Hoegh Autoliner Asa

Good morning and welcome to Hoag AutoLiner's Hoag Quarter presentation. My name is Malin Vu, Head of Investor Relations and with me today we have CEO Andreas Enge and our CFO Espen Stubbrud. We will walk you through the last quarter performance. We have a Q&A session at the end of the presentation and you can ask questions by sending email to our investor relations mailbox at ir.hoag.com. So with that I will leave the stage to you Andreas.

Thank you. Opening this presentation with a photo of beautiful Høg Moonlight at the quay in Gothenburg where we had a naming ceremony while loading cargo together with valued customers in Gothenburg. This quarter we are Once again, presenting a strong result. We have good underlying earnings and profitability driven by our strong contract backlog and an operation as expected. Previously noted, we have some more imbalances than others, but fundamentally we're running full vessels out of Asia and are basically serving customers to the full and executing our backlog. I will open this presentation to basically respond to an issue of a slight change in the payment schedule for dividends that may require some explanation. And I want to do that by starting with reiterating how we operate as a company. We have focused a lot on creating value through the cycle by building backlog, focusing on a cargo strategy being overweight cargo. We have basically operated in the market now. There is persisting market imbalances with strong growth in Asia, not so much opportunities elsewhere in the world. Shorter market is starting to provide opportunities for short-term capacity, which we are using at the cost to develop and be able to maintain a strong backlog. And we are now faced with, I think, a totally new level of geopolitical uncertainty coming from things like US port fees and taxes and whatever. While we are fully committed to keep our dividend policy of distributing excess cash flow, we have found that the unusual geopolitical situation is requiring a slight modification. And it's really triggered by the fact that the implementation of the tripling of the USTR fees that came a couple of weeks ago has resulted in the biggest change in our short-term cash forecast as long as I've ever been to the company. And that period includes the shutdown during the pandemic where we lost a large part of our cargo share. And adapting to a world where governments choose to introduce or increase cash payable taxes with it in reality two-day notice is really putting an extra requirement for securing the cash balance that has made us conclude it is prudent to do a small change. And without going into too much details, but The US port fees, and we don't know exactly what's happening with them and the tripling and the retaliation from China, is creating a situation where we suddenly get an additional cost of $60 to $70 million per year effective immediately. And that is totally unprecedented. And we can have all kinds of ideas and theories of what will happen. But in our financial and liquidity management, I think we'll have to work on a worst case scenario and basically say that we have to be prepared for these kinds of shocks in a situation where our business is drawn into a geopolitical space where we don't think we belong, but we are still pulled in. But I think I also want to emphasize that this This is not reflecting a fundamental change in our business operations. I mean, coming to that when we have the guiding for the next quarter, but it is to make sure that we are resilient to type of shocks that we haven't seen before, not because we have any expectations that there will be further shocks, but we think it's prudent to be capable or make sure that we can handle it comfortably. And so what we're doing is that we are reiterating, reconfirming our dividend policy or paying out excess cash. We are adjusting the calculation method that basically results in a one-off non-recurrable impact to the Q3 distribution. And the way we do it is simply that instead of paying the dividends based on the running outlook of cash, we are changing it to actually do it on the cash balance we are reporting at the end of the quarter, in this case the end of Q3. And that creates in many ways a one-quarter gap in the dividend payments. Just to remind, we have a track record of paying out dividends. We paid out one and a half billion in cash dividends since our IPO. That is more than three times the equity value of the company at the IPO. So it's quite substantial. And again, we are committed and we have reviewed our financial resilience requirements. We have concluded that the current strategy, the current cash balance is sufficient and that we intend to continue to pay all excess cash in cash. But we have changed the liquidity policy from a forward-looking one to ensuring that we actually have that cash balance at any time in order to be robust against those types of shocks. And that then leads us to the headline figures, 155 million EBITDA. Slightly down, Espen will come into more detail, mostly, you know, a result of combination of, you know, the imbalances in the system and charter costs to keep up the volume. We have two further new builds at the end of the year, but we do, due to our vessel sales, have a capacity gap to fill that is creating some charter costs in the near term. 132 million profit after tax, $92.3 of ingress rate. And then what we talked about, the 30 million dividend, which is then not related to this quarter's free cash, but produced out of this one time change in the timing of payouts. We have taken delivery of one purchased previously bare boat chartered vessel, Herg Copenhagen. It's the last one, I think. Now we have exercised all the purchase options and we have a strong equity ratio of 54%. If you take into going into the market, I think one very important thing is that shipments from Asia continue to grow and expand despite US tariffs and despite the kind of environment, I said, increased geopolitical risks. So we have a very, very strong activity. It's mostly driven out of China. And as we see it, you know, Chinese growth and Chinese exports of vehicles and equipment is basically continuing to grow. And that is a trend that has, you know, been driving this industry for a while, continues to drive it. And, you know, Chinese share of exports from Asia or actually even the world is strengthening. High and heavy market is also, after some flat years, going into a good growth pattern. But again, we have a... stronger market out of Asia than we have out of the US and Europe. But the market is generally strong and supportive. We have, as we said, a strong contract backlog being fully booked in 2026. And we are continuing to add contracts, although I think both capacity and the market cycle, the big contract renewals for the next couple of years or next year is behind us. But we have signed a long-term significant contract during September with substantial value and a 15-year duration actually. We have a contract share that is now up at 81% and a duration of the backlog of approximately three years. We do have rate agreements, mostly one year, fixed pricing, but non-committed. That is a product that is mostly towards freight forwarders and secondhand vehicles. And we do have sort of longstanding relationships also in that area that basically creates stability. And also reiterating that when it comes to what we call spot, it's not the kind of same cargo in a spot contract. You know, new vehicles, OEM business is almost entirely on contract and 60% of the spot volume is sign heavy and brake bulk, which is cargo that, you know, has a different, has more variability in volumes and trades. Espen, should you take over on the capacity side?

Yes, on the capacity side there is still a significant order book in the industry. Net fleet growth is up 12% in 2025 and another 8% is expected in 2026. As we've talked to a few times, we have expected the charter market to normalize in terms of pricing, and we are using that market to a larger extent than we have in the past with five actually short-term charges in the third quarter. We see pricing is stabilizing around 40 to $45,000 for a large ship at the moment.