d'Amico International Shipping S.A.

Good afternoon, this is the Coruscall Conference Operator. Welcome and thank you for joining the D'Amico International Shipping Full Year 2024 Results Web Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be a Q&A session. For operator assistance via web call, please press the headset icon on the bottom left side of your screen. For conference call assistance, please press star and zero on your telephone. At this time, I would like to turn the conference over to Mr. Federico Rosa. Please go ahead, sir.

Good morning, everyone, and welcome to the MECO International Shipping Conference call presentation. So, moving to our first page.

Sorry. I will skip the executive summary as usual.

Let's start with page seven, our usual snapshot of the MiG International shipping fleet. So at ERM 2024, we had 33 ships, of which 27 owned, three bare boat chartered, and three time chartered, six of which were LR1s, 21 ships were MRs, and six were Handys. 82% of the fleet was IMO class against an industry average of 48%. Average age of our owned and barefoot fleet was 9.2 years against an industry average of 14.3 for MRs and 15.8 for LR1s. 83% of our owned and barefoot vessels and 85% of the entire control fleet was eco-designed at year-end against an industry average of 37%. Moving to page eight. As usual here, we show our forecasted bank debt financing cash flow. So on the left, you see a little bit what we have been doing in 2024. So we have scheduled loan repayments for $28.1 million. We repay debt for $58.6 million. plus we repaid $6.5 million upon the sale of Glenda Melanie in Q2, 2024, which was the oldest ship of our fleet. And at the same time, during the year, we drew down debt for $66.3 million. Moving to the following years, we have no refinancing needs for 2025. and we expect scheduled loan repayments, bank loan repayments for $26.8 million. We're gonna have approximately the same amount of loan repayments in 2026 at $26.6 million, plus a small refinancing need of $3.2 million on one of our bank loan facilities that is expiring in December 2025, so at the very end of the year. In 2027, The situation is obviously a little bit different. We expect to take delivery of the four vessels that we ordered in Yangtze Jan in the second half of 2027. And here we are currently assuming to finance those ships with a 40% loan-to-value relative to their construction price. On top of that, we have some refinancing needs in 2027. We have debt expiring for a total of $66.2 million that we are currently expecting to refinance for the same amount. Interesting graph also on the right-hand side, which is this is our daily bank loan repayment on our own vessels, which has been falling quite dramatically from $6,147 a day in 2019 down to less than $3,000 a day in 2024, and it's going to be, according to our expectation, even lower going forward. This is also due to the fact that, as you know, several of the purchase options that we have exercised are now ships owned and completely free of debt. Moving to the next slide. Here we give, as usual, a rough guidance, a rough outlook on how Q125 looks. We fixed already, in time chart, 36% of our available vessel days at $25,261 a day. In addition, we also fixed 53% of our spot days at $20,428 a day, which entails a total blend of DVTCE, so the sum of the spot and the time charter exposure, of 89% of our total days in Q1-25 at a very profitable average of $22,373. And as usual on the graph on the right, we also show a sensitivity depending on our spot rate on the three days that we have at the moment. So should we make $18,000 a day on the remaining three days that we have right now? then our total blended daily TCE would be of $21,885 a day. Should we make $20,000 a day, then our daily blended daily TCE would be $22,100 a day. Should we make $22,000 a day on our free spot days, then our daily blended TCE would be of $22,331. So we're expecting at the moment another profitable quarter for DIS. Next page, page 10. Estimated fleet evolution. We're currently expecting to have an average of 32.2 ships in 2025. The vast majority is going to be, obviously, owned. As you know, we announced the exercise of one of the vessels that are currently in variable charge, which I will be using earlier in the year, the end of January, and the vessel is going to be delivered to us between September and October this year. Moving to the following graphs, potential upside to earnings. Right now, based on what we have fixed so far, we have a sensitivity for each $1,000 a day on the spot market that we make. We have a sensitivity of $5.9 million for 2025. And this obviously rises in 26 and 27, obviously because we have a lower coverage for those years at the moment, which is 