Q1 2025 TORM PLC Earnings Call

Thank you for standing by my name is Janice and I will be your conference operator today at this time I would like to welcome everyone to the term first quarter 2025 results. All lines have been placed on you to prevent any background noise. After this we will have a.

Operator: Thank you for standing by.

Janice: My name is Janice and I will be your conference operator today.

Janice: At this time, I would like to welcome everyone to the TORM first quarter 2025 results. All lines have been placed on mute to prevent any background noise.

Janice: After the speaker remarks, we will have a question and answer session. If you would like to ask questions during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you.

Like to ask questions. During this time simple prayer star followed by the number one on your telephone keypad, if you'd like to withdraw your question Press Star. One again. Thank you I would now like to turn the call over to Jacob Melkart CEO. Please go ahead.

Janice: I would now like to turn the call over to Jacob Meldgaard, CEO. Please go ahead. Thank you.

Jacob Melkart: Thank you. Thank you Janice and welcome to everyone joining us on the call. Today. This morning, we released our report with the interim results for the first quarter of 2025, Tom achieved a solid result in the quarter.

Jacob Meldgaard: Thank you, Janice. And a warm welcome to everyone joining us on the call today. This morning, we released our report with the interim results for the first quarter of 2025. TORM achieved a solid result in the quarter in line with our expectations. But again, it was a quarter that has been influenced by a wide range of external factors that we need to take into consideration. The first quarter reflected a more stable market environment compared to the volatility we experienced in the latter half of last year. TCE amounted to US$214 million, thus broadly in line with the previous quarter, signaling early signs of stabilization following the declines we saw in the second half of 2024.

Speaker Change: Again, it was a quota that has been intruded by a wide range of external taxes that we need to take into consideration. The first quarter reflected a more stable market environment compared to the volatility we experienced in the latter half of last year T.

Speaker Change: 214 million plus broadly in line with the previous quarter signalling early signs of stabilization. Following the declines we saw in the second half of 2024 seen in the fourth quarter in.

Jacob Meldgaard: Fleet-wide freight rates remained consistent with the level seen in the fourth quarter, enabling us to deliver solid earnings. For the quarter, we achieved a net profit of US$63 million, demonstrating that while our income has normalized compared to the elevated levels a year ago, we continue to generate strong and sustainable results.

Speaker Change: It was solid earnings for the quota we achieved a net profit of U S. Dollar 63 million demonstrating that while our income has normalized compared to the elevated levels a year ago, we continue to generate strong and sustainable results.

Jacob Meldgaard: I would also like to highlight that we successfully divested several older vessels. Despite a quiet second-hand market, with buyers and sellers struggling to align on pricing, we secured the sale of three 20-year-old MR vessels during the first quarter and one 17-year-old LR2 vessel after the end of the quarter.

Speaker Change: I'd also like to highlight that we successfully divested several older vessels. Despite a quiet second hand market with buyers and sellers strutting to align on pricing, we secured the sale of 320 year old a messages during the first quarter and 117 year old.

Speaker Change: Dakota East transactions underscore the high quality and strong maintenance standards of our fleet looking into the Reaming part of 2025, the shipping market remains highly dynamic with sentiment continuing to shift a new fact.

Jacob Meldgaard: These transactions underscore the high quality and strong maintenance standards of our Looking into the rimming part of 2025, the shipping market remains highly dynamic, with sentiment continuing to shift and new factors emerging at a fast pace. This environment presents both challenges and opportunities and it reinforces the need for us to be agile and adapt quickly to change. To stay ahead, we maintain a sharp focus on monitoring and analyzing new trends, ensuring that we are ready to respond swiftly to evolving conditions and can position ourselves effectively amid heightened uncertainty.

Speaker Change: At a fosterpace this environment presents both challenges and opportunities and it reinforce the need for us to be agile and adapt quickly to changes to say ahead, we maintain a sharp focus on monitoring an analyzing new trends ensuring.

Speaker Change: Evolving conditions and can position ourselves effectively emid heightened uncertainty as part of this approach I will on the following slides walk you through some of the key issues currently on our radar. Please turn two side five.

Jacob Meldgaard: As part of this approach, I will, on the following slides, walk you through some of the key issues currently on our roads. Please turn to slide 5. Since the second half of last year, power tanker freight rates have lost momentum compared to the high levels seen since 2020. but the rates have nevertheless remained at levels which are still strong in historical terms. One of the main reasons behind lower rates has been the fact that the Red Sea Disruption Effect has not been supportive of the Potter-Tankerton Mars since the last quarter of 2024. And here, I'll return to slide six, and I can elaborate on that.

Speaker Change: Since the second half of last year for single freight rates have lost momentum compared to the high levels seen since 2022, but the rates have nevertheless remained at levels, which are still strong in historical terms.

