Navigator Holdings Q2 2026 Earnings Call Transcript

Navigator Holdings (NYSE: NVGS ) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

The full earnings call is available at Summary Navigator Holdings reported record financial performance for Q2 2026, with all-time highs in net income, EBITDA, earnings per share, and average TCE rate. S. ethylene. Navigator completed the sale of Navigator Pegasus for $31 million and agreed to sell eight Unigas pool vessels for $183 million, expecting net book gains from these sales.

Financing for six newbuild vessels is secured, and a final investment decision is pending for three ammonia bunkering terminals in Norway, supported by a government grant. 08 per share from Q3, returning 35% of net income to shareholders through dividends and buybacks. The company anticipates a moderation in TCE rates and terminal volumes in Q3 due to seasonal patterns and market conditions, but remains optimistic about long-term demand. Operational highlights include record throughput at the Morgan's Point ethylene export terminal and ongoing strategic fleet management, including vessel sales and acquisitions.

Management expressed confidence in the company's financial position, emphasizing strong cash flow, a healthy balance sheet, and strategic flexibility amid geopolitical uncertainties. Full Transcript Mads Peter Zacho, CEO Good morning and good afternoon, and thank you very much for joining this Navigator Holdings earnings call for Q2 2026. Before we get into the results, let me just say a few words about the Middle East. We continue to have no vessels operating in or transiting the Strait of Hormuz, and we don't see any material operational impacts, as I'll touch on shortly.

And though it's on a sad background, the conflict continues to create real commercial tailwinds for us. Please turn to slide number four. Q2 2026 was an exceptional quarter, and I mean that in the most literal sense. We set all-time records for net income or EBITDA, for earnings per share, and average TCE rate all in the same quarter.

And for a company that's been operating for over 25 years, that is quite special. Let me walk you through a couple of the highlights. On the commercial side, TCE rates hit a record high of almost $34,000 per day. This is up significantly from Q1 and up 20% from the same period last year.

Utilization came in above our 90% benchmark. These are strong numbers across the board. Our ethylene export terminal at Morgan's Point delivered yet another record 374 tonnes in the quarter. That follows from the previous record that we set just one quarter ago.

S. ethylene continues to grow, driven by high naphtha prices and structural changes to how global crackers are sourcing their feedstock. We've also signed a fourth new offtake contract in the quarter, and discussions for further contracts remain active. On portfolio management, we completed the sale of Navigator Pegasus in April for approximately $31 million and a book gain of over $15 million.

And in July, we signed the definitive agreement to divest the eight Unigas pool vessels for a combined $183 million. That's a significant transaction, and we expect most of those sales to complete during Q3. We expect the net book gain on this transaction of 65 to 70 million dollars, and this again underscores the value of our vessel portfolio. We have indeed been quite consistent in booking net gains on our vessel sales.

Financing for all six newbuild vessels is now in place, both the four Panda ethane/ethylene carriers and the two Coral ammonia newbuilds. Completing that financing package is a real milestone, and it was done at the most competitive terms ever for Navigator. The balance sheet is healthy. Available cash at quarter-end was $226 million.

After significant debt repayments, shipyard payments, and capital returns, our investment in Azane Fuel Solutions is developing towards a final investment decision to build three ammonia bunkering terminals along the west coast of Norway. It's supported by a significant Enova grant from the Norwegian government. Upon reaching final investment decision on capital return, we are again delivering on our commitment. 07 per share for Q2, and together with buybacks we will return 35% of net income to shareholders in line with our improved capital return policy.

08 per share. Now on the outlook, Q3 is expected to see some normalization in TCE rates and terminal volumes. That's also consistent with the seasonal patterns and a tighter arbitrage on ethylene. S.

S. commodities across LPG, ethane, and petrochemicals. On the supply side, the handysize order book stands at just 11% of the fleet, while 17% of vessels are over 25 years old. The math on the fleet renewal continues to work in our favor.

