Q4 2023 Euronav NV Earnings Call
Everyone is in Houston.
Questions can be taken after the presentation I will now give the floor to Alexandre.
Thanks, very much and good afternoon, everyone.
I'll come onto our Q4 2023 earnings call. My name is Alexander service on the CEO of fewer enough and I'm joined by my brother, Bill <unk>, our CFO and.
Immediately <unk>.
Good afternoon everybody.
And thank you for dialing in on our Q4 earnings call.
Uh huh.
Go to the presentation of the Q4 results firstly on the financial highlights first and then Alexander will take over on the corporate developments in the tanker markets.
We're extremely pleased to say that we've had a record Q4.
In the history of the company at 997.
We have been able to deliver a profit for this quarter of $411 million and obviously that result has been skewed by capital gains out of the sales of part of the frontline fleet.
Operator: Everyone is muted, and questions can be taken after the presentation. I will now give the floor to Alexandra.
$333 million.
Nevertheless, the underlying profit of $888 million.
Alexander Savris: Thank you very much, Enya. Good afternoon, everyone, and welcome to our Q4 2023 earnings call. My name is Alexander Savris.
Puts forward a strong Q4 based on the real estate markets.
We're happy also to.
Ludovic Savris: I'm the CEO of Euronav, and I'm joined by my brother Ludovic Savris, our CFO, and I will immediately hand the word to him. Good afternoon, everybody, and thank you for dialing in to our Q4 earnings call. I'm going to start the presentation of the Q4 results, first again on the financial highlights, and then Alexander will take over on the corporate developments and the banker market. We're extremely pleased to say that we had our record Q4 in the history of the company. Since 1997, we have been able to deliver a profit for this quarter of $411 million.
Include that in Q4, we continued our fleet expansion within <unk>.
With another two vlccs, which today is still puts us with an order book of four Vlccs on order and four Suezmax is.
D a.
On the right hand side of this slide you can see that the Q4 results were.
For both our P&L breakeven, but also thats the Q1.
Guidance is going in the right direction Alexander will continue.
And that's where fixed for Q1, 46% at 50430.
<unk>.
Good day for the Vlccs.
Weird message, we had 54% fixed at $55000.
Ludovic Savris: Obviously, that result has been skewed by capital gains from the sales of part of the front-line fleet of $323 million. Nevertheless, the underlying profit of $88 million puts forward a strong Q4 based on robust trade markets. We're happy also to include that in Q4, we continued our fleet expansion within Uranav with another two VLCCs, which today still puts us with an order book of four VLCCs on order and four Suidmax. On the right-hand side of the slide, you can see that the Q4 results were far above our pre-and-outbreak evens, but also that the Q1 guidance is going in the right direction. Alexander will continue on that.
If you look on the next slides.
We are highlighting obviously the key metrics.
Of our company, we still have a.
Our leverage on book equity of about 30%.
Obviously with the sale of <unk>.
Most of the Vlccs to frontline.
We have strengthened our liquidity dramatically.
End of the year, we ended the year with a $1 243 billion in liquidity.
As of today as most of the vessels.
The sales of frontline, having delivered were closer to $5 billion in liquidity.
The net profit of $411 million I've mentioned happy also to include that for the full year, we are at $862 million profit.
$490 million is coming from the business and 372 from capital gains.
Ludovic Savris: We fixed for Q1 46% at $50,470 per day for the VLCCs, and on student access, we have 54% fixed at $55,000. If you look at the next slide, we are obviously highlighting the key metrics of our company. We still have a leverage on book equity of about 30%. Obviously, with the sale of most of the VLCCs to Frontline, we have strengthened our liquidity dramatically. At year end, we ended the year with $1.243 billion in liquidity. As of today, as most of the vessels of the sale to Frontline have been delivered, we are close to $2.5 billion in liquidity. The net profits of $411 million I've mentioned. I'm happy also to include that for the full year, we are at $862 million profit, of which $490 million is coming from the business and $372 million from capital gains.
Q4 has also been highlighted by a new chapter for <unk>, which is something that will continue to explain.
We have decided not to.
Dividends for Q4 until the mandatory offer is over.
Many of the stakeholders.
Stakeholders within your NAV investors analysts and others have asked this in the last couple of weeks, what the dividend policy would be for the company.
Previous management.