9.3 million for 26. and 11 million for 27. Looking at the graphs on the left, here we show as usual what our net result would be should we run the rest of the year at breakeven level. So still very far from where the market is right now or what we've seen before for Q1. running the rest of the year at breakeven level would entail for DIS a net profit of approximately $47 million in 2029, and already almost 21 in 26 and 6.5 in 27. Again, here on the right, we show sensitivity. So should we, instead of running it at breakeven level, should run the rest of the year at $80,000 a day, 2025, then our net result would jump to $61.2 million. Should we run it at $20,000 a day, our net result would be of almost $73 million. Should we run it at $22,000 a day, then our net result would be of $84.7 million, and so on and so forth for the following years, for 26 and 27. Next slide. On the cost side, daily operating costs, We mentioned this several times in our previous calls this year. And as you can see, after an increase of daily OPEX in 2023, which as you know, and we discussed this as I said several times, as you know, this was due to some inflationary pressures that we had on crew costs and also on insurance. And of course, the insurance cost, the higher insurance cost is also a reflection of higher best of values that we had in the last years. So, but anyway, after this increase that we had in 2023, as you can see, in 24, we just had a small 3% increase, as we mentioned before. It looks like this increasing trend has been stabilizing and it's not increasing much more from now on. On the G&A side, instead, here we had a 10% decrease compared to the previous year, compared to 2023. So our total daily GNAs are of $23.3 million. Of course, here, you know, relative to the years prior to 2023, of course, here, there's also a component, a significant component of the variable part of the personnel costs that is, of course, the reflection and the consequence of two very good years two extraordinary years that we have been having. Next page, net financial position, I guess this speaks by itself, gross debt of $285.5 million at the end of the year, cash and cash equivalent of almost $165 million. That gives it a total net financial position of $121 million, excluding FRS 16. This is $117.6 million. And these figures were in 2023 respectively, $224.3 million and $198.7 million. So significant reduction of our net financial position during the year. This compares to a fleet market value of over $1.2 billion at the end of the year. And that gives us a net financial position to fleet market value ratio of only 9.7%. This figure, as you know, was 73% almost in 2018, at the end of 2018. And this is obviously, as you know, the consequence of... very significant deleveraging plan that we have implemented on top of the huge cash that we have been generating in the last years. Next page, key items of the income statement. TC earnings came in at $367 million in 2024. Total net revenue of $371.9 million versus $401.8 million in 2023, even though we manage a smaller number of vessels relative to the previous year. We had a positive result on disposal in 24 for $4.1 million that relates to the sale of Glenda Melanie that I mentioned before in the second quarter of the year. EBITDA was $260.9 million, which gives us, as you can see, an EBITDA margin of over 70%. EBIT was $202.5 million. And as you have already seen, we had a net result of $188.5 million in 2024 against $192.2 million in the previous year. Also excluding some non-recurring items, which are mainly the result of disposal of vessels, and some small non-recurring financial items. Our net result, excluding these items, so our non-recurring net result, our recurring net result was $184.7 million in 24 versus $196.7 million in 23. Looking at the quarter, looking at the last quarter of the year, Still a very profitable quarter, $25.4 million of net profit. Of course, this is weaker compared to the same quarter of the previous year, given that, you know, a different market. The market is still profitable, but not as it used to be in the fourth quarter of 23. Next page, page 14, are KPIs. So our daily spot for the year was 33,871. So as I mentioned, extremely profitable. On top of that, we had a coverage of 41.5% at $27,420 a day, which gave us a total blendability CE of $31,195 a day, which is... not too far obviously from the 31,451 that we achieved in 2023. And looking at Q4, of course, weaker than the same quarter of 23, but as I mentioned before, still extremely profitable. We had a daily spot average of 23,547, 38.7% coverage at an average of 26,381. which gave us a daily blended TCE of 24,644. And I pass it on to our CEO, Carlos de Motora, for the rest of the presentation.

