Mpc Container Ships As

This is Konstantin Barg, CEO of MPC Container Ships, and I'm joined by our CFO and co-CEO, Moritz Fuhrmann. I would like to welcome you to our Q2 2025 earnings call. Thank you for joining us to discuss MPC Container Ships Q2 and half-year 2025 earnings. This morning, we issued a stock market announcement covering MPC's second quarter results for the period ending June 30, 2025. The release as well as the accompanying presentation for this conference call are available on the investor section of our website. Please be advised that the material provided and our discussion today contain certain forward-looking statements and indicative figures. Extra results may differ in material from those stated or implied by forward-looking statements due to the risks and uncertainties associated with our business. Before we dive into the Q2 2025 presentation, let me briefly reflect on the first half of the year. We are pleased to report another strong quarter for MPCC, continuing the momentum from Q1 and highlighting the resilience of our business amid ongoing macroeconomic and geopolitical uncertainty. Despite a challenging external environment, including regulatory shifts and unpredictable trade policies, the container market remained firm. Time chart rates held up well, demand on the second-hand market stayed strong, and island capacity remained low. While the global order books elevated, constrained supply in the small to mid-sized segment, an aging fleet and shifting trade patterns support a favorable supply-demand balance. That said, volatility remains as a factor, and we do not expect smooth sailing going forward, and we continue to approach fleet modernization with discipline and foresight. Maintaining strong investment capacity is critical. Earlier this year, we refined our capital allocation strategy to ensure flexibility for strategic growth. Our disciplined approach has consistently developed strong returns and dividends, and we remain committed to sustainable shareholder value. Looking ahead, we see opportunities to selectively divest, invest, and grow, leveraging favorable market conditions while staying agile and focused on long-term value creation. We will delve deeper into these themes during the presentation, and with that said, I will now hand over to Moritz to start the first session.

Good morning everyone, also from my side, and welcome to MPCC's earnings call for the second quarter of 2025. We will follow our usual agenda today and we'll start with the review of the Q2 highlights, after which we will spend some time on the current market and market developments and then also the outlook for the remainder of 2025. Kicking off with the highlights, there is obviously a continuation of our very strong quarterly performance as we have posted close to $140 million in revenue and around $81 million in adjusted EBITDA for the second quarter. As the very strong container market performance is more or less uninterrupted with both charter rates and durations remaining at what we see elevated levels We have followed our conservative chartering strategy and locking in as long periods as available. And consequently, our revenue backlog has increased relative to the previous quarter to $1.2 billion, with 100% of open days covered for the remainder of 2025, but perhaps more importantly, We have further improved the company's coverage for 2026, standing now close to 90% of open days already fixed, and hence providing a fantastic earnings visibility into the next year. And as a result of the good financial performance, the board has declared the company's 15th consecutive dividend with $5 cents per share, representing 50% of the adjusted net earnings for the second quarter. On the asset and fleet optimization side, we have been fairly active, having taken delivery of our second dual-fuel methanol new building vessel in April this year, while at the same time having sold 10 vessels since the beginning of 2025, of which eight vessels have already been successfully handed over to its new owners. and with the remaining two being expected handed over in the coming months. Part of the sales proceeds have been recycled into our recently announced new building transaction, namely ordering four 4,500 Q vessels for a total transaction volume of close to $230 million. The deal features a three-year time charter to a top five line operator, providing very good cash for visibility via the de-risking of the project. And the deal marks a very important continuation of our feed renewal efforts that we have been emphasizing on for the past year, and it's obviously also a great testament to the company's ability to structure and