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Imperial Petroleum (IMPP) Q2 2025 Earnings Call Transcript

Date

Friday, September 5, 2025 at 10 a.m. ET

Call participants

Chief Executive Officer — Harry Vafias

Chief Financial Officer — Fenia Sakellari

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Takeaways

Fleet Expansion-- Added seven dry bulk ships, increasing the fleet by approximately 56% to a total of nineteen non-Chinese-built vessels, with most of the additions delivered late in the quarter, limiting immediate earnings impact.

Net Income-- Achieved net income of $12.8 million, with basic earnings per share of $0.36; profitability rose by 13% sequentially from Q1 2025.

Revenue-- Reported revenue of $36.3 million, declining by $22.8 million compared to the same quarter in 2024 due to significantly lower market rates.

Daily Time Charter Equivalent-- Averaged about $20,700, down from $35,200 in Q2 2024, a result of weaker spot and time charter rates.

Operating Cash Flow-- Generated $42 million in operating cash flow in the first half of 2025; end-of-period cash and equivalents stood at about $212 million.

EBITDA-- EBITDA for the second quarter was $17.1 million and EBITDA for the six-month period was $31.8 million.

Fleet Book Value-- Increased to approximately $350 million, up 55% from the previous quarter and 68% from year-end 2024, driven by vessel additions.

Time Charter Coverage-- Stood at about 80% fleet-wide; dry bulk ships employed on short-term charters and five product tankers employed on time charters, with a 10% increase in coverage compared to Q1 2025.

Profitability versus Break-even-- Fleet daily average cash flow break-even was about $8,700 for tankers and $6,500 for dry bulk carriers, with net charter rates currently well above these levels.

Market Rates Context-- Supramax and product tanker rates were approximately 30% and 15% above their ten-year averages, respectively.

Capital Structure-- Maintained a debt-free balance sheet alongside positive working capital.

Share Valuation-- Management estimated net asset value per share at about $13.5 as of June 30, 2025, nearly four times the current market price.

Geopolitical Impact-- The brief Israel-Iran War in June led to a spike in tanker rates and market volatility.

Summary

Imperial Petroleum(NASDAQ:IMPP) reported a material fleet expansion that increased its vessel count and asset base, yet the earnings impact is expected to be more fully realized in future periods due to late-quarter deliveries. Management highlighted a significant sequential rise in profitability despite a challenging operating environment marked by declining revenues and softer rates compared to peak levels in 2024. The company emphasized its strong liquidity position, robust cash generation, and debt-free capital structure, suggesting operational resilience and strategic flexibility. Management framed the current share price as deeply undervalued against internal net asset value estimates, potentially indicating a disconnect between fundamentals and market perception.

CEO Vafias said, "we remain profitable, debt-free, and as of the end of Q2 2025, we held about $212 million in cash."

CFO Sakellari stated, "Our current share price is about three times higher than our earnings per share for the last trailing 12 months, a sign that our profitability capacity is not adequately reflected in our company's valuation."

Departures in the Guinea-China bauxite trade rose 41% in the first half of 2025 compared to the same period last year, supporting dry bulk segment growth drivers.

Sanctions and trade disruptions related to Russia, Iran, and global geopolitical developments were cited as sources of continued market volatility and potential rate effects.

Industry glossary

Supramax: A class of dry bulk carrier vessel typically ranging in deadweight from 50,000 to 60,000 tons, often used in global grain, coal, and iron ore trades.

Aframax: A size category of oil tanker with a deadweight capacity of roughly 80,000 to 120,000 tons, commonly used for shorter-haul oil transport.

Time Charter Equivalent (TCE): A metric that standardizes shipping earnings by calculating revenue per day per vessel after deducting voyage costs, enabling comparison across operating models.

Panamax-Capesize: Size segments for bulk carriers; Panamax vessels fit through the Panama Canal, while Capesize are too large and must transit via alternative routes such as the Cape of Good Hope.

Bunker Costs: Expenses associated with purchasing fuel for ships, often a major component of voyage costs.

Full Conference Call Transcript

On slide three, we're summarizing our key operational and financial highlights for Q2 2025. What governed Q2 2025 was our impressive fleet expansion, as within a single quarter, we took delivery of seven dry bulk ships, expanding our fleet by about 56% and reaching 19 non-Chinese-built vessels. Imperial Petroleum Inc. is now a company of a material size that operates a combined fleet of tanker and dry bulk ships. The majority of these dry bulk ship deliveries took place towards the end of the second quarter of 2025. Hence, these dry bulk ships did not have sufficient operating time to fully contribute to a bottom line. Nevertheless, our company continued the multi-year momentum of recurring profitable quarters.

