Gaztransport et Technigaz SA

PAR:GTT

Earnings Call Analysis

GTT's Q1 2024 Results and Future Outlook

In Q1 2024, GTT's revenue soared by 81% to EUR 145 million, driven by an uptick in newbuilds and LNG carriers. The company secured 29 new orders and aims to build on strong commercial momentum. Revenue from services grew by 74%, and the company anticipates steady growth in the LNG market. GTT confirms its 2024 revenue guidance at EUR 600-640 million and EBITDA at EUR 345-385 million. Jean-Baptiste Choimet was appointed as the new CEO, with a focus on leveraging his extensive LNG industry experience.

Introduction

Good evening. This conference call is being conducted by GTT to discuss their first-quarter performance for 2024. Philippe Berterottière, the CEO, and Thierry Hochoa, the CFO, presented the key highlights from this period. The company received 29 new orders for LNG carriers, which climbed to a total of 310 LNG carriers in their books.

Revenue Growth

GTT reported substantial revenue growth in the first quarter. Their revenues reached EUR 145 million, soaring 81% compared to the first quarter of 2023. This growth was mainly driven by new builds, increased LNG carriers, and revenues from LNG as fuel, which spiked by 98%. The revenue from electrolyzers also doubled, thanks to Elogen, reaching EUR 3 million compared to EUR 1.5 million in Q1 2023. Revenue from services saw a healthy increase of 74% due to pre-engineering studies and the expansion of their digital services and operations.

Commercial Momentum and Market Demand

The demand for LNG carriers continued to remain strong, which is well-supported by the long-term LNG demand. The company expects global LNG production to increase by 150 to 250 million tons per annum by the end of the next decade. This demand signifies significant investments and the need for more ships to be built.

Future Outlook

Looking ahead, GTT reiterated their revenue guidance for 2024, estimating consolidated revenues between EUR 600 million and EUR 640 million. The EBITDA is projected to be between EUR 345 million to EUR 385 million. The company also confirmed that the payout ratio will be at least 80% of their consolidated net income.

Leadership Transition

The Board of Directors announced the appointment of Jean-Baptiste Choimet as the new Chief Executive Officer starting from the next AGM on June 12. Jean-Baptiste currently serves as the Managing Director of Elogen and has extensive experience in the LNG industry.

Adoption of LNG as a Fuel

GTT is optimistic about the adoption of LNG as a fuel. The CEO emphasized that LNG is currently the most feasible solution for reducing CO2 emissions, stating that it is both available and affordable. He also expressed confidence that bio LNG and e-LNG will further strengthen LNG's position as a fuel of choice for maritime use.

Shipyard Capacity and Future Projects

The company addressed questions about shipyard capacity and confirmed that there was significant interest from new and existing shipyards, including those in China. GTT is actively working on resolving any challenges and ensuring capacity expansion to meet future demand.

Digital Services and Acquisitions

The commercial momentum for their digital services and Ascenz Marorka continues to grow. Their services segment saw a 74% increase in revenue due to digital services. GTT also completed a small acquisition recently and is continuously exploring potential targets that align with their strategic vision.

Hydrogen and Ammonia Potential

GTT is also invested in developing technologies for green ammonia and hydrogen transport, particularly focusing on reducing CO2 emissions from grey hydrogen. They are working with major partners like Total and Shell to explore future possibilities.

Conclusion and Q&A

The call concluded with a Q&A session covering various topics such as the potential for larger electrolyzer projects and future plans for LNG-fueled vessels. The CEO expressed gratitude for the participants' interest and looked forward to further engagement in the coming months to drive GTT's growth and innovation.

Earnings Call Transcript 2024-Q1

[Operator]

Good evening. This is the conference operator. Welcome, and thank you for joining the GTT First Quarter 2024 Activity Update Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Philippe Berterottiere, CEO. Please go ahead, sir.

[Philippe Berterottière, executive]

Good evening, everybody. I'm very pleased to be with you tonight. I am with Thierry Hochoa, who is the CFO of GTT, and also Jean-Baptiste Garnier with the Investor Relations.

So we are going to talk about the first quarter 2024 activity update. Some key highlights. First, in the core business during the first 3 months of the year, we received 29 new orders. Since, we received an additional order for 8 LNG carriers. In the first quarter, our revenues have amounted to EUR 144.8 million, which represents an increase of 81% compared to the first quarter of 2023.

