Odfjell Technology Ltd

Good morning to all of you and welcome to this presentation of Oddfjells third quarter results. We will follow a standard agenda for this presentation. I will take you through the highlights. My colleague Terje Iversen will present our financial performance and then I will conclude this presentation by an operational review and a market update and prospects. If we then turn to the highlights, we once again delivered a strong safety performance in our third quarter. We had high operational performance and we also saw no significant incidents during the quarter. We are delivering robust financial results and this is in line with what we saw in the second quarter. Our total volumes were slightly up in the third quarter. We saw our contract overfratment volumes going up, and we now have a contract percentage of approximately 56%. At the same time, we also saw that the spot rates continued to decline during the third quarter. Our time charter earnings ended at 173 million, and this compares to 174 million in the previous quarter. The time charter earnings per day was 28,174. This is slightly down from the previous quarter, which ended at $30,306. We deliver an EBIT of 59 million. This is very much in line with what we saw in the second quarter. Our quarterly net result was 43 million, adjusted for one of items. We ended at 42 million, which is again in line with what we saw in the second quarter. The net result contribution from Odger Terminals was 2.6 million. This is slightly up from the 1.9 that we saw in the second quarter. And finally, our carbon intensity, the AER, for our controlled fleet, remained at 6.8, and this is equal to the record low achievement that we reported after the second quarter. This concludes the highlights, and then I give the words to Terje, which will take you through the financials.

Thank you Harald and good morning to all of you. I will as usual start with the income statement this quarter. Starting with the time shutter earnings that decreased with the US dollar 1 million compared to first quarter and that had 173 million US dollar. So very much in line with the preceding quarter. However, looking back, looking behind the figures, we saw that the terms of the earnings per day was around 7% lower. While we also saw that the freight rate we achieved in the quarter was very stable to the previous quarter. So recently we are able to maintain the terms of the earnings in total in line with the second quarter. is that we increased the number of commercial days in this quarter, both with new vessels and also with fewer off-fire days than we had in the second quarter. Townshend expenses ended at $8 million from 4.1. Operating expenses was slightly down to 50.6 compared to 52.9 in the second quarter. The main reason being that we had less dry docking activity this quarter, and also we had one vessel that left the fleet during the quarter. Share of net results from John Panchers being over terminal investments was 2.6 million US dollar, up from 1.9 in the second quarter. That gives us an EBITDA of 97.3, compared to 98.4 in the second quarter. Deprivation and arbitration, 39.3. quite the same figure that we saw in the second quarter. Then we achieved a small capital gain on the sale of both August in this quarter, which was sold for recycling at 1.1 million US dollar, leaving us with an EBIT of 59 million US dollar compared to 58.6 in the second quarter. Net interest expenses at 15.5 compared to 16.4. And after other financial items in Texas, we then delivered a net result of 42.8, an increase compared to second quarter with 40.1. And that gave us an earnings per share of 54 cents in this quarter. Adjusting for non-recurring items, being other financial items this quarter, we then delivered a net result of 42 million in this quarter. Looking at the timeshot earnings per day compared to cash break even, as Harald mentioned, timeshot earnings per day ended at 28,174, down from 30,306 in the previous quarter. We saw also an improvement in cash break even per day, which ended at 22,054 USD this quarter compared to 23,791 in the second quarter. bringing over 12 months rolling average cash per given to $23,307. A decrease in cash per given was due to more commercial revenue days and also, as I mentioned, less dry docking activity this quarter. Going forward, we expect cash per given to remain stable around this level in the coming quarter. Looking at the balance sheet, we took delivery of both Gemini this quarter, which previously was a bare boat vessel that was already included in the balance sheet, the right of user assets. And we also sold, as I mentioned, both Fargus for residing for US dollar, 10 million US dollar. leaving us with a Ships and New Billion Contracts book value at 1.3 billion US dollar end of third quarter. Right of use of assets under 229.6 decreased due to the acquisition of Bo Gemini, which I mentioned was previously classified at right of use of assets. Investments in associate and joint ventures under the 173 down from 181. despite a positive result from the JVs. However, we took out dividend from the US terminal of 9.1 million US dollar this quarter, which then was transferred to the group. Cash and cash equivalents under that 136 million US dollar, or if you include undrawn loan facilities, we have then