execute such deals. On a debt financing side, we have been equally busy arranging two distinct senior secure facilities in the tune of around $100 million at very attractive terms with both existing relationship banks as well as new relationship banks. And one of the aforementioned facilities features a $250 million calling option, which gives us great flexibility going forward in our fleet renewal efforts and also underlines the support MPCC receives from its lenders in further developing the company. Looking ahead into the remainder of 2025, and as the market remains very supportive, we will continue focusing on further driving our fleet optimization and retrofit program to improve the fleet composition and enhance long-term shareholder value, and in addition, And based on the current markets, we reconfirm the revenue guidance and even the guidance which has recently been adjusted. Turning to the next slide, looking at some KPIs for this quarter, gross revenue and adjusted EBITDA have been approved relative to the previous quarter as a result of the continuously supported markets and also more trading days available than actually expected. From a balance sheet perspective, and despite having gone under new senior secure facilities, the leverage ratio with 33.6% remained in line with the previous quarter, while the net debt position actually decreased to around $130 million underlining the overall conservative balance sheet structure. As mentioned before, the board has declared a dividend of $0.05 per share. which will be paid in September 25, and operational cash flow generation remains strong and slightly above the first quarter at $78 million. While new digitalization improved to 97.6%, the actual OPEX increased due to catch-up effects from the first quarter, as well as one of non-recurring items that have been booked in the second quarter. Looking at slide number five and spending some time on our recent chartering activity, it is evident that the previously mentioned positive market results in very supportive pictures for us as a company. The second quarter was generally marked by continued macro uncertainty around tariffs, however, the chartering market remained relatively unaffected, and we certainly continue seeing strong demand from top-tier liner companies, especially for Peter Tonnage, as a result of the overall scarcity of available tonnage in the market. And both charter rates and durations holding up strongly, as can be seen by the four fixtures concluded since our last reporting. The only remaining open vessels in our fleet for 25 were all between $1,700 and $2,500 to you. And we managed to fix all of them, including some forward positions for around two years at levels between $21,000 and $26,000 per day. And with such strong coverage, the company's P&L is pretty much shielded from any adverse market movement, if any. On the asset side, we have already successfully delivered eight of the ten vessels sold to new owners. The total gross proceeds are close to $130 million, and all sales are very much in line with our fleet optimization strategy, meaning that we continue to divest all the non-efficient vessels while the sales proceeds are intended to be reinvested into our fleet renewal and building a future-proof fleet. In addition to the divestments, we have continued to invest in strengths in the fleet's composition and have therefore acquired a 50% share in our 1300 UFU methanol new building to be delivered in 26 from our joint venture partner, streamlining the corporate structure, which means that the vessel is now fully owned by MPCC. On the next slide, we spend a bit more time on the investment side and the recently announced new building order by MPCC, which marks the largest transaction on the new building site to date. MPCC has ordered four, four and a half thousand Q vessels at Taishu Sanfu, a yacht well known to us for a total consideration of close to $230 million. The vessels are scheduled for delivery in the second half of 27 and first half of 28. In addition to the firm order, we hold options for further vessel orders, potentially scaling the total investment. Most importantly, and from an investment perspective, we have, in parallel to firming up the order, lined up a three-year time charter with the top tier liner company for all four vessels, and the corresponding contracted revenue is around €140 million. And the projected EBITDA is around $100 million, which not only improves the company's backlog, it also provides good earnings visibility on the project level, as well as de-risking. And at the same time, allowing us to retain upside potential on this respective transaction. In general, we