Odfjell Se B

okay good morning to to all of you and good morning also to those who follow us live this presentation is given at the western norway at the stock exchange seminar here at close to bergen airport and I also want to remind those following us online that it's possible to type in questions during the presentation, and we will address them afterwards. Today's agenda is the same as always. I will go through the highlights, and then my colleague, Terje Iversen, he will take you through the financial results, and then I will conclude this presentation with an operational review and a market update and prospects going forward. And if we then turn to the highlights, I'm first and foremost extremely satisfied to see that we have completed another quarter without any significant incidents in our fleet. And we also, in my opinion, delivered very resilient results in a challenging market. First and foremost, because of the political turmoil that we all observe, and then also due to the unresolved trade negotiations that are still ongoing. I'll come back to that later. On top of that, the summer season is normally a more quiet season for chemical tankers. So despite all those negative factors, we still managed to deliver a $6 million increase in our time chart of earnings. And in the second quarter, we earned $174 million, and this compares to $168 million in the first quarter. Our time chart of earnings per day was $30,306,000, and this is up from 29,556 in the previous quarter. We also saw an increase in our EBIT, 59 compared to 54 in the previous quarter. And bottom line, we delivered net results of 40 million and adjusted for one-offs, it's 42, and this compares to 33 million in the first quarter. We also saw a net contribution from our terminal division of 1.9 million US dollars, and this compares to 2.9 in the previous quarter, and the reduction is in full due to one offs on corporate level for the terminal side. I'm also extremely pleased to report another reduction in our carbon intensity. This is the first time that Oddfjell is reporting an AER annual efficiency ratio below seven. We are now at 6.8 and then I also have to add that that the summer season is normally the best quarter when we are measuring carbon intensity simply because we see much more calm weather during the summer months. And finally the board also approved a dividend of 48 cents per share and This is in line with our established policy of half-yearly distributions of net result adjusted for one of items. And that concludes my quick introduction, and then I give the word to Terje.