Speaker Change: One of the main reasons behind lower rates, that's been the fact that the red fee disruption effect has not been supportive of the product tanker ton mass since the last quarter of 2024.

Speaker Change: I'm here I'll return to slide six and I'll can elaborate on that while crew Canibalization has normalized trade volumes on the roots, mostly affected by the Red Sea disruption have lost momentum by the start of this year straight volumes from.

Jacob Meldgaard: While crew cannibalization has normalized, trade volumes on the routes mostly affected by the Red Sea disruption have lost momentum. By the start of this year, trade volumes from the Middle East to Europe had fallen by around 40 percent compared to the first three quarters of 2024. lower trade volumes, counterbalanced, longer trading distances, and with this a ton-mile impact of the Red Sea disruption has been non-existent or even negative in recent months. Since March, we have, however, seen some refunds in these trades. Nevertheless, we believe that such low trade levels are not sustainable, especially considering that European diesel demand this year is supported by increased demand for marine gas oil from the Mediterranean emission control area, starting from this month.

Speaker Change: Yeah around 40% compared to the first three quarters of 2024, lower trade volumes counter balanced longer trading distances and with this a ton mile impact of the red seat disruption has been nonexistent or even negative in.

Speaker Change: Since March we have our refund in these trades. Nevertheless, we believe that such low trade levels are nausus demand. This year is supported by increased demand for marine gas or from the.

Jacob Meldgaard: At the same time, three refineries in Northwest Europe are closing, leading to lower local products. According to our calculations, Europe is about to lose around 140,000 jobs. per day of combined diesel and jet fuel supply by the end of this year. If all of this were replaced by imported fuels from the Middle East, this would translate into an additional demand of 12 LR2 equivalents per year, which is a conservative estimate based on the Red Sea Transition. This corresponds to around 5% of the current CPP trading LR2. At the same time, since the start of the fourth quarter last year, 24 new-built LR2s have entered the fleet, while the size of the CPP trading fleet has actually declined by around 20 vessels.

Speaker Change: 2000 today of confined diesel and yet you supply by the end of this year. If all of this were replaced by imports from the Middle East. This will translate into an anticent demand of 12 Ela two equivalence per year, we served.

Speaker Change: Space on the Red Sea transit this corresponded to around 5% of the currency pp trading in La two fleet at the same time since the start of the fourth quarter last year 24, Newbuilds have entered the fleet, while the size of the CP train.

Speaker Change: Actually decline by around 20 vessel. This means that more than 40 vessels have left the key trade and are now trading dirty instead.

Jacob Meldgaard: This means that more than 40 vessels have left the clean trade and are now trading dirty instead.

Speaker Change: Please turn to slide seven.

Jacob Meldgaard: please turn to slide seven. Looking a bit further ahead, the product-hanger market is expected to continue to be driven by geopolitical factors and high uncertainty. While a sustainable return of the Red Sea shipping in the near term is uncertain, we estimate that it could encourage trade and return the volumes lost since the end of last The return of lost trade volumes can potentially offset shorter trade distances, and at the same time, incentives for crude cleanups would decline.

Speaker Change: Looking a bit further ahead the products amount is expected to continue to be driven by geopolitical factors and high uncertainty while a sustainable return of the Red Shee shipping in the near term is uncertain, we estimate that it could.

Jacob Meldgaard: When it comes to EU sanctions against Russia, we do not foresee a quick abolishment of them. and the last months have shown that the prospects for a peace settlement remain highly uncertain. Further to this, internal disputes within OPEC plus have resulted in a sizable production increase in May and another one in June, accelerating the timeline for unwinding voluntary production. With the potential to continue this trend, we expect this to have a favorable effect on the crude tanker market indirectly supporting products.

Speaker Change: When it comes to E U sanctions against Russia, we do not foresee a quick apartment of these and the last months have shown that the prospects for a C. P.

Speaker Change: Have resulted in a sizable production increase in may and another one in June accelerating the timeline for online voluntary production costs with the potential continue this trend. We expect this to have a favorable effect on the crute.

Speaker Change: Indirectly supporting products.

Jacob Meldgaard: Last but definitely not least, a new layer of uncertainty stems from the current US administration's approach towards geopolitics and trade policy. Although it has caused a lot of uncertainty, the measures implemented so far are not expected to have any major direct effect on the product tanker market. However, a potential slowdown in global economic activity and consequently lower oil demand can have indirect effects on our On the other hand, the U.S. administration's more tough approach towards Iran, towards Venezuela, is expected to indirectly benefit product tankers via strong crude tankers.

Speaker Change: Last but definitely not least a new layer of uncertainty stems from the current U S administration's approach towards skew politics and trade policy. Although it has caused a lot of uncertainty the measures implemented so far are not expected to have any effect.