available liquidity of around 306 million US dollar per end of third quarter. Equity increased with around $1 million, corresponding to the total comprehensive income in a quarter. And last, the dividend, $38 million that we paid out due to the first, on the back of the first half result this year, which was then paid in September. Non-current interest-bearing debt increased slightly, and that is related to the acquisition of Bo Gemini, which I mentioned. That was fully financed by bank debt when we took delivery. Looking at the cash flow, operating cash flow ended at 67 million US dollar compared to 109.2 in the second quarter. The reason for decline, I would say, is that we had really strong operational cash flow in the second quarter with a substantial decrease in the working capital in the second quarter, where we saw more normalized working capital this quarter, leaving us with a cash flow from operation in 1967, which is very much in line with the first quarter this year. Looking at cash flow from investing activities, we see that we have included a sale from August with $10 million in plus, and then we have invested in Gemini, and we also have done some dry docking and invested in some of our assets, $43.7 million in total. And if we include the dividend from the terminals in the U.S., which is included in the 8.2, we are left with a cash flow for investing activity of 25.5 million U.S. dollars in the third quarter. On the debt side, not that much happening this quarter, but we financed the acquisition of Bob Gemini. And we also paid a dividend of $38 million, as mentioned. And that is summarized with the net cash flow from financing activities of $37 million this quarter. So we include investing activities and operational activities. We are done increasing the cash this quarter with $5 million. Looking at the free cash flow on a quarterly basis, the last 12 quarters, as I mentioned, we saw the operating cash flow this quarter was 67.4, a decrease of 41.8 compared to the previous quarter. The decline was, as I mentioned, primarily driven by an increase in the working capital or more normalization of the working capital this quarter. While we saw cash flow investment was summarized to $25.5 million in this quarter. That leaves us with a free cash flow of $42 million in the third quarter. And looking at the 12 months rolling, we have a cash flow done, free cash flow of 41.6. And if you adjust for repayment related to right of use of assets, we reach 28.4 million US dollar in 12 months rolling average under third quarter. On the financing side, not much happening this quarter. This is showing the scheduled repayments in the coming quarters, including fourth quarter 27. We are showing here that we have some balloons in the fourth quarter this year, but that is actually what we have already repaid on revolving credit facilities. And then we have two loans that are maturing in the first quarter and second quarter of 26. And we already started refinancing those vessels. And we are quite positive or optimistic with regard to what we are going to achieve in the market when it comes to both tenor loan profile and also margin on these refinancing. Looking at the total depth, we today have interest-bearing depth of $756 million. It's expected to decline somewhat to the year end, to $709 million, but we also expect a slight increase next year due to delivery of new vessels in 2026. Here we see that we have total CAPEX and time-shutter commitments. Looking at the CAPEX, we have, as mentioned, both Gemini, which is the last operating lease vessel, where we have declared purchase options being delivered, expected to be taken ownership in first quarter next year. Also, the purchase option for that is very much below the current market values, and we expect to obtain a financing around the full purchase amount for that vessel. The vessel is already included in the balance sheet. That's current depth rate of use of assets, so we did not include the total, in fact, the total asset on our balance sheet. And in addition to that, we have also two new billings on order for own account. So if we summarize Capex commitments, we are around $122.8 million per end of third quarter. Looking at the terms of the vessels, we have 18 new billings that are going to be delivered from first quarter 26 until 2028. 10 of those will be delivered in 2026, seven in 27, and one in 2028. Here we're showing the total expected time-shutter payments for these 18 vessels. That is US dollar 1.1 million US dollar, same figure as we have shown before. And total time-shutter payments on the 10 first vessels in 2026 will be 43 million US dollar. However, when we take ownership of these vessels or enter into the contracts, the vessels are delivered. We have to account for the total terms of the commitments or the bare boat element of these vessels. And we are talking around $300 million that will be capitalized in 2026 for these around 10 new buildings, which will be then booked as right of use assets and also debt related to right of use of assets. This most data here are more the total time shutter commitments, including also the OPEX element. And as we have mentioned, these vessels together with our new billings account for 40% of the current order book in our core segment. Then we'll leave the role to Havel again.

