Pyxis Tankers Inc . (NASDAQ:PXS), a global shipping company, announced a robust financial performance for the second quarter of 2024 during their earnings call. Despite the ongoing geopolitical tensions from the Russia-Ukraine war and conflicts in the Middle East, the company has shown resilience with significant increases in revenue and profitability, driven by favorable market conditions and strategic expansion into the dry bulk sector. The company reported a 42% increase in time charter equivalent revenues and a substantial rise in net income, reflecting a strong product tanker chartering environment and a balanced dry bulk sector.
Key Takeaways
- Pyxis Tankers experienced a 42% increase in time charter equivalent revenues, reaching $12.2 million in Q2 2024.
- The company's net income rose to $5 million, with basic earnings per share (EPS) at $0.48.
- Adjusted EBITDA for the period increased to $8 million.
- Product tanker charter rates remain strong, with 68% of Q3 2024 days booked at an average rate of $33,850 per day for MRs.
- Dry bulk sector booking stands at 76% for Q3 2024, with an average time charter rate of $17,200 per day.
- The company is pursuing value-enhancing investment opportunities, though high prices have made acquisitions of modern MRs challenging.
- Pyxis Tankers maintains a mixed chartering strategy and plans to strengthen its balance sheet through debt amortization and share repurchases.
Company Outlook
- Pyxis Tankers foresees a positive outlook for both product tanker and dry bulk sectors.
- The company plans to capitalize on the healthy chartering environment and pursue selective fleet expansion.
- Pyxis Tankers aims to enhance shareholder value through investment opportunities and share repurchase programs.
Bearish Highlights
- High acquisition prices for modern MRs due to 10-year historical highs, making compelling purchases difficult.
- Escalating tensions in the Middle East add market uncertainty.
Bullish Highlights
- Strong product tanker chartering conditions expected to continue, with lower inventories driving demand.
- The dry bulk sector shows a balanced supply-demand fundamentals for 2024.
- Global economic activity remains resilient despite tight monetary policies.
Misses
- The company has not found compelling acquisitions for modern MRs due to high current prices.
Q&A Highlights
- The Q&A session provided no additional information beyond what was presented in the earnings call.
In summary, Pyxis Tankers' Q2 2024 results show a company successfully navigating a complex global landscape with strong financials and a positive outlook. The company's strategic approach to fleet expansion and capital management, coupled with robust market conditions, positions it well for the future.
InvestingPro Insights
Pyxis Tankers Inc. (PXS) has demonstrated a commendable financial performance, as highlighted in their recent earnings call for Q2 2024. To further enrich this analysis, let's delve into some key insights from InvestingPro:
InvestingPro Data indicates that Pyxis Tankers boasts a gross profit margin of 61.99% for the last twelve months as of Q1 2024, underscoring the company's impressive ability to control costs and maintain profitability in a volatile market. This aligns with their reported increase in net income and profitability during the quarter. Additionally, the company's Price / Book ratio stands at a low 0.52, suggesting that the stock may be undervalued relative to the company's asset base.
From an investment standpoint, two InvestingPro Tips are particularly relevant:
1. Pyxis Tankers is trading at a low earnings multiple, with an adjusted P/E Ratio of 3.22 for the last twelve months as of Q1 2024. This could indicate that the company's earnings are not fully reflected in its stock price, presenting a potential opportunity for investors.
2. Analysts predict that the company will be profitable this year. This optimism is supported by the company's recent financial results and may provide additional confidence for investors considering the company's future prospects.
It's worth noting that there are 10 additional InvestingPro Tips available for Pyxis Tankers, which can be found at https://www.investing.com/pro/PXS. These tips offer deeper insights and could be crucial for investors making informed decisions about the company.
In summary, the InvestingPro Insights suggest that Pyxis Tankers Inc. may present a compelling investment opportunity, with strong profitability metrics and a stock price that could be undervalued relative to its financial performance. The positive analyst predictions further bolster the company's outlook, aligning with the bullish sentiments expressed in the article.
Full transcript - Pyxis Tankers Inc (PXS) Q2 2024:
Operator: Good day and welcome to the Pyxis Tankers conference call to discuss the financial results for the second quarter 2024. I must advise you that the conference call is being recorded. Additionally, a live webcast of today’s conference call and accompanying presentation is available on Pyxis Tankers’ website, which is www.pyxistankers.com. Hosting the call is Mr. Eddie Valentis, Chairman and Chief Executive Officer of Pyxis Tankers, and Mr. Henry Williams, Chief Financial Officer of the company. I would like to pass the floor to one of your speakers today, Mr. Eddie Valentis. Sir, please go ahead.
