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DATE
Wednesday, November 5, 2025 at 10 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Gernot Ruppelt
Chief Financial Officer — Bart Kelleher
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TAKEAWAYS
Adjusted Net Income -- $12.6 million, or $0.31 per share, for the third quarter, with sequential earnings improvement continuing through Q3 2025 and into Q4 2025.
Time Charter Equivalent (TCE) Rates -- MR tankers achieved $24,700 per day, and $24,900 per day so far in Q4 2025, with 40% booked; chemical tankers earned $22,600 per day, and $22,200 per day so far in Q4 2025, with 35% booked.
Fleet Expansion -- Three modern MR tankers delivered during the quarter, acquired before summer market uncertainty; vessels are already contributing fuel savings and earnings power.
Capital Structure Actions -- Full redemption of $30 million in preferred shares, lowering cash breakeven to $11,700 per day including CapEx, $10,800 per day on an operating basis.
Dividend Policy -- Twelfth consecutive dividend declared for the third quarter, consistent with the policy of distributing one-third of adjusted earnings.
Charter Contracts -- A 2014-built MR fixed on a two-year charter to an oil major at $21,250 per day, indicating new long-term charter activity at levels below current spot rates.
EBITDAR -- $27.6 million for the third quarter, with EBITDAR highlighted as a peer comparison metric.
On-Hire Availability -- 99% in the third quarter, reflecting operational reliability and minimal dry docking.
Projected 2025 Capital Expenditures -- $37 million in planned capital expenditures for 2025, with nearly 50% allocated to elective efficiency and tank coating upgrades.
Order Book and Fleet Age -- MR fleet is at its oldest level this century; the order book equals 13% of the fleet, and older tonnage approaching scrapping window is four times the size of the order book.
Sanctioned Fleet Impact -- 16% of the global tanker fleet now designated as sanctioned, reducing available compliant vessels and tightening supply.
Geopolitical Influences -- Imminent tightened EU restrictions on products refined from Russian crude, with "notably longer voyage distances" cited as an emerging trend.
AI and Digitalization -- Investments underway to upgrade high-frequency data collection and voyage optimization technology, aiming for operational improvements.
EU Biofuel Compliance -- Full fuel EU compliance across the fleet expected in 2025 through targeted biofuel use.
SUMMARY
Management stated that every incremental $10,000 per day in TCE results in a $2.15 increase in annual earnings per share (GAAP/non-GAAP basis not specified), underlining high operating leverage. Record refined product volumes and refinery throughput are fueling tanker demand and supporting elevated rates, with rates more than double the company's cash breakeven for the third quarter. The fleet expansion via recent opportunistic MR acquisitions reflected a 15% vessel price appreciation within four months, as cited by management. Export volumes and in-transit refined product both set new records in the third quarter, and the LR2 fleet's migration into crude has further tightened supply in the product market. Ongoing investments in vessel upgrades and advanced digital infrastructure are designed to accelerate efficiency paybacks and support emerging market and regulatory requirements.
Bart Bart Kelleher indicated that the older segment of the MR fleet approaching scrapping is disproportionately large compared to newbuilds, potentially shaping the supply curve.
CEO Ruppelt explained, "we are declaring our twelfth consecutive dividend consistent with our policy of paying out one-third of adjusted earnings," confirming sustained capital return to shareholders.
Bart Kelleher stated that on-hire vessel availability was "strong at 99% in the third quarter," referencing the fleet's limited off-hire time and operating efficiency.
Ruppelt described recent charter contracts as reinforcing "earnings quality" by diversifying the earnings stream while noting that most of the fleet remains spot-exposed.
Anticipated minimal dry-docking in upcoming years could enable more revenue days and cash generation, as described in the operating update.
INDUSTRY GLOSSARY
TCE (Time Charter Equivalent): A shipping industry metric used to standardize revenue from voyage and time charters, reflecting net earning power per day per vessel.
MR Tankers (Medium Range Tankers): Product tankers typically ranging from 45,000 to 55,000 deadweight tons, commonly used for refined petroleum products and chemicals.
EBITDAR: Earnings before interest, taxes, depreciation, amortization, and rent, adopted here for peer comparability in the shipping sector.
