Ardmore Shipping Q3 2025 Earnings Call - Robust Earnings Growth Amid Market Volatility and Strategic Capital Moves

Conference Operator: Good morning, ladies and gentlemen, and welcome to Ardmore Shipping’s third 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 through November 12th by dialing 1-888-660-6345 or 1-646-517-4150 and entering passcode 96494. At this time, I will turn the call over to Gernot Ruppelt, Chief Executive Officer of Ardmore Shipping.

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

Bart Kelleher, President, Ardmore Shipping: Thanks, Gernot. Turning to slide two. 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 third quarter 2025 earnings release, which is available on our website. Now, back over to Gernot.

Gernot Ruppelt, Chief Executive Officer, Ardmore Shipping: Thank you, Bart. Let me outline the format of today’s call, which you can see here on slide three. First, I’ll give you a brief overview of third quarter results, market trends, and how we are executing on capital allocation. I will then hand over to Bart, who will cover the market outlook and update you on our financial and operating performance. Thereafter, I will conclude the presentation before opening up the call for questions. Turning first to slide four. We’re pleased to announce our third quarter results, delivering adjusted earnings of $12.6 million or $0.31 per share. Earnings increased throughout the third quarter and into the fourth, driven by record volumes of refined product on the water. Our TCE performance remains exceptionally strong, defying seasonal norms. Rates have been firming throughout the year and into the typically stronger winter period at levels more than double our cash break-even.

Our MRs earned $24,700 per day for the third quarter and $24,900 so far in the fourth quarter, with 40% booked. Our chemical tankers earned $22,600 per day for the third quarter and $22,200 so far in the fourth quarter, with 35% booked. We took delivery of three modern MR tankers during the quarter. These were opportunistically acquired during a period of market uncertainty before the summer. Second-hand prices have been firming considerably since. These vessels have been capturing strong spot markets, notable fuel savings, and increased our earnings power. Meanwhile, guided by our capital allocation policy, we have fully redeemed our $30 million preferred shares, further reducing our cash break-even. We are declaring our 12th consecutive dividend, consistent with our policy of paying out one-third of adjusted earnings. In addition, we are further enhancing the value of our trading book through high-quality, long-term chartered contracts.

We recently fixed one of our 2014-built MRs for two years to an oil major at $21,250 per day. Looking ahead, markets are experiencing evolving product tanker demand, significant near-term disruption, and tight supply-demand balances, as Bart will cover in greater detail. Turning to slide five, where we highlight our disciplined and deliberate approach to capital allocation. We continue to balance returning capital to shareholders with growing the business and reinvesting in our fleet while maintaining low debt levels. As just mentioned, we are paying our 12th consecutive dividend. We fully redeemed $30 million of preferred shares, and we took delivery of three high-performing MRs. With that, over to Bart.

Bart Kelleher, President, Ardmore Shipping: Thanks, Gernot. Turning to slide seven and the market outlook. Export volumes in refined product and transit reached record levels during the quarter, fueling robust product tanker demand. In addition, ample oil supply is driving strong refinery throughput and trading activity. At the same time, high crude fleet utilization is tightening supply across the tanker industry. Notably, 50% of the LR2 fleet is now trading in the crude market, up 23% over the past year. Turning to slide eight, where we examine how geopolitical factors are creating further inefficiencies and favorably impacting the market. 16% of the global tanker fleet is now sanctioned, significantly reducing the pool of compliant vessels and limiting available supply. Looking ahead to the start of next year, the EU is further tightening restrictions, targeting products refined from Russian crude.

The map on the lower right highlights one example of notably longer voyage distances that are likely to emerge. Meanwhile, rapid changes to geopolitical conflicts, tariffs, and trade disruptions are driving increased market activity. Slide nine highlights the favorable supply dynamics, with positive trends on both ends of the age spectrum. An increasingly older fleet and a shrinking order book with decelerating ordering activity. Our favorite chart on the left illustrates the continued evolution of the aging MR fleet over time. The fleet is the oldest it’s been this century. Ongoing regulatory uncertainties continue to limit ordering activity, with the order book now representing just 13% of the fleet. Moving to the chart on the right, the older MR fleet, approaching the scrapping window, is four times larger than the current order book. As a reminder, even if these vessels are not initially scrapped, their utilization levels notably decline.