Speaker Change: Tanker market, however, a percentage of slowdown in global economic activity and consequently, lower all demand can have indirect effects on our market.

Speaker Change: On the other hand, the U S administration's more tough approach towards Iran. Towards Venezuela is expected to indirectly benefit product tankers via strong crude tanker markets. The much discussed U S. T R. One.

Jacob Meldgaard: The much-discussed USTR Section 301 Port Fee has currently been revised to a version which will not have any material impact on the product taker market, as a majority of voyagers will avoid it.

Speaker Change: That's currently been revised to a version which will not have any material impact on the product taken market S. A majority of voyages will avoid the fee.

Speaker Change: Please turn to slide eight.

Jacob Meldgaard: Please turn to slide 8. Let me also turn to the tonnage supply side. And as we pointed out earlier, the relatively high product tank order book should be seen in combination with the fact that the average age of the feed is the highest in two decades. with 15% of the feet being more than 20 years old. This will potentially offset a large part of the feet growth in the coming year. Furthermore, we see that as vessels turn towards 20 years of age, their average utilization drops significantly compared to younger. That will lead to a growing share of the fleet operating at lower utilization.

Speaker Change: And also turn to the Tar.

Speaker Change: Of the fee being more than 20 years old this will potentially offset a large part of the fee growth in the coming years. Furthermore, we see that as vessels turn towards 20 years of age their average utilization drops significantly compared to.

Speaker Change: That would lead to a growing share of the fleet operating at lower utilization.

Jacob Meldgaard: In addition, a large share of the older fleet is sanctioned, which is expected to support exits from the market. This is basically the case for the combined LR2 AFROMAX fleet, where a relatively large share of the fleet is under US control.

Speaker Change: And this in last year of especially the older feet is sanctioned which is expected to support exits from the market. This is basically the case for the combined two air from X fleet, where a relatively large share of the fleet is on the U S sanctions.

Jacob Meldgaard: Finally, the ordering of new vessels has basically come to a standstill this year, with the combined capacity of LR1s, LR2s, and MRs ordered in the first quarter of this year at the lowest quarterly levels in three years.

Speaker Change: Ordering a new vessel has basically come to a standstill. This year with the combined capacity of Elawn in two and Mred in the first quarter of this year at the lowest quarterly levels in three years.

Jacob Meldgaard: Now I lead to slide nine.

Speaker Change: 82259 to some of it in the market. We continue to operate in an environment cash by high gear diseases on certainty, where the speed of change has increased significantly while fee growth, we gain pace compared to recent.

Jacob Meldgaard: To some of them in the market, we continue to operate in an environment characterized by high give policies. uncertainty, where the speed of change has increased significantly. While feed growth will gain pace compared to recent years, we still see favorable developments in the refinery land. I'm certain that TORM is well-positioned to maneuver in this environment of increased uncertainty through our strong capital structure, operational leverage, and integrated platform.

Speaker Change: We still see favorable developments in the refinery landscape I'm certain that Tom is well positioned to maneuver in this environment of increased uncertainty through our strong capital structure operational leverage and integrated platform and now with that over to.

Kim Balle: And now, with that, I'll hand it over to Kim, who will walk us through the financials. Thank you, Jacob. Now, please turn to slide 11 for an overview of the funding. In the quarter, our TCE amounted to U.S. $214 million, and based on this, we achieved U.S. $136 million EVDA and U.S. $63 million in net profit. Feed-by, we averaged a TCE rate of close to 27,000 per day, with LR2s close to 34,000 U.S. dollars per day. LR1s at U.S. $25,000, and MR slightly below. All these numbers are aligned with the 84% coverage that we published in connection with our full year results in March.

Speaker Change: Two over us through the financials. Thank you Jacob now please turn to slide 11 for an overview of the financials in the quarter, our Tc amounted to U S. Dollar 214 million and based on this we achieved U S. Dollar 136 million E. B T a and U S dollar 63 million.

Speaker Change: P Y we average a C C rates of close to 27000 per day with Elato's close to 34000 U S dollars per day allow one set U S. Dollar 25000, a M. R slightly below this all these numbers are in line with the 84% coverage that we pu.

Speaker Change: Dollars in March freight rates have stabilized at a level compared to Q4 2024, reflecting strong underlying fundamentals. This renewed stability of the solid foundation as we move throughout the year without earnings remaining highly sensitive to.

Kim Balle: Thus, freight rates have stabilized at a level compared to Q4 2024, reflecting strong underlying fundamentals. This renewed stability offers a solid foundation as we move throughout the year with our earnings remaining highly sensitive to market volatility due to our operational leverage. Based on this, TORM achieved basic earnings per share of $1.64 per share and the board has decided to declare a dividend of $0.40 per share.