On-Hire Availability: The portion of time vessels are available to earn revenue, excluding downtime for dry-dock or repair.
LR2 Fleet: Long Range 2 tankers, larger than MRs, often used for crude and large product shipments; their migration to other cargoes impacts market supply.
Order Book: The list of vessels on order at shipyards, measured as a percentage of the existing fleet to gauge future supply.
Full Conference Call Transcript
Gernot Ruppelt: 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 are 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 breakeven. 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. Secondhand 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 breakeven. And we are declaring our twelfth 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 charter contracts. We recently fixed one of our 2014 build 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 twelfth 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: Thanks, Gernot. Turning to slide seven and the market outlook. Export volumes and refined product in transit reached record levels during the quarter, fueling robust product tanker demand. In addition, ample oil supplies are 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 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, 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 10. 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 US, 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. Now moving to slide 12. And turning our attention to Ardmore Shipping Corporation's strong financial performance. As previously mentioned, we have 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 breakeven levels.
Once again, the chart on the bottom left highlights the progress we have made to reduce our cash breakeven levels to $11,700 per day. This includes CapEx for drydocking cycles. Without this, our breakeven is even lower at $10,800 per day on an operating basis. Turning to slide 13, for financial highlights. For the third quarter, we reported EBITDAR of $27.6 million and as mentioned earlier, earnings per share of $0.31. We continue to frame EBITDAR as an important comparable valuation metric against our IFRS reporting peers. Full reconciliation details can be found in the appendix on slide 22. Also, refer to the appendix on slide 23 for our fourth quarter guidance numbers.
And most importantly, our strong operating leverage positions Ardmore Shipping Corporation 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 14 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 charter contracts at attractive levels.
We're continuing to invest in tangible AI and digitalization projects with short paybacks. For example, we're 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. And we are achieving full fuel EU compliance across the fleet in 2025. Finally, our on-hire availability was strong at 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: Thank you, Bart. Moving to Slide 16, let me summarize. Earnings have continued to strengthen through 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 Shipping Corporation's earnings power. We are wrapping up our CapEx program for the year with a minimal dry dock schedule for the coming two years. And 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.
And we take an agile and responsive approach to market shifts enabled by our high-performing operating platform. With that, we now welcome your questions.
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 Chappell with Evercore. Please go ahead.
Jonathan Chappell: Good afternoon. Thanks for taking the call. Maybe Bart or Gernot, either one can answer this one. But if you look at slide seven, you know, the output on the water, the size it's ever been, the refinery runs, size it's ever been. A lot of favorable things you're talking about as it relates to sanctions. And, you know, mid-twenties a day is a decent rate, but it's not a phenomenal rate. It's also lagging, I'd say, in historical relationship with the strength of the VLCC market. So is this, like, you know, things are building and you expect a much stronger winter period?
Or is there some limiting factor that kinda keeps the MR spot rates from getting, you know, $35,000, $40,000 a day?
Gernot Ruppelt: Yeah. Thanks, Jonathan. I'm gonna start here and then see what Bart might wanna add. But 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, you know, if you zoom out, there's a relatively strong correlation. And of course, you could argue that whatever goes into the refinery also comes out the other end. So, yeah, I think that point is well made. You know, just kind of looking at our sector, you know, we feel pretty compelled by the significant ramp-up in earnings that we've seen at the start of the year, where there's been more of a risk of approaching markets.
To now trading activity really going through a catch-up phase. But we are equally excited, of course, about 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 ten to fifteen years ago. And of course, not to forget that we have the oldest fleet kind of on record this century. So we are, you know, we're positive with the long-term picture and I think, you know, near-term, you know, 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.
And, you know, 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. And with volatility in commodity markets, you see more trading. And 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 was going on right now with regard to, you know, imports really moving up significantly into California, a significant some of the new triangulations we're seeing in the Atlantic Basin. It's just a story that's starting to play out now.
You know, we've of course talked at length about, you know, the displacement rate of formerly Russian diesel exports into Europe, whereby Europe is covering that from different regions. But to actually bridge the shortfall of their own domestic petroleum production has been quite heavily hit, of course, recently. So I think taking into account all of that, we feel positive about the market outlook.
