Hafnia Limited

welcome to hafnir's first quarter 2026 financial results presentation we will begin shortly you will be brought through today's presentation by hafnir ceo michael skov cfo perry van ecktelt soren vinter 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 by 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. 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's CEO, Michael Skov.

Thank you, and hello, everyone. And thanks for joining Hafnir's first quarter 2026 earnings call. I'm Michael Skov, CEO of Hafnir. With me today are our CFO, Peri van Echtelt, our VP of Commercial, Søren Vinter, and our Head of Investor Relations, Thomas Andersen. We released our first quarter 2026 results earlier today, and you can find them on our website. On today's call, we will cover our Q1 highlights, the latest market developments, including the significant geopolitical disruptions that have shaped the quarter, and then give an update on our financial position. We will also touch on our sustainability initiatives before concluding the presentation. Let's move to the next slide. Before we proceed, I would like to go through our safe harbour 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 in this call should be construed as an offer to buy or sell securities. Next slide. We now move to slide number four, and let's begin with a review of our results for the quarter. The first quarter was a transformative quarter for the Tengger industry, largely defined by geopolitical disruption without modern precedent. The closure of the Strait of Hormuz has fundamentally reshaped global oil trade flows during the quarter. Against this backdrop, we delivered a net profit of $179.7 million, nearly three times our first quarter 2025 result, supported by higher freight rates, which tighten tanker supply and disruptions of trading routes around the world. On our forward coverage, 73% of Q2 earning days has been covered at $46,600 per day, supporting our expectation of a stronger second quarter. On the fleet activity side, we continue to divest older vessels during the quarter as part of our fleet renewal strategy in maintaining a low average age modern fleet. Importantly, we have also announced the signing of a contract for eight new MR new builds with Hyundai Heavy Industries, with deliveries expected between Q3 2028 and second quarter 2029. Further to that, we recently exercised two additional options with the same yard for delivery in 2029. This is a meaningful step in our fleet renewal strategy, locking in modern, efficient tonnage at an attractive point in the cycle, continuing our focus on modernizing the fleet and reducing average fleet age. as well as strengthening our long-term earnings capacity. Let's move to the next slide. Hafnir remains the global leader in product and chemical tankers. At the end of the quarter, we owned and chartered in 118 vessels with an average fleet age of 9.6 years. Our net asset value at the end of this quarter has increased to approximately $4 billion, equivalent to $8.09 per share, or about 78.81 Norwegian kroner. That's up from the 3.5 billion at the end of fourth quarter, driven by higher valuations across all segments and strong earnings. We continue to operate around 60 third-party vessels across eight pools, while our sea-scale energy bunkering joint venture with Cargill continues to progress steadily, and even more so with recent geopolitical events. Looking ahead in 2026, we intend to wind down our Handy and LR2 pool operations. As our Handy vessels are sold, we expect to exit the Handy segment entirely, while the majority of our LR2 fleet will transition to employment under time-sharded arrangements. Let's move to the next slide. Turning to shareholder returns. We have now paid dividends for 17 consecutive quarters. Our net loan to value improved to 20.2% at the end of first quarter, down from 24.9% at the end of 2025, primarily driven by a strong cash flow generation from both operations and vessel sales. In line with our transparent dividend policy, we are declaring an 80% payout ratio. That translates to a total cash dividend of $143.8 million, or 28.77 cents per share. This represents an annualized yield of 14%. For shareholders receiving dividends in Norwegian kroner, The exchange rate will be based on the value date, which is two business days before payment. Over the last four quarters, our cumulative dividends totaled $365.3 million, or 73.19 cents per share. Our total shareholder return over the last 12 months now exceeds 100%, which is a result of strong earnings, consistent dividends, and meaningful share price appreciation. Søren Vinter, our VP of Commercial, will now take you through the industry review and market outlook.

