Q3 2022 Euronav NV Earnings Call
Good day and welcome to the Internet third quarter 2022 earnings conference call.
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Please note. This event is being recorded and now I'd like to turn the conference over to Brian Gallagher. Please go ahead.
Thank you good morning, and afternoon to everyone and thanks for joining our Q3 2022 learnings cool.
The first thought we'd like to say a few words.
The information discussed on this call is based on information as of today, there's like a third of November 2022, and may contain forward looking statements that involve risks and uncertainties.
Forward looking statements.
Reflect current views with respect to future events and financial before.
They may include statements concerning plans objectives goals strategies future events performance underlying assumptions and other statements, which are not statements of historical facts.
Forward looking statements attributable to the company or persons acting on its behalf.
Rusty qualified in their entirety by reference to the risks uncertainties and other factors discussed in the company's filings with SEC, which are available free of charge on the SEC's website at Www SEC Gov and on a on the company's website at Www Dot you're not you should not place undue relaunch 48.
<unk> looking statements speaks only as of the date the particular state.
And the company undertakes no obligation to publicly update or revise any forward looking statements actual results may differ materially from these forward looking statements. Please you can take it up to read our safe Harbor statement on page two of the slide presentation.
With that I'll now pass over to Chief Executive Hugo Stoop to start with the content slide on slide three Hugo.
Thank you, Brian and good morning, or afternoon to wherever you are welcome to Oracle I will run through the Q3 highlights before Boston back on to Brian Gallagher, Our head of IR will then highlight some key enduring trends in the winter market before I return to summarize our strategy, where we are in the current so.
Michael and our outlook.
Turning to slide five and the Q3 highlights.
He kept in markets today, everyone is looking for a five well in tanker market, especially in the larger VLT segment. We finally got all in for each week and this was the catalyst to drive us back to profitability.
Since July the substitution trade a VLCC sheep supplying the last T borne barrels from Russia to the EU has really gained traction.
She doesn't like sector has experienced more impactful dislocation since April and it's continued to see rates rise and now vlccs it largely caught up over the third quarter.
As experienced watches of shipping will know the impact in our numbers is lagged as we are operating six to eight weeks ahead of the current cabinet.
Hence you can see from slide five the quarter to date numbers for Q4 reflect better the trends we have seen since the summer.
We achieved neither have also been busy we've sold three older vessels this quarter and recycle the capital into two new eco suezmax contract, which will be delivered out of the winter and two years from today.
We now have eight vessels under construction that will be delivered across what we believe is the starting all the starting quarter of a multiyear up cycle.
It's a very pleasing operational quarter for us as we believe the cycle has to and should last for the foreseeable future.
Looking now at the financial slides.
It was a relatively quiet quarter on the financials during Q3 with no exceptional items.
Leveraging our liquidity remains very robust and in line with previous guidance.
We continue to work hard on adding additional sustainable financing, which we expect to complete very soon.
The two with the tools that we operate now fully a totally consolidated for an entire quarter in this for the first time since we acquired 50% of our partner on June seven 2022.
Slide seven also focuses on the how much progress we have made year to date in fleet renewal with interest remaining high in the secondhand tonnage.
With that I will now pass it back over to Brian Gallagher to give some thoughts on the current market cycle.
Thank you Hugo.
Driver of the oil market place over the last six months is about it's not very impactful phase.
This is the dislocation from the Russian crude flows.
The European Union has already divested about 1 million barrels per day seaborne imports from Russia.
Place those lost me from at lunch at these locations.
We expect another 1 million barrels per day, you're bound exports from Russia to follow a similar pattern over the next quarter ahead of the fifth of December deadline, so by the time oil or oil ships from the bus with the Europe .
This will mean that the same volume of oil would travel approximately three to four times the distance it previously did.
And we will continue to see the benefit of substitution trades from Atlantic to Middle East oil.
Oil being taken on the seaborne routes to the EU.
There's lots of substitution trade within a particular benefit the larger pesticides and such Vlccs.
It's been very pronounced since July onwards.
The chart on slide nine illustrates the distances involved and also the D kind of a dislocation all these crude barrels.