see a relative strong dislocation within the container market, as well as the order book to feed structure. especially in the feeder segment, is, in our view, very compelling and requires substantial fleet renewal in the coming years, but Konstantin will speak to it later in the market session. Obviously, needless to say, these vessels feature the latest energy-efficient technologies and will be amongst the most efficient vessels in the respective size bracket once delivered. being estimated to operate around 60% more efficient compared to existing vessels on the water. And although being conventional, there is a very clear path to methanol or ammonia retrofit in the future if we decide to invest in such retrofit. This investment marks another very, very important milestone for us as a company, and it's a very clear continuation of our feed renewal efforts that have started a few years ago, and this becomes more and more important as regulatory pressure increases over time and in the foreseeable future, but also to build a long-term investor portfolio that will generate sustainable shareholder returns in the foreseeable future. Turning to slide number seven, the cash flow the second quarter of 25 was dominated by the good operating cash flow of 78 million as well as sales proceeds from vessel sales generating a net amount of around 46 million dollars one and two by 71 million dollars in additional debt drawdowns throughout the quarter all those measures substantially improved the company's cash position, as well as the investment capacity to around 360 million by the end of June. And in addition to the balance sheet liquidity, we retained further flexibility through 75 million in undrawn RCF capacity, as well as an accordion option, together with a recently drawn senior secured financing. The positive cash generation was slightly offset by investments into our fleet and regular debt repayments. And last but not least, MPCC continues to reward shareholders having paid its 14th consecutive dividend in the amount of $36 million at the end of June. And more than one billion US dollar in dividends have been paid over the past 36 months, which we think is a very strong testament for the company's emphasis on prudent capital allocation as well as sustainable shareholder return. Today, the board has declared the next dividend, which is 50% of the adjusted net earnings to be distributed to shareholders, basically representing the upper end of the new dividend policy range, being 30% to 50%. And going forward, we will continue to emphasize on shareholder return as it has been as we have in the past, which will be either through cash distributions or a combination of cash and share buybacks. However, always within the policy range of 30% to 50% of adjusted net earnings. Also, importantly, with the adjusted distribution policy, we will continue to optimize MPCC's fleet composition, building a future-proof fleet that will benefit shareholders from a long-term perspective. while continuing to keep a sustainable dividend. Skipping to slide number eight, we see MPCC's quite conservatively structured balance sheet. We have, year to date, executed on a number of measures, namely vessel divestments and secured and unsecured debt facilities to improve the company's liquidity position. and therefore MPCC's investment capacity. By the end of the second quarter, liquidity stood at 360 million. However, on a pro forma basis or pro forma adjusting for subsequent events or measures that are in execution, MPCC has a pro forma implied liquidity of $485 million, including undrawn RCF capacity. In our view, or in view of our fleet renewal efforts, and the corresponding investment capacity is absolutely essential. However, IPCC managed to achieve this capacity without compromising on the overall robustness as well as flexibility of the balance sheet. We have a conservative leverage ratio of 33.6%. And in addition, very importantly, we have 27 debt-free vessels with a fair market value of around $600 million. And while Crossdebt has increased on a pro forma basis to $535 million, the net debt remains quite low. And the vessel portfolio with a charter-free market value of around $1.5, $1.6 billion dollars provides additional comfort. The company obviously will ensure to use the investment capacity as prudently as it has done in the past by identifying and executing on shareholder created transactions that will help building a future proof fleet. And journey speaking, all in all, we remain very disciplined on the capital allocation side of things, as we have always done. And on that note, I hand over to Konstantin for the market update and the outlook section.

