Hoegh Autoliner Asa

Good morning and welcome to Hoek AutoLiner's third quarter presentation. My name is Mai Lin Vu, Head of Investor Relations, and we have with me today our CEO, Andreas Engge, and our CFO, Per Winrosmo, who will walk you through the last quarter business and financial updates. As usual, if you have any questions, we have a Q&A session at the end of the presentation, and questions can be sent to our Investor Relations mailbox at ia.hoek.com. So with that, I will leave the stage to you, Andreas.

Thank you, Mai Lin. Welcome to this quarterly presentation. We're starting with a front page of a beautiful picture of Hög Aurora, the largest and most environmentally friendly car carrier in the world that we took delivery of in early August. And in this picture, just finishing his maiden voyage, successful maiden voyage to Europe, and is in the process of loading cargo for Australia. A very important milestone for the company since our fleet renewal program has been one of the driving pieces of our strategy, actually also one of the triggers of the IPO back in 2021. And we're very pleased now to see the vessels coming with this one in Europe. And also Högborealis, the second one, has after the end of the quarter left the yard in China and is loading in Asia as we speak. The quarter, pleased to report another strong quarter. EBITDA of 178 million. We have previously announced some vessel sales, meaning that we have a net profit of 193. We have continuing the growth in gross rates and with our dividend policy of paying out free cash because we are fully financed for our new build program and have a very strong balance sheet, the dividend for the quarter will be $245 million. And as I said, we have taken delivery and put in operation the first of our Aurora-class vessels successfully in the third quarter. And as I said, we have another one that is now in operation and we have another two coming towards the end of the year. Equity ratio 64%, reflecting what I said about the very, very strong balance sheet. We're going through the traditional presentation, commenting a bit on the market, on capacity and sustainability before we go into the financials. Just before we start and that's I mean at this stage just for the sake of good order we've just released a notice of planned future organizational changes and uh that is you know we are continuously working developing the organization a building a strong succession plan and creating opportunities for our people and one important element in that is that we have an operating model in her catliners where we do all the critical tasks related to our business internally with our own staff. And the largest office in the system is in Manila. During the last several years, we have added substantial new activities to the Manila office, includes activity we have traditionally had We had technical management of our vessels. We had the new builds. We've also and we had our entire financial or most of our financial office operating out in Manila. Recently, over the last few years, we've added IT. Our entire global IT is run from there. We've also built customer service. So it's becoming, you know, the largest and most important office in our business. system and an operating model. And we've also decided that further development and optimization and getting the full effect out of that office is very important to us and requires some more executive attention also from from corporate management and we have therefore, I'm happy to say that we agreed with Peter Eivind that he has been one of the key architects in creating the office and will from the beginning of next year spend more time on providing overall leadership in an executive chairman role for that office. which means that he will step out to the CFO role and will be replaced with Espen Stubbrud in that role. This is not happening now. It's happening in a planned process at the end of the year, but it's a reportable issue, so we want to make sure that we have shared that information. Going into the market, we have fairly stable, but as you know, somewhat lower volumes driven by the Red Sea and also a fairly high activity on five-year dry dockings of vessels and also obviously for the fact that we have sold some vessels, although they are being, you know, more than fully compensated by the additions of new builds that are happening this year. High and heavy brake bulk volume is stable. The net rate is, you know, continuing upwards, reflecting that we still, we have a continued strong market and we have a very positive activity on renewing and actually also adding new contracts. to the contracts uh we have as we as we said we've successfully signed a number of contracts uh you know adding up to five million cubic meters uh still with an average rate and new contracts uh above the 100 million dollar mark and a duration of 4.2 years which is i think longer that we had We still have some volume to renew before the end of 2024. There are good processes around that. And we basically continue to have contracts that are strengthening our backlog and creating a more robust rate level in Q3. Contract coverage was up to 75%, which is historically high, but we are continuing to build and are aiming for the 80% mark during 2024. And this is obviously a very important part of our priorities and economic model that we We are now focusing on creating a robust platform with customers and happy to report that we're making great progress on that. Also on the volume side, deep sea shipment of cars is increasing. It's still very much driven by Chinese exports, but a robust development also in many other markets. With high and heavy, in many ways the same development. There's been, we've talked about before, a dip in 2024. We believe we're back on a growth track. And also in that segment, we see fairly stable volumes or slight declines, but it's a fairly stable level out of Japan and Korea, and a strong growth out of China. Capacity. We're now entered into the kind of delivery phase for new builds through 2024. There has been a series of vessels delivered, including then one of ours if we include only the third quarter, two if we include to date in the fourth quarter, and four if we count to the end of the year. That is easing the charter market slightly, but still at a high level. And obviously, the deviation around Africa with the closure of the Red Sea is also continuing to create the strain on capacity. On sustainability, I started off with the, you know, talking about delivery of Hög Aurora and You know, these vessels with LNG and due to its size and lots of improvements in fuel efficiency in the design is actually from yard today delivering 58% lower carbon emissions per car transported than... a typical or an average car carrier in the market today. And as we add those new builds and also as we continue technical upgrades to ensure optimized fuel efficiency during dry docking of older vessels, we are on the trajectory to improve our carbon intensity substantially in the years to come. That is the start, and I'll leave the details on the financials to Previn.