Speaker Change: Two so our operational leverage based on this home achieved basic earnings press Air for two one at 64 U S cents per share and the board has decided to declare a dividend of 40 U S cents per share we believe that our approach insurance.

Kim Balle: We believe that our approach ensures that distributions align with actual financial performance, maintaining a disciplined, transparent, and sustainable capital allocation strategy.

Speaker Change: Aligned with actual financial performance, maintaining a disciplined transparent and sustainable caps allocation strategy. These treat to slide 12.

Kim Balle: Please turn to slide 12. On this slide we show the quarter-by-quarter development of our TCE since the first quarter of 2024. Looking back, it is now clear how the elevated freight rates in the first half of 2024 gave way to softer conditions later in the year, impacting our overall performance. Today, freight rates have stabilized at a lower but still healthy level that supports solid financial performance. Despite ongoing geopolitical uncertainties, ton-mile demand fundamentals remain supportive.

Speaker Change: On this life, we show the quarter by Court development of our T. C. Since the first product 2024 looking back. It is now clear how the elevated freight rates in the first half of 2024 gave way to softer conditions later in the year impacting our overall performance.

Speaker Change: Day freeway is have stabilized at a lower pastel healthy level that supports solid financial performance. Despite ongoing tier for digital uncertainties ton mile demand fundamentals remain supportive, although we remain mindful that condition can shift quickly.

Kim Balle: Although we remain mindful that conditions can shift quickly. In this market, we generated GCE of US$214 million and EPDA of US$136 million based on a feed rate of US$26,807 per day. As a reminder, due to our operational leverage, a change of US$1,000 in daily freight rates would have an EPDA impact of approximately US$8 million per quarter based on around 8,000 earning days. This highlights the significant earnings sensitivity to freight rate movements, which remains a key consideration for our financial outlook.

Speaker Change: G G of U S dollars 214 million and EBT of U S. Dollar 136 million based on a fee right of U S. Dollar 26807 per day as a reminder, due to our operational leverage a change of U S. Dollar 1000 in day.

Speaker Change: You would have an epda impact of approximately 8 million U S dollars per quarter based on around 8018 days. This highlights. This is significant earnings sensitive to freight rate movements, which remains a key consideration for our finance outlook.

Kim Balle: Likewise, on slide 13, we provide a breakdown of the quarterly development in net profit and the key share related ratios. While the current freight rate environment has led to a sequential decline in net profit, earnings per share, and consequently dividend per share, it is important to emphasize that earnings remain at historically attractive levels. Also, our approach to shareholder returns remains firm and consistent. We continue to return excess liquidity on a quarterly basis, while safeguarding financial strength through a disciplined buffer. Our liquidity threshold is based on two components, a fixed minimum of USD 1.8 per vessel and a discretionary element determined by the Board, which considers capital structure, future investment needs, and overall market.

Speaker Change: 13, we provide a breakdown of the quality development in net profit and the key Chevrolet ratios by the current freight rate environment has led to a sequential decline in net profit earnings per share and consequently dividend per share. It is important to imphase that earnings remain.

Speaker Change: Also how I prove to shareholder returns remain firm and consistent we continue to return excess liquidity on a quarterly basis, while safeguarding financial strength through disciplined buffer liquidity threshold is based on two components a fixed minimum of your point.

Speaker Change: At a discretionary element determined by the board, which considers caps structure future investment needs and overall market sentiment for the first quarter. This disciplined approach has resulted in a declared dividend of 40 U S cents.

Kim Balle: For the first quarter, this disciplined approach has resulted in a declared dividend of 40 U.S. cents per share in line with our free cash flow net repayments, reflecting both our earnings performance and our continued commitment to responsible capital allocation.

Speaker Change: In line with our free cash flow the net of prepayments, reflecting both our earnings performance and our continued commitment to responsible capital allocation and now please turn to slide 14.

Kim Balle: And now, please turn to slide 14. As illustrated on the slide, following several quarters of steadily rising investor values, we saw the first correction in Q4 last year.

Speaker Change: S illustrated on the slide following several quarters of steadily rising investment values. We saw the first correction in Q4 last year and that's rent has continued into Q1 2025 average programs for our fleet declined to U S. Dollar 3.1 billion.

Kim Balle: And that trend has continued into Q1 2025. average broker valuations for our fleet declined to US dollar 3.1 billion down 12% compared to year end. Aligning more closely with actual market transactions, the largest valuation drop has been in older measures from 2010 to 2012, with a reduction of up to 18%, while newer tonnage has set up relatively well, showing only single-digit declines.

Speaker Change: Percent compared to year end aligning more closely with actual market transactions. The largest valuation drug has been an older basis from 2010 to 2012 with reduction of up to 18%, while newer tonish has set up relatively well showing.