Yeah, thank you, Moritz. I would like to continue with the next agenda point, the markets. Back in the first quarter, I noted that volatility is here to stay, and Q2 has certainly confirmed that view. Looking ahead, we expect this environment of heightened uncertainty to persist, not only to the remainder of the year, but well into the foreseeable future. The second quarter was quite eventful, and some of the events are listed here on this slide. Multiple headwinds have further deepened the volatility, building on the challenges already evident in Q1. Geopolitical tensions in the Middle East intensified, culminating in the sinking of two vessels in the Red Sea. With security risks persisting, there remains no clear timeline for a resumption of traffic through the Suez Canal. Evolving U.S. trade policy, particularly shifting tariff announcements, added further uncertainty, impacting trade flows and also demand expectations. Against this backdrop, trade rates saw a temporary spike in early June, but quickly retreated as demand softened. Chart rates remained notably resilient throughout the second quarter, holding at elevated levels despite broader market volatility. This strength was underpinned by limited vessel availability and consistent fixture activity. Having said that, July brought a noticeable slowdown with fixing activity, declining by approximately 40% compared to the average of the first half of the year. Encouragingly, due to the lack of available prompt positions, forward fixing has gained momentum following a subdued first quarter, with vessels now being secured further in advance. The number of ships expected to be open within the next six months is 43% lower than during the same period last year. Notably, availability is particularly constrained in the larger sizes with very few units remaining open for the remainder of 2025. Looking at the container market more broadly, sentiment remains constructive despite ongoing economic and geopolitical uncertainties so far. Peril threats, regional tensions, and congestion at major European ports have not negatively impacted the container markets. On the contrary, geopolitical disruptions have supported demand for tonnage at the time when supply remains tight. This resilience in the charter market is also reflected in asset values, which I will address in more detail on the next slide. Turning to the S&P market activity in the container sector remains steady and in line with the previous quarter. Despite the traditionally quieter summer period, we observed a consistent flow of transactions and ongoing demand for tonnage. In total, approximately 60 asset transactions were recorded during the reporting quarter, reflecting a similar level of liquidity as seen in Q1. Eco-tonnage in the feeder segment continues to attract high interest. though the limited pool of available candidates has led to increased competition among buyers. According to Alphaliner, some owners remain undecided between locking in attractive charter rates or capitalizing on historically high second-hand prices through asset sales. This sustained interest in vessels has driven further appreciation in asset values. The Clarkson second-hand price index rose from 76 points at the end of Q1 to 79 points by the close of Q2, representing a 4% increase quarter over quarter. Looking at the new building market, contracting activity in the container segment remains elevated, particularly when compared to other shipping sectors. The increased sophistication of newly ordered vessels combined with strong forward coverage at shipyards and ongoing cost inflation has kept new building price indices hovering near historical highs. Speaking of the new building market and turning to the next page, you can see that the order book itself has also hit an all-time high at the start of the second quarter, with 9.5 million TU corresponding to an order book to fleet ratio of 30% at that time. When considering the order book itself, as shown on this slide, it appears logical that a relative slowdown could be observed during the second quarter. Another million TU has been ordered during Q2 2025. This brings total contracting for container ships for the first half of the year to 218 vessels and 2.2 million TU. In contrast to previous quarters, feed-in tonnage accounted for a slightly higher share in terms of numbers, 36 out of a total of 98 units. or over a third of all vessels ordered in Q2 2025 were attributable to container ships with a capacity below 3,000 cu. If the in-service feeder feed is aging and needs to be replaced, tonnage buyers are opting for vessels with less than 6,000 cu capacity. The order book to feed ratio in the smaller sizes is still fairly low, and for the segment below 8,000 cu, the order book does not cover the replacement needs that is expected to arise in the next years. European tonnage providers have been busy commissioning ships. Such orders are often letters of intent, so-called LOIs, inked speculatively without charters attached and often not confirmed yet. Envy ship brokers, for example, noted that various buyers were working to secure slots for feeders and mid-size ships for Chinese yards. Most of the recent orders are, however, for conventional dual-fuel ready vessels. Given the fact that 58% of the vessels below 6000 TU are 15 years, new building investments in the feeder and mid-size segment is still a bright spot at present, with inquiries and interest still coming from line operators. Recently, there have also been firm new building orders with charter covers attached and as our 4,500 new building with one of the top five