Good afternoon. Good afternoon to everyone. So we start with the CAPEX commitments. We were quite busy in this respect last year with investments of almost $107 million relating to the four LR1s that we ordered to continue controlling a competitive and efficient fleet. And these vessels would be delivered to us in the second half of 2027, and it entailed payment to the yard already last year of around $45 million for 20% of the contract price. And another $62 million in investments relating to the exercise of two options on vessels which we previously controlled through time chartering and contracts. Another 68 million around in investments in this year. Also relating to the exercise of two options on DC and vessels. One of these vessels was already delivered to us. Another one will be delivered in Q2 most likely. And then we show the investments for 26 and 27, which relates to the remaining installments on the four LR1s with most of the payments occurring closer to delivery or at delivery. Going on to the following slide, these are the vessels which we still have on verbal charter in. A number of options were already exercised as we see on the left, on the table on the left, on the slide. We still have the fidelity and discovery that can be exercised. The discovery we could already exercise now, the fidelity from September this year. We have refrained from exercising the discovery so far because the implicit cost of this transaction is very low. We closed these deals just before interest rates started moving up early in 2022. And so they are fixed rate transactions. They're also very long financings that run until 2032. So we, of course, will continue monitoring the situation. We expected last year interest rates to come down faster than they did this year. The policies which the US government seems to want to implement should create inflationary pressures and the interest rates might take a while to come down. And therefore, we are in a wait and see mode here to see how these rates develop before deciding whether to exercise these options. Going on to the following slide, we have already exercised all the options on the TCN vessels. The navigator as shown on the table here was delivered to us in February and the leader will be delivered to us most likely in Q2. On the left, we show the column and the difference between the estimated market value and the exercise price of the exercise date. And we see that substantial value was generated at the time through the exercise of these options. For those vessels which we already owned at the end of the year, we also showed the difference between the estimated micro value and the book value at the end of the year. And we see that for the vessels which had already been exercised, these values were slightly higher than they were at the exercise stage. vessel values since then have come down slightly, but I would say that the vessel, the correction in vessel values is mostly that we have experienced this year is mostly linked to older vessels, not the younger tonnage, which is very sought after and very few companies are willing to sell. and here we show the instead the contract coverage it took us a while but we did manage to increase our contact coverage to for 2025 and to take it to 35 percent so not the 40 percent that we would have aimed for but getting closer we continue searching for for our opportunities Of course, there's a lot of uncertainty right now relating to several geopolitical events, which could impact the markets positively, some less positively. So there's not a lot of, at this stage, several charters are refraining from committing to longer term contracts. But we are confident that we will be able to gradually increase this contract coverage during the course of the year, and hopefully also cover some of the 2026 states this year. And here we look at the TC rates and support rates. They have softened since the first half of last year. but they are still at very attractive levels, much higher than they were during the period from 2009 to 2022. So still at very profitable levels. Asset values have softened, especially for older vessels. Here we see the 10-year-old vessel, the red line has come down a bit. Also the five-year-old, but less so. in percentage terms especially. And then we see in building prices, which are holding firm for now, but the reality is very few vessels have been ordered this year. On the trade disruptions, which there are quite a few now, this part of the presentation continues increasing. It's also quite difficult to keep it updated because things are moving very fast. But here, this is a slide that we have presented already several times, and we show how there was this big change in flows out of Russia as a result of the sanctions which were imposed by Europe because of the war in Ukraine with Russia selling, which used to sell around 50% of its refined products to Europe, now selling a large portion of that to more distant locations in Asia, the Middle East. but also to add some of it staying more regionally in Turkey and in going to African countries, but contributing to an increase in overall trade flows. And Europe, of course, then replaced the lost Russian barrels with imports also for more distant locations from the U.S. from the Middle East and Asia. And so also contributing to an increasing ton miles. This is the, let's say the second big disruption that is affecting the market and has affected the market, especially in the first half of last year, which is one of the main drivers, which contributed to the very strong markets in the first half of last year. because of the Houthi attacks in the Bab el-Mandeb Strait, the vessels had to sail the longer route through Cape of Good Hope. Of course, it's more expensive to sail this longer route, but when these disruptions started, the refining margins were such that sailing this longer route was justified. and therefore there wasn't a loss in volumes transiting on these routes, but there was an increase in distances. Then came the summer months, as we will see later, and we saw this cannibalization happening, whereby vessels which usually transport crude, transported clean products, And then more recently with refining margins, which fell at the end of last year, we actually saw an overall reduction in volumes going, saving on this route because of the increased costs. So the arbitrage were partially closed. And of course, this explains, in my opinion, the softness, relative softness in the market we have seen since July last year. So also important to note that despite the peace agreement that there is now in Gaza, the volumes crossing the Suez Canal haven't picked up substantially. They are still at very low levels. and there are threats currently by the Houthis of starting to attack vessels again if humanitarian aid is not allowed into Gaza. Here then we see this other slide, which is connected to the previous one, which I was referring to, the blue line, On the left hand chart shows the overall long haul trades for CPP. And we see that these have been rising steadily. And that is one of the main factors which has been contributed to the demand for product tankers over the last few years. But since the summer, there is this strong in the overall long haul trades for CPP products, which is explained, in my opinion, through the fact that this important route from the Middle East to Europe, because of the fact that these vessels have to sail to the Cape of Good Hope, has become less competitive. and that has affected the overall long haul trades. We have seen that the share, we also