This brings us to the additional crude demand that we anticipate.
I see no further fuel switching on slide 10.
But China is a slide we've used before but which continues to have a very strong message where the current crude transportation market.
Volatility and its prices is wind up recently, we continue to see the relative price of oil being cheap in comparison to other energy sources.
All of the fuel prices illustrated on slide 10, I'll represented on a per oil barrel equivalents and therefore are completely like for like.
Oil example, relatively cheap in terms of the sorts of people at the moment and consequently, we believe that we will see what any fuel switching joined this winter.
Continue to see this trend well into next year.
The impact of all of this on slide 11.
It shows the impact on shipping itself.
The dislocation and increased demand for oil is clearly illustrated on slide 11. This.
This shows the amounts of boiler water being transported in adult Blue line.
The one year time charter rates.
Given in the light blue.
Oil and seaborne trends it is back to levels, we've not seen very short spike we saw in March 'twenty 'twenty just ahead of the Covid pandemic.
With 10 months continues to be a key feature of the dislocation. We anticipate we will continue to see growth in oil in transit on seaborne routes.
Similar patents.
So in summary of our market needs. We continue to remain very positive on the current trends and expect to see sustained strong winter period.
I'll now pass back to our Chief Executive Hugo Stoop to give some more medium term thoughts about where we are in the cycle on our current outlook from a traffic perspective.
Over to you.
Thank you Bryan I'd like to sum up before we go to Q&A with two very Gerald Foods'.
Firstly slide 13 gives an indication of what the problem is but also the differences we see between this current cycle setup and previous sustained multi quarter up cycles in the thank you Buck.
So those devaluation of the tanker sector kept to the market hubs is cheaper than what we have seen in previous up cycles in 2000 and for 2014 and 2019.
Chicken the average age of the global fleet is much higher than what we have seen in previous cycles.
Finally, we are in a very different deal right in terms of the order book expressed in absolute numbers or as a percentage of the fleet in the largest tanker space.
Those different aspects gifts very supportive and constructive medium term outlook.
So moving onto the final slide which is slide 14 that allows me to focus on the traffic lights. We gave at the end of every quarter earnings call.
Once again, we felt the market background deserves another upgrade and this time, we are upgrading to life.
The last phase of the Russian dislocation means that we expect to see further increases into mice, which bodes well for the tanker market. This winter and full of combing medium term.
You will have noted on slide 14 that our traffic lights are majority greed.
We still believe there is an upside at all of the recent upcycle that has been delivered without any benefit coming through from Chinese consumption, all Chinese oil demand growth.
So we still believe there's further to go and further potential for upgrades to our traffic lights.
Thank you for your time and attention with that I will pass it back to the operator for questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchstone phone excuse me a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
In the interest of time, please limit yourself to one question and one follow up at this time, well pause momentarily to assemble our roster.
Yeah.
Our first question comes from Jon Chapelle from Evercore ISI. Please go ahead.
Thank you good afternoon.
So first question on liquidity.
Just curious number one is that pro forma for all the vessel sales that had been done plus the down payments on the new builds and second of all this additional finance under discussion can you give us any sense to the magnitude of that and the terms given that you laid out it was.
Possibly go down the path of Green financing.
Yes, it will be very good question. So indeed.
$3 55.
It should be a little bit on the low side for your enough.
That is before we get our cash from the vessels that we have although we're sitting at the moment all.
All of those vessels are the tree.
In Q4, we expect to get approximately 160, <unk> hundred 59 million so that would be added to the liquidity and then the new facility, which is a 377 million.
We have a term sheet for currently in the documentation.
You expect that 330 ish of that will also be added to the liquidity and that's because it's replacing a facility that has already expired and so that explains why pre 55 seems a little bit on the low side. So overall, we go back to 800 million of liquidity and that is before operates.
<unk> cash flow comes in and we expect those to be significant and generous in Q4.
Okay, Yeah, great. That's a that's exactly why I asked it. Thanks for that the second question also has to do with capital just keep it to you on that specific.