In your analysis.
Standalone and pure play tanker company has aimed to dividend about 80% of its net profits going forwards.
The transaction with Siem detection.
We will be.
Next week.
The board of directors has decided that the dividend policy will be a full discretionary one.
I think like a shareholder has a track record of rewarding its shareholders, but in terms to give clarity to our investors.
The board of directors will keep a full discretion.
Many dividends will be paid based on the products.
The further growth we were happy to include in the Q4, two new long term charters.
Ludovic Savris: Q4 has also been highlighted by a new chapter for URNF, which Alexander will continue to explain, to pay a dividend for Q4 until the monetary offer is over. Many of the stakeholders within Euronab, investors, analysts, and others, have asked us in the last couple of weeks what the dividend policy would be for the company. Previous management and Euronab, as a stand-alone pure-play tanker company, have aimed to dividend out 80% of its net profits.
<unk>.
Our first year clients Valero.
And expands on our order book as of today.
Within <unk>, we have a remaining capex of $700 million.
Throughout the four Vlccs on order and four Suezmax.
Again, highlighting the fact, which we mentioned in the capital markets day.
The transaction with <unk> would be approved and next week.
<unk> had an outstanding capital commitments to new buildings of $2 billion.
Which would bring the total capex commitment was two points.
Seven 1 billion.
Ludovic Savris: Going forward, and if the transaction with C&D Tech will be consummated next week, the board of directors has decided that the dividend policy will be a full discretionary one. I think SCMD, as a shareholder, has a track record of rewarding its shareholders, but in terms of giving clarity to our investors, the board of directors will keep full discretion on how many dividends will be paid based on the profit. Further growth, we were happy to include in Q4 two new long-term charters to our first-year client Valero and expand our order book. As of today, within Euronav, we have a remaining CAPEX of $700 million for the four VFDCs on order and the four suites next. Again, highlighting the fact that, if the transaction with CNB Tech is approved next week, CNB Tech has an outstanding capital commitment to new buildings of $2 billion, which would bring the total CapEx commitment to $2.7 billion.
Tom.
One metric, we haven't highlighted and we hope to be able to grow further in the future as the contract backlog on our Marine Division.
<unk> stands at a $1 $75 billion revenue.
As CMV and <unk> stated it is our intention to continue to find attractive opportunities to be able to.
Looking long term cash flow.
To review a pass on the word to Alex on the corporate demand.
Thank you very much.
Well on the corporate development a lot has already been said over the last couple of weeks I think if we zoom in on.
The frontline transaction I think the first thing we can highlight today is at 23 out of the 24 Vlccs have already been delivered to frontline you have seen in the Q4, what's the result impact this and we've also projected the impact of the sale of the 24 vessels of the remaining 24 vessel.
In Q1, so one vessels still needs to be delivered but we're expecting that to be within Q1.
We also sold the Oceania.
Our oldest ship in the fleet. This is also being announced today and where we're going to realize a capital gain of close to $35 million, which will be recorded in Q1 2024, Ludovico already said very important contract win.
Ludovic Savris: One metric we haven't highlighted, and we hope to be able to grow further in the future, is the contract backlog on our marine division, which today stands at 1.75 billion dollars in revenue. As CNB and Euronet have stated, it is our intention to continue to find attractive opportunities to be able to lock in long-term cash flow. Well, for the view, I'll pass on the word to Alex on corporate development. Thank you very much, Ludovic.
With Valero on long term time charter of two new Suezmax ships for delivery in Q2, 2026, and then our total order book.
Part of our optimization strategy fleet renewal strategy of Vlccs at Beihai shipyard in Qingdao is now four vessels three of them, which will deliver in 2026, and one which will deliver in 2020. So if you look at our total feet apart from the two episodes that we have we have 17.
Alexander Savris: Well, on corporate developments, a lot has already been said over the last couple of weeks. I think if we zoom in on the Frontline transaction, I think the first thing we can highlight today is that 23 out of the 24 VLTCs have already been delivered to Frontline. You have seen in Q4 what the result impact is.
These on the water for us for new buildings, and 22 Suezmax is underwater and we have the Bristol delivering very soon there is another four on order, which are going to come in 2024 and 2026.
