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Imperial Petroleum Inc./Marshall Islands 6-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Imperial Petroleum Inc.
,

Filing date:

02/21/2025

TLDR:

Imperial Petroleum Inc. announced its Q4 and full year 2024 financial results, reporting a net income of $3.9 million for Q4 and $50.2 million for the year, along with fleet expansion updates.

ELI5:

Imperial Petroleum made money, but less than last year because shipping prices were down. They have a lot of cash, but their business can change quickly with the market.

Accession #:

0001193125-25-032034

Published on

Analyst Summary

  • Revenues decreased in both Q4 and the full year 2024 due to lower spot market rates.
  • Net income also decreased, reflecting the revenue decline and a significant foreign exchange loss in Q4 2024.
  • EPS improved in Q4 2024 due to a higher weighted average number of shares outstanding.
  • The company maintains a strong cash position, with a significant increase in time deposits.
  • EBITDA decreased, reflecting the overall decline in profitability.
  • Net profit margin decreased from 38.7% in 2023 to 34.0% in 2024.
  • Operating margin decreased from 35.9% in 2023 to 29.9% in 2024.
  • The current ratio decreased from 12.6 in 2023 to 7.9 in 2024, indicating strong liquidity.
  • Fleet operational utilization improved, indicating efficient vessel management.
  • The increase in total charter days suggests a shift towards more stable revenue streams.

Opportunities and Risks

  • The shipping industry is inherently cyclical, and IMPP’s performance is heavily influenced by tanker rates and global economic conditions.
  • The company’s reliance on spot market rates makes it vulnerable to market fluctuations.
  • The company is exposed to foreign exchange risk, particularly related to its Euro-denominated time deposits.
  • Potential conflicts of interest arising from related party transactions.
  • The company acknowledges the impact of geopolitical conditions, including the conflict in Ukraine and the Middle East, on shipping routes and trade.
  • The acquisition of seven dry bulk carriers presents an opportunity to diversify revenue streams and capitalize on potential growth in the dry bulk market.
  • The company’s debt-free capital structure provides financial flexibility to pursue growth opportunities and weather market downturns.
  • Continued focus on efficient vessel management can further improve fleet utilization and profitability.
  • Increasing the proportion of time charter agreements can provide more stable and predictable revenue streams.

Potential Implications

Company Performance

  • Monitor tanker rates and industry trends to assess the potential impact on IMPP’s future revenues.
  • Assess the company’s strategies for managing foreign exchange risk.
  • Carefully scrutinize related party transactions to ensure they are conducted at arm’s length.
  • Evaluate the potential impact of the newly acquired dry bulk carriers on the company’s revenue diversification and growth prospects.
  • Review future SEC filings for updates on fleet deployment, financial performance, and risk management strategies.

Imperial Petroleum Inc. – Form 6-K Report Analysis (February 2025)

Executive Summary

This report analyzes Imperial Petroleum Inc.’s (IMPP) Form 6-K filing for February 2025, focusing on the press release announcing the unaudited financial and operating results for Q4 and the full year 2024. The company demonstrates continued profitability and strong cash flow generation, although revenues and net income decreased compared to the prior year due to softer spot market rates. The company’s debt-free capital structure and growing fleet size are positive indicators. However, the reliance on spot market rates and foreign exchange fluctuations pose risks. Overall, a neutral to cautiously optimistic outlook is warranted, pending further information on the deployment of newly acquired vessels and the evolution of tanker rates.

Company Overview

Imperial Petroleum Inc. (NASDAQ: IMPP) is a ship-owning company providing petroleum products, crude oil, and dry bulk seaborne transportation services. As of the report date, the company owns twelve vessels (seven MR product tankers, two Suezmax tankers, and three Handysize dry bulk carriers) and has contracts to acquire seven additional dry bulk carriers. The company operates in the cyclical shipping industry, influenced by global economic conditions, geopolitical events, and tanker rates.