see on the yellow line that the share which was of these clean petroleum products, which was transported on uncoated vessels, and we see that there was a spike to 12% in the summer last year, and then it has now dropped again to more normal levels. which was expected. This anomaly which we experienced in the summer last year was linked to this big gap in earnings, which there was at the time between clean tankers and dirty tankers. Dirty tankers earnings have since improved quite a bit. and clean tanker earnings have softened, although I repeat, they stay at very profitable levels. So there's much less of an incentive for these uncoated vessels to transport clean products. On the right hand side, we see instead, gas oil sailing around the Cape of New Hope. We see that the volumes have, dropped significantly at the end of last year and then stayed at, had risen slightly at the beginning of this year, but stayed at lower levels than what we have seen in the Q2 especially and Q3 of last year. There's also quite a lot of jet fuel sailing around Cape of Good Hope generally, so here we're looking only at gas oil, but we see that there is lower volumes. Unfortunately, the Suezmax vessels do continue transporting. We see these blue bars, gas oil, but the VLCCs, which are the gray bars, we have seen much less of since November last year. Going on to the following slide, this is the, Third big disruptions here, or rather, so the sanctions, and we see here on the left, the vessels which were sanctioned by OFAC, by the US, which have been rising steadily since October 23, with a big jump, which occurred in January this year, just before the end of the Biden administration, there was a a large chunk of vessels which were involved in these, which was part of this shadow fleet, which was explicitly sanctioned by the US. US sanctions have historically been very effective in halting trade of targeted vessels. there was a wind-down period whereby vessels which had already loaded once these sanctions came into force were allowed to discharge their cargo. So we are going to start seeing the real effects of these sanctions only from now onwards, I would say. Of course, there are some loopholes and some vessels which were explicitly sanctions continue trading in the They turn off the AISs and they continue operating. Others, there's also the possibility of less efficient trading occurring through shift-to-shift transfers, and we expect to see more of that. But nonetheless, there is an important number of targets which were sanctioned and that should affect the fleet productivity and tighten the market substantially in the coming months. We might see further sanctioning because the shadow fleet is much bigger than the vessels which were already sanctioned. It's between 700 vessels and 1,000 vessels. depending on how you classify them. And so there's ample for these sanctions to be increased. But already those that were sanctioned, if you include also the European and UK vessels, represent 8.4% of the total tanker fleet. So it's a very substantial amount. And then another disruption now, potential disruption, but it is already affecting the market as we speak, is the threat of U.S. port fees on Chinese-built vessels. It's important to note, as per initial proposal from the U.S. trade representative, these fees are would not apply only to Chinese-built vessels, but also to operators which have Chinese-built vessels in their fleet, irrespective of which vessel is calling the U.S. ports, and also for operators that have Chinese new buildings in their fleets, irrespective of which vessel calls the U.S. ports. We don't know. This initial proposal is very wide ranging. It is unlikely to pass, in my opinion, as initially proposed. There is a period now of consultation with groups which are going to be affected by this legislation. They have until the 24th of March to provide their comments. And I expect strong pushback from several groups in the U.S. uh several export industries are going to be uh severely affected not only the um the oil industry which which will also be affected by these uh regulations uh but uh and of course it will affect also the us consumers and it has the potential to generate also a lot of inflation so It could be severely damaging for the U.S. economy as currently proposed. We see here only looking, focusing on the tankers. There's not, if you look only at the vessels on the water, there's not a huge percentage, but still significant percentage already of vessels which are Chinese-built, around 28% of all tankers. But if you look at the order book, then the percentages are much higher. In some cases, you go above 80%. For example, the Panamax L01 sector, which are Chinese-built or are going to be built in China. If you then look at how this regulation was the initial proposal and the fact that it affects fleets of vessels and not only the Chinese vessels specifically, you see that the unencumbered vessels, so the vessels which would be free to trade to U.S. ports without being subject to such fees is actually very small. And we are talking about only 25 Sorry, I cannot see the preview here. It's 26% of the MR, for example, which would be free to trade without being subject to such fees. So it is to have a huge impact in the market. I expect that if the strategic objective of these fees is to penalize Chinese shipbuilding, then I expect the initial proposal to be modified to only include such fees for vessels which are ordered from now onwards at Chinese yards. That, of course, would be much less detrimental to the economy and it would achieve, I believe it's a strategic objective of reducing interest for Chinese new buildings. Going on to the following slide, there's also the possibility of tariffs by the U.S. on its two possibly most important trading partners because they are also neighbors, Mexico and Canada. Both countries are important traders of crude oil and refined products with the U.S. We see here the volumes which are involved, and Mexico has a very important export of crude oil to the U.S., almost half a million barrels per day. and the U.S. exports 600,000 barrels per day of CPP to Mexico. So if such tariffs were to be imposed, it would affect most likely the competitiveness of the refining industry in the U.S., reduce refining throughputs. less products would be exported from the U.S. to Mexico. Mexico is likely to import, therefore, from other locations which are further away. And there is also the possibility of an escalation with Mexico imposing tariffs on the U.S., and in that case, U.S. exports of refined products to Mexico would fall more drastically and it would be more impactful on the market. Also, the US might need to replace the crude oil and the DPP imports from Mexico. importing crude oil and BPP from more distant locations. So once again, an inefficiency which would be introduced in the market, which would lead to an increase in ton miles and beneficial for the market. The same applies to Canada here that the potential tariffs on energy products are lower, 10%. But Canada is a very important exporter of crude oil to the U.S., 4 million barrels per day, mostly through pipeline, but part of it also 340,000 barrels per day seaborne, and the seaborne crude oil which goes to the U.S. West Coast. is likely to be replaced in such a circumstance with imports from other locations. Some of the crude oil which goes through pipeline could also potentially be exported through this DMX pipeline, which doesn't have a huge capacity, however, it's 900,000 miles per day. to other locations in Asia, possibly, and