Thank you, Harald, and good morning to all of you. I will, as usual, start with the income statement for this quarter. As Harald also mentioned, the time-shutter earnings this quarter ended at 174 million, seven million up compared to the first quarter. The main reason for the increase in the time charter was that we had increased volumes and we also had more commercial days in the second quarter compared to the first quarter. Commercial revenue days increased by 77 and we also added two time charter vessels on short-term time charter this quarter. Off-wire increased from 380 to 423, mainly due to increased dry docking activity in the quarter. And also we had one short-term time shutter vessel being out of operations because it was involved in a collision at the start of the quarter. Time shutter expenses ended at 4.1, quite comparable to the preceding quarter. Also operating expenses, 52.9, very much in line with the previous quarters, where we saw that G&A slightly down compared to second quarter, ended at 20.6, a bit higher than normal this quarter because we have the effect from holiday payments, normally reducing the G&A in the second quarter, but we also had increased legal fees in this quarter so we ended very much in line with the previous quarter in in total after gna we then delivered an abda of 98.4 compared to 93.1 in the second quarter depreciation amortization very much same level as previous quarter leading to an EBIT of 58.6 compared to 54.4. Net interest expenses decreased from 19.1 to 16.4. Part of the reason is that we also expensed amortized financing costs in the second quarter of 2.1, so the decrease is not as large as it appears like. But even though we are seeing that net interest expenses is coming down because we are reducing our debt, and also slightly lower SOFA this quarter, and also better priced financing in total for our balance sheet. After other financial items being capital loss this quarter, we ended on a net result of 40.1 million, up from 34.4 in the second quarter, leading to earnings per share of 51 cents this quarter. Looking at the time chart compared to our cash per given that we measure each quarter, we saw that time chart earnings ended per day ended at 3,306 in the second quarter, up from 29,556 in the previous quarter. Cash break even per day was 23,791, slightly improved since the first quarter, bringing the 12 months rolling average to 23,578, well below the time-shadow earnings that we are getting on our vessels. And as you can see, we have been very much cash positive since the fourth quarter of 2021 when it comes to comparing time-shadow earnings per day with the cash break even for our vessels. Going forward, we expect cash break-even to remain at these levels, and the same goes with the P&L break-even going forward. Looking at the balance sheets, main items here is that we took delivery of two vessels, both Precision and both Performer. Both vessels that we had done operational or time-shutter lease before we acquired them according to purchase options that we had in the agreements. So ships and new building contracts increased to 1.3 billion in this quarter. Where we see that right of use assets decreased because these were included as right of use assets. with the time charter agreements and the bearable agreements that we had before we exercised the options cash and cash equivalent increased to 131 or if you include underground loan facilities we are at a total available liquidity of 305 million us dollar and that includes the effect from the loan that we issued the bond loan that we issued in in may this year of 100 billion us dollar but we used all that proceeds to repay our revolving credit facilities. We are not increasing the cash at hand, and we are not increasing the debt, but we are increasing available liquidity in case we should need that for various purposes. Also, we see that current receivables was reduced this quarter, reducing our working capital and increasing our operational cash flow. and total equity increased with 49 million US dollar compared to our being our total comprehensive income for this quarter and we have no equity percentage around 46% at the total for the group. We also see that non-current interest-bearing debt decreased, the main reason being that we are reducing our debt, as mentioned, but also that two loan routes reclassified because they're maturing first half next year and now included as current portion of interest-bearing debt per end of first half. Looking at the cash flow, as I said, we improved the working capital quite substantially this quarter, leading to operating cash flow this quarter of $109 million, increase of $49 million compared to the first quarter. The main reason being, of course, we had improved results, but mostly due to the improvement in our working capital. And actually, I think this 109 is the second best quarter when it comes to operational cash flow in history, so we're very satisfied with the cash flow we saw this quarter. On the investment side, we acquired both performers in April. So looking at cash flow for investment activities, that was negative 54.6. And on the debt side, we did repay loan amounts on the revolving credit facilities, and we took this new bond loan. So in total, we had negative cash flow from financing of 10 million US dollars a quarter. And in total, we then had an improvement in cash and cash equivalents of 44.7 in the second quarter. Looking at the more long term, free cash flow generation from our business. As I said, we had strong operating cash flow in this quarter due to the improvement in working capital and improved results. But we have also included cash flow from investments this quarter, which was done the acquisition of both performer and proposition. Proposition actually was refinanced in the first quarter when we acquired. We exercised the purchase option, so we drew a new loan for that vessel in the second quarter. But the actual delivery took place only first April, so that is included. here in the second quarter as investment. So free cash flow this quarter was based on operating cash flow of 109 minus investments of 98, ending at 12. But however, looking at the more long term, we see that 12 months rolling free cash flow is now at around 60 million US dollar. And we are just at for repayments related to right of use assets, we are at 49 million US dollar on a 12 months rolling basis this quarter. On the debt side, I mentioned that we issued a new bond. Per end of second quarter, we have debt of US$742 million, interest-bearing debt. No significant changes expected for the remainder of the year. And as you can see on the bottom of this slide, we are expecting a slight decrease in interest-bearing debt in the coming two years. In June, we issued, I think it was in May actually, we issued this new bond of 1 billion Norwegian kroner, swapped that to US dollar 97, and that was issued at the price of a margin of 255 basis points above NIBOR, which is the lowest price shipping bond since 2014. So we're very satisfied with timing and the pricing that we achieved on that. that issue and as i said we are only used to proceeds to repay loan amounts on our evolving credit facility not increasing the depth on our balance sheet and total all in cost related to that is 2.5 percent per year to have that facility or cash available in case we should need that for investments or other purposes Also, during the second quarter, we added one vessel to the US$242 million bank facility that we managed to have in place in the first quarter. And also in July, after the quarter, we have completed the purchase of one additional vessel that we had on operational lease with Gemini, which also then has been included in the same loan facility. Going forward, looking at Capex and TimeStarter commitments, Capex being new buildings and also the clear purchase options stands now at 158 in the coming years. That includes two vessels, this one, Bogue Germany, that we acquired already in July this year, and we also have an exercise purchase option for Bogue Hercules, which we will take delivery of in the first quarter of 26. So that's summarized to 71 million US dollar. And I have to add that these purchase options are very favorable compared to the market values. And that goes also both by former and both position that we have taken delivery of in the past few months. And then we have two new billings that are being delivered in 26 and 27. And in total then 158 million US dollar in Capex commitments. Looking at the time shutter commitments, no new news in this. We have around 1.1 billion US dollar in time shutter commitments for vessels to be delivered in the coming years from 26 to 28. These are 18 vessels that are on long-term time shutters, 18 years per vessel that we are taking commitments to. and the total commitments are as i said 1.1 billion us dollar but when these are added to the balance sheet that will be a smaller amount because we are then excluding the opex element of this these commitments and also it could be that other time shelters that we have on on vessels that we have on time shutters today will be re-delivered and the total amount of the depth will maybe not increase with this this amount And these vessels together with our new buildings account for 14% of the Kurdish order bulk within our core segment. I can also add that five of these vessels that we have on time shelters that are going to be delivered have a fixed time shelter element and also a variable time shelter element depending on the earnings of these vessels. So what is included there is the guaranteed and fixed element of these time shelter agreements. I think that leaves the floor to you again, Harald.