Some other key elements, I would like to mention the corporate social responsibility roadmap that we published in February and -- which is really showing the very strong commitment we have on this matter, which is at the basis of our vision and of our strategy.

If we look at the commercial momentum, we can see that it's continuing unabetted, and we are reaching a record level with 310 LNG carriers in our order book, 8 ethane carriers, which is really something that we've never approached. So it's something which is definitely very remarkable and which is giving a long-term visibility for the activities of GTT.

We look at the LNG demand growth. Of course, this demand for LNG carriers is sustained -- supported by long-term LNG demand, which is fairly positive. And we can see, on the right-hand side part of the slide, the expectations of what should be the demand by the end of the next decade. We consider that, by that time, we should add 150 million to 250 million ton per annum in terms of LNG production, which is going to require significant investments and which is going to require many, many ships to build. So all that is supported by elements that we are talking regularly and mainly by the need to reduce the reliance of the world in terms of energy, the reliance on coal of the world.

Now I will hand over the floor to Thierry Hochoa in order to present to you our consolidated revenues for the first quarter.

[Thierry Hochoa, executive]

Thank you, Philippe. I suggest you look in more detail at the revenue per main activities at the end of Q1 2024. Total revenue amounts to EUR 145 million, up 81% compared to Q1 2023, driven by: newbuilds and higher number of LNG carriers and the constructions in Q1 2024 generating additional revenues; driven by revenues from LNG as fuel, up 98% compared to Q1 2023, thanks to 2021 and 2022 to order flows; driven by electrolyzers as well, double Elogen's revenues to EUR 3 million compared to EUR 1.5 million in Q1 2023; driven by services as well. The revenue increased by 74%, thanks to pre-engineering studies, development of our digital activities and services to vessels in operations.

This is where we are, Philippe, in terms of revenue details.

[Philippe Berterottière, executive]

Thank you very much, Thierry. Now looking at our outlook for 2024. We like to say that we are confirming our consolidated revenue estimation in the range of EUR 600 million to EUR 640 million. For the EBITDA, we confirm that we should be in a range between EUR 345 million and EUR 385 million. And we confirm that our payout should be at least 80% of our consolidated net income.

Now I would like to say that the Board of Directors, which has taken place today, has taken the decision to appoint Jean-Baptiste Choimet as Chief Executive Officer starting from the next AGM, on 12th of June. Jean-Baptiste Choimet is currently the Managing Director of Elogen, the electrolyzer company of the GTT Group. He's working in the group since 2020. He's been appointed as the head of Elogen in November 2020. And before he spent his career in LNG, in various positions, with EDF, working on the LNG terminal of Dunkirk, in Société Générale at the LNG trading desk, in fact, building this LNG trading desk, and in Technip, where he worked on large LNG projects, including larger FLNG projects. So he has an extensive experience in the energy industry. He has -- he knows obviously very well Elogen, and he has convinced the Board of his skills and capabilities for ensuring this function on top of his very relevant experience for future.

So now I will answer to your questions.

[Operator]

[Operator Instructions] The first question is from Jean-Luc Romain with CIC Market Solutions.

[Jean-Luc Romain, analyst]

And congratulations for the turnover and to Jean-Baptiste Choimet. My question relates to LNG as a fuel. How do you see the adoption of LNG as a fuel going forward and the technologies, which is quite a few providers of LNG -- types of LNG tanks for LNG as a fuel vessels? Do you -- and you have a strong market share in container carriers. How do you see this market share going forward in other kinds of ocean-going vessels?

[Philippe Berterottière, executive]

Thank you, Jean-Luc. Thank you for your question. First of all, we think that LNG is currently the only solution available for reducing the CO2 emissions. All the other solutions are not available and/or not affordable. So we -- and we think that LNG is not only available, but also is very affordable as you can amortize the cost of LNG tank, LNG equipment in something like 4 to 5 years and then you are more competitive than marine diesel oil-fueled ships. So we think that this will prevail.

And in addition to that, once the bio LNG will exist or the e-LNG will exist, it will be [ broken ] fuels, which will not require any modifications on the ship. So ordering LNG-fueled ship, you're ready for the future, and you can be at -- you can be carbon neutral whenever these new fuels, bio LNG or e-LNG, are going to exist. So there were some allusions about methanol or about ammonia, but we think that they are less appropriate. So we keep on promoting LNG.