Detailed Analysis

Financial Statement Analysis

The following table summarizes key financial data from the press release:

Metric Q4 2023 Q4 2024 12M 2023 12M 2024
Revenues (USD millions) 29.9 26.2 183.7 147.5
Net Income (USD millions) 6.5 3.9 71.1 50.2
EPS (Basic) (0.02) 0.10 3.22 1.54
Cash and Cash Equivalents (USD millions) 91.9 79.8 91.9 79.8
Time Deposits (USD millions) 32.1 126.9 32.1 126.9
EBITDA (USD millions) 8.0 6.4 82.8 59.2

Key Observations:

* Revenue Decline: Revenues decreased in both Q4 and the full year 2024, primarily due to lower spot market rates. This highlights the company’s vulnerability to market fluctuations.
* Net Income Decline: Net income also decreased, reflecting the revenue decline and a significant foreign exchange loss in Q4 2024.
* EPS Improvement in Q4: Despite lower net income, EPS improved in Q4 2024 due to a higher weighted average number of shares outstanding.
* Strong Liquidity: The company maintains a strong cash position, with a significant increase in time deposits, indicating a conservative approach to capital allocation.
* EBITDA Decline: EBITDA decreased, reflecting the overall decline in profitability.

Ratio Analysis:

* Profit Margin: Net profit margin decreased from 38.7% in 2023 to 34.0% in 2024, reflecting the impact of lower revenues and increased expenses.
* Operating Margin: Operating margin decreased from 35.9% in 2023 to 29.9% in 2024.
* Current Ratio: The current ratio increased from 12.6 in 2023 to 7.9 in 2024, indicating strong liquidity.

Management’s Discussion and Analysis (MD&A) Insights

* Positive Tone: Management maintains a positive tone, emphasizing profitability, cash flow generation, and fleet growth.
* Focus on Fleet Expansion: The company is focused on materializing its fleet growth plans, particularly the acquisition of seven dry bulk carriers.
* Market Conditions: Management acknowledges that market conditions in 2024 were softer than in 2023.
* Debt-Free Structure: The company highlights its debt-free capital structure as a key strength.

Red Flags and Uncommon Metrics

* Foreign Exchange Losses: The significant foreign exchange loss in Q4 2024 ($3.3 million) is a red flag, indicating potential vulnerability to currency fluctuations. The company holds a significant amount of funds in Euro time deposits, making it susceptible to Euro/Dollar exchange rate movements.
* Related Party Transactions: The company engages in related party transactions, including management fees and vessel sales. While not inherently problematic, these transactions require careful scrutiny to ensure they are conducted at arm’s length.
* Adjusted EBITDA and EPS: The company uses non-GAAP measures such as Adjusted EBITDA and Adjusted EPS. While these measures can provide useful insights, investors should carefully review the reconciliations to GAAP measures.

Fleet Data Analysis

Metric Q4 2023 Q4 2024 12M 2023 12M 2024
Average Number of Vessels 9.00 11.00 10.00 10.39
Fleet Operational Utilization 68.5% 86.0% 75.1% 78.3%
Total Charter Days 160 446 1,058 1,092

* Increased Fleet Size: The average number of vessels increased in both Q4 and the full year 2024, contributing to higher depreciation expenses.
* Improved Fleet Utilization: Fleet operational utilization improved, indicating efficient vessel management.
* Increased Time Charter Activity: The increase in total charter days suggests a shift towards more stable revenue streams.

Risk and Opportunity Assessment

Risks:

* Cyclical Industry: The shipping industry is inherently cyclical, and IMPP’s performance is heavily influenced by tanker rates and global economic conditions.
* Spot Market Reliance: The company’s reliance on spot market rates makes it vulnerable to market fluctuations.
* Foreign Exchange Risk: The company is exposed to foreign exchange risk, particularly related to its Euro-denominated time deposits.
* Related Party Transactions: Potential conflicts of interest arising from related party transactions.
* Geopolitical Risks: The company acknowledges the impact of geopolitical conditions, including the conflict in Ukraine and the Middle East, on shipping routes and trade.