Thank you. So by that, I will continue with an operational review. And I start with our contract coverage. On the left-hand side of this slide, you will see that we had a slight reduction in our contract coverage, meaning that 51% of the cargo that we carried was contract cargo, while the remaining 49% were spot cargoes. If you at the same time look at the graph to the right, you will see that we had a quite substantial increase in volumes during the quarter. We are back to 24 levels of 3.4. And that means that we haven't seen a dramatic reduction in contract volumes. But what we've seen is an increase in spot cargoes. And for that reason, we have seen a reduction in the percentage. But there is no... dramacy in those figures. Actually, I will once again say that I'm impressed by our team and the fact that they've managed to increase the total volumes in what we could characterize as a difficult quarter. And that is also reflected in the graph to the left, where we see that we saw an increase in average earnings of 1.2% within the Oddfjell fleet, and at the same time we saw a decrease of 3.8% in the so-called Clarkson's spot index. If we look at the various cargo types that we are carrying, we saw a slight decrease when it comes to speciality chemicals. We saw relatively stable volumes on the commodity chemicals, and those are the chemicals that are typically transported in large volumes. We also saw a slight growth in veg oils. Those are cargoes that we normally do not carry because the freight rates are lower than what you see for commodity chemicals and specialty chemicals. And the same goes for clean CPP cargoes, where we also saw an increase in Oddfjell volumes. That is also outside our core business. But as a consequence of reduced specialty chemicals, we focused on bag oils and CPP, and by that we managed to increase our earnings and also our results and volumes. Then turning to sustainability, as mentioned, we are this quarter reporting an AER, the annual efficiency ratio, which is the average carbon intensity figure for our fleet of 6.8. And that is a new record low for Oddfjell. It's the first time that we are reporting this figure below seven. There are many reasons for that. One reason is the continuous work that we do to retrofit energy efficiency devices. The sales are also starting to take effect. We installed the first set of sales on Bow Olympus during the first quarter. the immediate results were extremely encouraging we saw savings up to 40 percent and on the first voyage we saw average savings of 20 percent and since then we have had 48 sailing days and we all know how the european summer has been it's been calm and sunny weather so we we had have had limited utilization of of those sales but still we are at the average expected for this type of uh of sales which is a bit uh which is between uh eight and ten percent we are now uh preparing the the vessel for she's right now in in houston and she will she's preparing for trans-pacific voyage that is more or less one month in in open sea in september so we are both excited and curious about the results that we will experience during that particular voyage. And that is more or less a one month voyage before she's reaching Yokohama. And on top of that, we have already, despite that we don't have a full picture of how those sails are actually working, we have already decided to install sails on two more vessels, two of the new buildings that are presently being constructed in Japan. And those vessels will be delivered, one in 26 and one in 27. And then on the terminal side, we have relatively stable throughput on all our terminals. We have seen a slight decline in Korea, but then that is compensated for in the US and Europe. We did see stable results. The challenge is that the figure is being impacted by one-offs at the corporate or holding level. We also are extremely happy to see that all the expansion projects that we've conducted on basically all our terminals is now starting to pay off. So we are receiving dividends from Korea, from NordNazi in Antwerp, and also quite substantial dividend from our terminal in Houston. This is stable business, so the outlook for this segment is that we will have stable and similar performance also in the quarter that is coming. When it comes to expansion projects, which is maybe the most cost efficient that you can do on the terminal side to continue to build on the established infrastructure, We did inaugurate one tank pit in Antwerp this quarter, and we are now building another 12,000 cubic meters of stainless steel tanks. Those will be inaugurated uh later this year and i'm also happy to see that finally we get some traction in in korea we uh we are building out the so-called e5 area we have started with the groundwork and and the first 10 tanks will be in operation late next year and due to the expansion we are also improving our birth capacity, and we also decided therefore to upgrade one of the two births that we have in Korea. So I would say that we have stable and good development on the terminal side. And then to the market update and prospects. This graph reflects what I've already said. Normally, the summer season is a slow season. People are on vacations. Many of the factories are reducing their activities, so the need for the chemicals that we are transporting is seeing a dip during the summer months. This trend has been reinforced this year, partly because of all the geopolitical turmoil that we are all observing, and partly because too many of the trade agreements or tariff agreements between the US and other countries are still unresolved. And for that reason, we have seen slightly higher reduction in the spot rates than what we've seen previous years. We are not concerned about this. We think there are logical explanations to it. And then if we go to the next slide and look at the tariffs, I think what strikes your mind when you see the list of tariffs is that what's outstanding today is basically the BRICS countries. It's Brazil, it's Russia, it's China, it's India, and it's South Africa. And maybe it's more politics into that than real financial issues. What we see is that those agreements that have been