Eddie Valentis: Hello everyone and thank you for joining our call for results of the three months ended June 30, 2024. The disruption in global seaborne trade from the Russia-Ukraine war and the conflict in the Middle East continues. Global economic activity remains resilient despite the tight monetary policies by many central banks. Inflation is decelerating and interest rate cuts are expected, starting this fall. The fundamental outlook for our two markets, product tankers and dry bulk carriers, remains positive, characterized by healthy charter rates and rising asset values, but market conditions are dynamic and can be significant influenced by macroeconomic and geopolitical events which are beyond our control. Before commenting on our operating and financial results for the most recent period, please let me draw your attention to some important legal notifications on Slide 2 that we recommend you read, including our presentation today, which will include forward-looking statements. Thank you. Turning to Slide 3, our most recent quarterly results reflected strong financial performance in revenues and profitability, driven by healthy market conditions and our successful expansion into the dry bulk sector. With the acquisition of the 2015 build Kamsarmax in late June, our fleet of six modern midsized eco vessels consists of three MR2 product tankers, one Ultramax and two larger Kamsarmax bulk carriers. In the quarter ended June 30, 2024, we generated consolidated time charter equivalent revenues of $12.2 million, marking an increase of almost 42% over the same period in 2023. Our daily time charter equivalent for our fleet in Q2 2024 was approximately $29,150, of which the MRs averaged close to $32,900 and our midsized bulkers averaged $22,300 per day. For the most recent period, we reported net income of $5 million or $0.48 basic EPS, substantially better than Q2 2023. Our adjusted EBITDA in the most recent period rose to $8 million. The product tanker chartering environment remained strong throughout the second quarter of 2024. Despite slower global economic activity, armed hostilities contributed to tighter inventories of refined petroleum products, which continue to be below five-year averages in a number of locations worldwide. This has led to changing trade patterns, expansion of ton miles and arbitrage opportunities due to dislocation in certain end markets. Global refinery activity remains constructive in spite of moderating crack spreads and consumption, especially as we move further into the historically seasonally slower third quarter. Overall, many of these developments reinforce a positive outlook for product tanker charter rates. As of August 9, 68% of available days in Q3 2024 were booked for our MRs at an average estimated TC rate of $33,850 per day, similar to what we reported in the three month period ended June 30. Two of our MRs are employed under short term time charters and one in the spot market. The supply-demand fundamentals for the dry bulk sector continue to be relatively balanced for 2024. Our positive view on the dry bulk sector is further reflected by the recent acquisition of the Konkar Venture, a sister ship to the Kamsarmax we purchased back in February. As of August 9, our three modern bulk carriers were booked for 76% of available days in Q3 at an average estimated TC of $17,200 per day, all employed under short term time charters. Considering the favorable prospects for both sectors and our existing capital resources, along with established lending relationships, we remain committed to actively pursuing value-enhancing accretive investment opportunities; however, we have yet to find compelling acquisitions of modern MRs given current prices, which are reaching 10-year historical highs. While dry bulk values have also continued to appreciate, we have grown more selective in pursuing acquisitions in this sector. In the meantime, we expect to strengthen our balance sheet, amortizing scheduled debt and repurchasing additional shares. Please flip to Slide 4 for information on our existing fleet and employment activities. We are continuing to prudently maintain our mixed chartering strategy of time and spot charters with a focus on diversification by customer and direction. As you can see, five of our vessels are under staggered short term time charters, which provide us with attractive fixed revenues over defined periods of time and optimize working capital. The Pyxis Lamda, our youngest vessel, continues to operate in the spot market. Notably, the average age of the vessels in our fleet is materially below the industry averages, with our MRs at 9.9 years and 8.7 years for our bulkers. The next vessel surveys are scheduled to occur during the first half of next year on the Konkar Asteri and the Konkar Venture. Please turn to Slide 6 to review several macroeconomic and global oil market considerations which support fundamental product tanker demand. Market conditions especially for refined petroleum products continue to be very healthy and drive a positive outlook for the balance of 2024. Over the longer term, we expect demand for the product tanker sector to be boosted by refinery additions led by the Middle East and Asia, as you can see on Slide 7. According to Drewry, 3.7 million barrels per day of net new refinery capacity is scheduled to come online this year through 2028. Much of the incremental refining capacity will be export driven, which should lead to further expansion of ton miles. As you can see on Slide 8, the impact of the ongoing Russia-Ukraine war and the Israeli-Hamas conflict have continued to sustain strong charter rates, lengthened sailing distances and expand ton miles. Unfortunately, escalating tensions in the Middle East are directly affecting the oil markets, adding to the overall market uncertainty. Let’s move onto Slide 9. The combination of robust chartering conditions over the last two and a half years and continued positive outlook by owners has resulted in a significant increase in orders for the construction of new product tankers. According to Drewry, since the beginning of 2023, there have been orders for the construction of 231 new MR2s with the order book standing at 274 vessels, or 16.1% of the global fleet at July 31. By the end of 2025, 104 MRs are scheduled for delivery. Surprisingly, only 11 MRs have been delivered during the first seven months of this year, according to Drewry, so slippage may further affect the actual number of deliveries. Due to significant backlogs, many Asian yards don’t have available construction slots for MRs with deliveries