It's true, as you said, that we've encountered a large success in container ships. For the time being, this sector is not ordering ships. So we don't have any orders coming from this sector. We are keeping on promoting our solutions on other sectors, from tankers, on bulkers, on cruise ships. We think that, finally, the advantages, our arguments will prevail in this context, for the promotion of our -- of LNG as a solution.

[Operator]

The next question is from Richard Dawson with Berenberg.

[Richard Dawson, analyst]

I just wanted to pick up just on the hydrogen electrolyzer subsidiary. The industry is starting to see larger megawatt size awards coming to market. Is this something that's starting to see in Elogen? I know initially, we're sort of still at the pilot stage of some of those orders.

And then secondly, just following up on that question on LNG-as-fuel vessels. Are you starting to see any improvement in that outlook? I know you talked about sort of focusing on different segments of the marine market, so cruise ships, for examples. But are you starting to see ship owners sort of engage in discussions on ordering new vessels that are fueled by LNG?

[Philippe Berterottière, executive]

Thank you, Richard. I have to say that on your question on the electrolyzers, I did not get it perfectly. Could you repeat it, please?

[Richard Dawson, analyst]

Yes. No problem. It's more a question about the market in hydrogen with electrolyzers. You're starting to see sort of larger megawatt-scale projects coming to market, so beyond the single-digit size. And is this something that Elogen is starting to have discussions with, with customers? Are you starting to see sort of bigger projects coming down the pipeline?

[Philippe Berterottière, executive]

Yes. Yes. Yes. Definitely. Definitely, sorry. Sorry, definitely. Definitely, we are seeing that. We are addressing this double-digit megawatt projects. We are delivering stacks, large stacks, and people can see what we are delivering and what we are delivering, can see how it works. So we can address these 20, 30, 50 megawatts projects now. We have the industrial setup for that. We -- and I can see in the discussions we are having with the customers on these projects, we can see that they consider us as fully credible in this arena, pretty credible not only in terms of production of the stack, the electrolyzers, but also in the way we are performing the engineering, in the way we are studying the project, in the way we are dealing with the aftersales services and in the way we are treating the customers.

They can see that Elogen is a serious company in that field, and it's exactly what we were aiming at. We were aiming not at looking at large contracts if we were not able to work on them seriously, to deliver them. We were really concentrating on getting ready before looking at these solutions so -- at this market. So it was a matter of gathering the right people, of having the right processes, the right technical solutions before raising that. And now we are in this arena.

On the LNG as a fuel, other segments, yes, we are promoting our solutions for tankers. Yes, we are promoting our solutions for cruise vessels. We built tanks on one cruise vessel now, which she's operating very well. They are very satisfied. We are working with others. We have solutions. We are keeping on trying to convince these players.

[Operator]

The next question is from Kevin Roger with Kepler Cheuvreux.

[Kevin Roger, analyst]

Yes. And congratulations for Jean-Baptiste for the nomination and congratulations, Philippe, for the jobs past done as a CEO, even if you will remain around as a Chairman, congrats for all that.

Two question on my side, please. The first one is related to the order intake on the LNGC, so the traditional business. I was wondering if you were able to comment a bit on the dynamic replacement market versus vessel that are orders for the new demand, because there are probably a number of units that are dedicated to the replacement market this quarter. So is it possible to quantify the mix on the 20-plus unit that you have secured how many are related to replacements and how many are related to demand for new supply? And as a kind of follow-up, still on this LNGC schematic. The average price per unit has been very strong over the past quarters. Would you say that we are currently following the same dynamic?

[Philippe Berterottière, executive]

Thank you very much, Kevin. Thank you very much for your nice comments about myself and about Jean-Baptiste.

On the order intake, I would say that we are not so capable of distinguishing exactly what are the orders for replacement market. And in these circumstances, I have to say that I consider that, this quarter, there were no order for replacement. As you may have seen, there were order for Qatar, and they are not for replacement. And we are considering that all these new orders are for new projects, which have been launched and which have to secure their tonnage and not for replacement. So it's still a market to come, yes.

And as far as prices are concerned, prices for Qatar has been determined a while ago. And I would say that I don't see any changes in the prices. There were certain price in Korea, which is, let's say, around EUR 165 million and between EUR 160 million, EUR 270 million, depending on the spec, depending on the customer. And you have orders in China, which are between EUR 235 million and EUR 245 million. And I don't see any changes in these price levels.