Now moving to slide ten. Here we take a closer look at evolving trade flows and long-term demand. The global refinery base continues to shift, with capacity expansion concentrated in Asia and the Middle East, while closures persist in the West. In Europe and the U.S., refinery shutdowns are increasingly requiring long-haul substitution flows from the East, driving ton-mile demand. Specifically in California, refined product imports are up 50% year-on-year, with some major refineries now permanently shutting down. Meanwhile, forecasts note extended oil demand growth, supported by an increased focus on energy security and continued economic growth. Now moving to slide twelve and turning our attention to Ardmore’s strong financial performance. As previously mentioned, we’ve utilized our low-cost debt to fully redeem our preferred shares. As a reminder, this was from a 2021 bilateral transaction done directly with our friends at Maritime Partners.

Redeeming these shares supports our evolving capital structure and focus on low cash break-even levels. Once again, the chart on the bottom left highlights the progress we have made to reduce our cash break-even levels to $11,700 per day. This includes CapEx for dry docking cycles. Without this, our break-even is an even lower $10,800 per day on an operating basis. Turning to slide thirteen for financial highlights. For the third quarter, we reported EBITDA of $27.6 million, and as mentioned earlier, earnings per share of $0.31. We continue to frame EBITDA as an important comparable valuation metric against our IFRS reporting peers. Full reconciliation details can be found in the appendix on slide twenty-two. Please refer to the appendix on slide twenty-three for our fourth quarter guidance numbers. Most importantly, our strong operating leverage positions Ardmore Shipping to take advantage of market volatility.

Every $10,000 a day in additional TCE increases annual earnings by approximately $2.15 per share. Moving to slide fourteen for fleet operations. Dry docking activity for the year is largely complete, with very limited dockings in the coming years, resulting in more revenue days, earnings power, and cash generation. As a reminder, capital expenditures for 2025 are projected to be $37 million, nearly half of which is elective CapEx related to efficiency and tank coating upgrades. Projects where we are already realizing notable early returns. Our strong spot exposure is further enhanced through high-quality chartered contracts at attractive levels. We are continuing to invest in tangible AI and digitalization projects with short paybacks. For example, we are currently upgrading high-frequency data collection and transmission across our fleet to take voyage optimization to the next frontier. Our targeted use of biofuel bunkers supports trading strategies in the EU.

We are achieving full fuel EU compliance across the fleet in 2025. Finally, our on-hire availability was a strong 99% in the third quarter. A testament to our seafarers working in coordination with our global team. With that, I’m happy to hand the call back to Gernot and look forward to answering any questions at the end.

Gernot Ruppelt, Chief Executive Officer, Ardmore Shipping: Thank you, Bart. Moving to slide sixteen, let me summarize. Earnings have continued to strengthen through the first three quarters of 2025 and into the fourth quarter, supported by favorable market conditions and strong operating performance. Our recent acquisitions are capturing these favorable markets and increase Ardmore’s earnings power. We are wrapping up our CapEx program for the year with a minimal dry dock schedule for the coming two years. We continue to enhance the quality of our trading book with compelling long-term charters. Our strong financial position enables us to be opportunistic and resilient, giving us the flexibility to both reinvest in the business and deliver shareholder returns. As always, our actions are guided by industry-leading governance. We take an agile and responsive approach to market shifts enabled by our high-performing operating platform. With that, we now welcome your questions.

Conference Operator: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Jonathan Chapelle with Evercore. Please go ahead.

Good afternoon. Thanks for taking this call. Maybe Bart.

Bart Kelleher, President, Ardmore Shipping: Hi, John.

Or not. Either one can. Hi. Either one of you guys can answer this one. If you look at slide seven, you know the output on the water, the size it has ever been, the refinery runs, the size it has ever been, a lot of favorable things you are talking about as it relates to sanctions. Mid-twenties a day is a decent rate, but it is not a phenomenal rate. It is also lagging, I would say, in historical relationship with the strength of the VLCC market. Is this like things are building and you expect a much stronger winter period, or is there some limiting factor that kind of keeps the MR spot rates from getting $35,000-$40,000 a day?