Clearly most of the other publicly traded entities as kind of a return to the dividend model I know the visa black and we're really not going to see the true impact of the V recovery until the fourth quarter I'm, just wondering how you're considering capital allocation and kind of a twist on a question I've asked in prior calls are you somewhat restricted on what you can do.
With capital, especially visit the dividend until there is some finality to the potential frontline merger.
Yeah, absolutely I mean, when you do a merger and you calculate your economics, namely to reissue.
You are normally freezing the dividends so otherwise the economies all changing.
So what we have in our in the agreement is obviously that we can continue to pay a minimum dividend of <unk> <unk> every quarter that's in the books.
But we are now moving to a market that should allow us to return more capital to the shareholders.
And we will do so but only after.
We have the tender over at the tender offer.
Clues and Thats, what <unk> seen for for frontline and they've paid the dividend.
In Q2 that was also.
Agreed.
In calculating the in the ratio.
But then are we should we should hold on paying dividends.
And tubes and tender offer is a closed and that we expect as you've seen to be down in Q1, So there might be a little lag off of a of a quarter and even non food water I mean, probably a one or two months.
If you look at your calendar and when we'd be dividends related to every corner.
Okay.
Alright, well great title on slide 13 in and thanks for your time.
Thank you very much.
The next question comes from Amit Mehrotra from Deutsche Bank. Please go ahead.
Hey, gentlemen, good morning. This is Chris Robertson on for Amit how are you.
Why don't you.
Good good I wanted to ask you about the expansion of the Ti pool do you expect that will allow greater rate outperformance or how how would that change things operationally.
Operationally I'm I'm I'm not sure that will change much what we're trying to achieve there in the pool is to have a central point of contact for our clients to go I mean at the moment. The market is very fragmented. So if you are a broker.
Denting inclined what you do is.
You look at the different databases that exist out there and some are more comprehensive than other and then you try to spud the vessels that can perform the cargo you are in.
In charge of finding transportation for so when you have a place which represents a 65 and end to end tomorrow, hopefully 85, potentially 19, maybe one day, even 100 chips.
It makes the lives of many people easier.
And as far as the participant to the pool a concern what we're looking at is trying to optimize the voyage.
Among the different vessels and also I'm trying to find the appropriate vessel for the appropriate trade that we are doing because nowadays you have non eco ships eco ships, you had non eco ship with scrubber with us cover acreage he was carbon without a scrubber.
Every single voyage will have particular properties.
And so it's important to have a big pool of different vessels that can take those different voyages. So it's it's it's mutual benefits I would say a fully operate as much as a full declines.
And in the way that I explain.
And then if we play the game of triangulation and normally indeed, and that's one of the Ghoul Youll natural resource should improve but not at the detriment of your client which.
Which is in a very big benefit again for both parties you pay the same and we get the benefit of size.
Got it yeah. Thanks for that follow up question on Slide nine you talked about the Russian dislocation I just wanted to ask on the Baltic loading or how many of those can accommodate vlccs and what are they going to be ship to ship transfers associated with the dislocation of Russian crude.
Very few can accommodate visa and the ones that can usually you cannot load of the to the top so yes.
There is normally when you're always moving.
Far away or further away than it used to be I mean, Europe was it close dyskinesia and as we have explained.
In the interest to remark, we talking about three four potentially five times the distance that we used to before.
And on that kind of just didn't make sense to lighter into a VLCC. So far we have seen a few operation doing that we expect that this will pick up dramatically in the winter and why do we expect that to pick up dramatically because in the winter and he I'm not only talking about the bank takes a much more talking about.
The northern part of in the northern part of our Russia do you need ice class vessels and when you look at what exists in the world and handling.
A few Suezmax and then many aframax.
That caused it means that can do they can break the ice he can low deal and then they can go to their destination, but if you use those shifts to do the long voyage you know over are the owner of Africa, and going to India, China and whoever is interested in taking that oil then they won't be available to go.
For the distance, which is IC. So we expect those ships to lighter into VLCC in non ice waters and then to go back directly to the port where they are needed. That's why we're very optimistic about vlccs are in general.
Got it yeah that makes sense. So in other words there'll be traveling longer distances and it will take longer to load them because of the widening.