liner companies confirmed. When talking about smaller vessels, we should also look towards the trade they usually deployed in. And that brings me to the next slide, basically turning into intra-regional markets and non-mainline trades where our feeder and midsize vessels are primarily deployed. we continue to see strong and resilient market fundamentals. Unlike the main lane trades, which are projected to grow at a modest 0.6% compound annual growth rate, intra-regional container trades, the core focus for the MPCT feed is expected to grow at significantly stronger pace of 3.5% annually over the coming years. This outperformance is driven by several key factors. Firstly, emerging markets are expected to deliver higher GDP growth than advanced economies, translating into increased container volumes on regional trade lines. Secondly, intra-regional trade volumes already exceed those of mainline trades, underscoring the scale and strategic relevance of these markets. The continuous diversification of supply chains is another aspect which includes nearshoring and regionalization, which will further support robust volume growth in these segments. While regional demand remains a clear growth engine, we are also mindful of the headwinds facing the industry, including regulatory developments, macroeconomic uncertainty, and environmental changes. As we look ahead, the market continues to be shaped by a range of uncertainties, as we've shown on this slide. However, these challenges also present opportunities. The very forces disrupting global shipping are acting as catalysts for innovation, differentiation, and also long-term resilience. And as such, on this slide, we have illustrated four key factors shaping the future trajectory of the market. Firstly, U.S. trade policy. Trade policy out of Washington remains a major source of uncertainty. The potential escalation of tariffs could deepen fragmentation in global trade patterns, impacting volumes and routing decisions. Secondly, geopolitical tensions. Ongoing conflicts and security risks in the Middle East, particularly along the Suez route, are expected to prolong rerouting and reshape global trade force. These dynamics will continue to influence shipping, demand, and capacity deployments. Thirdly, fleet development. Contracting momentum is shifting towards smaller and mid-sized vessels. As of July 2025, the order book to fleet ratio reached 30.2%, with 2.2 million TU, as mentioned earlier, ordered in the first half of the year. Deliveries are projected to accelerate in 2027 and 2028, with an estimated 3 million TU entering the market. And lastly, feeder fleet renewal. Despite recent interest in feeder renewables, replacement tonnage for the aging feeder fleet remains insufficient. We have talked about that throughout the last quarterly presentations, and we will talk to that in our talk section again. But with regional trade forecasts to outpace mainland growth, demand for modern feeder capacity is expected to strengthen significantly. This is the opportunity we identified and acted on with our latest new building order, which positions us to capture growth in high-performing segments. And with that, let me turn to the next part of today's presentation, the company outlook. Starting with our charter backlog, on the left you can find some details on MPCC's forward coverage, illustrating that we are well covered for the quarters ahead. As explained in detail by Moritz, we have continued to utilize the strong charter market during the first half of 2025 and also further building out the backlog with our latest new building projects. On the back of this, and in combination with our recent new building order, we have added additional value to our backlog. even increasing our backlog figure compared to the status at the end of the previous quarter. And we now have a revenue contract backlog of around $1.2 billion and a projected EBITDA backlog that stood at $0.7 billion. In terms of coverage, we are now at 100% of all operating days covered. And for 26, we have further increased our coverage to around 89%, up from 77% shown in the Q1 updates. and a figure of around 34% for 2027 in terms of operating days covered. The degree of forward revenue visibility for the next few years has, in fact, never been better than it is today since we established MPC Container Ships. On the right-hand side, we show the upcoming and fixed charter positions of our fleet in 2025 and 2026. We have only four possible open positions until the end of the year 2025 left. This relates to vessels with a flexible re-delivery window based on the present rate environment, and our expectation is these are very likely 26 positions. For 26, we have 25 charter positions open, and the distribution of the open positions for 26 by quarter also shown in the overview on this slide. As you can see, almost half of the positions are Q4 2026 positions, and on a few of these forward positions, we are presently already in dialogue with some of our charter clients regarding early extensions. Let's look at some measures that we have taken and how we will move forward strategically on the next slide. As discussed in the market section, global developments ranging from geopolitical tensions to economic uncertainty and regulatory shifts continue to shape the landscape. And while it's important to keep these factors in mind and take them into account for our decisions, our operational focus remains on executing the strategy of things that are within our control with discipline and precision. Doing what is within our control means focus on ensuring safe and reliable