In Q2 2025, we generated a profit of $12.8 million, corresponding to an earnings per share of $0.36. In spite of the second quarter being a weak seasonal period, especially for tankers, we managed to improve our profitability against the first quarter of 2025, mainly at the back of increased tanker time charter coverage that led to improved performance of our product tankers. During the second quarter of 2025, we did witness a turbulent market in terms of geopolitical events, mainly in June, with the brief Israel-Iran War. This conflict caused a spike in tanker rates and affected market sentiment due to the high risk of trade over moors closing.

Our noticeable fleet expansion increased the fleet book value by about 55% against the previous quarter, and we now enjoy a fleet of about $350 million of book value. Imperial Petroleum Inc. continues to enjoy high liquidity as we entered the first half of 2025 with $212.2 million in cash and cash equivalents. We maintain a positive working capital and have sufficient quarterly cash flow generation, so we are able to preserve adequate liquidity throughout the periods. In spite of our expansion and our solid performance across the quarters, our company remains heavily undervalued.

Based on June 30 financials and fleet market values, as per our management estimates, our net asset value per share is about $13.5, which is almost four times higher than our current market price. It's evident that our company's strong financial and operating performance, along with the positive prospects set forth through our fleet expansion, are not yet embedded in our share price. On slide four, we provide a summary of our current fleet deployment. About 80% of the fleet is currently under time charter, as customarily all our dry bulk ships are under short-term charter contracts.

The commercial strategy we currently follow for our dry bulk ship allows us to secure cash flow while minimizing commercial idle days and voyage costs. For the tankers, we currently have four vessels, two product tankers, and two Supramax in the spot market. The remaining five product tankers are under time charter employment, ranging from short-term to medium-term contracts. The increase in time charter coverage, which compared to the first quarter of 2025 was in the range of 10%, improved our net revenue margin and assisted our bottom line. On slide five, we're discussing the evolution of market rates for both tankers and bulk carriers.

What is positive is that compared to the first half of 2025, daily rates have continued to strengthen for both tankers and bulk carriers. Looking at tanker rates, these are lower than the peak levels reached in the period 2022 to 2024, but still earnings remain robust compared to the ten-year average. Indicatively, it's reported that earnings for Supramax vessels are about 30% higher than the ten-year average. Rates for product tankers are almost 15% higher than the ten-year average. Within the second quarter of 2025, we witnessed a spike in rates around the Middle East region due to the brief Israel-Iran conflict.

Since then, the rates have further strengthened, mainly as a result of OPEC unwinding production cuts and the newly imposed sanctions by both the U.S. and EU UK. The following June 25, rates for dry bulk vessels strengthened at the back of trade fundamentals such as improved steel margin in China and a boost of grain trade in Brazil. Currently, rates for Supramax have risen to harsh levels since May 24, ahead of U.S. grain season kickoff, and we currently enjoy solid rates in both segments we operate, which fills us with a cautious optimism as to what we anticipate for Q3 in 2025. On slide six, we're reviewing the tanker market.

The global oil tanker market has entered the second half of 2025 with a positive stance, but the market is still dominated by geopolitical and trade policy risks. The recent Israel-Iran tensions had a direct impact on energy infrastructure, leading to a sharp drop in Iranian exports. Ongoing negotiations on trade tariffs, such as the recent China-U.S. discussions, cause trade frictions that have a material impact on market sentiment. Moreover, the expanded sanctions on Russia and Iran could alter trade partners, further creating trade disruptions and rate volatility. Setting aside the market uncertainty, both oil demand and supply are set to rise in the remainder of 2025 and 2026, with supply expected to outpace demand.

In terms of supply, OPEC Plus has begun unwinding voluntary production cuts, adding 1.8 million barrels per day in 2025, an action that would positively affect the tanker rates. Looking at the tanker supply, this market is governed by restrained fleet growth, an aging fleet, and moderate demolition activity. The order book for the product tankers, MR2s, stands at 3.2% for the remainder of 2025 and 5.1% for 2026, and Supramax fleet growth is 3.5% up to 5.1% for 2026 and 9% for 2026. We also anticipate regulatory and environmental pressures to intensify demolition activity for older tonnage, a fact which will shrink vessel supply. On slide seven, we are discussing the dry bulk market.

Following a softer first half, dry bulk trade has recently shown signs of rebounding. Since July 2025, dry bulk trade volumes have increased by 2% year on year. Ton mile growth for bulk carriers is expected to be moderate as Red Sea transits remain low, and any vessel rerouting back from the Red Sea in the near term looks unlikely. Any additional ton mile growth would be supported by the increase in local exports to China for Guinea bauxite and Brazil iron ore and grains. Indeed, Guinea-China box trade remains a key driver of dry bulk trade, particularly for large vessels, as departures were up 41% in the first half compared to the same period last year.

Mid-sized bulk carriers were supported by Brazil-China grain trade, U.S. corn trade, and Chinese steel exports. Overall, dry bulk trade is expected to remain relatively stable in the years ahead. In terms of fleet growth, we show 302 bulk carriers being delivered since the start of 2025. Current order book is 9% for Panamax-Capesize vessels, quite low for handy sizes at 6%, and reasonably big for Supramax-Ultramax at 11%. I'll now pass you the floor to Ms. Fenia Sakellari for the financial performance.