with the U.S. having to replace these imports with imports by sea from the Middle East, possibly, because it needs to import some heavy crude oil because of the way it's refining it as it's configured. So and then you have also the U.S. exporting to Canada 600,000 barrels per day of CPP. So the important trade flows between the two countries and it could be very impactful on the market if these tariffs go ahead. Going back to the fundamentals, well, things are changing fast because of the geopolitical situation. These estimates from the EIA are from February. We have to see how they are modified in March. But, I mean, it is a very difficult environment in which to make forecasts. There was an anticipation that oil demand was going to accelerate this year from the tepid growth that we experienced last year of just under one million barrels per day, which was affected by the weak industrial activity, in particular in Germany and France last year. The growth this year will be driven by what was expected to be driven by an improvement in the performance of the German economy, but also mainly by the growth in emerging markets, in particular in India and Brazil. But also, of course, China, where, however, demand growth is slowing down over the last few years. refining throughput was expected is expected to increase this year slightly more than it increased last year by around 600,000 miles per day so the fundamentals on paper should look good I mean of course there is a possibility that the German economy might grow even faster than initially anticipated if The stimulus package, which is currently being discussed, is approved, which will entail substantial investments in infrastructure. On military equipment, but that is still to be seen. And there's also the possibility that the U.S. economy might not perform as well as anticipated at the beginning of the year because of the policies uh being adopted and being threatened to be adopted by the u.s government the oil supply picture is very healthy a lot of oil which is expected to come from non-opic country non-opic countries in particular the u.s canada brazil but also the possibility of more oil coming from OPEC countries with OPEC recently announced that it will increase its production in April of around 140,000 barrels per day. So start this unwinding process, which, however, they claim they can stop at any moment if the market is oversupplied. There might be some room for them to opt to continue increasing as long as the U.S. follows through on its threats of trying to stop, prevent Iran from continuing to export substantial amounts of oil. So Iran used to export, last time Trump was president, around 300,000 barrels per day of oil. And over the last few years, it increased it to 1.6 million barrels per day. And so there's a substantial room for most stricter sanctions to be re-imposed on Iran to curtail these exports, creating more room for OPEC-plus countries to increase their output, which would then be transported on non-sanctioned vessels. So contributing to the demand for the demand of these compliant vessels. We see that here that oil inventories are below the five-year averages. So that is also supportive for the market. And we see that for 2025, oil demand growth should be driven by increases in NAFTA and jet fuel demand. Jet fuel demand growth will slow down, but will continue at quite a healthy pace and NAFTA demand will be instead linked to the large investments, especially in China and new petrochemical plants. But we see also positive contributions from gasoline and diesel. Diesel last year had provided a negative contribution to demand. The crude tanker fleet, the order book is still at quite low levels by historical standards. We see that it actually has fallen since the end of last year. And we see that on the LR2 fleet, there's still a substantial portion of the LR2 vessels which are trading clean. It has fallen slightly since July last year. But it was in July 20, for example, much lower, 54%. There are going to be quite a lot of LR2 vessels delivered over the coming two years. It is a product tanker segment where there are more vessels that are going to be delivered, but there is room for more of these vessels to switch into dirty trades, helping the CPP market. Refining capacity continues growing mostly in the Middle East and Asia. We had also big increase in Dangote last year. Dangote capacity increased last year, but will continue increasing this year. So Dangote is actually going to be exporting more. It's my expectation this year. It's already now providing some important export powers to the market. And so all of this should contribute to ton-mile growth going forward. The fleet is aging rapidly. We have already over 50% of the mRNA-1 fleet, which is over 15 years of age. And also importantly, we see here that there is a percentage of the vessels which are more than 20 years is, again, higher than the order book, which has actually fallen since the end of last year. So this is very healthy that we have this higher percentage of vessels which is higher than 20 years old than we have vessels ordered. The same applies if we look at across all tankers. We decided to include this graph here for all tankers now because since There is also quite a lot of LR2 vessels which have been ordered. We felt we should account for these in the statistics. But if we do account for these, we felt we should account also for the crew tankers because of these linkages and the fact that these LR2 vessels do switch and can switch quite easily between clean and dirty trades. And we see that the supply picture is also very – it's actually not that bad. If we look at all tank, across all tankers, we have an even smaller order book of 13.4% and an even bigger gap between this order book and the percentage of the fleet, which is more than 20 years, which stands at 17.2%. We see that a lot of vessels which are going to be turning 25 in the coming years, especially from 27 onwards, there's a huge, very sharp increase in the percentage of vessels which are turning 25. So there's a lot of potential for demolitions. uh the deliveries are um are going to be uh quite limited in the first half of the year but there's an acceleration in the second half and especially in q4 very little demolished so a lot of potential for demolition going forward only six vessels were ordered in the first two months of this year. So this is a very low number of vessels ordered. And here we see that the fleet growth, if we look at MRs and LO1s, accelerates a bit, but stays at historically quite low levels. It accelerates to 2.7% this year and 3.6% next year, assuming quite limited demolitions. If we look at across all tankers, then the fleet growth is of 2% in 25 and 2.6, 2.9% in 26. So still quite low and lower than if we look only at MRs and LR1s. Finally, we look here at the discount to NAV, which is substantial. I must say that this NAV here is probably not that reliable because especially for the older vessels, there were some transactions at lower values since the end of the year. So the NAV might be slightly lower than what we are showing, our current NAV than what we are showing here, but still we are trading at substantial discounts to NAV. And well, this we covered and here we show the dividend distributions over the last few years. We also include the proposed dividend for the AGM now of $35 million, which including the buybacks would entail a payout ratio of 40%, which has been growing over the last three years. So that is it. Thank you very much. And I pass it over to you for the Q&A.

