions. And since there are no further questions at this time, this concludes today’s call. Thank you for participating. You may now disconnect.

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Q1 2025

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