Thank you, Andreas. As usual, starting with a short recap of volumes and rates being the main driver for both the top line, but also the EBITDA and the cash flow. We had a small reduction in volumes, 2.8% down from 3.5 million CBM to 3.4 million CBM. Mainly coming from, as Andreas mentioned, periodical maintenance of more vessels, but also some repositioning. Mainly due to the issue in the Red Sea, it still creates a need for us to reposition vessels between continents. And that absorbs, of course, capacity. The net rate continued to increase, 83.2% to 86.7%, plus 4.2%. And the main driver now for the rate increase, as it has been the last quarter, is actually renewal of contracts, leaving behind us old legacy contracts with low rates and replacing them with contracts with higher rates. That's the driver more than the spot rate, time being. And converting this to numbers, it has been very stable the last quarters. We had revenues of 349 million. The lower volumes was offset by the higher rates, taking us from 341 to 349 if we compare with the last quarter. But as you see over the last five quarters, this has been pretty stable. And the same goes for EBTA. The EBTA margin is between 50% and 52%, 51% the two last quarters. And we had a small increase in EBTA from 174 to 178. So out of the 8 million that we increased the top line with, 4 million was converted into EBTA. Net profit before tax is record high this quarter. It's 196 million. The main reason for that is that we, in addition to the result coming from the operation, have included the sales gain from the sale of Høge Kobe and Høge Shiba, and that is together 52 million USD on top of the normal operating profits. The bridge between first quarter and third quarter is basically driven by cargo revenues from first quarter to second quarter. It was volume that increased and now from second quarter to third quarter, As I said, it was the rate increase that was the main driver for the uptick in EBITDA. Other expenses like bunker and other operating expenses, voyage expenses, is pretty flat actually between the quarters. The balance sheet, Andreas said it, we have a very strong balance sheet. We had net debt by the end of the third quarter of 255 million USD only. Net interest bearing debt EBITDA ratio 0.4. The book value of the equity is 1.3 billion USD, 64% of the total balance sheet. And we built a substantial amount of cash during the quarter that is also reflected in the proposed dividend. In addition to a solid cash flow from operation, we also had net proceeds from the sale of the vessels, of the two vessels that I mentioned, of 119 million USD. And both vessels were debt-free, so that cash is... is going directly into the cash balance here. There is no repayment of debt. In addition, we have unused drawing facilities of 208 million. So the liquidity reserve by the end of third quarter was 551 million USD together. A closer look at the cash development, we started with 195 million USD. We generated 190 million from the operation. EBITDA was 177, so we had a positive development in working capital, reducing the working capital through the quarter. We spent 10 million on investing activity other than vessels, mainly dry docking and maintenance expenses. We sold the two vessels that I mentioned, Koba and Shiba, 119 million net proceeds. And then we have taken delivery of Høge Aurora, that was 70 million out of the 100. And we also have purchased Høge Jedda during the quarter. We have used 19 million on debt service, amortization, repayment and interest expenses. And we have taken 110 million in new debt, 70 million on Høge Aurora and 40 million on Hageda. And then we have all the lease payments of 17 million USD. And then we paid 127 million USD in dividend and then a minor currency gain. So that is taking us from 195 to 244. Balance sheet, as we have said already, very strong. Our balance sheet is easy to understand. Most of the balance sheet is vessel and new building, close to 1.5 billion USD. We still have some right of use assets, vessels, but it has been considerably reduced over the years as we have purchased most of the vessels that we previously had on leases. That is 72 million. And we have bunker and receivables of 141 and cash of 344 million. That takes us to somewhat in about 2 billion in total assets. And the equity is 1.3. The interest-bearing bank debt is now 513 million. We have some lease liabilities of 119 and we have all the current liabilities of 86 million. The book equity per share is calculated to 6.8 USD, equivalent to 74 NOK. If we replace book value with market value for the vessels, we end up with total assets of 2.5 billion, and that represents a value per share of 13.3 or net asset value of 145 million, NOC 145 per share. Yeah, we have disclosed it and Andreas mentioned it initially here. We are proposing a dividend of 245 million USD. We expect to pay that in middle of December and it adds to the considerably dividend payments that we already have done so far this year. Okay, outlook for you Andreas.