Gernot Ruppelt, Chief Executive Officer, Ardmore Shipping: Yeah, I think so. I’m going to start here and then see what Bart might want to add. You’re making a good point. If you look at just sort of the short-term sort of relationship between MRs and some of the crude tankers, if you zoom out, there is a relatively strong correlation. Of course, you could argue that whatever goes into the refinery also comes out the other end. Yeah, I think that point is well made. Just kind of looking at our sector, we feel pretty compelled by the significant ramp-up in earnings that we’ve seen from the start of the year, where there’s been more of a risk of approaching markets, tuning out trading activity, really going through a catch-up phase.

We’re equally excited, of course, about sort of the long-term demand drivers, sectoral drivers, evolution of the demand picture of product tankers as a whole, where the market that we’re facing today is vastly evolved from what it would have been 10 to 15 years ago. Of course, not to forget that we have the oldest fleet kind of on record this century. We’re quite positive about the long-term picture. I think near term, not to kind of dive into all the geopolitical factors that are in play, but it certainly feels like the world is nowhere near an equilibrium. While there are these shifts brought on by geopolitical tension or even by conflict, of which there are many, that creates volatility in commodity markets. With volatility in commodity markets, you see more trading. With more trading, you have a higher demand for.

Ships carrying those commodities to move and to move at increasing lengths. I think what we hinted at, what’s going on right now with regard to imports really moving up significantly into California, a significant some of the new triangulations we’re seeing in the Atlantic Basin. It’s just the story that’s starting to play out now. We’ve, of course, talked at length about the displacement trade of formerly Russian diesel exports into Europe, whereby Europe is covering that from different regions. Probably very little talked about is that Russia is now actually looking to import CPP or petroleum products from relatively faraway places like in Asia to actually bridge the shortfall of their own domestic petroleum production, which has been quite heavily hit, of course, recently. I think taking into account all of that, we feel positive about the market outlook.

Okay. That’s very helpful, Gernot. Given that, I mean, I understand you want a balanced chartering strategy, and two years with an oil major is probably pretty good business. Again, that’s at a level that’s lower than what you just did in the third quarter, what you’re indicating for the fourth quarter, what you’re effectively insinuating for the near term. Can you help us understand the thought process behind that deal and your appetite to do others of similar duration and rate levels?

Yeah. I mean, it is, of course, a relatively small portion of the fleet, and the fleet is predominantly operating in the spot market, where we can capture those favorable currents. We look at it really as a portfolio. We have been active on both the time charter in and time charter out front, sometimes simultaneously. We’ll continue to do that. This was an opportunity to lock in a really strong return with a high-quality counterparty. As we’re expanding the earnings power, we also kind of augment and solidify earnings quality with a counterparty that is well known to us, first grade, and we have a long operating history with. We’ll continue to, of course, evaluate opportunities on both sides of the table, in, out, as well, of course, on the S&P side of things. It’s just one part of a broader portfolio.

I think maybe taking a little cue here from your first question on market direction. I mean, this is a major oil and refining company. For there to be the confidence to take a long-term charter at these good levels, I think also reflects positively on their view of their physical needs in terms of moving that product over multiple years.

Thank you, Gernot. Appreciate the time.

Thanks, John.

Conference Operator: Thank you. As a reminder, if you wish to ask a question, please press star followed by the one. Your next question comes from Omar Nokda with Jefferies. Please go ahead.

Thank you. Hi, Gernot. Bart. Couple of questions.

Bart Kelleher, President, Ardmore Shipping: Hi, Omar. On my end.

Hi. Yeah. Just a couple for me and maybe just following up on the first question from John. I guess thinking about the market, and you’ve already talked about it. Just from maybe your vantage point, obviously the market’s gotten better this year as time has gone on, right? Your results have sequentially improved, but it does not have that sizzle yet like we are seeing in crude tankers. I guess just from what you’re saying, is this as expected? Is this what you would have thought would have happened to product tankers given the shift in OPEC, that we would see crude tankers surge, products just sort of ho-hum improve? Is it just simply a matter of time, as you mentioned, that it’s just simply these cargoes now need to deliver into the refining system, and then that will then create more product flow?

