CHAIRMAN’S STATEMENT

Charting a Sustainable Future

In FY 2018, BW LPG continued to maintain an even keel in the face of another challenging year. The LPG shipping sector faced sluggish VLGC day rates and ship oversupply during the year. This was mitigated by strong oil prices and US LPG production growth, which allowed the oversupply of VLGCs to be partially absorbed and the US-Far East LPG arbitrage to widen at times, which allowed for rates to improve towards year end.

Against the backdrop of volatile oil and shipping markets, we remain committed to delivering long-term value for our shareholders. Although our financial performance was impacted by challenging market conditions, and we ended the year with a loss, we focused on building better momentum in 2018, driving efficiencies and positioning ourselves for the future. BW LPG today boasts one of the lowest cash cost breakeven levels per vessel across the industry.

At the same time, we continued to work proactively on capital management strategies. During the financial year, we engaged in competitive refinancing and strategic vessel divestments, while maintaining a stable leverage ratio and liquidity runway. Through opportunistic divestments of older vessels, we reduced our average fleet age and generated US$113.6 million in sales proceeds.

BW LPG made an all-share offer to merge with Dorian LPG, aimed at creating a stronger company with a larger combined fleet and better geographical coverage to deliver enhanced value to stakeholders. However, the Dorian board appeared unwilling to engage in substantive discussions, and after several months with no formal response, we decided to withdraw the offer.

We have taken steps to be future ready. Taking an industry lead, we invested in the world’s first LPG dual-fuel engine retrofitting. During the year, we committed to four engine conversions, secured options to convert additional vessels and now have 19 vessels in our owned fleet that are capable of being upgraded with LPG dualfuel propulsion. By harnessing LPG as fuel, these engines will not only comply with the IMO 2020 0.5% sulphur regulations, but will also be in line with the existing and stricter 0.1% Emission Control Areas (ECA) and Sulphur Emission Control Areas (SECA). Furthermore, these engines will be 11% more efficient, owing to the higher energy content in LPG as opposed to fuel oil. In the long run, the move will result in cost savings for our clients while driving positive change in the world.

We are convinced that in light of strong global LPG production growth and heightened environmental awareness leading to cleaner fuel policies, LPG stands as an attractive fuel for the future, both environmentally and economically.

On the technological front, we recognise the value of technology to drive efficiency. We are developing smart ships that are connected to the digital cloud, and use automation and predictive analysis to gain operational benefits from reducing collisions, injury and cargo loss claims, to integrated ship management and remote monitoring and control.

In early 2019, we unveiled our integrated LPG delivery service which extends BW LPG’s “best of class” reputation to product delivery services, enabling us to deliver LPG on time and to specification by utilising our own fleet. In doing so, we expect to improve fleet utilisation, drive shareholder value and enhance service quality for our customers across the globe.

Looking ahead, BW LPG is well-positioned to deliver value in 2019. We would like to thank our employees, shareholders and customers for their unwavering support.