Thanks, Michael. The next slide, please. Let me set the scene for the market environment we are navigating. This quarter has been unlike anything we have seen in modern shipping history. So I want to walk through the key dynamics shaping the market. The headline numbers tell the story. Global Observed Inventories has drawn down roughly 200 million barrels between February and April 2026, with OECD on land stocks, plunging 146 million barrels in April alone. The IEA's accumulative deficit is projected to reach approximately 900 million barrels by September, requiring roughly 1 million barrels per day of incremental supply over a three-year period to fully rebuild. On the fleet side, year-to-date around 72 LR2 vessels have migrated into Afromax dirty trading, reducing the clean LR2 fleet by about 28%. This has effectively absorbed the bulk of 2026 new-build deliveries. Meanwhile, and since the closure of the Hormuz Strait, U.S. clean product exports have surged approximately 40% from February to May, partly filling the supply gap left by the Middle East disruption. The market remains backed by fundamentals supporting continued market resilience. Most important drivers are elevated ton miles, structural fleet tightness, and a multi-quarter inventory rebuild ahead. Let me take you through the deeper detail. Next slide, please. Starting with global oil demand. In the face of global oil shortages, government and companies are working to constrain the crisis by implementing demand saving measures. As a result, the IEA is now projecting the first annual decline in global oil demand since 2020, with the sharpest dip coming in Q2 2026. However, projections for demand are to recover towards the year end to approximately 106 million barrels per day, averaging around 104 million barrels per day for the full year. On the inventory levels, as mentioned, the IEA's cumulative drawdown could reach 900 million barrels by September 2026, which includes the 400 million barrels of coordinated SPR stock releases, of which only 164 million barrels had been released as of May 8th. Next slide, please. Importantly, the inventory drawdown is uneven across regions, with draws heavily focused in the east. The US and China inventories remain balanced, as the US is supported by strong refinery runs for exports, while China adds to commercial stocks. The draws are concentrated in the Middle East, Asia, and Europe, The Middle East is drawing heavily on the direct Iranian impact, such as refinery damage and product diversion. The rest of Asia is drawing as eastbound arbitrage flows pull from regional stockpiles, and Europe is drawing as Atlantic supplies mobilize eastwards, tightening regional balance. Next slide, please. This slide puts the current situation into historical context and further shows the unique situation we are facing. You can observe historically oil supply deficits have coincided with weaker freight rates due to lower cargo volumes. However, current conditions break that pattern. We have recorded supply deficits occurring alongside VLTC earnings near cycle highs. We see two possible outcomes. Either freight rates correct sharply or supply rebound strongly to validate current freight levels. We expect the latter to happen. Supply recovery and continued freight resilience into 2027, supported by the Middle East refinery normalization, demand recovery and structural tanker market tightness from LR2 migration and sanctioned fleet attrition. The next slide, please. Apart from the closure of the Hormuz Strait, another key factor behind the market disruption is the extensive damage to regional refinery capacity. Around 2 million barrels per day of Middle Eastern refining capacity is currently offline due to war-related infrastructure damage. This includes major facilities like Sathorp in Jubail, Babco in Sitra, and Adnok Ruways. While Eastern refiners have indicated that even without further hostilities, full capacity won't return before Q1 2027. While consensus expects shipping to weaken post-conflict, we see continued strength if demand rebounds as forecasted, with ongoing refinery disruptions supporting elevated product flows and turn mild demand into late 2026. The next slide, please. Looking at daily loadings, global clean petroleum product departures are down approximately 15% heavily concentrated in the east of Suez, driven by the hormones disruption and export restrictions across Southeast Asia and Far Eastern hubs. This has partly been offset by a surge in Western exports, mainly from the US. but not enough to fully replace the lost eastern volumes. On the dirty side, we see a similar pattern. Global dirty petroleum product departures are down about 17%, mainly due to the collapse in Arabian Gulf crude exports. And the next slide, please. We typically observe ton-mile data as a proxy for product tanker demand. However, reliable