Hafnia Limited

Welcome to Hafnir's fourth quarter 2023 financial results presentation. We will begin shortly. You will be brought through the presentation by Hafnir's CEO Michael Skov, CFO Perry van Echtelt, EVP Commercial Jens Christoffersen and EVP Head of Investor Relations Thomas Anderson. They will be pleased to address any questions after the presentation. Should you have any questions, you can submit them via the chat function or use the raise hand function to be unmuted to ask your questions verbally. Questions will be answered at the end of the presentation. 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 Hafnir is unable to predict or control that may cause Hafnir's actual results performance or plans to differ materially from any future results performance or plans expressed or implied by such forward-looking statements in addition nothing in this conference call constitutes an offer to buy or sell or a solicitation of an offer to buy or sell any securities with that I'm pleased to turn the call over to Hafnir CEO Michael Scott

Thank you and hello everyone. My name is Michael Skov and I'm the CEO of Hafnia. Allow me to extend a warm welcome to each of you for joining Hafnia's fourth quarter 2023 conference call. With me here today are our CFO, Paraffin Egg Tilt, EVP Commercial, Jens Christoffersen, and EVP Head of Investor Relations, Thomas Anderson. We will present Hafnir's performance for the fourth quarter 2023 together. Today's presentation agenda will cover four key topics. As a start, I will provide an overview and highlight key corporate developments during the quarter. Following that, we present the fourth quarter and full year financial performance. Subsequently, we will provide commercial updates and an outlook on the product tanker market, and finally concluding the presentation with Hafnir's ESG overview. Let's move to slide number two. Before proceeding, you should all be aware and take note of the mandatory disclaimer. Certain statements in this conference call may constitute forward-looking statements, and it's crucial to recognize that these statements involve some inherent risk and uncertainties. You should also be reminded that nothing in this conference call constitutes an offer to buy or sell or a solicitation of an offer to buy or sell any securities. Thank you for your understanding, and let's begin with the presentation. Slide number three. Let us start with an overview of Hafnir and the key highlights in the fourth quarter 2023. Moving to slide number four. Hafner is one of the world's leading tanker owners and operators within the product and chemical tanker market. As owners and operators of more than 200 modern vessels across eight pools, we offer a fully integrated shipping platform, including technical management, commercial and chartering services, pool management, and an extensive bunker procurement desk serviced over 1,400 vessels within our pool platform and for external ship owners in 2023. With a robust business model, Hafni has maintained his position as one of the foremost players in the shipping industry. At the end of the quarter, we owned and chartered a diversified portfolio of 130 vessels. With an average broker valuation of $4.9 billion for Hafni's owned vessels, it gives an approximately net asset value of $3.9 billion at the end of 2023. This represents an NAV per share of around $7.7 or 78.9 Norwegian kroner. Since the merger with BW Tangers back in 2019, Our net asset value in five years have approximately quadrupled from $1 billion, which illustrates the significant growth of Hafnia. By implementing our fleet renewal strategy, we can maintain Hafnia's fleet at a low average age of 8.3 years to enhance its utilization and improve earnings capability as well as our environmental footprint. Moving to slide number five. At Hafne, we maintain a proactive approach to market evaluation, continuously seeking advantage opportunities as part of our active management strategy. We started the joint venture with CSSC in 2018 and subsequently Andromeda in 2021. In 2022, we have acquired a total of 32 chemical and product tankers through Chemical Tankers Inc. and its subsidiaries, and 12 LR1 product tankers from Scorpio. We also concluded a joint venture with Socartra last year with an order of four dual-fuel methanol MR new builds. Our fleet, which include our owned and commercially operated vessels, has steadily increased from 176 to 210 over the past five years, representing a growth of 19% in overall. We remain committed to pursuing strategic acquisitions and joint ventures that drive sustainable growth and position us for the long-term success. Moving to slide number six. Moving on, I would like to update some key corporate updates for Hafnir over the fourth quarter. Firstly, I'm proud to announce the newly launched Panamax pool partnered with Mercuria to bridge the gap across a rapidly aging segment. 10 vessels with an average age of 13 years will be delivered to the Hafnir Panamax pool, aiming to capitalize on the combined expertise and resources of both companies. Next, in alignment with our dedication to sustainability, we are venturing a joint venture with Big Hill on the development of hydrocarbon fuels plant to produce low CI blue methanol and sustainable aviation fuel at a later stage. Still subject to FID, this project will develop new sustainable shipping opportunities within the CO2 and methanol and sustainable fuel sector. Lastly, Hafnia collaborated with Hafnia Bunker Alliance member Unigas and the supplier of Finco Energies, good fuels in sustainable biofuel bunkering. During the year of 2023, we have facilitated seven deliveries of biofuels ranging from B30 to B100 for the Unigas fleet. Perry will take you all through the financials in the next section. Thank you.