concluded are concluded at levels where our customers seem to feel that they are coping with that. The American Chemical Industry, Chemistry Council, they estimate that the growth will be slower than they have estimated previously, but we We don't observe that there is any panic going on, and there is still a significant surplus in the balance between chemical imports and exports into the US. Oddfjell has approximately 20% of that market. So the expectation for the production in US, which is basically the Texas area, is that we will see a modest increase this year, a modest increase next year, and then it will back to normal levels. And then to the swing tonnage. Swing tonnage, those are vessels that are being built so that they can carry both easy chemicals and what they are normally doing, the CPP or petroleum products. That is an important figure for us because it's a disadvantage if those vessels are starting to swing into doing chemicals instead of gasoline and diesel. We have seen during the past few quarters, we have seen an increase of swing tonnage swinging into chemicals. But now, if you look at the graph to the left, you will see that there has been an upswing in MR rates. And I think that will convince and encourage MR owners to swing back into where they belong on the CPP side. So we are not concerned about the influx of swing tonnage going forward. If we look at the order book, The most positive news this quarter is that there were absolutely zero new orders for chemical tankers in our segments this quarter. And the order book is exactly the same as we reported after the first quarter. And if we start with the super segregators, which is basically the bread and butter for companies like Oddfjell. We control 40% of that segment. That is a segment where we will see a slight increase in capacity. And that increase is relatively modest. If we then go to the next segment, which is what we call large stainless steel tankers, those tankers are more or less the same size as the super segregators. The big difference is that they have much fewer tanks. A 33,000 tonner can, inside a large stainless steel segment, typically have maybe... 20 24 tanks while the super segregators are between 40 and 50 tanks so in the large stainless steel segment we will see a decrease going forward that that segment is getting smaller and smaller every year so if you combine the super segregators and and and and and a large segment and in total those two segments together we'll see a slight decrease in capacity And that means that where we really see a huge increase is on the medium stainless steel segments. The medium stainless steel segment used to be dominated by what they call the J19s, the typical 19 or 20,000 tonnes being built in Japan. Those ships, there are approximately 350 of them in total. Those vessels are slowly being phased out, and they are being replaced by the more modern J-25s. which have much more loading capacity, of course, but they have the same draft and the same crew, so meaning that they are maybe 25% more efficient than the old J19s. So the increase is coming as a consequence of J19s being replaced by J25s. And right now the order book is in total approximately 20% of the sailing fleet and Oddfjell has 14% of that order book, which means that we will see a slight growth in our capacity in the years to come. And then this is my last slide, second last slide, just to summarize what I've said. We do see that slowly more and more of those bilateral trade or tariff agreements are falling into place. We have seen that IMF has made a small upgrade on GDP production and the transportation of liquid chemicals and the world GDP is extremely closely connected together. It's not possible to to imagine one single industrialized process where the chemicals that we are transporting is not involved. Every process that you can think of, whether it's car industry, agriculture, medicine, food, they all need the chemicals that we are transporting. And for that reason, this GDP figure is extremely important for our segment. Geopolitical side, we continue to see challenges. I think the world has more adapted to sailing around Suez and the Red Sea. We expect to continue to do that for the foreseeable future. We are concerned about sailing through... into the Arabian Gulf through the Strait of Hormuz. But no, it seems that that situation has come under control and we are not today sailing as normal in and out of the Arabian Gulf. We do expect that the chemicals production and the need for transport will be more or less stable this year and also next year. And there is kind of a possibility for an upswing due to the increased production of oil and the increased refinery capacity in China. uh swing tonnage i've already mentioned we expect that those vessels to either be stable or slightly decrease and by that we foresee a stable outlook for for the trade we see a slight uptick on the gdp we see uh that tariffs are slowly coming in for landing. We don't see any hiccups when it comes to the new buildings, and we also feel that we have a good overview of the swing tonnage. To conclude this presentation, we did deliver a result that we have every reason to be proud of. We managed to increase our earnings and our results in a declining market. So a slight increase in volumes. This is basically due to the fact that we swung into CPP and VEG oils. And we did not renew any significant contracts during the quarter. And those contracts that were renewed were renewed more or less at expiring terms. On the terminal side, we had stable results in the second quarter. This is in line with the previous quarter. And as mentioned, we did have someone at corporate level that reduced our net results. The outlook, we have seen some reduced activity in line with the slower summer season. We do think that increased production of oil will have a positive effect. And we do, as mentioned, expect the swing tonnage to at least not increase. So based on that, we expect the third quarter to be in line with or maybe slightly below the second quarter results. That, ladies and gentlemen, concludes our presentation, and we are open for questions. Have you received anything, Nils?