[Kevin Roger, analyst]

Sorry, Philippe. I was mentioning the average price per unit on your side, the price for the technology that -- when you were looking at the average price per unit, it was increasing over the past quarters and well above our anticipation basically.

And just if I may also as a kind of follow-up. You just stated that even the very large order that you get, the EUR 270 million, [ 100,000 ], it's not for the replacement. That's related to the new demand?

[Philippe Berterottière, executive]

Yes. Yes, it's not for replacement. It's really for transporting the new capacity of LNG that has been decided, and it's really these programs which is continuing.

About prices for us, you know that we have a fixed price, which is determined in our contract. And this price is inflated according to the inflation in the French engineering industry. So we do so. And in your -- I would say that in your assessment on the turnover of the company, you can take into account the -- as a rule of thumb, the figure of EUR 7.5 million per ship.

[Operator]

The next question is from Daniel Thompson with BNP Paribas Exane.

[Daniel Thomson, analyst]

I had 2, please. The first is related to how the ramp-up in shipyard capacity or how the ramp-up in shipyard execution is going? As we take more vessels under construction, have you seen any signs of strain so far? I mean, obviously, Q1 suggests things are going quite well. But just if you could comment on any signs of strain you're seeing there. And then also in terms of shipyard capacity, have you had any sort of new conversations with existing or new shipyards around opening more slots for LNG carriers, perhaps any regions outside of South Korea and China?

And then the second question is related to Ascenz Marorka. I was wondering how commercial momentum has evolved in that business. And I know you've previously spoken about wanting to grow that business through potentially M&A. So have you come across any targets that you think could fit into the business over the next year or so?

[Philippe Berterottière, executive]

Okay. Thank you very much, Daniel, for your question. Well, the ramp-up in the shipyard capacity, we are discussing with other shipyards which they are assessing the potential of the market with us. So we are sharing our analysis of the market. We are sharing also what it means in terms of efforts, in terms of investments to enter to this activity, what it means in order to be credible in this arena. We are sharing also with them all the assistance we are going to provide if they decide to do so, all what we can do for them to accompany them in this process. But beyond those who've signed with us, I cannot tell you who's going to join us in the construction of new LNG carriers.

So I see that we had recently -- we signed recently with a shipyard where -- in China, who were very interested by LNG carriers, but also by other LNG structures, like FLNG and so on. So there is definitely an interest, and we are working on the project with these shipyards. We are working on the difficulties and all what we can do for these shipyards to soften these difficulties.

On Ascenz Marorka, well, the commercial momentum is there. You can see Thierry has detailed the growth of services, including digital services, during the first quarter. So the growth definitely is there. We are growing there. Our condition and our solutions are convincing customers.

You saw that we performed an acquisition in the first quarter. So it's not a very large sum. But in a certain way, we are people with enable are selecting targets, targets which have a very clear sense for us and that we can integrate easily. And that's what we do in -- with VPS that we bought something like 1 month, 1.5 month ago. So it goes fairly easily. We know exactly what we buy. We know how we are going to integrate them, what are the synergies we are going to develop.

So we may have other targets in mind. We are constantly reviewing possibilities. Sometimes we say no. Sometimes we propose a price, which is not corresponding to the expectations of the company. So I cannot tell you that we are going to have other acquisitions soon.

Just to make a long story short, keep in mind that our services have increased by 74% during the first quarter 2024 compared to the first quarter of 2023.

[Operator]

The next question is from Guillaume Delaby with Bernstein.

[Guillaume Delaby, analyst]

Yes. Congratulations to Jean-Baptiste. Congratulation for this process, which has been well prepared. My [indiscernible] probably Jean-Baptiste was the best candidate. So congratulation again.

My question is during this process, of course, Jean-Baptiste has probably come with some ideas, new ideas regarding strategy, regarding day-to-day implementation of what to do or what should be improved within the company, could you maybe share 1, 2 or 3, I would say, new ideas in qualitative terms, of course, of what Jean-Baptiste would like to implement within GTT?

[Philippe Berterottière, executive]

Well, I will say that it has been a competitive process. So there were external candidates and internal candidate or candidates. And Jean-Baptiste came with a knowledge of the sector, knowledge of the LNG sector and knowledge of hydrogen and knowledge of the company that nobody could match, obviously. And I would say that, probably, it was not that which was particularly distinctive as the Board knew that it was, anyway, the best in terms of knowledge of the company.