Thank you. This is the Chorus Call Conference operator. We will now begin the question and answer session. To enter the queue for questions, please click on the Q&A icon on the left side of your screen and then press the Raise Your Hand button. Please mute your microphone locally, and when prompted, make sure you turn on your webcam in the pop-up window. If you are on the phone instead, please press Start on 1 on your keypad. The first question is from Matteo Bonizzoni of Kepler-Chevreux. Please go ahead.

Thank you. Good afternoon. I have one question on your, let's say, central case scenario on the rates, given all what you have said here in your detailed presentation. So what we're seeing is an increase of the order and potentially some softening of the term miles. The rates have already corrected. But interestingly, in your presentation, you have, for example, say that there could be a ban to the activity of Chinese-built ships, which could mitigate in some way the impact of the increasing new building. So all in all, we know that it's always difficult to make projections for the rates. Would you say that in your central scenario level, close to the current one, could the could be sort of off-floor or even maybe plus and minus factors for the next quarters we could have for the softening. Thanks.

Matteo, thanks for the question, but it's a difficult one. It's very difficult to answer. There are several disruptions which are affecting the market, as we tried to cover in the presentation. It took us I think it was a bit longer than usual, the presentation because of this, but there are so many factors at play that we, of course, the fees on which could apply to the Chinese-built vessels calling U.S. ports is also quite impactful, but it is also the less certain of this trade disruption. This trade disruption today is creating uncertainty, and so it's stopping ship owners from ordering vessels at the Chinese yards. And today, as we see, the order book of tankers is almost exclusively in China. over 80%. So if ship owners stop ordering in China, this would be very positive for the market because Korean and Japanese shipyards will not be able to replace them. It will take them some time to increase production capacity, and they are very high-cost countries. it's also difficult for them to increase production capacity. So India might eventually come into play, but it will take years for that to happen. But as a shipbuilding country, so of course the official intention here is to build more vessels in the U.S. That's what the U.S. government declares, but that is even... It's a utopic, I would say, to build an MR today in the U.S. It costs over $200 million. So I don't know how... The amount of subsidies that would need to be provided to these U.S. guys to make them competitive is enormous. So it's... um yeah it is very difficult to say how you know the market will pay out there are the the sanctions which uh especially the sanctions which are being applied to to to vessels in the shadow fleet uh they could be positive for the market if these sanctions are toughened uh further in this room for that to happen that could also be very positive for the market If sanctions are imposed in Iran, to Iran, tougher sanctions, that would be very positive for the market because it would create room for more crude oil to be transported on compliant vessels, would tighten benefits, especially the BLCC market, but that would flow through to also the other segments. So these are the really factors which could be supporting the market. But of course, a peace agreement in Ukraine, which would entail the removal of sanctions also by Europe. And that is a big question mark because Europe seems to be moving in a completely different direction from the U.S. If Europe were to remove these sanctions, then that would be short term negative for the market. Then, of course, there is scope for demolitions of vessels to rebalance the market, but short-term it would be negative. The removal of the normalization of transits to sewage potentially could be negative for the market, but I'm a bit uncertain about that because, as I mentioned, the overall volume zone that are being traded on that route have fallen as a result of the higher costs linked to sailing through Cape of Good Hope. So there is, you would be losing some, you would be sailing shorter routes, but potentially there will be larger volumes sailing on such routes if there is a normalization of the situation in Suez.