Correct.
Alright, Thanks, guys appreciate the time.
Thank you.
Our next question comes from Omar <unk> from Jefferies. Please go ahead.
Hi, Thank you.
Afternoon, Hugo and Brian I, just wanted to ask about the latest new buildings that you have for the two suezmax as you ordered recently you got a nice delivery slot for the third quarter of 'twenty for both.
Those seem to be a bit earlier than what we thought maybe it was available.
Are those were those options lots that you had.
Or maybe can you just give some context as to how you got those slots and then also.
What does the picture look like from here, if you were to place a fresh order today.
Well very good question and then in fact, we hesitate in making those remained in the press release, because its very important people understand what the current picture is about shipyards in general and in that one in particular, so we're very much attached to the quantity that Korea can deliver and we monitor it very much.
<unk> the Korean yards are the three big ones, which are hindered by Samsung and they will they are completely full in until 'twenty five and when I speak about 25 Q2 for maybe one or two ships.
But it's mostly Q3 Q4.
And they continue to receive orders from other segments. In particular LNG is a is quite keen to continue to order obviously a ball for obvious reasons. The container societies is slowing down on that piece of older but to come back to the tanker space.
That's what the picture is we also check.
Whats going on in China, and it's very similar and I'm not even talking about Japan, because there is much worse, we're talking and 26.
They hand, which is not part of the top three but did used to belong to the who's who liquidity is very good.
I've had the opportunity to develop a very good relationship with them.
You will remember that earlier this year, we took two suezmax that was resale of contracts that we did last year and in fact that was that's very much what builds our relationship with them because we could act very very swiftly I think between the time they were in trouble with their existing clients and the.
We took that contract.
Our own hands, there was maybe two weeks or something like that and we were relatively generous on payment terms, which was appreciated by the yard. So what happened on this occasion is that there were two options if I'm not be seeking for product tankers and that the ship owner for.
One on another reason Couldnt list and they became available in the first party D came to offer those slots was youre not because of what I just explained and we grab them because indeed, we saw that the very interesting part was the time delivery, we haven't announced surprised but I can tell you that that was also.
A very attractive price compared to what we could see.
Being offered by other yards.
For what we believe the same quality so all in all we believe its a very good deal.
Whether we are going to see more of those is a little bit difficult to say I know that people are trying to study.
The options on the container side, and see whether or not they could be transformed to tankers.
The odd thing that most of those studies are showing that it's difficult.
Because it's it's it's always I mean, it's difficult because Saddam type of ship.
Two crude that's relatively easy, but container to tanker or dry bulk into tanker.
It's a it requires a lot of changes so he's not easy. So we don't expect to see many of those opportunities are arising for us so far all the people and therefore, we believe that the first opportunity that we will see is 25 beach for Suezmax social VLCC.
Thank you very helpful.
Just wanted to follow up then.
Like the structural notation of these two suezmax as.
You mentioned, there being designed to be LNG capable down the line after delivery I mean, you also evaluating making them ammonia and methanol ready.
Is it conceivable that you'd be able to pick.
You know first off you go back to the yard after delivering let's put on the LNG are components and then maybe a few years later, you bolt on ammonia or methanol as that becomes more prevalent.
Prevalent.
Is it is it conceivable that you'd be able to have like a tri fuel type of vessel.
Suezmax is where it could do bunker fuel you could do LNG and maybe down the line you could bolt ons methanol and ammonia.
Realistic or is that just too farfetched.
From a technical point of view everything can be done, especially on a tanker because we have a lot of space on our deck. So if you look at the ship the deck is relatively empty I mean, there's obviously the tree different lines to a load the cargo that we have.
Different from dry bulk because David hatches that need to open. So the space is more restricted completely different four container vessels because every single species useful loading to containers. So from a technical perspective, yes, you could imagine doing that but then from a cost perspective that is completely suboptimal.
Simply because we're talking about different type of fuel I mean, methanol will continue to be liquid.
At ambient temperature LNG is definitely not liquid and ambient temperature same for ammonia.
