Odfjell Se B

Good morning everyone and welcome to the presentation of Oddfjells first quarter results. Before I start, please note that there is a Q&A tab on the right hand side of your screen. Please use that tab if you have questions during our presentation. The agenda follows a standard format. I will present the highlights. My colleague, Terje Bassen, will take you through the financial figures, and then I will summarize this presentation with an operational review, a market update, and prospects. Oddfjell is today presenting the best financial result in our 110 year long history. This is, of course, a great inspiration for all of my more than 2000 colleagues around the globe. The time chart of earnings in Oddfjell tankers ended at 195 million US dollars, and this compares to 182 in the fourth quarter of 2023. We delivered an EBIT of 89 million US dollars, this compares to 71 in the previous quarter, and we delivered a record net result of 68 million US dollars. This net result adjusted for one of items was US dollar 69 million, and this compares to 50 million in the previous quarter. The rates on our renewed contracts during the quarter were up 14% on average, and we renewed approximately 22% of the estimated contract volume. The net result contribution from Oddfield Terminals increased to 3.2 million US dollars, and this compares to 2.4 million US dollars in the fourth quarter. Also, our carbon intensity for the first quarter came in at 7.14, and this is slightly better than what we observed in the fourth quarter. During the quarter, Oddfjell has taken delivery of one new building on long-term time charter, and we have also signed an agreement for one new building to be owned by Oddfjell. A further four new buildings on long-term time charter were concluded in April, and these vessels are all scheduled to be delivered in 2026 and 2027. This brings the total number of new buildings on order to Oddfjell to 16 vessels. And by that, 20% of the order book in our segment is for Oddfjell account. So this concludes the highlights, and then I give the word to my colleague Terje Iversen.