I hope I answered your question.

So I don't know if this is a flaw. There's room for rates to rebound. And we have been seeing a positive movement over the last few weeks. So there has been a strengthening in rates, especially east of Suez. It's still very weak in the U.S. Gulf. But that is seasonal. That's linked to refinery maintenance there. And I think by the end of March, beginning of April, that market will recover. But, yeah, let's see.

The next question is from Daniele Alibrandi of Stifelf.

Hello everyone, thanks for taking my questions. I have a couple. The first one may be for Carlos. I know this is a tough one, but what could you be in your view the most impactful catalyst for a market pick up and the bottom out of spot rates? So you elaborated already on the trade disruption before. But I was curious to understand from your perspective, which is the most relevant one in terms of potential impacts. Second one is a follow-up on the Red Sea situation. It's not clear to me if the situation has already normalized, I guess not, or if it is normalizing or not at all, just to be clear on this point. And the third one, maybe for Federico, on the working capital dynamics, which turned negative in Q4, should we expect in 2025 a normalization of the tailwind observed in the past two years? And so the absorption actually to continue in the following quarters, maybe as a consequence of the increase in fleet coverage or not? Thank you.

Thank you, Daniele. So which one is the most impactful? It's difficult. I think that if we, of course, if we could have these long haul volumes coming back and being transported on product tankers, not on uncoated tankers, So with the arbitrage opening up despite the longer distances, which needs to be sailed through Cape of Good Hope, that would be very positive for the market. We have seen over the last few days, quite a spike in the rates for LR2s and LR1s, which is promising. So hopefully that's the beginning you know, a longer strengthening trend, but we will have to wait and see to understand how that evolves. The Red Sea, no, the situation hasn't normalized at all because we see here that the volumes, this is okay, it's not updated up to March, but This is the latest figures we have, and it shows that volumes through Suez remain very low. And given the threats made by the Houthis recently of further attacks, if there is no, if humanitarian aid is not allowed into Gaza, I think that it is even less likely that this situation will normalize quickly. So, but then again, as I mentioned, if it were to normalize, it is not necessarily going to be negative for the market. And, well, I think that the sanctions, the tougher sanctions are being posed. on these vessels by the U.S. in particular could be very positive for the market. So we have to see here what is going to be the stance of the U.S. authorities, which the U.S. government has been very unpredictable, very difficult to read recently in relation to its stance relative to Russia. There was... They seem to have gotten much closer and much more aligned with Putin recently, but then there were some announcements that if Putin were not to accept the 30-day truce that was agreed between the US and Ukraine recently, then they could escalate sanctions on Russia substantially. So if that were to happen, then it of course would be very positive for the market. Pass it over to Federico.

Yeah.

No, thank you. On the working capital side, Daniele, there's nothing to write home about in the sense that it's really what happened in Q4 was really a time in effect in working capital and Q3 was actually positive. Q4, as you mentioned, was negative for 8.3 million. But it has a pure timing nature. Generally speaking, when we increase our coverage, we tend to have better working capital dynamics. And this is due to the fact that time shutter hires are paid monthly in advance. So that gives you a very positive working capital effect. While in spot employment of your vessel, in spot employment of your vessel, freights are usually paid upon discharging of the cargo. So usually four or five a week after you discharge the cargo. And plus you have to advance port costs, bunkers, et cetera, which you don't have when you fix a vessel out in tight chargers. So I hope that answers your question.

Sure, thank you. And maybe just a follow-up on what you said on Russia. In case of, say, a resolution of the conflict, I guess that also a potential positive effect could come from the scrap of the foreign the shadow fleet which is quite big. Do you expect in that case that the scrap could be very fast, slow? What kind of reasoning can we do around this topic?

It's difficult to forecast how fast the scrapping could occur because there are also not all the great vessels are the same. Some have been operating in legitimately under the price cap and are controlled by good ship owners. And these vessels most likely will be able to continue trading without any problem. But of course, a large chunk of these vessels have been maintained very poorly. They are very old and it is going to be difficult for them to then re-enter mainstream trades. And if you remove these sanctioned trades, there's going to be very little left for them. You know, very few trades or opportunities for employment left for them. So, it will become very uneconomical to continue employing them, and it is likely that they will then have to be demolished. There might be also bottlenecks if that were to happen at demolition yards, which would prevent vessels to be demolished as fast as they should be. but we will have to see how that plays out.

Okay, thank you very much and good luck.

Thank you. The next question is from Massimo Bonisoli of Equita.

Good afternoon. Ciao, Carlos and Federico. Two general questions. One on US tariffs. We have seen US industrial companies anticipating purchases of goods ahead of the introduction of US tariffs. From your perspective, do you see the same trend in the tanker market? You showed in one of your slides that inventories are almost back to past year's average. And I have another question on the market. During summer, spot rates were under pressure and Q4 was seasonally more favorable, but rates were not recovering as much as expected. And you explain also the reasons behind. Can we say that it is also driven by the weaker refining margin environment in the second alpha, which generated less trading demand for the clean tanker market? Thank you.

Yes, Massimo.

