Q4 2022 Torm PLC Earnings Call
Speaker 4: We world really important.
Speaker 5: Very.
Speaker 6: We we we.
Speaker 7: quarter and full year 2022 results call.
Speaker 8: Throughout today's recorded presentations, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session.
Speaker 9: If you would like to ask a question, you may do so by pressing star and 1.
Speaker 10: Press the star key followed by zero for operator assistance.
Speaker 11: It's my pleasure and I would now like to turn the conference over to Mr. Andreas Ablegardheim, who will play the video's light off. Please go ahead sir.
Speaker 12: Thank you. Welcome to Tom's conference call. We have been looking forward to presenting to you the results for the fourth quarter and full year of 2022.
Speaker 13: We will refer to the slides that we present during our presentation. At the end of the presentation, you will get the possibility to ask questions.
Speaker 14: After this conference call, you will be able to listen to a recording of the call and as usual you can find our presentation and other relevant data on our website.
Speaker 15: Please turn to slide two.
Speaker 16: Before we start presenting the results, I would like to draw your attention to the seed hopper statement.
Speaker 17: Please turn to slide three.
Speaker 18: The results will, as usual, be presented by Executive Director and CEO Jacob Melgaard and CEO Kim Bell.
Speaker 19: Please turn to slide 4. I will now hand over to Jacob.
Speaker 20: Thank you, address, and good afternoon. Good morning to all. Thank you for connecting with us today for our Q4 and for your 2022 presentation. The headline of today's call is that the very strong market-sensor markets have continued here into the fourth quarter of 2022, and that the underlying factors.
Speaker 21: have also continued into 2023. No visible signs.
Speaker 22: Enter now and to win the market to two.
Speaker 23: We have today presented the strongest results for the second quarter in the world. This means that we saw the fourth quarter of 2022 achieve an EBITDA of $267 million and a profit before tax of $222 million.
Speaker 24: Our 4th quarter average TTE ended at $47,520 per day across the fleet and above $45,000 would be a course I like, it would be marvellous.
Speaker 25: For the full year 2022 with our average TCE rate of $34,154 a day, we reached a total of $743 million and our profit before test.
Speaker 26: of $557 million.
Speaker 27: With this, we ended with a return on invested capital of 29.2% for the year.
Speaker 28: The Joint Board of Directors has approved a dividend of $2.59 per share based on the board quarter and we expect to distribute around $212 million in the next few cases.
Speaker 29: It means that our total distributions for 2022 will end up at around 378 million dollars.
Speaker 30: The distributions are aligned with the Distributing Policy announced last year.
Speaker 31: After the end
Speaker 32: of the fourth quarter of 2023, we acquired seven LR1 tankers built between 2011 and 2013.
Speaker 25: As of today, two of the vessels have been delivered, and the remaining vessels will be delivered before the end of April of this year. Further, we today enter into an agreement to purchase three 2013-built MR tankers for total cash
Speaker 23: commensuration of 48.5 million dollars.
Speaker 23: in combination with the issuance of 1.42 million shares.
Speaker 28: We expect that these vessels will be delivered before the end of May, and with this our fleet will reach a total of 88 unfold vessels. Finally, we also announced that we have obtained no commitment from a number of banks to refinance and extend maturity.
Speaker 23: on existing loan and leasing agreements for up to $433 million.
Speaker 25: At the same time, we obtained commitment to finance which in the second hand…
Speaker 29: for an amount worth up to $123 million.
Speaker 30: With this, refinancing
As we said, during the second quarter of this year, we have obtained more attractive films on a large part of our funding.
Please turn to slide five.
This is the start of the Russian invasion of Ukraine in February 2022, where it sees strong improvements in turret 1991 matterhages.
increased trace flows, long and straight distances.
partly due to the EU sanctions on Russia, and partly due to more fundamental factors
such as ultimate recovery, decent refinery closes, and consequently increased import. This has all moved the product maker feet closer to the point of good utilization, which is also there to hire a great, great end.
where even small changes in the underlying demand and supply are creating high volatility in the freight rate as we also experienced over the past 12 months.