Thank you, Harald. I will, as usual, start with the financials and the P&L this quarter. Starting with the time chart earnings, we saw that increased with $13 million to $195 million this quarter. Main reason, of course, we see an improved market. We see higher boat contract rates and also spot rates in this quarter. And at the same time, we also saw that we had higher spot volumes compared to contract volumes this quarter. And based on spot contracts, normally give a higher rate. Then also, of course, we see an increase in the timeshot earnings on that background. Timeshot expenses under the 2.7 compared to 5.3 in the four quarter. A reason for the decline is that we re-delivered two vessels on short-term timeshot loss during the quarter. Operating expenses ended at 49.1 compared to 50.6. It's a bit on the lower end this quarter, I would say. We had some positive deviations due to insurance claims that were reversed this quarter. And we also have some lower activity on the dry docking side for our fleet, also then leading to a slight decrease in the operating expenses. Share of net results from Associate General Ventures being the results from our terminal investments ended at 3.2 million US dollar and actually that is the highest contribution from all the terminals since we did the restructuring of the terminal division back in 2016-2017. It's also a pleasure to see that all the terminals are delivering improved results this quarter, then subtracting the substantial increase in the results that we have seen from that division in several quarters now. G&A ended at 19.3, very comparable to the previous quarter at 19.4. And then we delivered an EBITDA of 126.8 million US dollars compared to 108.7 in the fourth quarter. Deprivation 38.3, very much the same as previous quarter, led to an EBIT of 71 million, 89 million US dollars compared to 71 in the fourth quarter. Net interest expenses continue to decline. The reason for that is because we are decreasing the depth of our balance sheet, so we ended at 19 million USD this quarter. And after other financial items and taxes, we delivered a net result of 67.8 million USD, compared to 52.1 in the fourth quarter of 2023. That gives an earnings per share of 86 cents. And as you see from the table here, we also delivered commercial revenue days in accordance with what we delivered in the fourth quarter. But we saw a decline in offer higher days, leading to a slight increase in commercial days. Looking at the time shutter per day, we saw a substantial increase in that under the $33,000 compared to $31,000 in the fourth quarter. We also saw positive development in the cash break even, which ended at $22,500 compared to around $24,000 in the fourth quarter, bringing the 12 months rolling average to around $23,200 per day. Main reason for the decline in cash break even this quarter was that we had lower operating expenses and also lower time shutter expenses, as I alluded to, and also that we had lower dry docking activity this quarter compared to previous quarters. Going forward, we expect cash break even to remain around these levels, even though we are still striving to come closer to our cash break even target, around $20,000 per day. The balance sheets, not that much development on that. We saw that we took delivery of one time start vessels, Bowlings, that is leading to increase in right of use of assets this quarter compared to previous quarter. We see that cash and cash equivalents decreased to 87 million US dollar. And if you include undrawn loan facilities, we ended at 152 million US dollar in available cash and liquidity. And we also had to consider that we'd paid out around 50 million US dollar in dividend during this quarter based on the results in the second half 2023. Equity is continuing to increase. We have an equity ratio adjusted for RFS 16 commitments at around 48%, up 2% compared to end of last year. On the debt side, we did some extraordinary repayments of debt, leading to a continued decrease in our non-current interest-bearing debt. And we also see that we, this quarter, reclassified the bond that matures in January 2025 from non-current interest-bearing debt to current portion of interest-bearing debt. The cash flow this quarter, we saw operating cash flow at 90.7 compared to 101.4 in the fourth quarter. The decrease was then led by the increase in the working capital that we saw this quarter, where we had a negative change in working capital of 20.9 compared to a positive change in working capital of 14.4 in the fourth quarter. The reason for the change in the working capital negative this quarter was mainly due to the fact that we saw an increase in the revenue throughout the quarter, towards the end of the quarter, and also the fact that the working capital is varying from quarter to quarter and from month to month. On investment activities, not too much to talk about. We did investments related to dry docking activities around 8 million US dollar. And on the depth side, as I said, we did some extraordinary depth repayments of 25 million US dollar in addition to 17 million dollars in scheduled depth installments this quarter. And we paid a dividend of 49.7 million US dollar in February. Looking at the cash flow on a more long-term basis, we see that we continue to deliver increased free cash flow from the business. This quarter we had operating cash flow of 91 million USD and after investment of 9 million USD we had a free cash flow of 82 million USD compared to 64 in the preceding quarter. Also, 12 months rolling free cash flow is continuing to increase under the 87 this quarter. And also, if you adjust for repayments related to the right of use of assets, it reached 71 million US dollar this quarter. Going forward, of course, we have some Capex commitments to the new building that we have ordered, as Harald alluded to. And we also have some Capex commitments related to the purchase options that we now have exercised. In total, $118 million. The first purchase option will be delivered in December this year, while the second will be delivered in July 2025. And I must add that both these purchase options are quite favorable, and we expect to have quite high gearing, meaning that we are going to borrow 100% of the purchase price for these two vessels, and the fact that this will not impact the free cash flow to equity in any material way. This is the overview of the debt maturity going forward. We did a refinancing in this quarter of six vessels in total. I must say we did that on quite favorable terms, leading to the lowest margin that we have seen for a very long time. And also due to the refinancing, we are decreasing the cashback even for those vessels included in that facility with around $1,700 per day. and also increasing the underrun capacity for the group at around 26 million US dollar. And also, as we alluded to in the last quarter, this refinancing including the first of its kind, Transition Finance Trench that we presented in the last quarter. We did some extraordinary debt repayments and we have available underrun funds totaled at 91 million US dollar per end of April. We are considering to refinance some maturities early going forward to reduce the debt further and also to improve the terms on this financing. We have a bond maturing in January 2025. We haven't decided yet what to do with that. Based on the earnings that we see today, based on the balance sheet we have, we will be able to just repay that with cash on our balance sheet. But we may also consider to go to the market if we find that favorable for us. And on the debt maturities on the lower part of this presentation, we see that we have estimated debt end of this year at $784 million, which is somewhat lower than we presented last quarter. And end of fourth quarter, 2026, we expect to be around $600 million in debt, interest-bearing debt at that time. Of course, depending on the earnings and what they decided to do on the investment side in that period. I think that leaves my presentation. Over to you again, Harald.