With that, I'll pass on the word to Gary, and please go ahead with a little bit more detail on the financials. Go ahead, Gary. Gary Chapman, Chief Financial Officer Thanks, Mads, and hello, everyone. Following on from where we left off on our last call in May this year, the tailwinds we described as we moved through the second quarter did indeed arrive and, as Mads has said, we're pleased to report exceptional second-quarter results.

This was achieved against a backdrop that included continued disruption across key global shipping corridors, including the Strait of Hormuz, which, having limited direct operational or financial impact on us, has acted as a meaningful demand catalyst, pushing customers towards North American supply chains and benefiting our utilization and rates in the quarter. Oeyvind will go more into this shortly.

Turning to more detail on slide 6, we're reporting an average TCE of 33,946 for the second quarter of 2026, an all-time high, being more than $4,000 per day higher than the 29,684 in the first quarter of 2026 and over $5,000 per day higher than the 28,216 in the second quarter of last year. 2% in the second quarter of last year. Voyage expenses are showing higher in the second quarter of 2026, but are effectively pass-through costs to our customers related to bunker fuel and other such spot, and they're reflective of the record total operating revenues that we're reporting this quarter.

1 million for the quarter were broadly flat in absolute dollar terms, though up on the basis of dollars per vessel per day at 9,554 compared to $8,905. This was mainly driven by higher crewing and logistics costs and the timing of project-related expenses incurred in the quarter. 5 million. 9 million in the second quarter of 2025.

1 million in the second quarter of 2025. 8 million in the second quarter of last year. Our income tax line reflects current tax and deferred tax in relation to our equity investment in the ethylene export terminal. 31 per share, reported in the second quarter of 2025.

We continue to actively use, strengthen, and build our balance sheet as shown on slide 7. Our cash, cash equivalents, and restricted cash balance was $274 million at June 30, 2026, and this figure was $362 million at close on August 3, 2026.

In particular, following the $57 million we drew from our recently closed Newbuild Vessel Financing Facility as a precautionary measure in April 2026 when the war in Iran started, we drew down just over $91 million under our revolving credit facilities given the geopolitical uncertainty seen at that time, and whilst this of course has not gone away, we expect to repay those revolving facilities in the coming months based on our ongoing assessment of market conditions and as the proceeds from the sale of the Unigas vessel fleet are received.

8 million of scheduled loan amortization, and ahead of our agreed sale of the Unigas pool fleet, early repaying $43 million of debt secured against certain of those vessels. 8 million of payments towards our newbuild vessels during the quarter. Our share in the Morgan's Point ethylene export terminal remains unencumbered. We also owned 14 unencumbered vessels at June 30, 2026, eight of which are part of the Unigas fleet to be sold, and with our bond having $60 million of untapped capacity, we continue to retain significant additional liquidity for if and when needed.

5 million represents capitalized interest under US GAAP. 6 million, as I referred above, from our new $164 million bridge loan facility, recouping 80% of the pre-delivery installments paid to the shipyard to date for the first of our two Panda newbuild vessels.

We continue to press forward in maintaining a balanced capital structure and, on slide 8, across the quarter and with a very supportive banking group and a strong underlying business, we were again able to return cash to shareholders, use funds for the construction of our newbuilds, reward shareholders through buybacks, and continue managing and refreshing our debt to meet our financing needs in an efficient and cost-competitive way. 07 per share, and in respect of the second quarter of 2026, our board yesterday approved an increase such that we will return 35% of net income attributable to stockholders.

2 million of share repurchases to take place between now and September 30, 2026, given the company's strong cash position for the third quarter ending September 30, 2026. 08 per share of the company's common stock, while maintaining that the fixed element and the variable element together should equal 35% of net income attributable to stockholders of the company. Just note that the declaration of any dividends and the amount of any such dividends, including with respect to the third quarter, do remain subject to approval by the company's Board of Directors following the conclusion of each quarter.