On top of that some of those projects are more corrosive than others, which means that the piping that you need to put in place.
More or less sufficient by that I mean will be.
Specific type of metals.
Piping and then the way you will feel the engine is also very important because ammonia for instance.
Is more toxic than any other dog a few that we are considering at the moment and so you really need to make sure that everything is completely watertight because you cannot afford to have any needs no matter. How small that is so from a from a capex perspective, I don't think that you're going to see a different type of fuel try.
Fuel as you name it a dual fuel that's that's the obvious conventional that we used to D plus one of the new.
And transforming the ships I E. In the first place you will receive a conventional than potentially you transform it into a let's say methanol because that's the closest to what we're using today.
Then at the later stage, let's say 10 years down the road methanol is no longer the flavor of the day and you move to LNG or pneumonia that is also possible, but it will cost money and so you got to make sure that that that that are at that point in time and when you take the decision and it makes sense to transform those vest.
A second time in their lifetime.
A few of the consumer is concerned.
Okay.
Got it thanks Hugo.
The next question comes from Chris Wetherbee from Citigroup. Please go ahead.
Okay.
Maybe apologize for what could be an obvious question first just wanted to clarify on the opportunity for the long haul from Russia from an ice perspective, do we is that a potential seasonal situation or do you see that being persistent beyond say first quarter or as we think about 2023.
But part of it should be a permanent part of it should be seasonal but the season is forcing it to happen. If you see what I mean, you have no choice you need to use to the Max does ice breakers.
To the extent that the weather the temperature.
That law and so there will be fools, if they want to export are what they are producing today to do the lighting on the long term. It continues to make sense from an economies of scale perspective, and that's why vlccs are usually used for long distance suezmax four four to distance and Aframax for Metro.
To distance.
That's the name of the game to certain extent so differently in the winter with a lot of legs for the long term.
Okay. That's helpful. I appreciate the clarification there.
And then maybe thinking about sensitivity of demand so going to your your Red Light Green Light chart that you've put in here and obviously the only one that sort of maybe not quite as constructive as demand for oil and wanted to get your perspective, if you think that sort.
Sort of economic dynamic it may be as impactful to the overall market as it has been historically just given all of the other potential constraints to both capacity and also theres the ton mile sort of multiplier here I just wanted to get a sense.
Concerned about the macro clearly, but we're wondering if we should if we think it's going to be quite as impactful as it historically, yes.
Well, that's a great question and to a certain extent I love some of your colleagues to give me the answer [laughter].
Uh huh.
So it.
It's almost like a gut feeling but we are very simple people and were trying to look at very simple.
In fact, the biggest factor in and we also mentioned that in our introductory introductory remarks, sorry is the demand that is coming from China and that is not yet back to pre COVID-19 level and thats the minimum that we should see coming back when.
When we speak about China, and then we believe that.
Once these.
Restrictions are being lifted in China, China will continue to grow and you've seen it from <unk> point of view, obviously that that country has slowed down, but certainly not nearly GBP the complete slowdown compared to the growth numbers, we used to see so that's already in itself I can't tell you when it's going to happen.
Give us a big boost to our oil demand. You'll also know that it will start sort of restricting to usage of fossil fuel only by 2030 until then.
The one that Max out.
The usage of a fossil fuel so I don't think that there is any concern coming from that region.
For this decade.
And then for the remaining part of the World I mean, clearly you're talking about a recession, we were talking about it in the law.
Quarterly cool and yes that usually has an impact on a D. D. D energy that is being used by the world in general.
But there where we are I would say may be more positive than other sectors as the relative pricing of a kilowatt hour because you can translate that you can translate that in all the virus or in kilowatts or whatever unit you may choose but it's true that the prize of volume relative to the other than especially.
Relative to gas is very cheap, which means that anyone who was an opportunity to switch from gas.
Gas to oil will do it.
The same could be said about the call, but I think that people are more and more reluctant to switch to cool because of the emissions and because of all those type of solution not only Q2, but.
Many types of pollution. So I think at the moment oil is probably more protected than many other sources of energy, even if we enter into a recession.
As you can see I'm using very simple simple analysis.