Jonathan Chappell: Okay. That's very helpful, Gernot. And then given that, I mean, I understand you wanna balance chartering strategy and two years within the oil major is probably pretty good business. But again, that's at a level that's lower than what you just said in the third quarter, what you're indicating the fourth quarter, what you're effectively insinuating for the near term. So just help us understand the thought process behind that deal. And your appetite to do others of similar duration and rate levels.
Gernot Ruppelt: 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. And we'll continue to do that. This was an opportunity to lock in a really strong return with a high-quality counterparty. And as we're expanding the earnings power, we also kind of, you know, augment and solidify earnings quality. A counterparty that is well known to us, you know, first grade and we have a long operating history with.
So we'll continue to of course evaluate opportunities on both sides of the table, in, out as well, of course, on the S and P side of things. And it's just And 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. And 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.
Jonathan Chappell: Thank you, Gernot. Appreciate the time.
Bart Kelleher: Thanks, Jonathan. Thank you. As a reminder, if you wish to ask a question,
Operator: please press star followed by the one. Your next question comes from Omar Nokta with Jefferies. Please go ahead.
Omar Nokta: Thank you. Hi, Gernot, Bart, couple of questions on my end. Yeah. Just a couple for me and maybe just following up on the first question from Jonathan. I guess, thinking about the market, you've already talked about it. Just from maybe your vantage point, obviously, the market's gotten better, you know, this year as time has gone on. Right? Your results have sequentially improved, but it doesn't have that sizzle yet. Like, 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 improve. And then 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 then that will then create more product flow. Is it as simple as that?
Gernot Ruppelt: Yeah. I mean, look. If there is an abundance of oil supply, which I think is, at this point, pretty much a given, given the not just the strong output and OPEC plus production increases, even though they might be moderated now at the start of the year. But of course, that's always kind of a balancing act. But OPEC plus of course, are not the only oil producers at the moment. And I think we have continued to observe as there is ample oil supply that creates, you know, 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.
And 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 sorts 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. And just kind of creates that additional layer of trading demand. So to your point, I think there's still a lot of positive factors that could play out in addition to just continue just trade shifts that are purely within refined products trading.
Bart Kelleher: And I just add in Omar as well, you know, seasonality is always more of the discussion of is it mid-November or kind of prior to Thanksgiving? And so from that, I mean, we still do have part of the refining base coming back from maintenance period and everything and then you have the accelerants that Gernot just spoke about.
Omar Nokta: That helpful. And I just wanted to ask maybe a bit more on Ardmore Shipping Corporation specifically, you know, 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 got no real debt repayments next year. And you've paid for those three MRs or delivered. So you're in a great position with plenty of flexibility as we look into '26. Presumably, the market still looks fairly decent. Kind of what are you thinking now that you've just 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 wanna 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 MRs? Are you thinking about that?
Gernot Ruppelt: Yes, that's a great question, Omar. And 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. So of course, 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 with been around $38 million just north of that.
And we've seen now ships of the same age getting sold for $43 million, in one case as much as north of $44 million we earned the money by 15% there within four months. And of course, we take note of that big step up, happy with that transaction. To what extent the opportunities moving forward, closely, of course, connected with all sources of deal flow. It's an active market, fragmented buyers, sellers that sometimes buy and sell ships for reasons that are, you know, not necessarily only economically motivated.
But at the same time, we've 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, and of course, you know, across the past year, have provided shareholder returns, not just through a dividend, but also through share buybacks. When we thought there was an opportunity to lean in and all those avenues, will continue to be on the table. Of course, what we did recently with the pref helps reduce our breakeven on top of kind of really rigorous cost discipline as well.
And 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.
Omar Nokta: Thank you.
Jonathan Chappell: Thanks, Gernot. Appreciate that. And thank you, Bart. I'll turn it back.
Bart Kelleher: Thanks, Omar. Thanks.
Omar Nokta: Thank you.
Operator: Since there are no further questions, this concludes today's conference call. Thank you for your participation. You may now disconnect.