Alexander Savris: We've also projected the impact of the sale of the 24 vessels or the remaining 24 vessels in Q1. One vessel still needs to be delivered, but we're expecting that to be within Q1. We have also sold the Oceania, our oldest ship in the fleet. This is also being announced today.
Go to the next slide.
We cannot.
This call without mentioning the Ritchie.
As you have heard we were one of the very first companies to.
The area officer Hootie rebel attacks on the merchant shipping.
<unk> not changed our viewpoint. So far so we will continue until further notice to go and choose other routes than through the Red Sea until that situation has become safer for our crew and for our ships.
Alexander Savris: We're going to realize a capital gain of close to $35 million, which will be recorded in Q1 2024. We've already said it's a very important contract done with Valero on a long-term time charter on two new Suez matches for delivery in Q2 2026. Then, our total order book, part of our optimization strategy, fleet renewal strategy of VLTCs at Bay High, Shipyard, and Tsingtao is now four vessels, three of them which will deliver in 2026, and one which will deliver in 2027. If you look at our total fleet, apart from the two FSOs that we have, we have 17 Vs on the water, plus four new buildings and 22 Suez matches on the water We have the Bristol delivering very soon, plus another four on order which are going to come in 2024 and 2025. Go to the next slide.
Fact of the diversion as can be seen everyday and shipping in general and I would say crude oil and product tanker shipping in specific.
Indeed, creating more demand for ships because of the longer ton miles.
We're expecting the situation Unfortunately to last at least for the next couple of weeks, hoping for this to be resolved in the following months.
And go to the next slide.
I'm, making a little recap what we already did on the capital markets day presentation of what has happened over the past months and what will happen in the next couple of weeks on the ninth of October we struck an agreement with the Fredriksen group to get out of the deadlock for your enough. That's a deal that agreement was ratified in November.
Alexander Savris: We cannot have this call without mentioning the Red Sea. As you have heard, we were one of the very first companies to avoid the area after the Houthi rebel attacks on merchant shipping. We have not changed our viewpoint so far, so we will continue until further notice to go and choose other routes than through the Red Sea until that situation has become safer for our crew and for our ships. The impact of the diversions can be seen every day in shipping in general and, I would say, crew and product, tanker shipping in specific.
The special General meeting of shareholders.
Just before Christmas, we announced the CMV Tech transaction.
And next week on Wednesday, we will have a special general meeting to vote on that specific transaction.
Shortly thereafter, we hope to open the mandatory bid.
Four year enough and we hope to close it by the middle of March.
I want to say a few words about the tanker markets as well.
As we are in shipping there's things we know when things we don't know.
Alexander Savris: It is indeed creating more demand for ships because of the longer tonne miles, and we're expecting the situation, unfortunately, to last at least for the next couple of weeks, hoping for this to be resolved in the following weeks. You can go to the next slide. I will do a little recap of what we already did on Capital Markets Day of what has happened over the past month and what will happen in the next couple of weeks. On the 9th of October, we struck an agreement with the Frederiksen Group to get out of the deadlock on Euronav.
If we zoom in on the supply side at the fleet composition, which are things that should be relatively certain I can only say that the signals are still very positive.
Look at the order book to fleet, even though there has been some recent increase in ordering activity specifically for Suezmax is some VLCC. We are still at a very low order book to fleet ratios from a historical point of view and this definitely for the next two years will be very supportive for our industry.
Zooming in on the age of the vessels, stating the obvious with the fleet that is hardly getting scrapped.
Alexander Savris: That deal, that agreement, was ratified in November at a special general meeting of shareholders. Just before Christmas, we announced the CMB tech transaction, and next week, we will have a special general meeting to vote on that specific transaction. Shortly thereafter, we hope to open the mandatory bid for Euronav, and we hope to close it by the middle of March.
The age profile of the vessels.
Increasing is going up and we are now looking at agents average ages of the fleet that we haven't seen for a very very long time again should be a very positive signal.
Going forward we are.
One more slide the next slide.
Zooming in on the VLCC fleet age profile and order book basically you can see there that's a big chunk of the vessels is going to reach the age of 20 years in the following years, which means a lot of potential to scrap.
Alexander Savris: I want to say a few words about the tanker markets as well. As we are in shipping, there are things we know and things we don't know. If we zoom in on the supply side and the fleet position, which are things that should be relatively certain, I can only say that the signals are still very positive. If we look at the order book to fleet, even though there has been some recent increase in ordering activities, specifically for Suez Maxis and some VLCCs, we are still at very low order book to fleet ratios from a historical point of view. And this, definitely, will be very supportive for our industry for the next two years.