That's usually the right way to do it so I appreciate the time thanks, so much.
Thank you.
The next question comes from afraid Mark at all from Clarksons Securities. Please go ahead.
Thank you hi, guys.
Just a question on Europe .
The final leg as he called it.
Embargo.
Perhaps you can discuss the oil price cap.
Abstentions.
Trade and I guess, the third alternative is that exports go down.
Curious to know how are you.
See this shaking out.
Yeah again, one would need to have a crystal ball why don't we start with the last one which is.
Cut in production.
A lot of people were talking that potentially they would reach.
The maximum capacity of export to countries like India, and China are already taking a rational.
At <unk>, we believe that if the oil is cheap and certainly cheaper than what you can fetch in other place in the market It will find a home.
We have many precedents that demonstrate this.
And annoyed cap and I will come back to that is another way to forcing a discount which is already happening because obviously the freight is more expensive. So when Russia sells oil to China, and India, no doubt that the sell it at a bigger discount than when they used to sell it to Europe .
So from that perspective, I think that it's more physical operational restriction that will dictate whether or not Russia will have to shut in some of their all of their field and by that I come back to the comment that we made earlier on the ice class vessels.
People of all being enough numbers to go to Russian boards, and then do the lightning and this is obviously a heavier operation Dan when you can just pick up the audience in a pause and transported to its this nation without interruption. So that's that's what we believe at you and I will will.
We will happen as far as the price caps sanctions.
We don't think that that will stop the prediction of Roche now and I'm not even sure that the world really want.
Unless oil being put on the market given where.
Pricing is and given the influence of the impact it has on general inflation, which is really problematic as you know in Europe and to certain extent in the U S.
Yes.
Just as a follow up.
Do you have any idea, how how much Russia arent as being insured by.
Less than company.
And there is also this bond on insurance coming up so how do you think basketball.
Trading market in the tankers.
So first part of question no I D whatsoever, very difficult to know obviously the restrictions of the sanctions also coming up on the insurance World I don't think that it will change a great deal of what we're seeing today, because if I look at the P&I.
We are involved in are they already did what many companies and banks have gone, which is sort of self sanction or imposing already.
Great deal of restriction on what business, they can or cannot do with Russians.
So that's already the situation and for the few cases that we have tried to analyze and then we've heard off.
This is simply being replaced by.
Less international insurance companies, namely.
Insurance companies being located in Dubai.
Dubai in China, and Hong Kong.
Especially when the destination of the oil is all those countries.
Yeah I think thank.
Thank you very much.
Youre welcome.
Next question comes from Chris Tsung from Webber Research. Please go ahead.
Hey, good afternoon, Hugo and Brian how are you.
Find you.
Good good thanks, I just wanted to pick backup on the Russian dislocation.
And there were some talks about a girl.
Dark shadow.
<unk> seen that pick up in S&P market for all the tankers just curious on your views on how much tonnage could actually I think the market falling sanctioning.
Simba.
[laughter].
Well another one I definitely I should've brought my Crystal ball here.
First of all Youre, absolutely correct I mean.
The pickup in the second hand in the S&P market and second hand vessels is definitely there and when you look at the price one cannot ignore and not imagine that some of that tonnage is not going to be dedicated to two.
To the trade with Russia, I think that.
I'm not sure I would call is a shadow trade.
Simply because well up until fiscal December .
It's allowed I mean, you obviously need to have an agreement with your find in season and what not but.
Shipping is mostly private.
That shouldn't be a problem.
After that.
It's the destination, which is a problem right and the the ownership of the vessel, but if your vessels owned by the REIT and outside Europe outside the U S outside the U K.
Then you can continue to create so I'm not sure I would call it a shadow trade like what we've seen.
Happening with the oil coming out of.
Iran.
So.
Yeah, it's a limit it's is very peculiar.
And I don't know how much vessels would be able to do that I think that there will be a two tier market.
He is going to be very difficult to have ships, even if you're a beast.
Outside Europe to achieve that.
Do one cargo out of Russia, and then the next one out of a place that is not under restrictions. So I think that the fleet will be more dedicated.