Opportunities:

* Fleet Expansion: The acquisition of seven dry bulk carriers presents an opportunity to diversify revenue streams and capitalize on potential growth in the dry bulk market.
* Strong Balance Sheet: The company’s debt-free capital structure provides financial flexibility to pursue growth opportunities and weather market downturns.
* Improved Fleet Utilization: Continued focus on efficient vessel management can further improve fleet utilization and profitability.
* Time Charter Agreements: Increasing the proportion of time charter agreements can provide more stable and predictable revenue streams.

Conclusion and Actionable Insights

Imperial Petroleum Inc. demonstrates a mixed performance in 2024. While the company maintains profitability and a strong balance sheet, revenues and net income declined due to softer spot market rates and foreign exchange losses. The company’s focus on fleet expansion and its debt-free capital structure are positive indicators. However, investors should carefully monitor the company’s exposure to spot market rates, foreign exchange fluctuations, and related party transactions.

Overall Assessment: Neutral to Cautiously Optimistic

Recommendations:

* Monitor Tanker Rates: Closely monitor tanker rates and industry trends to assess the potential impact on IMPP’s future revenues.
* Evaluate Foreign Exchange Risk Management: Assess the company’s strategies for managing foreign exchange risk.
* Scrutinize Related Party Transactions: Carefully scrutinize related party transactions to ensure they are conducted at arm’s length.
* Assess Dry Bulk Market Potential: Evaluate the potential impact of the newly acquired dry bulk carriers on the company’s revenue diversification and growth prospects.
* Review Future Filings: Review future SEC filings for updates on fleet deployment, financial performance, and risk management strategies.

Financial Ratio and Metric Analysis – Imperial Petroleum Inc.

Profitability

  • Gross Profit Margin:

    • Q4 2023: ($29,881,814 – $13,470,678 – $348,535 – $5,541,258 – $117,500 – $2,454,960) / $29,881,814 = 25.13%
    • Q4 2024: ($26,211,665 – $8,122,190 – $338,262 – $6,561,878 – $89,500 – $195,418) / $26,211,665 = 41.54%
    • Trend: ((41.54% – 25.13%) / 25.13%) * 100% = 65.30% increase
    • Industry: The shipping industry is highly cyclical. Gross profit margins vary widely based on freight rates, vessel type, and operational efficiency. A 41.54% margin is generally healthy, but further benchmarking against similar companies (product tanker and dry bulk operators) is needed for a more precise comparison.
  • Operating Profit Margin:

    • Q4 2023: $2,926,370 / $29,881,814 = 9.79%
    • Q4 2024: $4,997,913 / $26,211,665 = 19.07%
    • Trend: ((19.07% – 9.79%) / 9.79%) * 100% = 94.79% increase
    • Industry: Operating margins in the shipping industry are sensitive to operating costs and market rates. A 19.07% operating margin suggests good cost control and efficient operations compared to Q4 2023.
  • Net Profit Margin:

    • Q4 2023: $6,463,943 / $29,881,814 = 21.63%
    • Q4 2024: $3,917,661 / $26,211,665 = 14.95%
    • Trend: ((14.95% – 21.63%) / 21.63%) * 100% = 30.88% decrease
    • Industry: Net profit margins are affected by interest income, finance costs, and foreign exchange gains/losses. The decrease from 21.63% to 14.95% is primarily due to a $3.3 million foreign exchange loss in Q4 2024.
  • Return on Assets (ROA):

    • 2023: $71,134,002 / $376,834,541 = 18.88%
    • 2024: $50,157,772 / $449,505,061 = 11.16%
    • Trend: ((11.16% – 18.88%) / 18.88%) * 100% = 40.89% decrease
    • Industry: ROA measures how efficiently a company uses its assets to generate profit. The decrease in ROA from 18.88% to 11.16% indicates a less efficient use of assets in 2024 compared to 2023.
  • Return on Equity (ROE):