data is delayed due to prolonged voyage lengths. Instead, products on water serve as the most reliable proxy for transportation demand. It's important to note that while clean petroleum product loadings are down by roughly 15%, floating cargo volume are only down about 6%. This tells us that the actual impact on global transportation demand is milder than the headline figures suggest, meaning that vessels are spending more time on the water effectively absorbing tonnage supply. Next slide, please. On ton miles, the reported data shows a decline of about 10% from February to April. But as mentioned, this may not paint the most accurate picture, as it's distorted by data lag and ongoing voyages not yet fully captured. Once in transit, latent voyages are reflected, and we expect the gap to narrow. What is much more telling is the ballast voyage lengths, hitting record highs of approximately 1,900 nautical miles in April. This means vessels are sailing further to secure their next cargo, a clear sign of repositioning inefficiency that support a tighter supply-demand balance. And the next slide, please. Turning to key exporting regions, China's anticipated 2026 export quota of 332 million barrels has a remaining balance of about 1 million barrels per day through end year, representing sustained refinery export capacity. US export volumes increased roughly 40% from February to May, stepping in to fill the left gap by disrupted eastern supply. Although elevated prices have since narrowed arbitrage spreads, export flows remain resilient and continue to sustain ton-mile demand. Russian clean product exports remain constrained by ongoing refinery disruptions from Ukrainian drone strikes. And the next slide, please. In the Arabian Gulf, exports have been partially offset by increased loadings via the Red Sea, particularly from Yanbu, supported by a greater utilization of the Saudi Gulf to Red Sea pipeline. However, this remains only a partial offset. Overall regional export capacity is still materially below historical levels. Clean petroleum product exports from the Red Sea remain resilient. And onto the next slide. Turning to tanker supply. Over the past years, the tanker market has faced five major shocks. COVID-19, the Russia-Ukraine war, the Panama Draught, the Haiti Red Sea disruption, and now the Hormuz blockade. Each shock has rerouted trade flows and added ton miles, while replacement capacity has consistently lacked. The fleet age 20 years and above has grown from 48 million deadweight tons in 2020 to 187 million deadweight today, with 251 million projected by 2028. Scrap potential, sanctions, and operational restrictions on this expanding age cohort form a durable supply anchor through the end of the decade. And the next slide, please. The LR2 to AfraMax migration continues to be one of the most important structural shifts in our market. Global clean LR2 availability is now down approximately 28% year to date, with 72 vessels having migrated to dirty trading. This has effectively absorbed both 2026 new build deliveries and part of the existing clean trading tonnage. A reversal is unlikely while AfriMax economics remain this strong. This migration is materially tightening clean tanker supply and reinforcing the overall tonnage constraint. Next slide, please. On the order book and scrap landscape, the known new build program through 2029 for handy to LR2 consists of approximately 54 million deadweight tons. with LR2s accounting for a large proportion. Against that, potential scrapping of older vessels and sanctioned tonnage total 79 million deadweight tons over 2026 to 2029. Here we assume that the sanctioned fleet above 20 years is unlikely to re-enter mainstream trading. Despite available yard slots for 2029 and 2030, Any new order would arrive late in the cycle, structurally capping the net fleet growth. And on to the next slide. When preparing this material, the Hormuz Strait remained closed and leaving 124 laden and 33 ballast tankers carrying approximately 96 million barrels worth of dirty petroleum products and 18 million barrels worth of clean petroleum products trapped within the region. The stranded tonnage is materially tight in global supply conditions and underscores the constrained state of the market. Moving on to the last slide. In summary, while the timing and trajectory of geopolitical developments in the Middle East remain difficult to predict, we remain constructive on the strength of the underlying market fundamentals. As countries continue to draw down on inventories, the eventual reopening of the Hormuz Strait and recovery in eastern refinery operations could trigger a meaningful multi-quarter inventory rebuilding cycle, providing strong underlying support for the tanker demand and resilient freight rates. I'm now handing over to Perry, our CFO, who will bring you through our financial developments.