If you don't have and will be the case of frontline very soon.
We are under a European.
Regulation that is called the tonnage tax and then the different countries.
Being a member of the European Union has their own way of applying that directive as we call it.
And we are based in Belgium, and we have already done our analysis in Cyprus.
It's a very good system that everybody lies and I would be surprised if they wanted to change it I mean everything is possible, but at the moment nobody's questioning that system and the reason why nobody is questioning that system simply because if it wasn't there in place in the European Union I think that very very few.
<unk> ships very few shipping companies would be based in Europe , and as you know, it's very different to ownership than it is to own a factory I mean, the factory you cannot just move it out of country overnight. That's more the case with a shape I mean, the ship you decide on the flag you decide on the registry.
And you can also decide where the companies incorporated so I I understand the question because that's very much talked about in the energy sector and.
We are very different animals did the reason why the energy sector is is making a lot of profit is because of the characteristic of the energy market and very much what's going on.
Because of the Russian Crane.
Crisis.
As far as shipping is concerned yes, we are.
Going to enter.
<unk> and upcycle as we call it but our business is full of upsides and downsides is therefore, very very cyclical and the benefit of the tarnish stacks for the states that apply it means.
Means that they get their tax even when we are lossmaking. So that's that's you know, it's just a different way of taxing and.
An industry and one that has worked for more than a decade now and from what we hear is there to stay I mean very few people question. It.
Okay.
Thank you for that.
Follow up question H that the frontline transaction has reached slightly bedight into Q1.
Can you maybe indicate what's good for the delay the transaction for for my <unk> also looking at at the rate of increase steak by the family Chavez.
Yeah. So maybe to question. The first one is on timing and initially we had we were very ambitious and we said that we should be able to close the transaction in Q4, and obviously, we had plans to use a fuchu for to do that and what happened is that we.
Could being a position to lounge to tender offer in queue fall, but that would mean that we go over the Christmas spirit than the holiday period, which is suboptimal. So today, we prefer to announced to the market that it'd just lounged tender offer as early as possible into one but then have.
The food period, where the tender offer is open free of holidays free of I would say bank holidays and people not may be paying the same attention as they would in other period. So that's very much is.
The main reason so we're not talking about a big delay we're talking about a strategic delay if I may use that that.
Auto things that could delay defy where there are things that we control and the things that we don't control and the things that we don't control is all the regulatory part most of the filings in the U S or in Belgium. They have the regulator has a certain time to analyze defies before we make them before.
We all frontline makes embolic that's on the first review the second review usually is not as no time limit. So if there is deleted and then there is very little we can do it most of the time, we don't expect to see you want. So we are optimistic that we can meet the new time nine.
That we have a set to the market and then on your last question, which is our largest shoulder at the moment, which is C. M. B, which is indeed, a boat moshe's and that's token I suppose they'd be leaving the business, which is always great to hear especially at those prices.
It means that yeah.
Today, they have a position of 21% if we wanted to do a full merger with frontline I create one big company, we need 75% of the vote. Once someone has 21 or more votes. It becomes very difficult because not everyone is voting and that's the reason why we are structured.
This transaction is two step process. The first step is a combination so it's not a merger we will be able to achieve we believe up to 90% of the synergies of a fully emerge company. We will look at every single Department I would say beat.
On the revenue side B on the on the cost side the overhead and.
And really act as one group.
But indeed in order to achieve a full merger, we will need to see what happened with CMP steak and already how many shares we can connect.
In the tender offer so that's something that we will do the second stage of the rocket that would say and certainly after the tender offer I don't think that it matters a great deal to the investors simply.
Simply because for for those who understand shipping they will understand that once you control accompany with more than 50% of the vote.
You can do already a lot if not everything that you would've done.
<unk> may be the only thing that you cannot do is a is a delisting basically.
Okay. That's clear thank you.
There are no more questions in the queue. This concludes our question and answer session I'd like to turn the conference back over to Hugo de Stoop for any closing remarks.
Not much to add I think we've we've called pretty much everything that we wanted to call. This one I think everyone for participating to the school <unk>. Thank you.
Conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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