As normal, we've continued to be busy with vessel financings, and we've now closed three transactions relating to our six newbuild vessels in addition to the March 2026 facility we previously announced that finances two of those vessels. 8 million JOLCO financing to refinance this bridge facility on delivery of the vessels and provide long-term post-delivery financing on very competitive terms. 8 million to finance approximately 70% of the cost of our two Coral ammonia newbuild vessels, executed at our lowest ever margin, 135 basis points plus SOFR.

The facility is available to draw on delivery of the vessels around May and September 2028 respectively, and as always we'd like to thank our banking group for their continued support. 5 times at 3-31-2026, and we have only relatively small near- and mid-term balloons as we work to ensure our debt profile is pushed to the right. Net debt was $653 million, and our loan-to-fleet value ratio remains approximately 31%, or below 30% when you include a reasonable value for our Morgan's Point terminal investment, and 55% of the company's debt was either hedged or on a fixed interest rate basis at the quarter end, consistent with the prior quarter.

We'll continue to prioritize returning capital to shareholders while maintaining balance-sheet strength, lowering the cost of our debt where we can, and balancing growth, deleveraging, and shareholder returns all in a disciplined, deliberate, and careful manner. On slide 9, this again highlights two of the core strengths of our Navigator Holdings platform: our ability to generate consistent operating cash flow and our structurally lower all-in cash breakeven when isolating for the change in ownership days.

Starting with cash flow, over the last 12 months to June 30, 2026, the business continued to generate strong underlying operating cash flow, with a pre-capex cash flow yield averaging around 17%. Post-capex free cash flow continues to reflect investment in our newbuild programme. Our latest estimate for 2026 all-in cash breakeven is $21,990 per vessel per day, up from 21,230 last quarter. The increase versus last quarter's estimate principally reflects our agreed sale of the eight Unigas pool vessels, which reduces the average fleet size across which costs are spread.

Notwithstanding, our headroom over our TCE revenue remains substantial, even adjusting out the exceptional rate levels we've seen in this quarter. Our cash breakeven figure incorporates over $175 million of operating costs, $114 million of debt amortization, and approximately $44 million of net interest expense. Expense guidance for 2026 is materially unchanged from the guidance provided in our first quarter earnings results presentation when accounting for the change in ownership days, noting that in particular OPEX and depreciation have reduced accordingly with the upcoming sale of the eight Unigas vessels. Slide 10 outlines our historic quarterly adjusted EBITDA.

Adding this second quarter's result, we now have 14 quarters in a row since the beginning of 2023 where we've reported at least $60 million of quarterly adjusted EBITDA and with an average of $72 million per quarter over that period. We've also added for reference some historic data points to this slide showing our share of the terminal's adjusted EBITDA. 28 per share of annual EPS uplift, for every $1,000 increase in TCE rates, all other things being equal. Then, as for previous quarters, an update on our vessel dry-dock schedule, projected costs, and time taken can be found in the appendix should that detail be of interest to anybody.

And finally, looking ahead, after an exceptionally strong second quarter, we do expect TCE and utilization to moderate in the third quarter, also consistent with normal seasonal patterns. Even so, we expect the business to remain cash generative, and despite the geopolitical uncertainty and market crosswinds that remain, Navigator Holdings is in an excellent financial position, and it gives us the confidence and the flexibility to move forward and pursue opportunities as they arise. With that, I'll hand over to Oeyvind to provide the latest commercial update. Oeyvind.

Oeyvind Lindeman, Board Member Thank you, Gary. Good morning everyone. I'll spend the next few minutes on the Strait of Hormuz and what it's doing to maritime trade lanes, then the ethylene story, our utilization, and I'll wrap up with a quick view on vessel supply and rates. So let's start with the big one, which continues to be the Strait of Hormuz on page 12.

The Strait continues to disrupt global shipping lanes and it's creating inefficiencies across pretty much every ship segment. Today, only around 20% of the vessels that would normally transit the Hormuz are actually doing so. The rest are either finding employment elsewhere or they're sitting in the Indian Ocean waiting for a green light to resume Middle East loadings. And where do the cargoes come from instead?

It's North America.