Another 450 vessels? GTT emerges as the biggest winner in the LNG vessel order boom

Received orders for 162 LNG carriers, setting a new record for annual orders! In last year's record-breaking global surge in LNG carrier orders, French engineering company GTT, which holds the core technology for membrane-type LNG carriers, undoubtedly became the "biggest winner." However, for GTT, this may just be the beginning; the strong outlook for LNG demand has given this "unicorn" in the LNG carrier market continued confidence in the future market.

2022 performance slightly declined; record revenue expected in the next 3 years

GTT recently released its annual report, showing that in fiscal year 2022, the company's total revenue was €307.3 million, a year-on-year decrease of 2.4%. Newbuild vessel revenue was €279.5 million, down 4.4% year-on-year. Patent royalties for LNG carriers and ethane carriers totaled €242.3 million, with €16.2 million from floating storage units (FSU), €1.2 million from floating liquefied natural gas units (FLNG), €6.2 million from onshore tanks, and €6.8 million from gravity-based structures (GBS). Patent royalties for LNG as fuel amounted to €6.8 million, but this has not yet been impacted by the surge in orders in 2021 and 2022.

In 2022, GTT's service revenue increased significantly by 33.1% to €23.1 million, driven by digital solutions and the engineering research institute, including research related to the conversion of LNG carriers into floating storage regasification units (FSRU).

In 2022, GTT's earnings before interest, taxes, depreciation, and amortization (EBITDA) was €161.1 million, down 6.4% year-on-year, with an EBITDA margin of 52.4%, slightly down from 54.7% in 2021. External spending increased by 1.4% year-on-year, mainly due to the resumption of travel expenses (up 46.8% year-on-year), and personnel expenses also increased slightly (+1.65%). Annual operating income was €152.2 million, and net income decreased by 4.3% year-on-year to €128.3 million.

Although performance declined slightly, GTT pointed out that due to orders for its core business, the group has good visibility of revenue until 2026, with future revenue from 2023 to 2026 reaching a record €1.594 billion, including €335 million in 2023, €504 million in 2024, €475 million in 2025, and €280 million in 2026 and beyond.

GTT expects total revenue to be between €385 million and €430 million in 2023 and total EBITDA to be between €190 million and €235 million, assuming no major order delays or cancellations.

GTT Chairman and CEO Philippe Berterrotiere stated: "From a financial perspective, 2022 revenue met our expectations, with a limited decrease of 2.4% compared to 2021, due to an unfavorable base effect, but this effect is fading under the strong order momentum. The 14.1% strong growth in revenue in the fourth quarter of 2022 compared to the fourth quarter of 2021 illustrates this. The 2022 EBITDA of €161 million was slightly above forecast thanks to good cost control."

In terms of innovation, GTT continues to deploy its R&D roadmap, aiming to be a major technological player in decarbonizing maritime transport, particularly by supporting its clients' energy transition. In 2022, GTT obtained numerous approvals in principle from classification societies, particularly in the field of liquid hydrogen transport and for an innovative three-tank LNG carrier concept.

A total of 162 LNG carrier orders were received in 2022; 450 LNG carrier orders are predicted for the next 10 years

The financial report shows that in 2022, GTT received a total of 162 LNG carrier orders, a record high, including 6 LNG carriers of 200,000 cubic meters. The delivery time for these LNG carrier orders ranges from the third quarter of 2024 to the fourth quarter of 2028. At the same time, GTT also received an order for one FSRU for delivery in 2026 and two orders for large ethane carriers for delivery at the end of the fourth quarter of 2025. In addition, GTT also received 42 LNG-powered vessel orders in 2022, setting a new record for this business line.

As of December 31, 2022, GTT had an order backlog of 274 vessels (excluding LNG-powered vessels), including 256 LNG carriers, 4 ethane carriers, 1 FSRU, 2 FSUs, and 11 onshore tanks. In the field of LNG as fuel, GTT has a total order backlog of 70 vessels.

Philippe Berterrotiere pointed out: "The continued strong demand for LNG, especially in Europe, is generating additional demand for LNG carriers. In addition, the replacement market is expected to grow in the coming years, particularly with the entry into force of new environmental regulations."

GTT predicts that new orders for large LNG carriers will reach 400-450 vessels in the decade from 2023 to 2032. Strong LNG demand prospects and stricter environmental regulations will force LNG carrier owners to replace older vessels. In the next ten years, FSRU orders (excluding conversions) will reach 10, FLNG orders 5, and very large ethane carrier (VLEC) orders 25-40.

Berterrotiere stated that due to changes in pipeline gas supply in 2022, the emergence of new markets in Western Europe, and the increase in LNG as marine fuel, the demand for LNG is growing significantly, with a potential supply gap of 240 million to 325 million tons per year by 2040.

He introduced that in 2022, four LNG production projects made final investment decisions (FID), with a total annual production of 28 million tons. At the same time, more new projects are expected to reach FID in 2023, as sales and purchase agreements (SPA) totaling 53 million tons per year were signed in 2022, 90% of which were from US projects.

At the same time, increasingly stringent environmental regulations are accelerating fleet renewal, and the demand for LNG carriers may grow even faster than the demand for LNG. According to the latest Carbon Intensity Indicator (CII) regulations, 240 LNG carriers will be rated E, and this number will rise to approximately 400 between 2030 and 2040, exceeding half of the current global fleet. Therefore, he believes that about half of the new LNG carrier construction will be for fleet expansion, and the other half for replacing older vessels.

In addition to the LNG carrier market, GTT is also optimistic about the prospects of LNG as marine fuel. Berterrotiere insists that LNG propulsion is the "best way" to comply with new environmental regulations. Although orders for methanol-fueled vessels have increased rapidly since last year, Berterrotiere pointed out that methanol "does not meet regulatory requirements" because it produces more carbon dioxide. As for synthetic methanol or electro-methanol, he believes that there is not enough production capacity, and these blended fuels will also be more expensive than LNG.

Berterrotiere said: "We expect that LNG will remain the preferred solution for decarbonizing the shipping industry in the long term."