Thank you, Terje. I will then continue with our operational review. The rates increased during the first quarter, and this was mainly driven by the trade flow disruptions on top of an already tight market balance. The odd-fix index was up 6.8% during the quarter, and this relates to an increase of 12.8% for the Clarkson Chemical Tanker spot earnings. We have touched upon a couple of times that vessels are being rerouted and the graph on your right shows the transits of chemical tankers and project tankers through Gulf of Aden. And since December there has been a sharp decline and today Somewhere between 0.3 and 0.4 million tons of chemical tankers are transiting the Gulf of Aden on a weekly basis. It's also important to notice that, as far as we understand, none of our direct competitors have been transiting the Gulf of Aden during this quarter. The first quarter was an active quarter for contract renewals, and we continued to increase our rates. We renewed 22% of our existing contracts during the quarter, and the average rate increase was around 14%. And these figures also include contracts where customers have exercised their option periods with rates rolled over at or around existing levels. And since the market upswing started, the contract rates are on average up around 30%. We saw, as Terje mentioned, a reduction in our total volumes being transported during the first quarter, and this is due to the longer sailing distance from the rerouting of vessels away from the Suez Canal and also, to some extent, from the Panama Canal. The contract volumes fell quarter on quarter while we saw some upswing in our spot volumes. The contract coverage in the first quarter came in at 59% measured against the total volumes. Carbon intensity, Oddfield's carbon intensity was within our targets also in this quarter. We report an AER of 7.14, which is slightly lower than the average that we saw for the full year 2023. We have also, as Terje mentioned, launched a transition finance framework and these funds will be used to finance our decarbonisation projects going forward. The testing of air lubrication on board our vessel Bo Summer is ongoing and the final test is scheduled to commence later this month. The installation of suction sails on board Bo Olympus is slightly delayed to the first quarter of 2025. The reason for that is a postponed dry docking and by that later arrival in Europe where the installation will take place. Then turning to Oddsfield terminals, the average commercial occupancy rate at Antwerp terminal was 100% during the quarter, and we also saw that the Ulsan terminal experienced a quarter-on-quarter increase in occupancy. We saw a slight reduction in commercial occupancy at our US terminals during the first quarter, and this is partly related to the commissioning of more than 32,000 cubic meters of new tank capacity at our terminal in Houston. Our terminals continue to perform well, with an average occupancy rate at almost 97% in the quarter. This is in line with the previous quarter. Higher shipping costs due to the deviation away from the Panama Canal has to some extent reduced imports and exports between Korea and the U.S., and this in combination with a reduction in end-consumer demand in certain regions has resulted in a moderate reduction in activity levels at our terminals compared to the mid-2023. However, the prospect of a macroeconomic soft landing globally can indicate an upside to activity levels for the second half of 2024. Then to the market update and our prospects going forward. starting with the markets west of Suez, and we saw a stabilizing of spot rates west of Suez throughout the quarter, but also with an upswing in the US Gulf to Europe trade lane during the quarter. The situations in Panama and the Suez canals all contributed to limited tonnage supply in the Atlantic basin. The picture was slightly better in east of Suez, where we saw spot rate increases throughout the quarter. The rates for the Middle East export to trade line to Europe increased the most, while rates Middle East to Far East were stable. Here we also have to take into account that the Middle East-Europe trade line is the trade line that perhaps is most affected by the deviation away from the Suez Canal. Total chemical volumes were stable in the quarter. And we now see that the influx of swing tonnage is less than 3% of the total product tanker fleet, meaning that more or less only MR tonnage that has traditionally sailed all the time within chemicals are those being left in our segment. Order book remains at low levels. During the quarter, we have seen some new additions of orders for super-segregators. The order book today is around 7.2% of the total fleet, and approximately 2% of that order book is scheduled to be delivered in 2024. It's also important to notice that approximately 20% of the total order book are vessels for Oddfjell account. Crate flow receptions are likely to continue into the second half of 2024, and this will limit supply in an already tight market. Geopolitical tension, particularly the situation in the Red Sea, will continue to affect our markets. We also see a forecasted increase in GDP of approximately 3.1% in the global economy. and we are foreseeing a soft landing. We also see positive figures both from the US, from India, and partly also from China. On top of that, we see that parts of the value chain are currently having low inventories, and this indicates that the destocking of the pandemic and inventory buildup may now be coming to an end. All in all, the global chemical production is predicted to grow by approximately 3% in 2024 after moving sideways in 2023. So all in all, we have a positive demand outlook with growth in production and continued high demand for ton mile production. While we on the supply side see a stable development with limited new orders, we see swing tonnage remaining in CPP and we continue to see that older tonnage is leaving our core trades. To summarize this presentation, Oddfjell achieved a record result in the first quarter with strong markets and a very good operational performance. The time chart earnings for Oddfjell tankers increased significantly in the first quarter as the rerouting of vessels away from the Red Sea has elevated freight rates further. The net result contribution from Oddfjell terminals increased in the first quarter as new capacity came on stream both in Antwerpen and in Houston. Market outlook, we expect steady growth in demand and limited new supply. The net growth forecasted for 2024 is around 2% of the total fleet. The current situation in the Red Sea remains dangerous and uncertain, and we continue to increase the rates for our contract portfolio, and by that we expect stable result contribution from Oddfield Terminals in the coming quarter. In sum, we expect our earnings to increase further in 2024, in the second quarter of 2024. Before we turn to the Q&A session, I would like to remind you that on Monday, the 13th of May, the coming Monday, then Oddfjell will arrange our Capital Market Day in Oslo at the Hotel Continental. I hope to see many of you there. And if you would like to attend, then please send you see on the screen right now. So we turn to the Q&A session, and I'm curious to see whether anyone has questions for us today.