operations of our fleet, invest in our fleet on the water, that, for example, means retrofits, Continue to build strong relationships and be a good partner to our charter clients, executing charter package deals or strategic new buildings with our partners. Maintain high balance sheet flexibility. That is a moderate leverage. As Moritz has alluded to, keep significant part of the fleet unencumbered. Maintain sufficient investment capacity, et cetera. Carefully weigh up risks and rewards. in particular in growth investment decisions, as we have done with our new building order, but not stand still and do not be afraid to take decisions to grow the business. And having said that, fleet renewal is, in our firm opinion, a very important element in order to create long-term value for shareholders. And now on this slide, you can see how we developed the company over the past years. You can see the status of some more financial KPIs and some more fleet-related KPIs end of Q3 2021 and today. Looking at the upper three elements, which is the more financial part, we have rebuilt the revenue backlog, which, as I explained, now stands at $1.2 billion compared to roughly $1.1 billion in Q3 2021. And in the meantime, we have distributed more than $1 billion in dividends, so we have rewarded investors and will continue to do so. We have further freed up collateral and further strengthened the balance sheets and the investment capacity of the company, as alluded to by Moritz. and not shown on the slide, but we have also been able to bring down the cost of debt of the company quite significantly. Looking at the fleet, the lower part of the lower three items of the deck there here, we have divested a number of vessels and also invested significantly in modernizing the fleet. More on this I will explain on the next slide. Furthermore, compared to four years ago, we have been able to bring down the average age of the fleet from 15 years to 13 years today, which is four years later. So we have been able to significantly reduce the average age. And yet, and that's at the very bottom left of the slide, parts of the fleet have aged, like the global container fleet in general. And hence, we strongly believe that we further need to renew the fleet in order to continue to create sustainable long-term value for the company and our shareholders. That brings me to the next slide where I would like to talk a bit more in more detail to our fleet renewal efforts and how we intend to continue to modernize the fleet and create long-term value. On the top left, you can see an overview of the largest tonnage providers on non-operating owners in the sub-6000 EU segment. Looking at our fleet, As briefly mentioned on the previous slide, we have substantially invested into our fleet. Breaking down our portfolio in four categories, you can see that we have now around 53% equal share based on number of vessels and actually closer to 60% if we would look at it the same way, same figure weighted by TU. And we have invested more than $800 million to renew the fleet by carrying out a number of measures. And that includes the following, as is illustrated on the right-hand side. We have invested around 500 million in nine new buildings, including three dual-fuel methanol vessels. We've acquired, over the last couple of years, nine modern second-hand ecovessels for more than 300 million. And we have carried out substantial hydrodynamic and energy efficiency measures on more than 20 vessels for more than 30 million. And there is more to come on that part. This we have done in most cases in close partnership with our charter clients, for example, against charter extensions, creating win-win situations. And then lastly, we have the conventional pool of vessels for which we constantly analyze the options, carry out retrofits, continue to trade the vessels and charter them out to generate cash flows or a combination of the two, or certainly at all times consider divestments if the price is right and attractive. And going forward, you can expect us to generally continue that trajectory, always looking at geopolitical, macroeconomic, and market developments, of course, and adjusting the course if required. And certainly, we will continue to also seek attractive opportunities from value dislocations would they arise. As explained in the past and as also shown on this slide, we firmly believe MPCC has a strong value proposition with significant upside. Let me explain why. As you can see on the left-hand side, the current enterprise value is fully covered by the projected EBITDA backlog of around 0.7 billion US dollars and the recycling value. While the significant upside potential from the existing fleet of 55 vessels, which are, as I explained earlier, by now significantly younger on average than they have been four years ago, and the earnings capacity, the future earnings capacity linked to those chips. In addition, we have run an indicative sensitivity analysis on open rates based on the charter coverage and open days of the MPCC feed in two scenarios, and that is illustrated on the right-hand side. The current market rates in gray and the 10-year average rates from Clarkson's, sorry, the current market rates in blue, actually, and the 10-year average rates from Clarkson's in gray. The outcome you can see on the right-hand side of this slide underpinning not only the resilience of our earnings capacity going forward for 26 and 27, but also the earnings upside potential that is significant. Before we now open the floor for questions, let me summarize some key takeaways from today's call. U2 has been another