Hoegh Autoliner Asa

Good morning from Arendelle and welcome to Herc Autoliner's second quarter presentations. My name is Mai Linh Vu, Head of Investor Relations. And with me today, we have our CEO, Andreas Engge, and our CFO, Per Bin Rosmo. We will walk you through the last quarter business and financial update. If you have any questions, feel free to send an email to our Investor Relations mailbox at ir.herc.com and we can read out the questions at the end of the presentation. And with that, I will leave the stage to you, Andreas.

Thank you. Yes, welcome to today's presentation. And we're starting with this beautiful picture of Hög Aurora, the world's largest and most environmentally friendly car carrier. We had a great naming ceremony last week at the yard in China, and the vessel has since then bunkered LNG and is loading cargo in Japan and is going to make a fantastic voyage back to Europe. So that's a big milestone for our company. It's something we've worked for the last three or four years and we're impressed with the results and very, very pleased that the program we laid out in 2021 in connection with our IPO has been executed flawlessly and the vessel is now in operation well ahead of original schedule. To the quarter, another good quarter for Höök Outliners. We have an EBITDA of 174 million US dollars and we happen to have a net profit also of 174 million due to some extraordinary items that Previn will come back into. And, you know, a gross rate of $96, you know, illustrating that the market is still at, you know, it's a very attractive level and coming back to, you know, our contracting activity is also reflecting that. In line with our dividend policy, we have declared a quarterly dividend of $127 million that will be paid during August. And we have taken delivery of one purchased previously bearable chartered vessel, Hög Jacksonville, which is a modern, efficient vessel, part of our core fleet. equity ratio up 3% to 65%. And again, Per-Evin will explain to you, you know, a very strong and continuously strengthened balance sheet. We're going through the standard items. I'm going to talk about market lid touch on capacity and sustainability and Previn will take us through the financials before we have an outlook and Q&A. And one of the characteristics I think of this first half for her goat liners is that with the Red Sea situation and things, we have a constraint on volume. In addition, we have, as you know, also sold a few of our older vessels and the first one was delivered at the end of last year and it's obviously impacting our capacity. But given the pricing of this vessel and the accelerated delivery on our new builds, we believe that's on balance a prudent portfolio management move. High and heavy and break bulk roughly constant said the net rate is with the positive underlying trend now mostly driven by contract renewals and new contracts. And coming to new contracts, we have now signed what we call sort of new contracts with 4.6 billion cubic meters, weighted average of 4.3 years, very attractive rate levels. And we still have, I mean, we are in advanced processes with several contracts, and we still have legacy contracts an annual volume of 3.8 up for renewal most of it during 2024 and we are continuing to increase our contract coverage and i want to make one comment on this and that is you know we had quite an attractive result out of chasing opportunity in the spot market during the last 12 to 18 months. I think during this first half, we have a very, very clear strategy of where we're willing to give up short term profits from potential opportunistic spot trades and rather allocate volume into long-term contracts, and that also includes new contracts, new counterparties, in order to further increase the resilience of our contract backlog and improve our customer and cargo portfolio. And we have good progress in that work, and I think we are continuously strengthening our contract portfolio. In the market, still steady growth, still driven by China. And China is further firming up its position as the leading vehicle exporter. And it's also driving the market growth to a large extent. But it's also interesting to see that it's not it's not actually eating into the volumes from South Korea and Japan. So it creates an overall very strong volume position out of Asia. High and heavy has been, you know, in terms of the global market volumes, slightly down this year due to, you know, I think inflationary and sort of effects on CapEx. It's projected to regain its growth. It is an important market segment. We are introducing vessels with additional high and heavy capacity and more cargo flexibility. So it's obviously an important market and we believe there is good outlook also for high and heavy. On the capacity side, I think, you know, we're seeing now that, you know, new builds are deliveries and new builds have started. They're not at the level that in our view is fundamentally changing the capacity situation. But, you know, we are obviously very pleased with the first vessel that we have, Aurora-class vessel now in operation, and the next one that we will get in a little more than a month, and then further two that are in advance. I mean, one of them is actually a float at the yard, but will be delivered right at the beginning of 2025. So we are in the situation where we are getting new capacity into the system that both has allowed us to to dispose of older vessels and is giving us capacity in a situation where the capacity market is still very tight. Sustainability, that is obviously an important part of our strategy. And with the new builds and working into new fuels, we are, I think, at the verge of making real progress. But in this half year, we're still with our existing fleet is still biofuel and fuel efficiency measures that matters. And we respond to that by continuously increasing our use of biofuel for customers. And we have good demand and are continuously increasing the use of biofuel. we have a preference for the 100 biofuel that is is totally clean easy to explain we're also for this quarter for the first time also bunkered some some blends which obviously also gives gives some effect but also on the technical side we have we have a very clear program on technical updates for fuel efficiency, which includes propellers, bulbs, additional technical technical upgrades. And and we have installed substantial fuel efficiency upgrades on six vessels during Q2. And we have a further nine on order. So in addition to taking delivery on world class, extremely efficient, zero carbon ready vessels, we are obviously also working to improve fuel efficiency on our legacy vessels, and there's good progress on that. That is my part of it, and Per-Eyvind will take you through the financials in some more detail.