Yes. So we have a few questions that have come in. during the presentation and I think we can say that there are a couple for each of you and I'll start with the first one to you Harald and it is just a question concerning the volumes and you mentioned it in your presentation but volumes are slightly down compared to last quarter and this relates to the quarter do we expect this to level out for the coming quarter or can we expect further decrease related to the sailing distance?

I think my first observation when it comes to our total volumes is that the decrease has been less than what we anticipated when we started to reroute vessels away from Gulf of Aden and the Suez Canal. So that takes away 6%, 7% of the total capacity, but we haven't seen that high reduction in our total volumes lifted. And that indicates that we've become even better in utilizing the capacity of our ships. Now we see that the capacity in Panama is slightly coming back, so in volumes for the coming quarter.

Okay, thank you. Next one goes to you, Thalia. And I think this is a question that we have gotten before and it's related to given the low financial ratio going forward or share buybacks?

That's a good question. Up until now, our final strategy has been about capturing the short term and de-risk the long term. At the same time, we announced a dividend policy, I think, two years back, saying that we want to return 50% of the net results of our shareholders. We have done that, and that has been well-received, I must say. Going forward, of course, we see that our balance sheet is strengthening. We're not at the target yet. I would love to be closer to that target, but that could be challenging. But at the same time, we want to keep and continue to strengthen our balance sheet and also building investment capacity for the future. As we have said, here we are expanding our fleet, mostly through time shutter, doing the expansion on the capital right way. But at some stage, we would also like to invest in our own fleet and build capacity to do that. So up until we decide otherwise, we continue, I think, on our strategy to capture the short-term and de-reserve.

Next question is for you, Harald. I guess on the subject of ordering ships, we did order one vessel for our own account or directly during the quarter. And the question is, why did you... order a single ship and not a series?

Well, that particular vessel is a 25,000 tonner that is being built in China, delivery expects And then this vessel has been ordered for replacement of fleet for cabotage operation on the east coast of South America. So this is one vessel that is dedicated for one specific trade in South America.

Okay. Thank you. I actually think that was the final question. So with that, the Q&A is concluded.

Thank you. And thank you all for listening. And I'll see you one day next week. Have a nice day.