Yeah, we could just start out just to sort things out. We'll start off with questions from the audience here, and then we'll continue with questions from the webcast. And we'll bring a microphone, so please. Anyone?

If you have questions from the webcast.

I have a couple of questions, yes. So maybe I should borrow your microphone. There you go. Thank you. I'm just going to read this question. It's from Sam Eliotson. You noted an order book of 20%. Similar companies in the industry tend to report a figure below that. How does Oddfield estimate the figure? I guess the question is sort of how we define the current fleet and the existing order book in our core segment.

It's actually a good question. We are calculating dead weight versus dead weight. And that's how we calculate the figures. But it's an interesting question because the question is, how is the Right now, how is the compliant fleet, the fleet that we are actually competing with, how is that fleet developing? And what we've seen lately, for example, when it comes to the J-19s that I mentioned, there are almost 350 of them, is that many of those vessels are being sold for regional trades in the Far East. So they are still alive, they are still being counted, but they are no longer competing with the international fleet. So I think this guy has a point that these figures are not absolute, but our figures are. are relative to each other every quarter, so I think when you're looking at the figures that we are reporting, you have to compare them to what Oddfield has been reporting in previous quarters, and not necessarily with what other companies or or other analysts are reporting, because they might have a different way to calculate the volumes, and also it's different what they actually included as a core chemical tanker. We have very specific definitions of what's being included and what's not being included.

Thank you, Harald. The next one is from Evan Colesquad, and he's asking, what is the implied daily TCE for the current COA contracts? I'm not sure that's something we comment on specifically. Maybe a general answer could be given.

There I have to disappoint our viewer. That's not the figure that we are commenting on.

The next one is again from Sam Eliotson. You said you engaged more in CPP. Was it mostly in the Middle East to Asia trade or somewhere else?

No, that was, as you might have understood, the trades in and out of the US are those being by far most affected by the turmoil that we are observing due to the tariff discussions. And for that reason, we have utilized the local CPP market in and out of the US to kind of occupy our vessels while we are waiting to fill up our ships.

Thank you. And then there is another question here from . Will swing tonnage grow if geopolitical issues are going to be solved? I guess he's asking about the product tankers market, I guess, and the political situation.

Where do I start? I think if there is a peace treaty between Russia and Ukraine, that will have an impact on the regional trades in Europe, that I think will be positive for the regional trades. And then it is a question what happens to the shadow fleet. The shadow fleet today counts for, some people say it's 25% of the total tanker fleet is being defined as part of the shadow fleet. If those vessels are being allowed, and that is a ridiculously inefficient way of running shipping, to service only three countries in the world, Venezuela, Iran, and Russia. So if those vessels are being allowed to simply swing back into the compliant fleet, then that might have a negative effect. So...

don't have any good answer to to to that question there are there are factors going in in all directions here no absolutely um thank you harold um i think that was actually the final question from the webcast audience so um if there's any more in the audience here okay thank you very much for your attention and for showing up