Hafnia Limited

Welcome to Hafnia's third quarter 2025 financial results presentation. We will begin shortly. You will be brought through today's presentation by Hafnir CEO, Michael Scove, CFO, Perry Van Echtelt, Soren Winter, VP Commercial, and Thomas Anderson, EVP, Head of Investor Relations. 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 Hafnir CEO, Michael Skov.

Thank you, and hello, everyone. We appreciate your joining in Hafnir's third quarter 2025 earnings call. My name is Michael Skov, CEO of Hafnir, and with me today is our CFO, Peri van Echtelt, our VP of Commercials, Søren Vinter, and our EVP and Head of Investor Relations, Thomas Andersen. Earlier today we released our Q3 2025 results, which are now available on our website. During this call, we will walk you through our quarterly performance, discuss key market developments and share updates on our financial position. We will also present our sustainability initiatives before opening the call for questions. Let's move to the next slide. Slide number two. Before we proceed, I would like to go through our Safe Harbor statement. The information discussed on this call is based on information we have today, which may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Nothing presented on this call should be construed as an offer to buy or sell securities. Thank you for your attention. With that, let's begin with a review of our results for the quarter. Next slide, slide number four. The product anchor market started out this year on a softer note, but it strengthened significantly through the third quarter. Higher trading volumes and strong refinery margins drove this. Much of the growth came from increased export flows out of the Middle East and Asia, with clean petroleum products on water continuing to rise throughout the quarter. This strong backdrop supported the spot market, and I'm pleased to share that Hafnir delivered another excellent quarter. For Q3, we achieved $150.5 million in adjusted EBITDA and a net profit of $91.5 million, our best quarter so far this year. As part of our fleet renewal strategy, we also sold four older vessels, all built between 2010 and 2012. Finally, in September, we announced a preliminary agreement to acquire 14.45% of TORM shares from Oaktree. This was followed by a binding share purchase agreement, and we are now waiting for the appointment of a new independent board chair at TORM before we can complete the acquisition. Moving on to slide number five. Next, I'd like to give you a brief overview of Hafnir and highlight our key investment attributes. Hafnet is a global leader in the product and chemical tanker space. We operate one of the largest and most diversified fleets in the industry. As of the third quarter, we own and chartered in 126 vessels with an average fleet age of 9.6 years, significantly younger than the industry average. At the end of the quarter, our net asset value was approximately $3.4 billion, translating to $6.76 per share or 67.55 Norwegian kroner. Beyond our core fleet operations, we continue to build strength through our complementary business platforms. We commercially manage about 80 third-party vessels across eight pools, and our bunkering procurement platform supports both Hafnir's vessels and external partners, creating additional scale and efficiency benefits. Let's move to the next slide, which is slide number six. Another key investment attribute of Hafnir is our transparent and consistent dividend policy. We have delivered dividends consistently over the past several years, And our goal has always been to make them sustainable and predictable across the market cycle. Our net loan to value ratio improved from 24.1% in the second quarter to 20.5% supported by strong operational cash flows. Approximately $100 million was used to repurchase vessels on the sail and leaseback financings. In addition, vessel market values have also recorded a slight uptick compared to the previous quarter. In line with our dividend policy, we are declaring a payout ratio of 80% for the quarter. This corresponds to a total cash dividend of $73.2 million or $0.1470 per share. For shareholders receiving dividends in Norwegian kroner, the exchange rate will be based on the value date, which is two business days before the payment date. With this quarter, we now mark 15 consecutive quarters of dividend payments, underscoring our commitment to consistent shareholder returns and long-term value creation. Søren Vinter, our VP of Commercial, will now share the industry review and market outlook.

