Hafnia Limited

Welcome to Hapnia's Q1 2020 Financial Resource presentation. We will begin shortly. You will be brought through the presentation by Hapnia's CEO, Michael Skoll, CFO, Perivan Eshel, VP Commercial, Soren Winter, and EVP, Head of Investor Relations, Thomas Anderson. They will be pleased to address any questions after the presentation. Should you have any questions, please press star one on your telephone keypad or type your questions into the chat box on the website. You will receive further instructions as required. Certain statements in this conference call may constitute forward-looking statements based upon management's current expectations and include known and unknown risks, uncertainties, and other factors, many of which Hafnia is unable to predict or control. that may cause Hapnia's actual results, performance, or plans to differ materially from any future results, performance, or plans expressed on implied by such forward-looking statements. In addition, nothing in this conference call constitutes an offer to purchase or sell or solicitation of an offer to purchase or sell any securities. With that, I'm now pleased to turn the call over to Hafnia's CEO, Michael Skoll.

Thank you very much. As mentioned, my name is Michael Skoll, and I'm the CEO of Hafnia. I would very much like to welcome you all to our first quarter 2020 conference call. As mentioned, I have today with me our CFO, Perry Veneto, our Vice President of Commercial, Sean Venter, and the Executive Vice President and Head of Investor Relations, Thomas Anderson. Before us, we'll present the Q1 2020 financials for Hafnir. So we'll move on to slide number two, which is the disclaimer slide, which I would like everyone to be aware of the mandatory disclaimer that we have and read it very carefully. We move on to slide number three to talk a little bit about the first quarter 2020 highlights. So first of all, we addressed the first quarter financials, and the time shot equivalent earnings for Hafnia was $193.5 million, and EBITDA was $129.6 million. The commercially managed pool business generated an income of $5.9 million and the overall net profit for the company was $77.1 million. EPS or earning per share was 21 cents per share. We had a return on equity of 27.3% and the return on invested capital of 14.3% both on an annualized basis. At the end of the quarter, Hafni had a total of 102 vessels, hereof 87 owned and 15 chartered in. The average estimated broker value of the owned fleet was $2.3 billion. As of the 15th of May, 70% of the total earning days in the second quarter were covered at $28,921 per day. Hafni will pay a cash dividend of 10.62 cents per share. We move on to slide number four. So in the first quarter, the product market was very heavily influenced by the very tragic COVID-19 outbreak. Countries all over the world adopted various containment and lockdown measures to limit the spread of the virus. The virus and the consequent lockdown had a historical dampening effect on the demand for refined oil products. We saw that members of OPEC Plus failed to reach an agreement on crude production costs, which resulted in an all-out price war, as members were no longer bound by output restrictions. This created a dramatic oil supply of oil and oil products, which both benefited freight rates. The demand for jet fuel was most significantly impacted as international air travel was paralyzed by global travel bans. Reduced domestic land-based travel also saw that demand for gas oil fell correspondingly. The dramatic fall in food prices on the back of weak consumption environment created trading opportunities where spot oil prices were lower than future prices and the buildup of inventories. This led to strong demand for floating storage, benefiting the tanker market in general. Move on to slide number five. So focusing on the market activities in the second quarter of 2020. We saw economic activity started to recover in China in April, while many economies in the West and other parts of Asia went into lockdown resulted in an additional decline in demand for refined products, leading to land storage filling up, while container steepening fueled a further demand for floating storage for refined products. As tanker supply was reduced by port congestion, freight rates across most clean tanker routes rose to an all-time historical high in late April 2020. In the second half of May, freight rates experienced a downward correction, The agreed production costs of $9.7 million per day by OPEC Plus members in April started to play a part in improving supply-side fundamentals of the oil market, while the rate of recovery of oil demand in the medium term triggering a de-stocking of floating storage. Looking a little bit into the various segments and what effect that had, we've seen the following. The handy segment is benefited from the filter-down effects of the larger vessel segments on the European continent and the Mediterranean, which increased demand accordingly. The average year-to-date clean and dirty anti-earnings are in the range of $20,000 to $25,000 a day. Looking at the MR and the LR-1 vessels trading west of Suez, the flow of naphtha and gasoline from Europe to Asia on MRs soared in April, as the LRs were diverted to loadings in the Middle East and tied up in floating storage. The average year-to-date earnings are $22,000 per day for MR vessels and $30,000 per day for LR1 vessels. Looking at the same sizes, i.e., MR and LR1s, but instead sewers, we saw that low crew prices, excess crew supply from onshore storage, and demand destruction from the coronavirus created a steep contango structure leading to increased demand for clothing storage. The average year-to-day earnings for MRs in the Far East are $25,000 per day. For MRs in the Middle East, about $24,000 to $26,000 per day, and LR earnings around $35,000 per day. Looking at another important part of the business, which is the bunker site, We saw that at the end of the first quarter, the spread between high sulfur fuel oil and very low sulfur fuel oil was $80 per metric ton. The spread narrowed to $48.50 per metric ton with falling crude oil prices, but rebounded to $68 in Singapore as the overall prices made some recoveries. That was the end of the commercial view on Q1 and Q2. So, Perry, why don't we move on to the next few slides?

Yes. Thanks, Michael. And good day to everyone on the call. As Michael correctly said, the first quarter was Havnia's strongest quarter yet, where the industry benefited from a winter market in combination with the oil industry building floating storage. We feel that we got a very good result of a net profit of $77.1 million. and pay a dividend of in total $38.5 million, or 10.62 cents per share. The income from the management of third-party vessels of our pool business in the first quarter was $5.9 million. The effort resulted in an annualized return on equity of 27.3%, and a return on invested capital of 14.3%. The balance sheet is strong with an equity ratio of 41.9% and a liquidity position of $128 million. The increase of working capital is mainly a result of higher freight rates. Save for two LR1s in our Vista joint venture, there is no further CAPEX for new builds. The remainder of the investments for these two vessels will be drawn from the arranged bank financing. Then zooming in on the next page, on page 7 on the pool economics chart, Let me explain that a little bit further. Hafnir charges a commission for the management of external ships based on two elements, a fixed fee of $250 per day per vessel and 2.25% of net TCE earnings made by that vessel. So in an example where a vessel makes $20,000 per day, Hafnir will make $250 plus $450 totaling $700 per day. The $250 fixed fee basically covers the fixed costs of running the pool for external vessels. Based on a fleet of 80 external managed vessels and a TCE hire of $20,000 per day, Hafnia generates an income of $13 million before tax. And as I said, for the quarter, the pool business generated $5.9 million before tax. Michael will now present as of slide number eight.