Kim Balle: Turning to the center charge, our net interest bearing debt now stands at US$832 million, with a stable net loan-to-value of 27% before distribution of dividends for Q4 2024. This is consistent with year-end and underscoring the strength of our conservative capital structure. On the right, you will find our debt maturity profile. So over the next 12 months, we only have US $162 million in borrowings maturing, equal to 13% of the total, plus US $14 million in committed scrubber installations. Beyond that, our obligations remain manageable, with no major maturities until mid-2029.

Speaker Change: This is consistent with year end and underscoring the strength of our conservative capital structure on the right you will find out our debt maturity profile. So over the next 12 months, we only have U S. Dollar 162 million in borrowings maturing equal to 13% of the total plus.

Kim Balle: All together, our solid financial foundation gives us flexibility to navigate current market conditions and to pursue value-creating opportunities as they arise.

Speaker Change: S. They arrive.

Kim Balle: And now, please turn to slide 15 for the outline. Our performance in the first quarter puts us on a solid path to achieving our full year guidance. Also, based on our rates and coverage as of 5 May 2025, we have fixed a total of 57 of our earning days at USD 28,026 per day in the second quarter across the year. Likewise, for the full year 2025, we have now fixed a total of 43% of our earning days at $27,829 per day.

Speaker Change: And I'll. Please search to slide 15 for the outlook our performance in the first quarter puts us on a solid path to achieving our full year guidance also based on our rates and coverage as a fifth may 2025, we have fixed a solar 57 of our earning days and U S.

Speaker Change: 126 per day, and the second quarter across the fleet Likewise for the full year 2029, 2025, we have now fixed a total of 43% of our earning days at $27829 per day. That's it we continue to operate in a volatile.

Kim Balle: That said, we continue to operate in a volatile geopolitical environment and we recognize that actual results may deviate depending on how key events unfold. Nevertheless, we are comfortable in narrowing the guidance range compared to the guidance provided to the markets two months ago. Thus, we forecast full-year TT earnings in the range of USD 700-900 million compared to the previous guidance of USD 650-950 million. Likewise, we narrow the range for our expected EBDA to USD 400-600 million compared to the previous guidance of USD 350-650 million. This outlook incorporates an expected year-over-year decline in trade rates aligned with both current spot rates and the forward market trend.

Speaker Change: Environment, and we recognize that actual results may deviate, depending on how key events unfold.

Speaker Change: Nevertheless, we are comfortable in narrowing the guidance range compared to the guidance provided to the markets two months ago, Thus beforecast full year Tc or any in the range of U S. Dollar 700 to 900 million compared to the previous guidance of U S dollar 650 million.

Speaker Change: Yes, we narrow the range for our expected EBITDA to U S. Dollar 400 to 600 million compared to the previous guidance of U S. Dollar 350, So 650 million this outlook incorporats and expected year over year declined with both current.

Speaker Change: What market Trans.

Kim Balle: And with this, I conclude my remarks and hand it back to the operator.

Speaker Change: For this I conclude my remarks and handed back to the operator.

Speaker Change: At this time I would like to remind everyone in order to ask question press Sardan. The number one on your telephone keypad. Your first question comes from the line of John Chappelle with Ericcore I S. I. Please go ahead.

Janice: At this time, I would like to remind everyone, in order to ask questions, press star then the number one on your telephone keypad.

John Chappell: Your first question comes from the line of John Chappell with Evercore ISI. Please go ahead. Thank you. Good afternoon. Morning, John.

Speaker Change: Good afternoon.

Speaker Change: Jacob Jacob you laid out a bunch of different you know geopolitical and macro uncertainties and maybe the different path forward no offence, but I imagine you don't have any better idea on how many how many of these things are gonna.

John Chappell: Jacob. Jacob, you laid out a bunch of different, you know, geopolitical and macro uncertainties and maybe the different paths forward. No offense, but I imagine you don't have any better idea on how many of these things are going to play out than we do.

Jacob Meldgaard: So thank you. Knowing what you can control, which is capital allocation, capital structure, vessel sales, purchases, chartering, etc., has there been any shift to any of those strategies, financial or operational, that maybe 12 months ago, just given all of these different moving parts and the different somewhat binary outcomes? That's a good question. I would say on the financial side, really, it's really extremely stable. I mean, we keep the discipline and we also sort of keep the discipline around where our cash is headed when we deliver the strong results like in this quarter. So, I would say on that.

Speaker Change: So.

Speaker Change: Moving parts and the different somewhat binary outcomes.

Speaker Change: That's a good question I would say on the financial side really it's really extremely stable I mean, we keep keep the discipline and we also sort of keep the discipline around where cash is headed when we deliver.

Speaker Change: So I would say on that not on the business side I think we are S. I also alluded to I think we are seeing that that I think we are gradually sort of meeting a new a new normalization of the freight rate compared to that.