strong quarter for MPCC, driven by high fleet utilization and solid operational execution. Our strategic fleet extension through the addition of four advanced new buildings position us for long-term growth and continued competitiveness. We have further enhanced our financial flexibility with 100 million in loan facilities, and an up to 250 million accordion option, ensuring we remain well capitalized to pursue future opportunities. In line with our renewed capital allocation strategy, we are distributing out 50% of adjusted net profit as dividends, reaffirming our commitment to delivering robust shareholder returns. Our disciplined strategy, robust financial position, and proven ability to generate value in complex market positions ask the MPCC to capitalize on emerging trends and deliver sustainable growth for our shareholders. And finally, despite geopolitical volatility, we remain resilient. We are confident that with our disciplined strategy and strong investment capacity, emerging opportunities with confidence in order to continue to generate value in complex markets. Thank you very much for your continued trust and support. And with that, I open the floor for questions. a number of questions that have come in. I would start with the first one, and that is related to the dividends. Why is the dividend declining so sharply compared to the past challenging years? We discussed the dividend very extensively during the last quarter and this quarter, and we have explained that we continue to be fully committed to a dividend. We have adjusted the dividend policy in the last quarter. And we're now paying out the high end of the range with 50% payout ratio, which we deem very significant. Obviously, there is a reduction compared to the 75% in the past. But as we've explained throughout the presentation, it is about balancing between creating long-term value for the company and for shareholder, which we do by carrying out strategic investments and still rewarding shareholders with a significant dividend. And that is reflected in the figures. There is another question. How has the introduction of hub spoke networks, specifically the Gemini Corporation between Maersk and Hapag-Lorde, impacted feeder markets? That's part one. And the second one is for the U.S. Trade Representative, a USGR introduction, new port call fees, particularly targeting Chinese new built and operated vessels. What are the potential implications for Caribbean to U.S. feeder services? Let me start with the first one on the Gemini Corporation. This, in fact, and we have discussed that in previous quarters, has had an impact of, in particular, those two names securing certain tonnage a few quarters back ahead of the implementation and rollout of the Gemini Alliance. It has obviously changed to some extent the hubspot network in certain regions of the world. I would argue there is a tad more slack in the system, meaning the Gemini Alliance operates more ships, utilizes more ships, which is obviously good because that also means utilizing more feeder ships. And we have actually seen quite some additional demand coming from the Gemini Alliance users. implementation and going forward I do believe that you know with shifting trading patterns new hub spoke networks might surface and might be implemented also by other alliances and therefore I think in general that has a net positive effect on the feeder markets on the uscr and and the new port call fees and specifically and targeting a chinese built and operated vessels and there are Certain implications, I guess, they are not yet fully visible, given the fact that a lot of the liners are still adjusting their course for probably, there's, for example, one liner company who is considering to increase the larger vessels going into Kingston and then featuring from there. There are other companies taking a slightly different approach. We do believe that it will in any case create more feeder demand going forward because there will be fewer port calls and hence the ports need to be connected by the means of smaller vessels. And the UST obviously targets vessels above 4000 cu. So the smaller vessels are actually in our view a potential net beneficiary of the whole development.

And there's a question on the new building side of things. What are you seeing in terms of similar deals as the four new buildings with charters? Are you risking part of the investment? Do you believe it is likely you will enter similar deals over the coming months? I think we have mentioned in the presentation that we do hold options for sister vessels at the same yard at the same pricing. which obviously have not been executed yet. We are, as we speak, trying to replicate what we have done on the four new builds, basically saying that we're looking for either the same charterer or other high-profile names who would be interested in taking those vessels on a mid- to long-term charter, basically providing a de-risking because we will continue walking the talk, meaning speculative orders are not on the agenda in MPCC. So if we were to enter a similar or other new building transactions, we would always try to combine with the longer-term charter. And generally speaking, and as we have emphasized several times throughout the presentation, we do see continued investment need from an MPCC perspective because parts or a larger part of the fleet has been aging to a degree that we deem it necessary to replace those ships in the foreseeable future. So, yeah, speculative orders are not on the agenda, so we're trying to continue combining a new billing order with a long-term charter.