    • 2023: $71,134,002 / $362,305,473 = 19.63%
    • 2024: $50,157,772 / $420,667,668 = 11.92%
    • Trend: ((11.92% – 19.63%) / 19.63%) * 100% = 39.28% decrease
    • Industry: ROE measures the return generated for shareholders. The decrease in ROE from 19.63% to 11.92% suggests a lower return for shareholders in 2024.
  • Earnings Per Share (EPS) – Basic:

    • Q4 2023: -$0.02
    • Q4 2024: $0.10
    • Trend: (($0.10 – (-$0.02)) / abs(-$0.02)) * 100% = 600% increase
    • 2023: $3.22
    • 2024: $1.54
    • Trend: (($1.54 – $3.22) / $3.22) * 100% = 52.17% decrease
    • Industry: EPS is a key indicator of profitability on a per-share basis. The increase in EPS from -$0.02 to $0.10 in Q4 is a positive sign, while the decrease from $3.22 to $1.54 for the year is a negative sign.
  • Earnings Per Share (EPS) – Diluted:

    • Q4 2023: -$0.02
    • Q4 2024: $0.10
    • Trend: (($0.10 – (-$0.02)) / abs(-$0.02)) * 100% = 600% increase
    • 2023: $2.93
    • 2024: $1.40
    • Trend: (($1.40 – $2.93) / $2.93) * 100% = 52.22% decrease
    • Industry: EPS is a key indicator of profitability on a per-share basis. The increase in EPS from -$0.02 to $0.10 in Q4 is a positive sign, while the decrease from $2.93 to $1.40 for the year is a negative sign.

Liquidity

  • Current Ratio:

    • 2023: $183,188,789 / $14,529,068 = 12.61
    • 2024: $228,397,782 / $28,837,393 = 7.92
    • Trend: ((7.92 – 12.61) / 12.61) * 100% = 37.20% decrease
    • Industry: A current ratio above 1 indicates that a company has more current assets than current liabilities. A decrease from 12.61 to 7.92 indicates a decrease in liquidity, but the ratio is still very high.
  • Quick Ratio (Acid-Test Ratio):

    • 2023: ($183,188,789 – $7,291,123) / $14,529,068 = 11.42
    • 2024: ($228,397,782 – $7,306,356) / $28,837,393 = 7.67
    • Trend: ((7.67 – 11.42) / 11.42) * 100% = 32.84% decrease
    • Industry: The quick ratio excludes inventory from current assets. A decrease from 11.42 to 7.67 indicates a decrease in short-term liquidity, but the ratio is still very high.
  • Cash Ratio:

    • 2023: $91,927,512 / $14,529,068 = 6.33
    • 2024: $79,783,531 / $28,837,393 = 2.77
    • Trend: ((2.77 – 6.33) / 6.33) * 100% = 56.24% decrease
    • Industry: The cash ratio is a very conservative measure of liquidity. A decrease from 6.33 to 2.77 indicates a significant decrease in the company’s ability to cover current liabilities with cash and cash equivalents.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • 2023: $14,529,068 / $362,305,473 = 0.04
    • 2024: $28,837,393 / $420,667,668 = 0.07
    • Trend: ((0.07 – 0.04) / 0.04) * 100% = 75% increase
    • Industry: A low debt-to-equity ratio indicates that the company relies more on equity than debt to finance its assets. The increase from 0.04 to 0.07 is not significant and the company remains conservatively financed.
  • Debt-to-Assets Ratio:

    • 2023: $14,529,068 / $376,834,541 = 0.04
    • 2024: $28,837,393 / $449,505,061 = 0.06
    • Trend: ((0.06 – 0.04) / 0.04) * 100% = 50% increase
    • Industry: The debt-to-assets ratio measures the proportion of a company’s assets that are financed by debt. The increase from 0.04 to 0.06 is not significant and the company remains conservatively financed.
  • Interest Coverage Ratio (Times Interest Earned):

    • 2023: $66,017,641 / $1,821,908 = 36.23
    • 2024: $44,142,883 / $398,320 = 110.82
    • Trend: ((110.82 – 36.23) / 36.23) * 100% = 205.86% increase
    • Industry: The interest coverage ratio measures a company’s ability to pay its interest expenses with its operating income. The increase from 36.23 to 110.82 indicates a strong ability to cover interest expenses.