Jacob Meldgaard: Now, on the business side, I think we are, as I also alluded to, I think we are seeing that I think we are gradually sort of meeting a new normalization of the freight rate compared to where we were a year ago. And that in this more normalized environment, I think it's time to maybe take the calculator out again and see what makes sense in terms of the fleet composition. But it's probably a little early. We've divested. as we normally do when vessels are of a vintage which is not really servicing our client that well, which is around the 20 years.

Speaker Change: More normalized environment I think it's it's time for maybe take a calculator out again and see what makes sense in terms of the fleet composition, but it's probably a little early we've divested as we normally do when when vessels are of a vintage which is not really.

Speaker Change: Which is around the 20th we've done that this year I think we continue to do that and then it's really up to to Mr market to see how what is what what comes out of opportunities.

John Chappell: We've done that this year. I think we'll continue to do that. And then it's really up to Mr. Market to see what comes out of opportunities in terms of acquiring assets. We haven't seen anything yet that is so transpiring to be but obviously in a normalized rate environment. that could be something to look at early days, but I think that's probably the change. Okay, two quick follow-ups to that.

Speaker Change: In terms of acquiring assets, we haven't seen anything yet that is also transpiring to be interesting, but obviously in a normalized rate environment.

Speaker Change: That could be something to look at 30 days, but I think that's that's probably the change.

Speaker Change: Okay. Two quick follow ups to that one the payout ratio on the I F. R. S earnings was about 64% for the dividend in the first quarter is that just coincidentally lower than the last several quarters or does that somewhat reflect.

John Chappell: One, the payout ratio on the IFRS earnings was about 64% for the dividend in the first quarter.

John Chappell: Is that just coincidentally lower than the last several quarters, or does that somewhat reflect maybe a bit of the uncertainty going forward?

John Chappell: And then the second follow-up is you had mentioned in your prepared remarks somewhat, I don't know what the right term is, but maybe less liquidity in the second-hand market. As you talk about that fleet path going forward, do you envision that that second-hand market may gain more liquidity in the near term, or do you think it may be status quo in the industry for the next six or so months until we get a little bit more clarity on some of these outcomes? Yeah, good.

Speaker Change: And then the second follow up is you'd mentioned in your prepared remarks somewhat I don't know what the right term is but maybe less liquidity in the second hand market as you talk about that fleet path going forward.

Speaker Change: Near term or do you think it may be status quo in the industry for the next six or so months until we get a little bit more clarity on some of these outcomes. Yeah. Good. So let me start with your second follow up question and I'll, let Kim talk to the first.

Jacob Meldgaard: So let me start with the with your second follow up question.

Jacob Meldgaard: And I'll let Kim talk to the first. So I think what we are what we're seeing is that in a market where the secondary sales are less frequent, so lower liquidity, as we as we discussed, then what has served us really well, is that The vessels that we have, which we keep in-house, we have the technical and everything. operational sort of under the control of ourselves has meant that the type of buyers that are active in this relatively illiquid market, they graviate towards the type of business that we've got because they are maintained to a standard where they can actually meet any customer's requirements on any day.

Speaker Change: Yep, So I think what we what we're seeing is that in a market where the secondary tells a list frequent so lower liquidity as we as we discussed then what has served US really well is that we have.

Speaker Change: In house, we have the technical and everything operational sort of under under the control or of ourselves has meant that the type of buys that are active in this relatively illegal market. They got.

Speaker Change: Saying two standard where they can actually meet any customers requirements on any day. So.

Jacob Meldgaard: So I actually don't need so much to qualify whether there will be more liquidity, because what we're seeing is that there is a low liquidity, but it's sufficient for us to transact the deals that we want to do.

Speaker Change: I still don't need so much to to qualify whether there would be more liquidity because what we're seeing is that there is a low liquidity, but it's sufficient for us to transact use that we want to do I do think that as a market sort of normalizes I would see.

Jacob Meldgaard: I do think that as the market sort of normalizes, I would be inclined to think that you will see more meeting of minds between buyers and sellers, but irrespective, that is my expectation over the coming months that we will see sort of that to normalize more.

Speaker Change: No meaning of mines between buyers and sellers, but but irrespective that that is my expectation over the coming months that we will see sort of that to to normalize more.

Speaker Change: Okay.

Kim Balle: Yeah, hi John, it's Kim. Hi Kim. Regarding the payout ratio, of course there's one thing that you can adjust for, that is we have the impact of the sale of vessels, so if you take that out of course you can normalize it a bit and then we are above 70%. probably more like the 73, 74. But the way we do it is consistent with what we have done throughout this whole period ever since we changed the dividend policy, actually. So I think you allude to the right thing. It is more working capital fluctuations that can deviate a bit.