Is it as simple as that?

Gernot Ruppelt, Chief Executive Officer, Ardmore Shipping: Yeah. I mean, look, if there’s an abundance of oil supply, which I think is at this point pretty much a given, given not just the strong output and OPEC Plus production increases, even though they might be moderated now at the start of the year. Of course, that’s always kind of a balancing act. OPEC Plus, of course, are not the only oil producers at the moment. I think we have continued to observe as there is ample oil supply that creates really strong incentives for refineries to, of course, put that to the refinery. We see already refining margins very strong. We see product on the water, indeed, quite firm. Just with the.

Market, sort of the oil market kind of flirting with the contango, kind of not quite there, but dipping in and out of that. Of course, that then creates all sort of interesting commodity plays, increases economic incentive for long-haul trading. For the larger ships, could certainly lead to some storage activity, which has a very positive cascading effect. It just kind of creates that additional layer of trading demand. To your point, I think there’s still a lot of positive factors that could play out in addition to just continued trade ships that are purely within refined products trading.

Bart Kelleher, President, Ardmore Shipping: I’ll just add in, Omar, as well. Typical seasonality is always more of the discussion of, is it mid-November or kind of prior to Thanksgiving? From that, I mean, we still do have part of the refining base coming back from maintenance period and everything. Then you have the accelerants that Gernot just spoke about.

Thank you. Yeah. Helpful. I just wanted to ask maybe a bit more on Ardmore specifically, strategy. Obviously, you guys have done very well in terms of strengthening the balance sheet. You’ve got now, just looking here on your slides, no dry docks next year. You’ve got no real debt repayments next year. You’ve paid for those three MRs that have delivered. You’re in a great position with plenty of flexibility as we look into 2026. Presumably, the market still looks fairly decent. Kind of what are you thinking now that you’ve, especially now that you’ve redeemed the preferreds, you have a lot more flexibility than you have had in the past? Does this change anything in terms of how you want to deploy capital, whether it’s returning more capital to shareholders, or do you think there’s opportunities to kind of maybe replicate the.

Sale and purchase transaction you did a few months ago with those three MR tankers? How are you thinking about that?

Gernot Ruppelt, Chief Executive Officer, Ardmore Shipping: Yeah, that’s a great question, Omar. I think ultimately our next steps will be guided by the market. Always, of course, underpinned and guided by our strong governance and our very balanced approach to capital allocation. We feel like we have found a way to be value-enhancing across a wide range of transactions. The three vessels we took delivery of just after the summer, if you just take sort of price point that we paid for the five-year-old, would have been around $38 million, just north of that. We have seen now ships of the same age getting sold for $43 million in one case, as much as north of $44 million. We are in the money by 15% there within four months. We take note of that big step up, happy with that transaction.

To what extent there are opportunities moving forward, closely, of course, connected with all sources of deal flow. It is an active market, fragmented buyers, sellers that sometimes buy and sell ships for reasons that are not necessarily only economically motivated. At the same time, we have also found ways to reinvest in the business, not by acquiring ships, but by investing in vessel upgrades that had extremely short payback periods, whether it was efficiency upgrades that enabled really compelling fuel savings, whether it was increasing cargo versatility by upgrading our chemical tankers. Of course, across the past year, we have provided shareholder returns not just through a dividend, but also through share buybacks when we thought there was an opportunity to lean in. All those avenues will continue to be on the table. What we did recently with the pref helps reduce our break-even.

On top of kind of really rigorous cost discipline as well. I think that will continue to be the guiding pillars of our strategy focused on the product and chemical space and looking to do value-enhancing transactions across the spectrum. How that would look in detail, again, is ultimately guided by the market.

Thank you. Thanks, Gernot. Appreciate that. Thank you, Bart. I’ll turn it back.

Thanks, Omar.

Bart Kelleher, President, Ardmore Shipping: Thanks.

Conference Operator: Thank you. As I said, no further questions. This concludes today’s conference call. Thank you for your participation. You may now disconnect.