Thanks, Michael. Despite the unprecedented disruptions in the supply chain and the challenging geopolitical conditions we experienced in 2023, Hafnia continues to deliver strong results. We achieved a net profit of $176.4 million for the fourth quarter, bringing our net profit for the year to $793.3 million. This represents Hafnia's highest full-year result for the second consecutive year, further building on the strategic growth we've set out earlier. With a strong commitment to enhancing shareholder value, we optimized our balance sheet by reducing our leverage further. Our net LTV ratio continued to decrease from 27.4% to 26.3% in the fourth quarter due to accelerated debt repayment and improved asset prices. Over the year, our net LTV ratio has been reduced by more than 5%, reducing financing expenses further in a high interest rate environment. In line with the dividend policy, I'm pleased to announce a dividend payout of $0.2431 per share, or approximately 2.57 Norwegian kroner for the quarter. That means we will distribute a total of $123.5 million in dividends on the dividend payout ratio of 70%. And this brings Huffington's total dividends from 2023 earnings to be more than $500 million, representing an average payout ratio of 64.1%. We will continue to optimize our balance sheet to further reduce our leverage and simultaneously deliver strong shareholder returns. We then move to the next page. For the fourth quarter, we generated a TCE income of $330 million, bringing our full year TCE income to $1.367 billion. As mentioned earlier, we've also taken the IFRS 15 principles of load to discharge adjustments into our financials, and this resulted in a negative TCE adjustment of $11.7 million. Including this, we achieved an EBITDA of $234.5 million for the fourth quarter and a full-year EBITDA of just over a billion dollars. In Q4, we have generated $8.8 million from our commercial pool and bunkering business, which is continuously to perform well. um financial expenses reduced as we also recognize the portion of the market value of our interest rate hedges in our income statement resulting in a reduction of 6.6 million dollars in that financial expense all in all we've reported a record net profit of 793.3 million dollars as i said having his best year to date our return on equity accounted to 37.4 percent for the full year We had a cash balance of $142 million at the end of the year and maintained a total liquidity of over $460 million, including undrawn facilities of $321 million. At the end of Q4, around 75% of our loans was hedged at a weighted average of 1.62 base rate. This hedging strategy has largely protected us against the strong increases in interest rates and thereby controlling the financing costs. As a forward-looking company, we will continue monitoring our key leverage ratios and cash break events. This strategy will ensure the resilience of our balance sheet and enabling us to seize upon any opportunities that arise in the market. We then move on to the operating summary. In the fourth quarter, our TCE was based on 10,732 earning days, and we generated an average TCE per day of $30,732. This improved from $28,954 per day in the third quarter of the full year 2023. The average TCE stood at $32,326 per day. Then OPEX costs, which consists of our vessel operating costs and technical management expenses, were based on 9,601 calendar days in the quarter, leading to an average of $7,764 per day, lower than the $8,160 per day in the previous quarter. For the full year, 23, the OPEX costs were $7,760 per day based on almost 38,000 calendar days. The reduction is mainly owing to delay in some supply due to trading patterns and no major repairs of vessels for the year. Then moving on to the fleet coverage for 24, The product tanker market has remained strong through 2023 due to factors like increased refinery throughput, shifting refinery capacity, and higher trade volumes. In the beginning of 2024, the market has been heavily impacted by the situation in the Red Sea, resulting in rerouted and longer voyages and spikes in earnings. As of 29 February 2024, 80% of the total earning days in Q1 24 have been covered at an average of $37,668 per day. This represents a significant increase compared to the previous quarters. For 24, 30% of the entire earning days were covered at an average of $33,419 per day. If we then move to the next page, benefiting from solid fundamentals and anticipated increased oil demand, we can expect 24 to yet be another strong year. We are well prepared for this market through our strategically positioned fleet and high spot market exposure. This page presents a comparative analysis of three scenarios outlining Hafenia's potential earnings for this year. These scenarios include, firstly, the consensus forecast from the equity analysts, Secondly, an extrapolation of the Q1 covered rates applied to the available earnings days in 24. And then a third scenario based on the 2024 covered rates, similarly applied to the available earning days in 2024. In each of the three scenarios, the indications show yet another exceptionally robust year for Hafnia. We move to the next page. Jan will then be sharing the industry review and market outlook.