Hafnia Limited

Welcome to Hafnir's first quarter 2025 financial results presentation. We will begin shortly. You will be brought through today's presentation by Hafnir's CEO, Michael Scove, CFO Perry Van Echtelt, VP Commercial Soaring 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, you can submit them via the chat function or use the raise hand function to be unmuted to ask your question verbally. Questions will be answered at the end of the presentation. You will receive further instructions as required. During this conference call, some statements may be considered forward looking, reflecting management's current expectations. These statements involve risks, uncertainties, and other factors, many of which are beyond Hafnia's control that could cause actual results, performance, or plans to differ significantly from those expressed or implied. Additionally, this conference call does not constitute an offer or solicitation to buy or sell any securities. With that, I'm pleased to turn the call over to Hafnia's CEO, Michael Scott.

Thank you. And hello, everyone. I'm Michael Skov, CEO of Hafnir. Welcome to our earnings call for the first quarter of 2025. And thank you for joining us today. With me today are our CFO, Perifran Eckthild, our VP of Commercial, Son Winter, and our EVP and Head of Investor Relations, Thomas Anderson. Together, we will walk you through Hafnir's performance for the quarter. Today's presentation will cover four key areas. I'll begin with a review of our first quarter performance and key highlights, followed by an overview of Hafnir and our market position. Søren will then discuss recent commercial developments and share our outlook for the product anchor market. Perry will review our financial results and capital allocation strategy. I will then conclude with an update on our ongoing sustainability initiatives and provide closing remarks. Let's move to next slide, slide number two. Before proceeding, I want to direct your attention to our safe harbors statement. Today's presentation will include forward looking statements that involve risks and uncertainties. Our actual results may differ materially from these statements. This call does not constitute an offer to buy or sell securities. Thank you for your attention. Let's start the presentation. Let me begin by outlining some of the key highlights from the quarter. We now go to slide number four. Despite a challenging market environment, Hafnet delivered solid financial results, demonstrating the resilience of our business model and operational strategy. In the first quarter of 2025, we achieved a net profit of $63.2 million, a reflection of our operational strength amidst ongoing uncertainty. Our first quarter results reflect approximately 500 off-hire days due to scheduled dry docking and repairs, yet we still generated TCE income of 218.8 million, underscoring the strength of our core operations even during a maintenance intensive period. Our performance was further supported by our adjacent fee generating pool and bunkering businesses, which contributed $7.9 million to our overall results. Moving to slide number five. Next, I would like to highlight Hafnir's key investment attributes. Hafnir is a global leader in the product and chemical tanker market, operating one of the largest and most diversified fleets in the industry. as owner and operators of more than 200 vessels across eight pools, we provide a fully integrated shipping platform, which includes technical management, chartering services, pool management, and the bunker procurement desk that has serviced over 1,500 vessels in 2024, both within our pools and for external ship owners. Seascale Energy, Our new joint venture with Cargill is expected to commence operations in May and will be one of the world's largest bunker procurement companies. These initiatives reflect Hafnir's commitment to delivering cost efficiencies and innovative fuel solutions to our customers. At the end of the quarter, our own and chartered fleet comprised 125 vessels with a net asset value of approximately 3.4 billion dollars. This equates to an NAV per share of around 6.96 US dollars or 73.03 Norwegian kroner per share. Our modern fleet presents significant opportunities for enhanced operational efficiency and higher earnings potential. This is reflected in the average age of our own vessels at 9.3 years, compared to the global product tanker fleet average of approximately 14 years. As part of our commitment to a more sustainable maritime future, we also look forward to welcoming the ECOMARC-EN this month. This vessel is the second of four dual fuel methanol chemical IMO2 medium range product tankers ordered through our joint venture with Socarta of France. As they are designed to run on both conventional fuel and methanol, these vessels will pave the way for a transition to more sustainable fuel options. Let's move on to the next slide, which is slide number six. At the end of first quarter, our net loan to value ratio stood at 24.1%, increasing slightly from the previous quarter, primarily due to a decline in vessel market values. Based on our payout policy, I'm pleased to announce a payout ratio of 80% for the quarter. This represents a total cash dividend of $50.6 million for the quarter, which corresponds to 0.1015 USD per share. Notably, we have elected not to deduct the $27.6 million that has been used for share buybacks from this quarter's dividend calculation, which effectively increases our total payout ratio to 123%. This decision underscores our confidence in the market and enables us to maintain financial flexibility while delivering strong returns to our shareholders. Søren will now be sharing the industry review and market outlook.