Thanks for the questions. Good questions on the tariffs. Yes, I think there is some anticipation of purchases, especially of crude oil by U.S. refineries. There are some U.S. refineries in Europe which are landlocked in the Midwest, which don't have much choice but to buy, for example, from Canada through pipeline. And so they have a big incentive to anticipate these purchases. When there was the first threat of introducing these tariffs, in February, there was quite a sharp movement up also on the TC2 with a lot of cargoes fixed from Europe to the US Atlantic coast. But then a lot of these fixtures were not confirmed after Trump decided to postpone the implementation of the tariffs. This time as we approached the March deadline, there wasn't a similar movement as the one we saw in February. And so the market seems to be, in that respect at least, seems to be waiting to see what happens before moving. Because maybe there is some skepticism as to whether these tariffs will actually be implemented or whether they are just being used as tools to negotiate other concessions from Canada and Mexico. Regarding the lack of rebound of the market in the second half of the year, um especially in q4 uh i agree with you and i was expecting a stronger market to be honest i mean it's uh q4 and also in q1 this year uh i think there was quite a lot of uh of refined product which was imported by by europe on uncoated tankers over the summer so that might have created a bit of an overhang in europe of refined of such products, which has dampened demand and closed this arbitrage for these longer hold trades in the last two quarters of last year. And I agree that the lower refining margins also play a role here that some trades are not viable or profitable because of that and therefore yeah that might have negatively affected the market also. One other factor which could explain a bit of this relative weakness is the ramp up in production from Nangote. I mean, one negative factor which we saw in the market last year was this reduction in imports from Europe by Nigeria. But the positive aspect here is that Nigeria is now starting to export more. So hopefully we have already experienced the negative consequences of this new refinery coming online in Nigeria. And the effects from now on would be positive for the market.

Thank you.

Thank you very much. The next question is from Clement Mollies of Value Investor Edge.

Good afternoon. Thank you for taking my questions. I wanted to start by asking about how shareholder returns fit into your capital allocation priorities going into 2025. In 2024, you ended up paying around 40% of net profits. Could you provide some insight on what payout we should expect in 2025? And secondly, should we expect dividends to remain the priority?

Thank you for the question. Now, it is a tough one to answer, I must say, because of the volatility of the market and the uncertainty relating to all these geopolitical factors. We need to better understand how this market is going to be moving in the second part of the year, in the rest of the year, let's say. before providing an indication of the expected payout for 2025. So dividends, I wouldn't say they are a priority, but of course we are mindful that shareholders would like to receive more and more dividends, including our controlling shareholder uh is uh would be very happy to receive more dividends so we will try to find the right balance when deciding uh how much uh how much to distribute uh given the the investments we all have already committed to given the outlook for the market and providing us keeping a enough firepower to be able to profit from a downturn, which is not our base case, but if it were to happen, then we will then be deploying some of this firepower to acquire more vessels, either on the second-hand market or resales or new buildings. Let's see which is more convenient at the time. So, yes, I apologize for not being able to provide a clear answer at this stage, but hopefully in the course of the year we will be able to provide more visibility in this respect.

I understand. Thanks a lot, Olerp. You provided some commentary on recent pressures on both daily operating costs and G&A, but as we go into 2025, could you talk a bit further about whether we should expect a normalization of these costs or whether we should expect them to remain near current levels?

Well, no, thank you for the question.

I think we've already seen, as I mentioned before, a normalization of these costs, both on the off-exide As you could see before, I can go back to the previous slide that we were showing, we had an increase in 2024 of 3%. that is here at $7,728 a day for a daily weighting cost of our vessels. And the GNAs in 2024 were also lower than in the previous year. So I would expect these figures more or less depending also A little bit, of course, on the inflation to stay more or less in line with these numbers. I don't expect additional bumps in these figures here. And as I mentioned before, we always have to remember that in 2024 and 2023, of course, GNA is wise. are also the consequence of some very, very good and exceptional years in which we made last year $192 million profit, this year $188 million profit. So consequently, obviously, there's also an increase for these two years of the variable component of personnel costs.

So that part is really related to how the company performs.

Yeah, makes sense. And final question from me, which is more on the modeling side. You recently exercised the purchase option on the CLOD Houston, which was previously bare-boating. Could you quantify the liabilities associated with the bare-boating as of year-end?

Sure. I'll tell you immediately, on the Fidelity and Discovery, wait a second, on the one that we just exercised, huh?

I was wondering on the Cielo di Houston, yeah, on the recent one.

Sure, I'll tell you immediately. It was 27.2 million dollars. Sounds good. Thank you. I'll turn it over.

Thank you very much.

As a reminder, if you wish to register for a question, please press Q&A on the left bar and raise your hand or press star and one on your cell phone. For any further questions, please press Q&A on the left bar and raise your hand or press star and one. Gentlemen, there are no more questions registered at this time. I'll take a call back to you for any closing remarks.

Well, thank you everyone for participating in the call today and thank you for the very good questions and look forward to seeing you and speaking with you soon when we present our Q1 results in May. Thank you and good afternoon. Thank you.