Which means that our utilization definitely has some support.
Even if demand and we will speak about demand in a second.
Relatively flat so only positive things to say about the supply side.
Going into the asset prices.
The market reacts.
When the supply demand balance is tight we are seeing.
Very very healthy secondhand prices for both Suezmax and Vlccs, if we have.
To say something negative I would say that the VLCC second half market has not gone up.
The underlying sentiment would have it's it's been under welding a little bit, but we're expecting this to catch up and as the year proceeds if the fundamentals stay as they are.
On the next slide we have a few graphs on demand again, even though demand is growing slowly is the supply demand balance, which is still looking very very healthy and it's well publicized the only new VLCC of the year has already been delivered.
Alexander Savris: Zooming in on the age of the vessels, stating the obvious, with a fleet that is hardly getting scrapped, the age profile of the vessels is increasing, is rising, and we are now looking at ages, average ages of the fleet, that we haven't seen for a very, very long time. Again, this should be a very positive signal going forward. We have one more slide, the next slide, that zooms in on the VLCC fleet age profile at Holbrook. Basically, you can see that a big chunk of the vessels are going to reach the age of 20 years in the following years, which means a lot of potential to scrap, which means that utilization definitely has some support, even if demand, and we'll speak about demand in a second, stays relatively flat. So only positive things to say about the supply side. Going into asset prices, the market reacts as it does when the supply-demand balance is tight. We are seeing very, very healthy second-hand prices for both Swiss banks and VLCCs.
Normal V is coming in 2024, and you can see on the slide that the order book for 2025.
Indeed, very low or nonexistent.
It's a slight growth in the market oil they should tighten up the balance of supply demand further.
Okay.
So I already have my concluding remarks before we go and take some questions obviously photos of Eni.
This is a euro.
<unk> Q4 earnings call, maybe the last one is a pure play if the transaction of CMV Tech on Wednesday.
Ratified as agreed by the shareholders then obviously at the next earnings call, we'll zoom in a lot more on all the different divisions that were added.
But for now we are open for questions.
Okay.
Oh, if you'd like to ask a question. Please raise your hand and I will tell you your name and so are you telling us when you can ask your question.
So the first person who asked the question is at least somewhat.
You mean unused and ask your question. Please.
Hello <unk>.
Afternoon.
Alexander Savris: If we have to say something negative, I would say that the VLCC second-hand market has not gone up as the underlying sentiment would have it. It's been underwhelming a little bit, but we're expecting this to catch up as the year progresses if the fundamentals stay as they are. On the next slide, we have a few graphs on demand. Again, even though demand is growing slowly, the supply-demand balance, which is still looking very, very healthy, it's well publicized that the only new VLCC of the year has already been delivered. So there are no more Vs coming in 2024, and you can see on the slide that the order book for 2025 is indeed very low or non-existent. With a slight growth in demand for oil, this should tighten the balance of supply-demand further.
Okay.
Two questions if.
If I may.
It's Jim.
And the approval of the acquisition is backed by a simple majority vote.
April is a qualified majority.
Second key and best case scenario, one when would we see the first consolidation of <unk>.
The transaction is approved and.
And then.
Secondly regarding.
Regarding the sandals vlccs and two frontline.
Delivery is perhaps any thoughts.
Water and first quarter.
Can you give more detail on.
And how this impacts the cash flow statement in the fourth quarter and the first quarter Omnichannel vessels in the fourth quarter and your cash flow statements and then how much of repayments of borrowings you foresee late two lease sales in the first quarter.
The fourth quarter of last year.
And then third question, if I may on tankers international.
Alexander Savris: So I'm already in my concluding remarks before we go and take some questions. Obviously, for Ludovic and me, this is a Euronav Q4 earnings call, maybe the last one as a pure play. If the transaction for CMP Tech on Wednesday is ratified and agreed by the shareholders, then obviously, the next earnings call will zoom in a lot more on all the different divisions that we will have added. But for now, we are open to questions. Dear all, if you would like to ask a question, please raise your hand, and I will tell you your name and tell you to unmute when you can ask your question. So the first person who can ask a question is Christophe Samois. You may unmute and ask your question, please. Hello, good afternoon.