Thank you, Michael. Let me start with an update on the current market conditions in the product tanker and CPP segments, where Hafnir primarily operates, and then share our outlook for the months ahead. The first quarter experienced an increase in trade volumes and ton miles, supported by strong global demand, resulting in an improved spot market. Sentiment have improved further in the second quarter, setting a positive tone for the remainder of 2025. As we can see, CPP on water has rebounded strongly from Q4 through Q1 2025. primarily driven by reduced crew tanker cannibalization and higher export volumes. While such trends typically signal improved earnings, this difference between recovering CPP volumes and lacking earnings primarily reflects market sentiment rather than fundamental weakness, creating a potential upside opportunity as sentiment normalizes. Moving on to next slide, slide nine. Improvement in demand fundamentals is further illustrated here. When we examine cargo volumes against ton miles, we observe an upward trend over the years. Since April 2018, cargo volumes for CPP and chemicals have steadily increased, reaching their highest levels in April 2025. Ton miles have also increased across the years due to ongoing refinery dislocation but remain lower than 2024 levels, which are largely due to geopolitical unrest that resulted in vessels rerouting away from the Red Sea. We anticipate this high CPP-torn mile to persist, driven by export volume gains fueled by ongoing refinery production increases in the Middle East. On the other hand, DPP cargo volumes have slightly declined over the years. In early May, OPEC+, led by Saudi Arabia, announced a second consecutive monthly increase in output. We expect this move to support crude tanker rates in the near term and have positive spillover effects on the product tanker market in the medium term, as increased crude supply is likely to drive higher refinery activity. Moving on to slide 10. A key change in global trading pattern in 2024 has led to the reduction of latent voice lengths. The initial market disruption caused by Red Sea closure led to vessels rerouting around the Cape of Good Hope. This has gradually diminished through 2024 into 2025. Instead, there has been limited cross-atmosphere trading, leaving tonnage static within regions. As a result, average laden voids lengths have decreased by about 10% from a year ago. On the tonnage supply front, the year-to-date effect on clean tonnage supply has been very marginal. This is largely driven due to 100% of LR2 new-built deliveries or the equivalent they are off in 2025 entering the dirty trade. For dirty tonnage, the earlier OFAC sanctions and the corresponding import ban by China and India on sanctioned tonnage have had a more profound impact on DPP than on clean products. We estimate that DPP market has experienced an approximate 10% drop in supply. Moving on to slide 11. The OFAC sanctions primarily target crude tankers, which are expected to have a positive spillover effect on the product tanker market. When considering the decreased usage of older vessels, the sanctioned crude tanker fleet is equivalent to the entire crude and new-build program scheduled through 2025. We can therefore anticipate reduced crude tanker cannibalization and increase in the shift from clean to dirty trade, as we have already observed with the year-to-date LR2 deliveries. The percentage of sanctioned fleet ton miles measured against global ton miles currently stands at 2.15%. We expect this figure to decline further through Q2 2025 given that the trade wind-down period only concluded in March. Compared to the total debt rate increase, the current worldwide fleet of 2.68% for 2025, the underlying supply-demand balance for the year remains solid. Moving on to slide 12. Despite the older age profile of the sanctioned fleet, we do not expect this to significantly impact scrapping levels. However, de facto scrapping seems evident and supports the underlying supply versus demand balance. Additionally, we estimate that around 400 Dark Fleet vessels remain engaged in Russian trade despite not being listed by OFAC. The Dark Fleet is identified as tonnage with questionable ownership and a predominantly older age profile. While the grey fleet is associated with more reputable ownership, this signals the potential for further sanctions from EU and OFAC. Moving on to slide 13. The supply outlook remains positive. Considering known new builds from 2025 to 2028 across the tanker segments from Handy to VLCC, deadweight supply totals approximately 97 million. based on assumed scrabbing ages at 23 years for LR1s, 2s, SUIs, MAXIs, and VLCCs, and 25 years from HENDIs and MRs, we estimate potential scrabbing at around 167 million deadweight over the same period. An additional 87 million deadweight could be scrapped between 2029 and 3031. It is worth noting that we did not account for differences in utilization between new builds and older vessels. Moving on to slide 14. A recent geopolitical key development is the USTR's proposed port fee announced on April 17th targeting Chinese-built vessels as well as Chinese operators and owners. While we expect limited direct impact on the product tanker market, the full implications remain difficult to predict at this stage. However, we can provide an overview of the magnitude of existing and future new built tonnage from Chinese yards. If implemented, the proposal could lead to another global reshaping of trading routes, increasing ton miles. Moving on to slide 15, Perry will now bring you through the key financials for the first quarter. Over to you, Perry.