Here, we turn to slide 6. This weight volatility can be demonstrated by humans in average weight rates. But in the past 12 months, we have also seen increased weight volatility across the different regions.
which has turned into even more MR-level.
and are parenting over longer distances to optimize their release.
parenting over longer distances to optimize their release. Be more efficient.
Shading patterns have heightened the availability of vessels on the market and further support trade rates. The irregular and sub-optimal trade patterns is further emphasized by the fact that owners that are willing to do what is trade are also willing to wait for these higher paying titles.
which is again tightening the level of availability. In this environment of increased volatility, being able to position our feet towards the premium space and vision is even more important. And this means that having access to the right cost and the right carbon combination is essential.
for building optimality.
We can see that we, with our one-form, integrated platform, we are continuing to have strong support from our customers and we remain confident that we will have access to the trials and tricks that is in turn enabling us to position our teams towards the premium regions.
Slide 7 please. When we look more closely at the main market drivers, clearly the EU ban on Russian oil and oil products has been the most important demand driver in the past few months.
We have been estimating that the EU ban on Russian oil products and the corresponding fuel trade to meet the expectations will lead to a deep 7% increase in biomass, as Europe needs to import clean oil products, expecting fuel from sources further appealed and fiddling.
Russia needs to find new buyers for their products in the lead.
And indeed, this trace recalibration has started.
EU started to prepare for the ban already ahead of the final deadline of the fiscal year by importing higher volumes of non-grossing sources.
especially the Middle East and India.
At the same time, the EU countries continued to import high volumes from Russia, basically until the very start of the ban.
Higher import volumes added strongest turn marks but also allowed the EU countries to build up deep limits of weight from multi-yellows.
With inventory stacked to normal levels, EU import needs are currently lower compared to the high levels seen at the end of last year. But these imports are coming from further fields and the inventories will need to be built again, increasing import demand over the coming months.
Emily?
Similarly, Russia has so far been quite successful in redirecting its clean products to market in North and West Africa, Turkey, the Middle East, and lately also increasingly to Asia.
Considering that around two-thirds of Russian clean petroleum parts originate from the Baltic seaport, these changes in export situations have resulted in solid ton-miles increases.
Can you turn to side please?
The geopolitical tensions in Europe have no doubt been the main driver of the strong race-rate environment. However, fundamental drivers not directly related to the geopolitical situation in Europe , such as changes in the societal landscape, are also significant consumers.
If 2020, around 300 baht a day refining capacity has been closed down permanently or is scheduled to be closed down during this year.
Most of the adequate capacity is located in regions with a already large skin porous or refined oil products with Australia and Sweden. And that's some of the most prominent examples.
Just to give an example of the potential impact, the binary approaches resulted in an almost 20% increase in clean consumer imports to these three countries and contributed to the 2% increase in the global demand for product makers.
Given the fact that oil demand in these countries is still lagging behind the pre-COVID levels, it believes that the true effects of refinery filters is yet to be seen.
On the other hand, these refinement filters coincide with more than formula does to their new capacity coming online mainly in the Middle East and China.
regions that over today are not a source of all products.
Much of this capacity, especially from the Middle East, is currently ramping up and reaching full capacity this year and is to a large extent concentrated around Middle East excellence, which we believe will facilitate the trade recalibration triggered by the EU ban on Russian border.
Both these adornments and developments are positive for trade shows and some are in the coming year with only a few projects which are not positive for trade.
Please turn to slide 9. The positive outlook for the demand for product changes in the next two to three years coincides with the supply side, which is the most important thing for more than two days.
With high new building prices, limited TPR space, tender ordering last year remains very important, especially when considering the strength of the pre-market.
So by this year, we've seen an increased interest in new building orders, although not all of it has materialized here.
However, at the Jibguard are filled up with other metal segments and continues to have a presence with these other segments, only very few product taker positions are available for entry 2025. In China, even the 2026 order groups are also being rapidly filled up.
