TORM plc

Thank you for standing by. My name is Rebecca and I will be your conference operator today. At this time, I would like to welcome everyone to the TORM third quarter 2025 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would like to turn the call over to Jacob Melgaard, CEO. Please go ahead.

Yeah, thank you. And also, welcome to everyone joining us here today from me. This morning, we released our interim results for the third quarter of 2025. delivering another strong set of numbers that underscored TORM's ability to generate market-leading performance. In Q3, we continued to operate in a relatively stable market environment despite ongoing geopolitical tensions. Trade rates firmed compared to the first half of the year, driving a TCE of US$236 million above the levels achieved in the previous quarters. This, in turn, resulted in a net profit of US $78 million, enabling us to declare a dividend of 62 US cents per share, clearly reflecting how stronger earnings translate into higher shareholder returns. Also, we advanced our fleet optimization strategy with the acquisition of five vessels for 2014-built MRs and one 2010-built LR2, while divesting a 2007-built MR. We also agreed a three-year time charter for the 2009-built MR Vessel Tome Lily to a European refiner at a daily rate of US$22,234, thus above the prevailing market rate for such vintage. These transactions support our ongoing focus on maintaining a modern, high quality and commercially attractive feed. Looking ahead, while the macro environment remains dynamic and shaped by geopolitical uncertainty, market sentiment is broadly positive. We enter the final month of the year with solid momentum, supported by firm rates across all vessel segments and good visibility on our upcoming fixtures. Based on this and the coverage we have already secured, we further increase the midpoint of our guidance and narrow the range to reflect a high level of transparency on earnings with relatively few uncovered days for the remainder of 2025. As always, we remain disciplined and agile in our execution. And with that, let's turn to the key market drivers and how we are positioned for the quarters ahead. Here, please turn to slide five. And here, let's start with a snapshot of the market landscape. Power tanker rates have remained both stable and attractive across the board. While recent figures reflect the onset of refinery maintenance season in the Atlantic and the Middle East, benchmark earnings for MR and LR2 vessels continue to show resilience. This overall rate stability is supported by consistent demand and limited growth in the CPP trading fleet. Let's turn to slide six. As we've noticed for some time, the low levels of east to west trade volumes observed earlier this year were unsustainable. Indeed, in the third quarter, trade volumes increased significantly, driven by higher middle distal flows from east to west, supported by transatlantic movements. This lifted ton miles well above the level seen before the Red Sea disruption, while crude cannibalization stabilized at historically normal levels. At the start of the fourth quarter, trade flows have eased slightly, as refineries in the west and the Middle East undergo seasonal maintenance. However, as maintenance concludes, trade flows are expected to resume, further supported by refinery closures in the West, which increase the need to source products from alternative locations. Please turn to slide seven to elaborate on that. And since the start of this year, two refineries in Northwest Europe have closed, with two more scheduled to shut by end year. Together, these clauses represent 6% of the region's refining capacity, reducing local product supply and increasing reliance on imported middle distillates in an already tight market. If this supply were fully replaced by imports from the Middle East Gulf, an additional 15 to 24 LR2 equivalents per year would be required depending on whether vessels transit the Red Sea or sail around the Cape of Good Hope. To put this in perspective, this represents six to 10% of the current TPP trading LR2 fleet. Beyond Europe, two refineries on the US West Coast representing 11% of the region's capacity are expected to close within the next six months. This will likely drive increased demand for gasoline and jet fuel imports, translating into a need for more than 25 MR equivalents on a round trip basis if sourced from Asia. And here, I kindly ask you to turn to slide eight. Geopolitical developments continue to be a key market driver. Since our last quarterly call, several new measures have emerged. While the duration of these measures remain uncertain, inefficiencies caused by the red sea disruption and sanctions on Russia, continue to support the tanker market. Earlier this year, OPEC Plus began unwinding production costs, but the impact on crude tanker rates only became apparent at the end of the first quarter. We expect the positive effect of strong VLCC rates on product tankers to become more visible once the refinery maintenance season concludes. Sanctions against Russia have intensified in recent months. The EU import ban on third country petroleum products derived from Russian crude, effected January next year, is not expected to significantly affect product tanker tonne miles, as alternative sources are available at similar distances, or could slightly increase demand if imports are sourced from farther away. Meanwhile, intensified drone attacks on Russian refineries have reduced Russian clean petroleum product flows, boosting flows from the US Gulf. Recent OFAC sanctions on Rosneft and Lubecoil may further lower Russian crude export. While the direct loss of Russian barrels is limited to the sanctioned fleet, replacement barrels from other regions would provide additional demand support for the conventional crude tanker fleet in an already strong rate environment, indirectly benefiting the product tanker market. Regarding US-China reciprocal port fees, these are now off the table for another 12 months. While such measures could have added inefficiencies to the broader tanker market, TORM would have seen limited impact due to exemptions and the flexibility of our fleet. Finally, the IMO postponement of the net zero framework in October does not affect the market today, but signals that oil will continue to play a role in the maritime industry for the foreseeable future. Please turn to slide nine. Let me turn to the tonneau supply side. This year's higher nominal fleet growth has been largely absorbed by a significant shift of LR2s into dirty trades, as OFAC sanctions continue to limit the productivity of sanctioned Afromaxes. Over the past year, nearly 50 new-built LR2s have joined the feed, yet the number of LR2s trading clean has declined by around 10 vessels. As a result, total steam product tanker capacity has fallen by roughly 1%, despite a 5% increase in the nominal product tanker feed. Looking ahead, the relatively high order book for the next two to three years should be viewed in the context of an aging fleet. The average age is now at a two decade high, and the share of vessels approaching scrapping age is almost equivalent to the current order book. Furthermore, a significant portion of the older fleet remains under sanctions, which is expected to accelerate exits from the market. This is particularly evident in the combined 802 Afromax segment, where one in four vessels globally is under OFAC, EU or UK sanctions. Kindly turn to slide 10. To summarize, the key factors shaping the market this year are expected to continue into next year, including ongoing geopolitical uncertainty, the Red Sea disruption, and sanctions on Russia. In addition, higher crude output from OPEC is indirectly supporting the product anchor market. On the demand side, oil consumption remains solid and structural changes in the global refinery landscape continue to support ton mile growth. On the supply side, a wave of new build deliveries will be offset by an increasing number of scrapping candidates and reduced trading activity among sanctioned vessels, factors that will influence overall tonnage availability and market balance. I'm confident that TORM is well positioned to navigate this environment of elevated uncertainty supported by our strong capital structure, operational leverage and fully integrated platform. And with that, I'll now hand it over to Kim. who will walk us through the financials.