Then there is another question regarding contracts that have been established, for example, 25 and 26. Are there risks of contract cancellations? I think that is obviously a question around the counterparty constellation or the contractual constellation. I mean, in general, these contracts cannot be cancelled. These are firm time-sharper contracts, legally governed and safe. Of course, there have been times where contracts have been renegotiated. We do not foresee that in 2025 and 2026, that you know the the container liner operators that are our counterparties have the strongest balance sheet they have had in history and most of them have net cash positions so very strong counterparties and we do not see any risk of contract renegotiations or cancellations What we have seen and what we have also done is strategically to maybe consider an extension of the charter against the balancing out of the rate. Even that, you know, we haven't seen over the last couple of years on many occasions. We have seen that once or twice potentially, but we would only do that if it's in the benefit of MPC container ships. And we do not see any risk, neither on the contractual side of contracts being able to be cancelled, nor a renegotiation of the rates. There's a second question on that part, and this is related to the replacement need that we alluded to on page 12. And the question is, what do you mean by the order book does not cover the replacement need that will arise over the next years in MPCC's core segments What we mean specifically on slide 12 where we show the age structure of the order book as well as the order book to fleet ratio that we presently have around 4,000 vessels in our segment, between 1,000 and 8,000 TU. Of these, around a quarter is about 20 years of age and will require to be renewed in the next five years potentially. The order book in contrast is only a single digit compared to the fleet on the water. So there's a structural need to replace these vessels by virtue of age of the fleet. We also see Given the latest geopolitical developments, there will also be a shifting trading pattern, possibly or likely in our view, benefiting more flexible ships, which is the smaller ships. So we also see a structural demand growth that we might foresee in the next three to five years when you look at the slightly smaller vessels. So both from the demand side, but certainly from the age structure and supply side, and the age of the feed on the water as well as the order book, For this specific segment where we are involved, there is not sufficient orders being placed at the moment. We have expected that to come over the last couple of quarters and years, actually, and now we're actually seeing more activity there. But I'm not overly concerned at this stage that this is too much. To the contrary, I think it's desperately needed. And what we see in terms of orders is yet insufficient to cover the replacement needs for the specific sector.

There's one, it seems to be a final question on capital allocation, a usual one that we get almost on a quarterly basis. Will share by BEX be part of the distribution equation? That is the first question. And the second question is what shareholders can expect in terms of distribution or recurring distribution, whether 30 or 50% going forward. I think to start with the second question, that obviously will be assessed. The new distribution policy has been put in place to stay. We'll make sure to continue doing that going forward. This quarter we have distributed as mentioned, the upper part of the range, meaning 50% of the adjusted net earnings. And I think it's fair to say that as long as the market is performing as it is now, we'll try to continue distributing in that range. On the first part of the question in terms of share buyback, and that's also as previously mentioned and communicated to investors, We have a quarterly discussion with the board, and it is being discussed whether there will be cash distribution share-by-backs. We have done share-by-backs in the past. It is always part of the equation. It will also be assessed going forward. However, I think it's important to say that if there should be potentially also a combination of cash distribution and share-by-backs, will always be within the communicated range of 30% to 50% of adjusted net earnings.

Since there is no further question raised, we would like to thank you for your interest and for the participation in this call. We are looking forward to the second half of this year, to 2026, and we are confident that We will see a couple of more interesting times ahead, yet we feel very well prepared for that and we are confident to be able to deliver further value and create MPCC as a valuable long-term and sustainable company in the market. Thank you very much for your attention and all the best. Bye-bye.