in two-plus years. It is important to note that 13.5% of the global MR2 fleet, or 230 tankers are 20 years of age or older. Given this large number combined with declining economics of operating older vessels, major scrapping should occur over the next five years, but with a strong market, only four MRs were demolished in 2023 and that pace has yet to pick up. Overall, we continue to estimate the net fleet growth for MRs to be about 2% this year, very low by historical standards. Turning to Slide 10, we see the strong chartering conditions have led to steep increase in MR prices across the board. Values for secondhand tonnage remains well above 10-year averages. According to Arrow Shipbrokers, 94 MR2s were sold in the first seven months of 2024, up 24% year-over-year, marking the largest number on record. Tanker sales continue to be concentrated in older tonnage. Construction contracts for new buildings in South Korea now exceed $52 million, excluding yard supervision and add-ons. Prices for younger eco-efficient MR vessels, our preference, are approaching the cost of a new build, making viable acquisition candidates difficult to find, in our opinion. Now I would like to provide some updates for the dry bulk sector, so please flip to Slide 12. Overall, the supply-demand fundamentals for the sector look reasonably balanced for the remainder of 2024. Considering a moderate correlation to global GDP growth of 3.2% in 2024, demand for dry bulk commodities should remain positive. The dry bulk trade is estimated to grow 2.6% to almost 5.7 billion tons this year, with ton miles to increase by 3.9% due to the effects of armed hostilities and to a lesser extent port congestion and restrictions caused by adverse weather conditions. To a certain extent, the supply picture for dry bulk carriers looks manageable in the near term. Drewry estimates the order book for Panamax carriers, which includes Kamsarmax-class vessels, to be 406 vessels or 12.4% of the global fleet, but a similar percentage in 20 years of age or more which should eventually lead to more scrapping. At July 31, the order book for Supramax carriers, which include Ultramax, stood at 607 units or 14.1% of the global fleet of this highly versatile vessel class. As you see on Slide 13, prices for dry bulk carriers have also substantially appreciated. In fact, the price of a five-year-old Ultramax now matches or exceeds a new build cost; nevertheless, strong asset prices are another positive indicator for the sector. At this point, I would like to turn the call over to Henry Williams, our Chief Financial Officer who will discuss our financial results in greater detail.
Henry Williams: Thanks Eddie. On Slide 15, let’s review our unaudited results for the three months ended June 30, 2024. Our time charter equivalent revenues for Q2, which we define as revenues net minus voyage-related costs and commissions, rose to $12.2 million, an increase of almost 42% as we benefited from higher demerge income under spot charters, better market conditions, and more operating days due to the addition of the dry bulk vessels. Strong chartering rates were reflected in our daily TC for our MRs, which improved to $32,868 in Q2. Our bulkers reported an average daily TC of $22,333 for the same period. During the quarter, the overall fleet generated an average TC of $29,156 per vessel, almost a 17% increase through a mix of short term, time and spot charters. Moving to Slide 16, we generated net income to common shareholders of $5 million for the three months ended June 30, 2024, or $0.48 basic and $0.43 diluted EPS, compared to net income of $2.8 million or $0.25 basic, $0.23 diluted income per share in the same period in 2023. Please note for accounting purposes, the fully diluted earnings calculations assume the potential conversion of all the outstanding Series A convertible preferred stock into common shares and the elimination of the associated dividend. In Q2 2024, a majority of the increase in TCE revenues of $3.6 million flowed through to adjusted EBITDA, which increased $2.8 million to $8 million for the period. Now flip to Slide 17 to review our capitalization at June 30, 2024. At quarter close, our consolidated leverage ratio of net funded debt stood at approximately 23% of total capitalization. Our weighted average interest rate was 8% in the most recent quarter, and the next bank loan maturity is now scheduled for December of 2026. I should point out that at the end of June 2024, our total cash position aggregated $44.6 million. Most of the excess cash is invested in short term money market investments, which currently earn 5.5%. Lastly, given the recent common share buybacks, the partial redemption of the convertible preferred stock offset by the issuance of restricted shares of the Konkar Venture acquisition, we have approximately 10.7 million common shares outstanding as of August 9 and 12 million shares on a fully diluted basis. With that, I’d like to flip the presentation back over to Eddie to wrap up.
Eddie Valentis: Thanks Henry. The outlook for both the product tanker and dry bulk sectors remain positive in the near term, supported by healthy chartering environments. While the order books for our class of vessels have grown significantly since the beginning of 2023, we find solace in the large number of older vessels which are less competitive operationally and face demolition soon. The ongoing major geopolitical conflicts continue to create operating challenges and opportunities for us. We continue to benefit from the combination of solid end market consumption, lower refined product inventories in many parts of the world, changing trade patterns and expanding ton miles Scheduled developments for the refinery landscape only enhanced the long term outlook for the product tanker sector. Further, global GDP growth over the near term supports demand for a broad list of dry commodities and benefits our class of bulk carriers. We expect to utilize our solid financial position and extensive industry relationships to develop additional investment opportunities that maximize shareholder value, including selective fleet expansion. We also look to continue our common share repurchase program and of course repay scheduled debt. Enhancing our balance sheet remains a key priority. We appreciate your interest and thank you for joining our call today. We look forward to reporting on future progress at Pyxis Tankers.
End of Q&A: This concludes today’s conference. You may now disconnect your lines. Thank you for your participation.
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