Thank you, Jacob. And please turn to slide 12 for an overview of the financials. In the third quarter, we generated TCE revenues of US$236 million, resulting in an EBITDA of US$152 million and a net profit of US$78 million. On a fleet-wide basis, we achieved TCE rates of US$31,012 per day and bringing it down By basic class, LR2s earned well above 38,000, LR1s around 29,500, and AMRs exceeded 28,000 US dollars per day. Compared to previous quarters, freight rates have strengthened, supported by solid market fundamentals. Once again, the rates we secured reflect our continued outperformance relative to the broader market. And now move to slide 13, please. This slide shows our quarterly revenue progression since Q3 2024. With this quarter's results, we see meaningful uptick adding to the stable freight rates and earnings of prior quarters. This further highlights the favorable market conditions we are operating in. We delivered a satisfactory result with TCE of 236 million and an EBDF 152 million, US dollar 25 million higher than previous quarter. This improvement reflects a US dollar 4,340 per day increase in feed-wide TCE rates. Given our current operational leverage, we are well-positioned to benefit from the already very attractive freight rates. Please turn to slide 14. Here we present the quality development in net profit and key share-related metrics, which closely track the trend in EBITDA. So for the third quarter, earnings per share came in at 79 US cents. Our approach to shareholder returns remains clear and consistent. We continue to distribute excess liquidity on a quarterly basis while maintaining a prudent financial buffer to protect our balance sheet. For Q3, this has resulted in a declared dividend of 62 US cents per share, representing a pay-up ratio of 78%. This aligns with our free cash flow after debt repayments and reflects both our strong earnings and our ongoing commitments to responsible capital allocation. Please turn to slide 15. As shown here, broker valuation for our fleet stood at USD 2.9 billion at quarter end. This reflects generally stable vessel values with a slightly positive sentiment amongst other factors resulting in a NAV increase of approximately USD 100 million to USD 2.4 billion. In the central chart, you will see our net interest-bearing debt now stands at USD 690 million, corresponding to around 24%, roughly the same level as the same time last year, underscoring the strength of our conservative capital structure. On the right, our debt maturity profile shows that only USD 122 million in borrowings will mature over the next 12 months, and that we will have no significant maturities until 2029. This provides us with ample financial runway and stability. As we mentioned in August, we have secured an attractive refinancing package to replace two syndicated loan facilities and our lease agreements. To date, TORM has repurchased 13 out of 22 leaseback vessels and two additional purchase options have been exercised, with one vessel expected in Q4 2025 and the other in Q1 2026. The remaining vessels are scheduled for repurchase during 2026. Altogether, our strong financial position gives us the flexibility to navigate current market conditions and pursue value creating opportunities. And now, please turn to slide 16 for the outlook. Our strong performance in the first three quarters provides a solid foundation for the remaining part of the year. As of 31st October, we have secured 55% of our Q4 earnings days at an average of TCE $30,156 per day. For the full year 2025, 89% of our earning days are fixed at an average TCE of $28,281 per day. These levels provide solid earnings visibility and reflects continued market strength across our business segments. While geopolitical volatility remains a factor, market sentiment is firm on this basis we are confident in increasing the midpoint of our tca guidance by us dollar 25 million to 900 million us dollars while further narrowing our full year guidance thus we now expect tc earnings of between 875 to 925 million us dollars compared to our previous range of 800 to 950 million us dollars Similarly, we increase the midpoint and narrow our EBITDA guidance to US dollar 540 to 590 million compared to the prior range of US dollar 475 to 625 million. This revision reflects both our secured coverage and current market expectation while acknowledging the potential for continued fluctuations. And with that, I will conclude my remarks and hand it back to the operator.