It does.
You also see vessels, which have been sort of frontline or no longer part of the pool, how how can these days and four tankers international what's the impact there.
Yeah, how do you see the position of Euronext and package with the Nashville going forward. Thank you.
Okay. Thank you Vishal I'll take the last question and then I'll hand over to Ludwig So LTI as we've stated before as far as we're concerned it's business as usual as you know, we're 50 50 shareholder to get them at NSW. The fleet has obviously reduced but operations are still growing as they were before and actually in recent weeks or months.
We've even added a new vessels to the pull from other third party owners.
For your other questions I'll hand over to Greg Christopher Thanks for the questions on the <unk>.
GM next week, its simple majority I E C.
And b can vote as well.
Christophe Samois: I have a few questions, if I may. The upcoming SGM, the approval of the acquisition, is that by a simple majority vote that it needs to be approved to be a qualified majority. And then secondly, in the best case scenario, when would we see the first consolidation of CNB Tech if the transaction is approved? And then secondly, regarding the sale of VLCCs to Frontline, the delivery is spread between the fourth quarter and the first quarter. Can you give more detail on how this impacts the cash flow statement in the fourth quarter and the first quarter?
So and there's a high likelihood that transaction will.
Go through.
On the consolidation of <unk>.
We have the simple answer is that you will see that into Q1 figures, which obviously will be announced in may we have put an illustrative balance sheets and the capital markets day.
Were the main.
Going to be pointed out is that.
We do not take any goodwill I E. The vessels.
And.
On the water and CME take will be passed on at book value.
In Europe.
But so you will see a full.
Consolidation in the Q1 set of results.
Christophe Samois: How many vessels will you sell in the fourth quarter of your cash flow statement and how much repayment of borrowings do you foresee linked to these sales in the first quarter and fourth quarter of last year? And then, thirdly, on Tankers International, the VLCC vessels which have been sold to Frontline are no longer part of the pool. How do you see this for Tankers International? What's the impact there?
On the sale of the Vlccs.
11, Vlccs, having sold to frontline in Q4.
With a capital gain of $323 million.
13 Vlccs.
Will be sold to frontline I E.
<unk> had been sold in Q1 and one is being.
We will be sold around mid March with a total capital gain of $372 million for Q1.
The total.
Sales among those two building $350 million.
The exact.
Detail.
The net debt the full proceeds in Q on Q4, there are I have to come back to you on that if you're just taking the average on the 11 74 vessels will be around $1 1 billion in Q4, and then one to five in Q1, there was no debt.
Alexander Savris: And yeah, how do you see the position of Euronet in Tankers International going forward? Thank you. Okay, thank you, Christophe. I'll take the last question, and then I'll hand it over to Ludovic. So, on TI, as we stated before, as far as we're concerned, it's business as usual. As you know, we're a 50-50 shareholder together with INSW. The fleet has obviously been reduced, but operations are still going as they were before. And actually, in recent weeks and months, we've even added new vessels to the pool from other third-party owners. For the other questions, I'll hand over to Ludovic. Great, Christophe, thanks for the questions. On the SGM next week, it's a simple majority, i.e., C and B can vote as well.
On the ships.
Being delivered to frontline that is because.
We didn't even know we have refinanced all the remaining fleet that still remains today in our ownership.
We've really leveraged those vessels to 55% of fair market value.
We use excess cash or debt.
To take out of that.
The vessels that are being sold to frontline, which means that the 235 billion, giving us net cash proceeds.
Does that answer your question.
Yes. Thank you.
Okay. Thank you then the next person who can ask his question is this you can mute and ask a question. Please.
Yes, <unk>, ABN amro or there'll be a chance.
Three questions.
First you recent.
Breakeven P&L breakeven 44, you think gosh pits.
Pits presale.
Ludovic Savris: So hence, there's a high likelihood that the transaction will go through. On the consolidation of CMB tech, we have the simple answer that you will see in the Q1 figures, which obviously will be announced in May, we have put an illustrative balance sheet on the capital markets day, where the main point to be pointed out is that we do not take any good world, i.e. vessels. And on the water, NCMETec will be passed on at book value in URNAT. So you will see a full consolidation in the Q1 set of results on the sale of the VLTCs; 11 VLTCs have been sold to Frontline in Q4, with a capital gain of $323 million. 13 VLCCs that will be sold to Frontline, i.e. Twelve have been sold in Q1, and one will be sold around mid-March, with a total capital gain of $372 million for Q1. The total sales amount was $2,350,000.