Thank you, Michael. Let me begin with a review of third quarter market conditions within the product tanker market segment, where Hafnir primarily operates, and then share our outlook for the months ahead. The product tanker market started 2025 on a softer note. but showed counter-cyclical strength throughout the third quarter, supported by higher trading activity and ton miles. Clean petroleum product volumes on water for 2025 continue to track above the four-year average, with Q3 showing an unseasonal increase compared to previous years. Importantly, the corresponding rise in daily loaded volumes suggests that total oil and water is being driven by higher export demand rather than longer voyage distances. Moving on to slide nine. While high clean petroleum product volumes usually correlate with stronger earnings, the earnings recovery this quarter was more modest, yet 18% stronger for MRs. We also saw a strong rebound in ton days during the third quarter, supported by tight gasoline and distillate supply in Europe, stemming from ongoing refinery closures. This dynamic has driven ton miles and supported strong trading margins out of the US and the Eastern Basin. Moving on to slide 10, on the supply side, Despite continued newbill deliveries in 2025, overall fleet growth has remained limited. This is primarily driven by continued vessel sanctions and the migration of LR2s into Afromax dirty trading. Year to date, roughly 88% of the coded LR2 newbills have migrated into the dirty market, supported by a stronger crude earnings environment. In effect, the crude segment has absorbed about 45% of the 2025 Code of New Build program, significantly minimizing increases in clean trading debt rate. Moving on to slide 11. Beyond the LR2 migration, sanctioned vessels also play a significant role in tightening fleet supply in 2025. The UK, UN, and OFAC have collectively sanctioned more than 400 tankers this year, with roughly 25% of them operating in product segments. This is supportive for product tankers, as it effectively reduces available supply and also limits crude cannibalization, contributing to a tighter overall supply-demand balance. EU's 19th sanctions package adds another 19 vessels to this list, with the new additions split evenly between dirty and clean trading. We estimate that approximately 280 additional vessels have engaged in trade with sanctioned regions, signaling the potential for further sanctions. The Dark Fleet refers to tonnage with questionable ownership and an older age profile. while the grey fleet is associated with more reputable ownership. Moving on to slide 12. Bringing together the topics of LR2 migration and vessel sanctions detailed in the previous two slides, overall clean petroleum product capacity growth in 2025 has been limited. Year-to-date, around 12 million coated deadweight has been delivered. yet only about 1.1 million deadweight has effectively entered clean trading. This translates to approximately 0.5% net growth in clean product tanker supply. Moving on to slide 13. Looking ahead, the supply outlook is less concerning than initially feared or reported. If we apply a 72.5% crude migration factor to future coded LR2 deliveries over the next three years, this implies roughly 11% fleet growth based on the current order book. However, nearly half of that growth is concentrated in 2026, driven by a heavier delivery schedule in the first quarter. Slide 14. Clean product cannibalization remained a real threat in Q3, with cannibalization volumes exceeding the 3-year average. Despite this, clean product earnings proved resilient throughout the quarter. On a positive note and looking ahead, the current strong earnings environment in the VLTC and Suezmax segments has reduced cannibalization volumes for November to nearly zero. This sets the stage for a robust outlook for the remainder of 2025 into Q1 2026. Moving on to slide 15. Apart from the factors we have discussed, the continued aging of vessels and potential scrapping also supports a positive supply outlook. Between 2025 and 2028, we expect around 114 million deadweight of new builds across handy to VLTC segments. Over the same period, potential scrapping could approximately be around 167 million deadweight based on typical scrapping ages. Looking further ahead, an additional 87 million deadweight could exit the fleet between 2029 and 3031. It is important to note that these estimates do not account for differences in utilization between new builds and older vessels. Slide 16. Inventory levels are an important indicator within the product tanker market. European diesel inventories have seen significant draws in 2025. With the winter season approaching, Europe will look to replenish inventory. The end of refinery turnarounds in the US Gulf, Far East and Middle East during November will free up additional export capacity to support the supply. As I'll explain in later slides, it's also worth noting that South America will rely on increased North American supply over the next two quarters, leaving the eastern hemisphere to cover the European import shortfall. This dynamic is expected to drive higher volumes and longer torn miles. Slide 17. With continued drawdowns and refinery turnarounds, refinery margins have been on the rise in 2025. This typically correlates with higher earnings, further supporting the underlying market strength over the first quarter of 2026. Slide 18. The longevity of strong refining margins and resulting transportation demand is set to continue in Q1 2026. Fundamentally, European supply and rising transportation volumes depend on sufficient oil availability and the pricing structure that supports underlying arbitrages. Forward arbitrage from the US Gulf and the east to Europe is trending higher for the remainder of 2025 into 2026. This supports forward trading volumes and underscores the real and sustained demand from Europe to cover for the winter season and replenish low inventories. Slide 19. Geopolitical tensions continue to influence the product anchor market. Following Ukraine's drone strikes on Russian refineries, clean petroleum product exports from Russia have declined significantly, while crude exports have correspondingly increased. This limits Russia's ability to supply clean petroleum products to South America and West Africa, prompting substitute barrels from the US Gulf and Europe. These shifts drive higher ton miles on the non-sanctioned fleet, pushing the overall utilization. We are already seeing a decline in South American imports from Russia, accompanied by corresponding increases in imports from the US Gulf. Moving on to slide 20. Further on geopolitical tensions. In early Q4, the Trump administration facilitated a peace plan between Israel and Hamas aimed at ending hostilities. While this could eventually lead to a gradual reopening of the Red Sea, we expect the process to take time. Our analysis suggests that the potential impact of a Red Sea reopening may be less than initially anticipated. With Red Sea transit's return to normal, Suez Canal traffic could regain the equivalent of roughly 180 MRs in transportation demand, while autonomous demand loss via the Cape of Good Hope are projected at around 230 MRs. The net effect on total arbitrage transportation volumes via the Suez Canal is about 43 MR equivalents. This implies a minimal negative market impact of approximately six MR units. Moving on to the next slide, where Perry, our CFO, now will bring you through the financial developments.