Thank you, Andreas. Good morning, everyone here in Arndal and on the webcast. As Andreas mentioned, we had recovery in volumes in second quarter compared to first quarter. That was expected. We had a lot of disturbances in the scheduling and routing of vessels early in the year. coming from the sudden situation where we had to reroute vessels through Cape. To some extent that has been migrated and we ended the quarter with 3.5 million CBM. Net rates compared to first quarter, more or less the same. We saw a small reduction from 83.6 per CBM to 83.2 per CBM. And as we all know here, the top line is the driver for our EBITDA and profit. So it is important for us to follow these numbers. Second quarter results, we saw on the back of higher volumes, the freight revenues increased from 328 million to 341 million. That translated into an increase in the EBITDA from 162 to 174 million. It's somewhat lower than what we had the previous quarters, but it's basically all coming from the reduction in volume. The rate has to a large extent migrated the reduction that we have had in volume. We are reporting a net profit before tax of 135 million. That is an increase from 130 million that we had in the first quarter, and it's more or less exactly the same net profit that we had in the second quarter last year. And bear in mind, again, that we have considerably less volume this quarter than second quarter last year. It's actually a reduction of 600,000 CBM from second quarter last year. It is the volume that is in a way limiting the upside here, comparing with the 199 million that we had in Q4. That was all time record high for the company. You see here that the cargo revenue was reduced with 54 million into the first quarter, and then we see a small uplift in the cargo revenues from first quarter to second quarter. Bunker expenses, positive development, plus 3 million, comparing to QFAR, and other operating expenses, looking at the the first half has actually been reduced with 12 million part of that is of course that we transport less volume that gives less handling cost and to some extent also less port costs so this basically follows from the reduction in the volumes The balance sheet is still extremely strong and healthy. It's solid resilience now in the company. We have been focused on building resilience, and that is still intact. Net interest bearing debt, 354 million USD only, including lease liabilities. And we have a net interest bearing debt EBITDA ratio of 0.4. Book value of equity, again, well below 60%, 65%. It increased somewhat from first quarter, but it is more or less the same as we had in second quarter last year, 64 million. And we have been paying out substantial amounts in dividend over the last 12 months. The cash balance, we are targeting a cash balance by the end of the quarter of plus minus 200 million. We ended the quarter with 195 million. And in addition to that, we have 204 million in drawn revolving credit facility. So also cash wise, we are well off also by the end of this quarter. The development in cash, comparing to end of first quarter, we had 207 million. We generated 169 million from the operation. And we had capex of 65 million. A majority of that is yard installments related to the new buildings. That accounts for approximately 50 million out of the 65. We had a debt service of 18 million installments and interests, and we paid 109 million to the shareholders during the quarter. And we took new debt of 70 million. That was 50 million related to the purchase of one of the least vessels that we had from Ocean Yield. Hug Jacksonville and we also took 20 million related to two of the new buildings. That is actually pre-delivery financing given by the lease provider for two of the vessels. And we had lease payments and others of 15 million, and we purchased Herg Jacksonville for 43 million. So that took us from 207 million to 195. And as I said, on top of that, liquidity reserve of 204 million in the form of untouched revolving credit facilities. Balance sheet, strong, as I said, equity ratio of 65%. It's a simple balance sheet, as we have mentioned before. We have vessels and new buildings, 1.4 billion. We still have some vessels on leases that accounts for 119 million right of use assets. We are in the process of buying another one of the leased vessels. Høgd Jedda will be purchased in October. And bunker and receivables, 182 million. And as I said, cash, 195 million. Equity 1.2 and interest bearing bank debt is 414 million by the end of the quarter. And then we have leased liabilities of 136 and current liabilities of 120. So equity 1.2. If we take market value of the vessels instead of using book value, we calculate the net asset value or the value adjusted equity. And as you see here, that's what's calculated to 2.6 billion by the end of the quarter. That equals US dollar 13.5 or NOK 145. per share compared to a book book value per share of 17 dividend 127 million has been declared and it will be paid out on or about August 28. And as you also see from this graph, the new dividend policy of distributing all free cash flow has increased the dividend considerably compared to the same period last year. A very strong quarter in a market that is somewhat more volatile than what we have seen. It is disruptions. We are exposed for waiting. We have the Red Sea situation, but we are running. all vessels full of cargo and we are to say it that way, we are sold out and we don't really expect that to change in the short term future. Andreas will say a few words about Outlook.