Speaker Change: Dot Hi, John it's okay.

Speaker Change: Regarding the payout ratio of course, that's one thing that you can adjust for that is we have the impact of the state of between so if you take that out of course, you can normalize it a bit and then we are above 70% probably more like the 70 370.

Speaker Change: But the way we do it is consistent with what we have done throughout this whole period ever since we changed the dividend policy actually so I think you allude to the right thing. It is more waiting capital fluctuations that can deviate a bit so one quality can be 74 another.

Kim Balle: So one quarter can be 74, another quarter 79 or 72. So that is where you shall sort of see the slight deviations. We basically not changed anything. But of course, as Jacob also said, that the conservativeness that we have when we divest vessels where we basically just keep the cash, that of course has a little impact on the payout ratio. And we've done that consistently throughout the whole period. So we just maintain it on the balance sheet. And for that, therefore, you can see some deviations. But you shall find it in the working capital. Because it's the same methodology we use every quarter.

Speaker Change: 72, so sorry that is where you shall sort of see the the slight T V. He basically not change anything but of course S. Gup also said that the conservativeness that we have when we divest vessels, where we basically just keep the cash.

Speaker Change: Right of course has a little impact on the payout ratio and and we've done that consistently throughout the whole period. You know so we just maintain it on the balance sheet and there for that therefore, you can see some deviations, but you should find it in the in the one capital because it's the same method.

Speaker Change: Understood. Thanks, Kevin Thanks, Jacob Thank you.

John Chappell: Understood. Thanks, Kim. Thanks, Jacob. Thank you.

Bendik Nyttingnes: Next question comes from the line of Bendik Nyttingnes with Clarkson's. Please go ahead. Hi, I'm Bendik Nyttingnes. I'll jump on the market, I think. So you were talking about there essentially being no real support from the Red Sea disruption recently, and with, I think, the US President tweeting that there is a deal with the Houthis going on, but that is still a bit up in the air. How do you view sort of the market in the event of a reopening? Should we expect some disruptions and instant movement on cost rates in the short term, in the event of a reopening?

Speaker Change: Next question comes from the line of Pendicines with Clarksys. Please go ahead.

Speaker Change: Hi, Benic Oh.

Speaker Change: O Om the market I think so you were talking about their essentially being no real support from from the Red Sea disruption recently and with.

Speaker Change: I think the U S. President tweeting that there is a deal with whopis going on for that is still a bit of in the air and how do you view sort of the the market in the event of a reopening should you expect some discru.

Speaker Change: [noise], Yeah, I mean time will tell on on both parameters, whether there is a deal that we can all trust with the Hoosies, but let's just make the assumption that that is actually the case, then what will happen with the market I think one.

Jacob Meldgaard: Yeah, I mean, time will tell on both parameters whether there is a deal that we can all trust with the Houthis. But let's just make the assumption that that is actually the case. Then what will happen with the market? I think what we're seeing with our customers, we had a client meeting actually earlier this week with one of the largest producers of oil in the world. And they're And their team on the sales end, they couldn't really recall when it was last that the arbitrage for them was open for, you know, the diesel going, moving from the Middle East into Europe.

Speaker Change: I'm meeting actually earlier this week with one of the.

Speaker Change: The lot is producers of oil in in the world and there.

Speaker Change: Their team on the sales side, they couldn't really recall when it was last that the arbitrage for them was open for you know the diesel going moving from middle East into Europe. So so right now.

Jacob Meldgaard: So right now... the producers are really not incentivized to hold bigger volumes of diesel from Middle East into Europe. You will, of course, have, you know, the odd trade that needs to be done, but sort of the marginal trade, it's not done. I think it would actually, in that sense, in the short end, I think you would see a reopening of the Red Sea, that you would have more demand coming quite quickly, because we are, it would definitely be much more supported by that particular trade route. But I do think that if we sort of average out over a longer period, then I think it is demand neutral.

Speaker Change: J for just I really not incensivized to hold big a volumes of these from middle East into your you will of course have you know the trait that needs to be done, but sort of the marginal trade interrupt is not done I think it would actually.

Speaker Change: I think you would see a reopening of the redfin that you would have more demand coming quite quickly because we are definitely be much more supported by that the particular trade, we but I do think that if we sort of.

Speaker Change: Then I think it is demand neutral I don't think that it's going up or down that's but I think that would be kind of a an immediate kind of a flurry of cargos that could move quite fast in the case of that you had a reopening.

Jacob Meldgaard: I don't think that is going up or down as such.

Bendik Nyttingnes: But I think there would be kind of a, an immediate kind of a flurry of cargoes that could move quite fast in the case of that you had a reopening. He's perfect, that's a great caller. I'll return to him.

Speaker Change: Just perfect that's a great color I'll with Dr.