Activity/Efficiency

  • Inventory Turnover:

    • 2023: $183,725,820 / $7,291,123 = 25.20
    • 2024: $147,479,980 / $7,306,356 = 20.19
    • Trend: ((20.19 – 25.20) / 25.20) * 100% = 19.88% decrease
    • Industry: Inventory turnover measures how efficiently a company manages its inventory. A decrease from 25.20 to 20.19 indicates that the company is selling inventory less quickly.
  • Days Sales Outstanding (DSO):

    • 2023: ($13,498,813 / $183,725,820) * 365 = 26.78 days
    • 2024: ($13,456,083 / $147,479,980) * 365 = 33.33 days
    • Trend: ((33.33 – 26.78) / 26.78) * 100% = 24.46% increase
    • Industry: DSO measures the average number of days that a company takes to collect payment after a sale. An increase from 26.78 days to 33.33 days indicates that the company is taking longer to collect payment.
  • Days Payable Outstanding (DPO):

    • 2023: ($8,277,118 / $117,708,179) * 365 = 25.66 days
    • 2024: ($5,243,872 / $103,337,097) * 365 = 18.51 days
    • Trend: ((18.51 – 25.66) / 25.66) * 100% = 27.84% decrease
    • Industry: DPO measures the average number of days that a company takes to pay its suppliers. A decrease from 25.66 days to 18.51 days indicates that the company is paying its suppliers more quickly.
  • Asset Turnover:

    • 2023: $183,725,820 / $376,834,541 = 0.49
    • 2024: $147,479,980 / $449,505,061 = 0.33
    • Trend: ((0.33 – 0.49) / 0.49) * 100% = 32.65% decrease
    • Industry: Asset turnover measures how efficiently a company uses its assets to generate revenue. A decrease from 0.49 to 0.33 indicates that the company is generating less revenue per dollar of assets.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Calculation: $24.83 / $1.54 = 16.12
    • Industry: The P/E ratio is a valuation metric that compares a company’s stock price to its earnings per share. A P/E ratio of 16.12 is within a reasonable range for the shipping industry, but further benchmarking against similar companies is needed.
  • Price-to-Book Ratio (P/B):

    • Book Value per Share 2024: $420,667,668 / 29,933,920 = $14.05
    • Calculation: $24.83 / $14.05 = 1.77
    • Industry: The P/B ratio compares a company’s stock price to its book value per share. A P/B ratio of 1.77 suggests that the market values the company at a premium to its book value.
  • Price-to-Sales Ratio (P/S):

    • Calculation: (29,933,920 * $24.83) / $147,479,980 = 5.04
    • Industry: The P/S ratio compares a company’s stock price to its revenue per share. A P/S ratio of 5.04 is relatively high, suggesting that the market has high expectations for the company’s future revenue growth.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Market Cap: 29,933,920 * $24.83 = $743,255,086
    • Debt: $28,837,393
    • Cash: $79,783,531
    • EV: $743,255,086 + $28,837,393 – $79,783,531 = $692,308,948
    • EBITDA: $59,242,475
    • Calculation: $692,308,948 / $59,242,475 = 11.69
    • Industry: The EV/EBITDA ratio is a valuation metric that compares a company’s enterprise value to its earnings before interest, taxes, depreciation, and amortization. An EV/EBITDA ratio of 11.69 is within a reasonable range for the shipping industry, but further benchmarking against similar companies is needed.

Growth Rates

  • Revenue Growth:

    • Calculation: ($147,479,980 – $183,725,820) / $183,725,820 = -19.73%
    • Industry: The -19.73% revenue growth indicates a decrease in the company’s revenue.
  • Net Income Growth:

    • Calculation: ($50,157,772 – $71,134,002) / $71,134,002 = -29.49%
    • Industry: The -29.49% net income growth indicates a decrease in the company’s net income.
  • EPS Growth:

    • Calculation: ($1.54 – $3.22) / $3.22 = -52.17%
    • Industry: The -52.17% EPS growth indicates a decrease in the company’s earnings per share.