It will effectively limit the sleep growth in the next 2-3 years.
And here, we turn to Tri-Fed. To conclude our remarks on the Product Manager Mark, we think that the main demand of supply drivers on Product Manager Mark continues to be very important.
The TRACE recalibration, painted in refinery landscapes that already started last year, will continue to support the market also this year, with the new large refineries ramping up in the Middle East being an important break in this battle.
We cannot disregard the fact that the current environment with high inflationary pressure on the global economy is likely to slow down the growth pace of the global ultimate.
We have the opinion that the effects of the redistribution of the energy supply chain will tolerate the potential negative effects caused by the store water mangroves. As love
The important demand side is complemented by the supported supply side situation, securing low people for at least the next two to three years.
I now hand it over to my colleague, Kitz, for further elaboration on our performance. We're covered for the coming period, our declared evidence, and of course also the refined connecting physics.
Thank you, Jacob.
Please turn to slide 11. We reported record-high TT rates in the third quarter of 2022, but we managed to obtain even higher rates average rates in the fourth quarter of 2022. We increased our rates from 44,376 cost per day in Q3 to above 47,500 per day in the fourth quarter quarter of 2022.
For the fourth quarter, he did at $45,229 per day, going down once.
at $48,076 per day and for a luxury the average rates were $58,889. I'm very happy with the performance of the One Song Platform that once again demonstrated our performance.
Please turn to slide 12. Looking into the TCE rates we have obtained during the beginning of this year, we have seen that the strong markets are continuing.
Tom has covered 90% of our first quarter, 2023 Jenga days at an average rate of $43,002 per day. And for the MRs in the first quarter, we have of the 13th of March, fixed 89% at $37,730 today and so far 86% at the LR1 Jenga.
Days were fixed at $44,135 per day and 90% of the LR2 days were fixed at $65,950.
Also, in the remaining quarters we managed to fix rates at strong levels. As of March 18% of our days are fixed at $42,237 per day in the second quarter. 13% are fixed at $42,228 per day in the third quarter.
and 13% are fixed at $42,527 per day in the fourth quarter of this year.
It made part of our coverage. Beyond the first quarter was made in the yellow ones and in my basic classes remaining.
and also maintaining a high operational leverage in JLA through this class.
This turns to slide 13. The strong TT rates led to the highest EPD-A from our operations on record. Our 4th quarter EPD-A of $267 million brought us to a full year of $743 million, which is more than the previous quarter.
increase compared to the end of 2021, where we even have 85 bases.
The increasing freight rates that we saw in Q2 and Q3 of 2022 naturally led to increasing net working cattle zone. The high but more stable rate environment from Q3 to Q4 resulted in a likewise more stable development in our net working cattle zone. Hence, the working cattle zone development in the fourth quarter only had an immediate impact on the net working cattle zone.
at the end of Q4 2022, coming from 52% at the end of 2021. It was largely driven by a set increase in vessel values, ordinary debt installments and a strong cash generation. If we take the dividend amount for Q4 2022 of around $212 million into account.
the net loads of value would increase, wouldn't that be 33%?
Lastly, I can inform you that as per year, Enson had low capers commitments of 18 million dollars in total, which is mostly related to carbon emissions.
Please turn to slide 14. As mentioned we will distribute around 212 million dollars or 2.59 dollars per share based on our industry forecast balance.
consistent with our distribution policy. Our distribution is based on a cash position of $324 million and the Boeing-Kelson facilities of $93 billion.
We deduct restricted cash primarily related to financial instruments and cash in marine exhaust technologies of around $6 million and finally our EMI proceeds of $58 million. Our minimum cash reserve for semi-investment was $140 million at the end of the fourth quarter. So in conclusion, it resulted in a pay-up ratio for Q4 2022 with a profit of $222 million.
of more than 95%. The total dividend distributed in relation to 2022 would also be $378 million.