I would say that his vision of this sector, the energy sector, on the LNG sector, of the shipping, of the hydrogen and of the new energies has particularly impressed the Board. And that, plus the achievements that he has demonstrated to the Board in turning around -- it's not fully accomplished yet, but turning around a very small company into a company which is now competing in an arena with the -- not just electrolyzer company of the world in a matter of 3 years. That has particularly impressed the company.

Now for having specific ideas on what Jean-Baptiste has in mind, I suggest you wait a little bit, and you will have the possibility to ask him directly. I cannot tell you more, and I could betray what he has in mind. So yes, the best is to be a little bit patient.

[Operator]

The next question is from Jean-Francois Granjon with ODDO BHF.

[Jean-Francois Granjon, analyst]

Yes. Jean-Francois Granjon speaking from ODDO BHF. Two question, please. The first one concern the percentage on the backlog for the replacement LNG, please. What is the proportion for the replacement market expected for all of your full backlog currently?

And my second question concern the mix for the backlog. Could you give us some color about the evolution of the mix of the backlog between the short or long series and the impact, for sure, on the pricing and the margin?

[Philippe Berterottière, executive]

Jean-Francois, on the replacement, I would say that most of the vessels in our backlog are for new projects. And I wasn't saying previously about the orders during the first quarter were for us, they are for new projects. So the replacement market has not yet really materialized.

On the mix about the short or long series, I would say that we answer to this question that something that you can do with the -- if you had the name of the shipowners, but we are not particularly or systematically allowed to disclose the name of the shipowner. But using the rule of thumb of EUR 7.5 million, it's a good proxy for assessing whether we are talking of long or short series. So...

[Jean-Baptiste Garnier, executive]

I think we have a couple of questions coming from the web as well.

So the first question from [ Chris Lazar ]. Due to your excellent Q1 2024 results, why don't you revise annual sales upwards instead of confirming only your 2024 forecast?

[Thierry Hochoa, executive]

Thank you for your question. That -- you know that we are very cautious regarding our approach of our forecast and the guidance because you have a ramp-up regarding the Chinese yards, and we need to take into account the different elements regarding delays regarding the production. So that's why today is -- we cannot revise and just confirm just that because we need to very cautious regarding this aspect of the production and the delivery of yards today.

[Jean-Baptiste Garnier, executive]

And we have a second question from the web from Renaud Saleur. What is the potential for ammonia and hydrogen membranes?

[Philippe Berterottière, executive]

We -- a lot of people are looking at ammonia and hydrogen and especially green ammonia and green hydrogen and to transport that. We are developing the solutions. We are expecting that it's going to represent significant volumes in the next decade. Probably for ammonia, we are going to -- we may have some business before the next decades. There are estimates on that. It depends very much on the capability to produce green hydrogen in places where you have a lot of sun, a lot of wind and to transform that, thanks to electrolyzers, into green hydrogen then to liquefy it for hydrogen.

So there are very significant investments. We -- but if you have already the pressure to reduce the CO2 emissions linked to grey hydrogen. Today, it represents --grey hydrogen represents 3% of the CO2 emissions of the planet. So it's absolutely huge. Then it may be something very successful. Well, we are working on that. We are working on that with major partners, Total and Shell, who were very interested by these solutions. We are benchmarking these solutions with other supply chains.

We are also benchmarking hydrogen against ammonia, and we are on the 2 possibilities. We are exactly at the heart of the transition and of the technological solutions, which have to be developed in order to allow this transition to happen. And there is something which is -- in a certain way, may risk the world touching. Very large oil and gas companies looking at us and asking us what can you do in terms of technological development in order to make that possible at a minimum cost. And we are coming with solutions, with solutions which are, in our opinion, affordable, which are possible, affordable. And in doing so, we can help them to develop these green molecules and to transform them, yes. But it's for the next decade.

[Jean-Baptiste Garnier, executive]

We have no further questions.

[Philippe Berterottière, executive]

Okay.

[Jean-Baptiste Garnier, executive]

Please, Mr. Berterottiere, the floor is yours for the conclusion.

[Philippe Berterottière, executive]

I would like to thank you very much for your attendance, and I will be very pleased to meet with you in the next couple of months and next -- and then I will dedicate my energy to work with Jean-Baptiste for writing some new and bright pictures of the GTT book.

Thank you very much. Good evening.

[Operator]

Ladies and gentleman, thank you for joining. The conference is now over. You may disconnect your telephones.