Other Relevant Metrics

  • Fleet Operational Utilization:

    • Q4 2023: 68.5%
    • Q4 2024: 86.0%
    • Trend: ((86.0% – 68.5%) / 68.5%) * 100% = 25.55% increase
    • 12M 2023: 75.1%
    • 12M 2024: 78.3%
    • Trend: ((78.3% – 75.1%) / 75.1%) * 100% = 4.26% increase
    • Analysis: Fleet operational utilization increased significantly in Q4 2024 compared to Q4 2023, indicating improved efficiency in generating revenue from available voyage days. The increase for the full year 2024 was more modest.
  • Time Charter Days:

    • Q4 2023: 160 days
    • Q4 2024: 446 days
    • Trend: ((446 – 160) / 160) * 100% = 178.75% increase
    • Analysis: The almost 180% increase in time charter days in Q4 2024 compared to Q4 2023 suggests a shift towards more stable, longer-term revenue streams.
  • Adjusted Net Income and Adjusted EPS:

    • Q4 2023 Adjusted Net Income: $7,216,350, Adjusted EPS: $0.01
    • Q4 2024 Adjusted Net Income: $4,582,723, Adjusted EPS: $0.12
    • Trend Adjusted Net Income: (($4,582,723 – $7,216,350) / $7,216,350) * 100% = -36.50% decrease
    • Trend Adjusted EPS: (($0.12 – $0.01) / $0.01) * 100% = 1100% increase
    • 2023 Adjusted Net Income: $74,382,103, Adjusted EPS: $3.39
    • 2024 Adjusted Net Income: $55,144,556, Adjusted EPS: $1.70
    • Trend Adjusted Net Income: (($55,144,556 – $74,382,103) / $74,382,103) * 100% = -25.86% decrease
    • Trend Adjusted EPS: (($1.70 – $3.39) / $3.39) * 100% = -49.85% decrease
    • Analysis: Adjusted net income and EPS exclude certain non-cash items and one-time events, providing a clearer picture of the company’s core operating performance. The decrease in adjusted net income and EPS for the year is consistent with the decrease in overall profitability.
  • EBITDA and Adjusted EBITDA:

    • Q4 2023 EBITDA: $7,955,544, Adjusted EBITDA: $8,707,951
    • Q4 2024 EBITDA: $6,391,755, Adjusted EBITDA: $7,056,817
    • Trend EBITDA: (($6,391,755 – $7,955,544) / $7,955,544) * 100% = -19.66% decrease
    • Trend Adjusted EBITDA: (($7,056,817 – $8,707,951) / $8,707,951) * 100% = -18.96% decrease
    • 2023 EBITDA: $82,751,270, Adjusted EBITDA: $85,999,371
    • 2024 EBITDA: $59,242,475, Adjusted EBITDA: $64,229,259
    • Trend EBITDA: (($59,242,475 – $82,751,270) / $82,751,270) * 100% = -28.41% decrease
    • Trend Adjusted EBITDA: (($64,229,259 – $85,999,371) / $85,999,371) * 100% = -25.31% decrease
    • Analysis: EBITDA and adjusted EBITDA are measures of operating profitability before non-cash items and certain adjustments. The decrease in both metrics for the year reflects the overall decline in profitability.

Commentary

Imperial Petroleum’s financial performance in 2024 showed a mixed picture. While fleet operational utilization improved, revenues and net income declined due to softer spot market rates and a significant foreign exchange loss. The company maintains a strong liquidity position with substantial cash reserves and a debt-free capital structure, but profitability metrics such as ROA and ROE decreased. The shift towards more time charter activity provides stability, but the overall decrease in revenue and net income raises concerns about future performance.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️