Dampskibsselskabet Ord

Hello and welcome to the Norden Q1 2025 Analyst and Investor Conference Call. My name is Harry and I'll be your operator today. All lines are currently in listen-only mode and there will be an opportunity for Q&A after management's prepared remarks. If you would like to enter the queue for questions, please dial star followed by one on your telephone keypad. Alternatively, you can submit written questions using the Q&A function on the right-hand side of your webcast screen. I would now like to hand the conference over to Norden CEO, Jan Rymbo. Thank you. Please go ahead.

Thank you very much. Let me start by pointing out some of the highlights from the first quarter of 2025. We delivered a group net profit of $33 million and a return on invested capital of 11%, and that was driven primarily by good coverage in weaker markets. We've also seen improved financial performance that was driven by a margin recovery in the dry operator segment in freight services and trading. Last week, I upgraded the four-year net profit guidance to a range of $50 to $130 million. NAV at the end of the quarter stood at Danish kroner 372 per share, and we are focusing on realizing net asset values by selling nine vessels in the quarter, and out of that, three were from declared purchase options. We are... paying out an interim dividend and a share buyback program in total of $17 million, which is accruing to 52% of the net profit for the first quarter of 2025, and that is through a dividend of two Danish kroner per share and a new share buyback program of $7 million. I will now turn over to CFO Martin Badsford. Please turn to the next slide.

Thank you very much, Jan. Before diving into some of the details of our segments, let me just point your attention to the fact that in our report, we have added new segment information and operating EBITDA figures where we adjust for IFRS 16. This is on the back of requests from both the analysts and investors, and we hope really that this will add to the transparency and ease of reading of our reports going forward. On that basis, our EBITDA in freight services and trading unit was $3.3 million compared to a loss of $27 million in the same period of last year. And breaking that down into the new four segments that we report on the FST, you can see the numbers at the bottom right-hand side in the gray area of the slide. And you will see the dry operator made a positive EBITDA of $2.1 million, projects in arsenic continue to deliver profitable growth with 2.3 million. Tango operator was somewhat down as expected, since it's very dependent on the market levels that were weaker in this quarter. And logistics did book a small loss, but much improved compared to the same period of last year. Please turn to slide number four. Or as the management division continued to deliver good results with a contribution margin that increased to $48 million versus $42 million last year. EBITDA did actually decline, but that was to a large extent explained by last year being impacted by gains from vessel sales, which was lower in this year. And at the end of Q1, Norton had a total of 66,000 extension option days and 81 purchase options. Of those, more than half can actually be declared within the next two years and strike prices that are on average 15% below current broker values. So there's still a lot of good value in our purchase options. And actually, even though we have declared a number of purchase options recently, we continue to also build the portfolio for the future. So actually, we still have the same number of purchase options that we had at year-end 2024. Now to slide number five. So our earnings were delivered against the backdrop of fairly weak markets, but we were actually quite well positioned for that. It was a quarter marked by political developments and geopolitical uncertainty. And especially worth mentioning is the U.S. Trade Representative proposed port fees on Chinese-built vessels entering U.S. ports. There was a new draft coming out a couple of days ago which actually was a significantly watered-down version of the original proposal. Then today, actually, a new proposal has then been set forward. So this just shows you how volatile the situation is. But basically, compared to where this started a couple of weeks ago, the versions that are being circulated are something that we think Norton's flexible business model can handle with limited costs. Then there's the tariffs that were first announced at the beginning of April and later put on hold for at least half of them. I would say that there are limited impacts on our markets directly from the U.S. tariffs, but we do see a lot of uncertainty and investment postponements adding to the risk that the global economic outlook is actually weakening as we speak. We think we're quite well positioned to capture opportunities in weaker markets in the short term, We have a strong balance sheet with limited bank debt. And we do actually believe that the long-term outlook is structurally quite attractive. And we have position for that, as you can see in the bottom graph on the right-hand side. And actually, in the short term, you will see that at the end of April, we had more open tanker days than we did in dry cargo. And in tankers, of course, we are long. That's 5,700 open days. whereas in dry cargo, we assured 3,900 vessel days for 2025. And with that, turn to slide number six, please, and actually end.

Thank you, Martin. On this slide, we'd just like to highlight the diversity of our business model, where we both have owner and operator activities, and we're active across TANGAS and dry cargo. And that flexibility enables superior returns over time. For example, it's the ability to adjust exposure on several different parameters that helps us to navigate market volatility. At the moment, we have mainly exposure to the product tanker market for the rest of the year, but longer term, we are more exposed to the dry cargo market. This enables strong value creation through the cycle in the shipping markets. And as you can see in the graph on the right-hand side, with value creation over time, we can deliver best-in-class return on invested capital over time. Our ambition is to generate a high degree of stability in earnings and protect the downside risk while also embracing the volatility to capture the potential high markets that we also see. Please turn to slide number seven for guidance. On the back of increased gains from the sailor vessels and good operational performance, we have upgraded the full year guidance on April 25th to a range of between $50 million and $130 million. This includes sales gains from already agreed transactions of $45 million. In the freight services and trading units, we expect margins to improve compared to 2024, And in the asset management part of the business, we expect to continue to benefit from high earnings coverage in both dry cargo and tankers at profitable levels. Please turn to slide number eight. And let me just finish here with the key takeaways from the first quarter. It was a solid first quarter with a group net profit of $33 million and 11% return on invested capital. We are well positioned for weaker markets in the short term, while we are maintaining deferred exposure in markets where we believe there are some strong long-term fundamentals, especially supported on the supply side. We continue to benefit from our flexible business model and have great upside from our portfolio of purchase options. We have, over time, delivered best-in-class return on invested capital and return to shareholders through our flexible business model. the current share price indicates a large upside to net asset values. So with that, we can turn over to the Q&A session.

Thank you. We will now open the call for your questions. If you would like to ask a question, please dial star followed by one on your telephone keypad. And when preparing to ask your question, please ensure your phone is unmuted locally. Alternatively, please submit any written questions using the Q&A function on the right hand side of your webcast screen. As a reminder, that's style one for any questions or the Q&A function on your webcast screen for written questions. And we'll pause here just briefly to allow any questions to come in. As a reminder, for any questions, please dial star one if you've joined over the phone or submit written questions using the Q&A function on your webcast screen. With that, we have no questions on the line at this time, so I would now like to hand back to Norton Management for closing remarks.

All right. Well, thank you very much. Thank you for your attention and have a good day. Thank you and goodbye.