Speaker Change: Yeah. Thank you. Your next question comes from the line of Jay Mcgary with Jefferies. Please go ahead.

Bendik Nyttingnes: Yeah, thank you.

Jay McGarry: Your next question comes from the line of Jay McGarry with Jeffreys, please go ahead. Hey guys, thanks for taking the question. Just had a market question. You mentioned, you know, the supply and how it can play out down the road given, you know, the current fleet age and maybe some scrapping down the line. But just for now, you know, the LR2 deliveries, certainly coming in more so than previous years. Can you describe just the impact in today's market with that oncoming supply? Just how noticeable is it? And if you see those ships staying in the clean trade or switching Yeah, well...

Speaker Change: Hey, guys. Thanks for taking the question just had a market question you mentioned the supply and how it can play out down the road given you know the current fleet age and maybe some scrapping down the line, but just for now you know the LR two deliveries certainly coming in more southern PR.

Speaker Change: Describe just the impact in today's market with that oncoming supply just how noticeable is it and if you see those ships staying in the clean trade or.

Speaker Change: Yeah, well at least going forward, we don't know yet, but if we just take the data points that we have on hand from let's say the last couple of quarters. Then as you point to there is a more a.

Jacob Meldgaard: At least going forward, we don't know yet, but if we just take the data points that we have on hand from, let's say, the last couple of quarters, then as you point to, there is more LR2 new builds that have sort of been placed and that are labeled on the ordering and sort of out of the yard, as here comes a new LR2. And as I alluded to a little in the prepared remarks also, we saw that you had globally around 250 LR2s that were trading as clean vessels in the end of the third quarter last year.

Speaker Change: That has sort of been placed and labeled on the ordering and sort of out of the yard as here comes a new electron and as I alluded to a little in the prepared remarks also we saw that you had globally around 250.

Jacob Meldgaard: whereas as of today, right now as we speak, you probably have around 230. So actually the number has declined by 20. And in the interim period, you've had exactly as you point to, you've had about 24 new built deliveries of this type of vessel. So if the world was flat, we would today say, okay, you had 250 steam trading vessels, you added 24 new builds, so you would have 274. But actually trading is 230. Going forward, of course, What we believe is that you should look upon LR2 and AFRA as an integrated trade. The ship owners, the investors, they are not that caring about whether their vessel, as they come out of a yard, will enter one market or the other.

Speaker Change: 24, but actually trading is 230 going forward of course.

Speaker Change: What what we believe is that you should look upon a two and after as an integrated trait. This ship owners investors. They are not that caring about whether their vessel as they come out of a yard will enter one market or the other what they care about.

Jacob Meldgaard: What they care about, what is the return on investment. And that's, of course, also how we operate, our energy. We will, from time to time, operate in clean. We will, from time to time, operate as an AFRA. And I think this swing factor will be very dominant going forward. And obviously, given that the age profile of the AFRAMAX fleet globally is much more prone to that this is older vessels, you will see that there will be more scrapping potential as new vessels come into the market. So I think this market is actually much more finely balanced than what sort of the labeling of the ships, i.e.

Speaker Change: So how we operate our two feet, we will from time to time operate in clean we will from time to time operate as an effer and I think this wing factor will be a very dominant going forward and obviously given that the H profile of the ex.

Speaker Change: S. Much more prone so that they are this is older vessels you will see that there will be more scrapping potential S. New vessels coming to the market. So I think this market is actually much more finely balanced than what sort of the labeling of the ships I E that we only have.

Jacob Meldgaard: that we only have LR2s coming out of yards. Well, they may be coming into the CPP market, but they may just as well be trading as AFRAMAXes. And I think the data points that we've had, as I just pointed to over the last six, nine months, actually sort of points to that that is a fair way to think about that market.

Speaker Change: Coming out of yours, well, they may be coming into the C. P. P market, but they may just as well be trading as air from access and I think the data points that we've had as a point just part of two over the last six nine months actually sort of points to that that is a fair way to think about that market.

Speaker Change: Great. Thanks for the cover I'll turn it over.

Jay McGarry: Great. Thanks for the cover up, Paola. Thanks.

Jay McGarry: Thanks for the questions.

Speaker Change: Six thanks for the question.

Jacob Meldgaard: I will now turn the call back over to Jacob Meldgaard, CEO, for closing remarks. Please go ahead. Yeah, thanks a lot, Janice.

Speaker Change: Oh now turn the call back over to Jacob Melcard C. O for closing remarks. Please go ahead, yes. Thanks, a lot yes. Thanks for everyone for dialing in to the first quarter 2025 resource presentation have a great day.

Jacob Meldgaard: Thanks for everyone for dialing in to the first quarter 2025 resource presentation. Have a great day.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Janice: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Thank you.