Fenia Sakellari: Thank you, Harry, and good morning to all. The second quarter of 2025 was a turning point for Imperial Petroleum Inc. Our fleet increased materially. Our recent acquisitions in Q2 2025 did not contribute significantly to our operations and profitability, as most of the vessels were delivered towards the end of the quarter. Nevertheless, within the second quarter of 2025, we managed to increase our profitability by 13% against the first quarter of 2025, generating a net income of $12.8 million. Focusing on the second quarter of 2024, though, this was exceptional as market rates were at their peak, much higher than in Q2 2025.

Indicatively, it's mentioned that in Q2 2024, our daily fleet time charter equivalent was in the order of $35,200, while for Q2 2025, daily fleet time charter equivalent was about $20,700. Looking at our income statement for Q2 2025 on slide eight, revenues came in at $36.3 million, marking a $22.8 million decline compared to revenues generated in the same period of 2024. This decline stems from lower market rates. During Q2 2025, average daily spot rates for product tankers were $9,500 lower when compared to the same period of last year. In addition, average daily one-year time charter rates for product tankers were about $12,000 lower compared to prevailing rates in Q2 2024.

Voyage costs amounted to $10.7 million, $6.4 million lower than when compared to Q2 2024. This decrease in voyage expenses is attributed to increased time charter activity by about 36%, leading to a decline in voyage costs, particularly bunker costs. In Q2 2025, embarkation costs were $5.2 million lower compared to the same period of last year. Running costs amounted to $8.4 million, increased by $1.9 million due to the increase of our fleet by an average of 3.8 vessels between the two periods. Overall, during the past year, we have witnessed a stabilization of daily operating costs across the quarters.

Our average fleet operating costs oscillate between $6,400 to $6,700 per day, depending on maintenance and supply needs within each quarter. Dry docking costs amounted to $1.7 million, as this quarter one of our Suezmax tankers and one of our Supramax dry bulk carriers underwent dry docking. EBITDA for the second quarter of 2025 came in at $17.1 million, while net income at $12.8 million corresponded to a basic earnings per share of $0.36. For six months, EBITDA 2025, our EBITDA came in at $31.8 million. Our operating cash flow was $42 million, while our net income was $24.1 million, corresponding to an EPS of $0.67.

Our current share price is about three times higher than our earnings per share for the last trailing 12 months, a sign that our profitability capacity is not adequately reflected in our company's valuation. Moving on to slide nine, let us take a look at our balance sheet for the six months of 2025. We enjoy a hefty cash base of close to $212 million. Within April 2025, we repaid about $40 million for the vessels CleanEpir and Neptulus. Nevertheless, we faced a marginal decline in our end-of-period cash balance, as robust cash flow generation allows preserved liquidity at high levels.

Our fleet book values are shaded above $350 million, about 68% higher than end-of-year 2024 due to our vessel additions. Payable to related party balance mainly reflects the amount owed for recent vessel delivery, which was paid within July and August 2025. Proceeding to slide ten, we provide a summary of our liquidity, profitability, and market considerations going forward. We continue to enjoy a debt-free balance sheet and a solid cash flow generation. Within the first half of 2025, our operating cash flow was $42 million. Our profitability margin remains wide as market rates are favorable and significantly higher than our break-even levels.

In Q2 2025, our time charter equivalent per fleet voyage day was close to $21,000, while our daily average cash flow break-even is currently about $8,700 for tankers and close to $6,500 for our dry bulk carriers. In terms of market consideration, a focal point is the duration and next steps pertaining to the trade war, as well as OPEC further output increases, if any. For the dry carriers, it is important to see how demand will play out and whether the current level of rates can be sustained.

Concluding our presentation with slide 11, we summarize yet once more our company's strong points, placing emphasis that we operate a quality-built fleet of tankers and dry bulk vessels that we strive to grow even further and have managed to demonstrate recurring profitability since the fourth quarter of 2021. At this stage, our CEO, Mr. Harry Vafias, will summarize our concluding remarks for the period examined.

Harry Vafias: We are proud of completing our recent fleet expansion. This is an important milestone for us. Imperial Petroleum Inc. now operates a combined diversified fleet of nine tankers and ten bulk carriers, all non-Chinese-built vessels. In terms of our financials, we remain profitable, debt-free, and as of the end of Q2 2025, we held about $212 million in cash. In the first half of 2025, we generated $24.1 million of net profit and $42 million of operating cash flow. Market rates for both tankers and bulkers are currently favorable. Therefore, we hope that we will be able to take advantage of the second half of 2025, utilize our fleet at full speed, and produce even better results.

We'd like to thank you all for joining us at our conference call and for your interest and trust in our company, and we look forward to having you again with us at our next call for our Q3 results. Thank you.

Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.

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