We expect that the potential dividend payment in the next quarter will not be notably impacted by the acquisition of the seven LR1 vessels that we completed in January this year. The unfinance part of the acquisition will thus be taken from our earmarked proceeds. All other things being equal, this will leave our earmarked proceeds of around $11.8 million at the end of Q1 2022.
that the potential dividend payment in the next quarter will not be notably impacted by the acquisition of the seven LR1 vessels that we completed in January this year. The unfinanced part of the acquisition will thus be taken from our earmarked proceeds. All other things being equal, this will leave our earmarked proceeds of around $11.8 million at the end of Q1, 2022. This is the interest for the operations of the
This morning we announced that we have acquired three additional MR bases.
The vessels have fuel-efficient eco vessel specifications and are expected to be delivered no later than 31st May 2023. We will pay for the transaction with 50% cash and 50% shares that will be issued in conjunction with the delivery of the vessels.
The cash element of the transaction is expected to be financed through traditional bank financing.
Also, today we obtained commitment for the refinancing of $433 million and leasing agreements with two new bank facilities, thereby extending debt maturities until mid-2028 and with the possibility to extend most of the debt exploration to mid-2029.
Further, we have obtained commitment for financing of additional signal and visual for up to $123 million with the same expiration terms.
The refinancing state will be structured as a facilitated facilities agreement that includes 69 banks, approximately $322 million. That will refinance 21 vessels built between 2009 and 2020. And a bilateral facilities agreement about $111 million. That will refinance 26 vessels built in 2003.
Does that sound good?
Looking at our repayment profile, we will increase repayments in 2023 and 2024 slightly, thereby deleveraging more than under the existing loan agreements in the first years. In addition to extending maturity, we have obtained attractive terms on this new financing agreement. The closing of the agreements is subject to documentation and is expected during the second quarter.
Thank you. We're very pleased with the support from our existing Reggio banks and our new banks. With them we are confident that we will have set the clue of banks that for the years to come can assist us in growing George's business.
during all of 2022 to almost in compliance with all financial commitments.
With that, we will let the operator hold most of the questions.
Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one.
If you wish to remove yourself from the question queue, you may press star followed by 2.
Anyone who has a question may press star followed by one at this time. One moment for the first question please.
We have the first question from John Chappell from Everclear. Please go ahead, sir. Thank you. Good afternoon. Just two somewhat obvious strategic questions for you this afternoon. I like the slide 12 that you put in on the 23 coverage.
three-year contracts that are out there and maybe as part of that question can you speak to the liquidity of that market and how representative it is of the current spotlight environment.
Thanks for those questions.
If you had the same conversation over the last couple of quarters, what would be the time when you start to take cover a bit deeper?
Clearly, we would be more inclined to look at it today than in the last quarter. The rates on, let's say, Onomatopoeia 2, just an example, have gone from 3 years being sort of in the mid high 30s to probably around 40 now.
So given that you in the meantime, as you can see, have had the benefit of a strong spot market, it's of course encouraging that the long end of the market is creeping up at the same time as more time has passed on your exit at risk that I thought that. But I don't have a precise...
idea about the windows that we would look at. But of course it's a better return today than having done it three months ago. Okay. The other one is...
I'm sure you're doing great returns on the secondhand efforts in buying the 7-hour ones and the 3-hour NIRs that you just announced today. But I'm a little curious, the market seems incredibly strong from an asset value perspective, especially for ships of that age. So I'll go by, probably could be the retail.
Why haven't we seen kind of a greater unwinding of some of the older tonnage in the fleet? So kind of a one for one substituting the 10 year old for maybe a 15 year old and taking advantage of the strong second landing market for those older ships.
Yes, we actually did do that in a way. I mean, we sold I think eight ethics of all the widgets over the course of last year. So that movement is more or less already taken, but we are constantly evaluating as you point at these events.
what is the right balance for us around maintaining vessels or selling off. We are comfortable in all the way in our feet right now to be honest.