<unk> or both sale off the fleet or somewhere in between.
Then second question is.
Given the.
Situation, we used to teach et cetera.
Are you, making extra costs for protecting your thresholds now.
And if so what amount should we think of.
Our first question is on the brink or for Williams.
What is your strategy going forward.
Okay. Thanks.
I'll take the first one I'll take the next two months the breakeven the temperature protect it as a projected all of the remaining fleets.
So this is going forward these R&D P&L breakeven on.
Both suezmax and Vlccs.
Okay.
Yeah, and then on the protective measures for.
We don't need to take any measures because the best measure is not going there.
We are basically sitting around.
Crossing the area.
In terms of the bunker strategy tests we.
We are basically keeping a strategy of being full floating some market related.
Ludovic Savris: The exact details on the net, the full proceeds in Q1, Q4, there, I have to come back to you on that. If you just take an arithmetic average on 11 of 24 vessels, it would be around $1.1 billion in Q4, and then $1.25 in Q1. There was no debt on the ships while they were delivered to the front line. That is because within a year and a half, we refinanced all the remaining fleet that still remains today in our ownership. And we've re-leveraged those vessels to 55% of fair market value, and we've used excess cash from debt to take out the debt on the vessels being sold to Frontline, which means that the $2.35 billion came in as net cash proceeds.
There's not any significant hedging.
And we are not doing anything that maybe it was done in the past.
Bunkers beforehand and loading it on all of the Oceania because now the vessel scope. So we basically go back to normal.
Normal strategy.
Staying on the spot market and not taking any color.
Does that answer your question Ted.
Yes. Thank you.
Maybe I'll give you probably go back to the question on Christophe is what I thought is $1 $1 billion in cash came in in Q4 and 1.25 in Q1.
Ludovic Savris: Does that answer your question? Yes, thank you. Okay, thank you. Then the next person who can ask his question is Thijs Berkelder. You can unmute and ask your question, please. Yeah, Thijs Berkelder, Avian Emerald, Older Bees Chef.
You can do it.
Is there anyone who still has a question you can raise your hands.
Thijs Berkelder: Three questions. First, you presented a break-even, P&L break-even for your tankers. Is that pre-sale of the fleet or post-sale of the fleet or somewhere in between? And then the second question is, given the... situation with the Houthis, etc. Are you making extra costs for protecting your vessels now? And if so, what amount should we think of?
Okay I see no further questions Alexander.
Okay.
Alright, great, but we're always there to answer any questions you might have after this call. Thanks for joining us and see you next week on Wednesday at the General Assembly.
Thanks, Mike.
Alright.
Yeah.
Thijs Berkelder: The third question is on bunker volumes. What is your bunker strategy going forward? Okay Thijs, thanks. I'll take the first one. I'll take the next two ones. The breakeven of the temple is protected as the projectors are from the remaining fleet.
Ludovic Savris: So this is, you know, going forward; these are the piano breakevens on both suit and axis and just. And then on the protective measures for the Houthis, we don't need to take any measures because the best measure is not going there. We are basically sailing around and not crossing the area. In terms of the bunker strategy, Thijs, we are basically keeping a strategy of being fully floating, so market-related. There's not any significant hedging, and we are not doing anything that maybe was done in the past of buying bunkers beforehand and loading them on board the Oceania because now the vessel is gone. So we basically go back to the normal strategy of staying on the spot market and not taking any cover.
Yes.
Ludovic Savris: Do you think that answers your question, Thijs? Yes, thank you. Thank you. Maybe, Enya, before we go back to the question about Christophe, it is what I thought was $1.1 billion in cash came in in Q4 and $1.25 in Q1.
Ludovic Savris: You're good, aren't you? If there's anyone who still has a question, you can now raise your hand, please. Okay, I see no further questions, Alexander and Lovie. All right, great. But we're always there to answer any questions you might have after this call.
Operator: Thanks for joining us, and see you next week on Wednesday at the General Assembly. Bye-bye. Thanks. Bye. All right. Hmm.