And we don't see a big price differential between older tonnage and newer tonnage in one-block rate engine and spot market. So therefore for now I don't have a particular.
sort of still pull around, offloading more times, but of course you may decide to sell slightly a little bit if the price is right. Okay, thanks for the answer, Shobha.
of sales all around, offloading more tonnage, but of course you may decide to sell slightly a little bit if it's the price to fight. Okay, thanks very much for sharing. You're welcome.
Ladies and gentlemen, if you would like to ask a question via phone, please press star, followed by one. Please return to your seats.
Ladies and gentlemen, if you would like to ask a question via phone, please press star, followed by one.
We have the next question from Peter Houghton from ABG. Please go ahead.
Good afternoon guys. I'm sort of continuing on the former question and want to ask you what you think about the new building opportunities.
out there now and to what extent Torum would be contemplating to not only add second hand tonnage but also new buildings to its fleets.
So we prefer, as you can see...
This is a cyclical industry and it can be quite volatile over the years. So for now our preference is for tonnage where we can, I'm not going to say tea at least.
If you then look at, let's say, a 2026 delivery, I think if we were to think about it, it would be to be.
investments that are difficult to get to by virtue of buying the assets today. My strong preference for assets today I think would have to be really something special. On price or features capability on an asset that has a long-dated delivery.
Well, thanks for that. The obvious question here is that at some point someone needs to build more ships. These ships, as we all know, deteriorate by the day and at least one needs some sort of replacement for a ship.
It's sort of your billion dollars for 2023 comes through. Will we see more ordering, you think, through 2023 if markets hold up as most of us expect?
I think it is definitely conceivable that you will have more ordering.
more contracts in 2023.
than what you had in 2022 is true. Simply because people are also going wrong with data. I think in 2022 people will probably be more reluctant.
to buy, let's say a 2025, 2026 decision today. There's not much capacity as we discussed. So I think that the contracting itself will probably be bigger, but what I expect is that it will not.
at least in 2025, in 2026, climb above the 3-4% that we're concentrating on. And then of course when you get into the second half of this decade,
What is interesting is to look at the 25 year old sort of scrapping potential is increasing dramatically once you get out there.
What is interesting is to look at the 25 year old sort of scrapping potential is increasing dramatically once you get out there. As I'm sure you've also looked at Peter.
Oh, yes, that's the point there. I'm very curious to see how... The way we think about it is that we actually did spend time in China.
and in Korea earlier this year when it was opened up. And we sort of, we have our own view on what is the realistic availability of the CPR capacity in 2025, 2027. And we modeled it here, as if all of that would be true. And when we get that.
That's the extreme case, that's where the TPRs are not and attracted by fly cargo or container or energy or other sessions. And in that scenario, there's still a very manageable order book that you get to.
Yeah, this is, it's all, it's quite dynamic obviously, and it is outside of our two to three year discussion that we just had. I think that it is.
It's only possible that the fleet, additional fleet will be subtued at least up to an increment in 2026. And then when you get past that point.
The feed that needs to go to reciting is increasing dramatically.
That's why we like lessons in the water now, because we think that there is, having 88 lessons in the water now, I think it's better than, let's say, having whatever, 60 now and 20 out in the future.
We like that in the water now because we think that there is, so having 88 vessels in the water now, I think it's better and let's say having whatever, you know, 60 now and 20 out in the future.
Understood, understood and agreed. The final question from my side, the ship for share transaction you just did now. Should we expect more of that for the next process?
quite positive around utilizing our equity. I thought the payment, we think it's good for the
In this case for the new shareholders, I think they get on board with significant upside potential for them and for us.
We are growing the company without
losing the strength of the potential to have the same pay-out ratios as we just discussed. So yes, if and when these opportunities arise, we will be willing to enter into that.
Thank you, David. Thank you.
Thank you for all coming. There are no further questions from the phone and I hand back to Mr. Hein for the web questions. Thank you, we have no further questions on the web. So this concludes.
the Earling Conference call regarding the results for the fourth quarter and full year 2022. Thank you for participating. Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you very much for joining and have a pleasant day. Goodbye.
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