Thank you, Tage. We follow on the agenda and I will take you through an operational review of the quota that is behind you. I will start with the volumes. Once again, we saw an increase in total volumes carried on board Oddfjell vessels. This is the third consecutive quota where we see volume increases. We also, as Terje mentioned, we have started to take delivery of our new building program and we did see a 7% increase in commercial revenue days during the quarter and that was compensated, the increase in revenue days was to some extent compensated by an increase in volumes and we also saw relatively robust increase in our contract volumes. Today the contract coverage stands at 56% and we are now entering the renewal season for our contracts. Only 3% of our contract volumes were renewed in the third quarter and those contracts were renewed more or less on rollover terms. If you look at earnings per day, as mentioned, we saw a 7% decline in average time charter earnings per day. This was mainly driven by the mentioned increase in commercial revenue days, which exceeded the mentioned volume growth. We saw a positive development in speciality chemicals, which is the core business of Oddshell. We also saw an increase in the commodity chemicals, the large volume chemicals. We saw a flat development when it comes to vegetable oils. And finally, the last segment, clean products. Here we saw a decline in volumes carried by Oddshell, and we are now back to the to what I would call the more normal influx of clean products on board our ships. So all in all, we see an increase in our core activity, speciality and commodity chemicals. We see a flat development in bag oils and we see a healthy decline when it comes to oilfield vessels carrying clean products. And then turning to sustainability, as mentioned, we are repeating the record low AER that we delivered in the second quarter. Once again, we deliver an AER of 6.8. This is the lowest ever reported by Oddfjell. And it's important to notice that when... When the second quarter is perhaps the best quarter when it comes to fuel consumption due to weather conditions, we are now back to the more normal weather conditions in the areas where we operate. It comes as no surprise that Oddfjell was disappointed that the IMO net zero framework was not adopted in October. However, this will not deter Oddfjell from continuing on our decarbonization pathway. We will continue to invest in IMOs. in decarbonisation projects. We will continue to utilise biofuel to reduce our AER and we will continue to invest in the net zero future. Finally, one of those projects relates to the sail installation on our vessel Bo Olympus. We have reported on this vessel before. This vessel recently completed a westward transit of the Pacific. Here we saw a 16% reduction of fuel consumption. This translates to 4 tons of fuel every day during that transit. And this is not only good for the environment, it's also good for Oddshell's bottom line. The Boa Olympics is now loading for the return voyage to the U.S. Gulf. She will commence that voyage in a week or two. And normally the eastward passage across the Pacific has more friendly wind directions. So we are very optimistic and eagerly waiting for that transition, that transit. Finally, tank terminals. The headline here is stability. We continue to deliver a stable performance. We had an occupancy rate slightly above 95%, which is marginally down from the second quarter. We saw an increase in inbound throughput of approximately 3% during the quarter. And as a result of increased throughput and reduced... expenses, we did see an improvement of our EBTA of approximately one million US dollar compared to the second quarter. However, we still have one of items at holding level that are negatively impacting the consolidated EBTA and net results of our terminal division. The outlook for the division is a stable similar underlying performance also in the last quarter of this year. We continue to develop our terminals. We are constructing the so-called tank pit Q at the North Nazi terminal in Antwerp. This expansion project will be completed towards the end of the fourth quarter, and that will add approximately 12,000 cubic meters of capacity to our Antwerp terminal. We also have a large expansion project going on in Ulsan, in Korea, at our OTK terminal, the so-called E5 expansion project. Here, we are constructing almost 90,000 cubic meters of capacity, and that project will be completed towards the end of next year. In total, we therefore have close to 100,000 cubic meters of capacity under construction at our terminals. It's also worth mentioning that we are refurbishing both of our jetties at the Ulsan terminal, OTK. when those refurbishment projects are completed, that will significantly improve the flexibility of that terminal. And finally, it's important to notice that all our CAPEX related to the terminals is funded locally within the respective joint ventures. So by that, I turn to a market update and prospects going forward. Starting with the freight rate development, you will see that west of Suez we have seen a flattening of the rates. The decline that we have seen over the past 12 months have come to a stop, and we now see a relatively flat development. We anticipate that some of the reason for this development is the consequence of the tariff negotiations and also the proposed port fees both in the US and in China. As a consequence of these negotiations and the port fees, we have seen that some of the chemical tanker capacity has gradually moved from the western hemisphere and over to the eastern hemisphere. And the reduction of available tonnage in the western hemisphere has had a stabilizing effect on the freight rates in this region. Then, if we look at the situation east of Suez, we've seen that there has been a decline in freight rates during the quarter, and that is, in our opinion, the effect of more tonnage moving from west of Suez to east of Suez, and the surplus of tonnage east of Suez has put a pressure on chemical freight rates. in that region. Overall, it's important to notice that despite the recent reductions in freight rates, we are still significantly above the levels that we saw before the end of 2022, where rates were at relatively depressed levels. So even if we have had a freight rate reduction over the past 12 months, we are still significantly above the levels that we saw before the end of 2022. And then to swing tonnage, If you look at the graph on your left hand side, you will see that the MR earnings have been in a positive trajectory already since the end of 2024, and they are now at relatively robust levels. This has had an impact on the swing tonnage, meaning MRs that are carrying liquid chemicals, The situation is still that we see a relatively comfortable level of MRs swinging into our segments. And we also have to take into consideration that many of the MRs are 100% employed in the chemical segment. That also goes for odd-shell. As an example, we have six MRs that are continuously trading in chemicals. And that implies that we will never see that the influx of swing tonnage becomes zero, but we believe that we are now close to the lowest level that can be achieved. Finally, the order book now stands at 22% of the existing fleet. The reason for the change from the second quarter is mainly... that previously entered into new building contracts have now been registered in the various systems. So there has been relatively few new orders during the third quarter. The main reason for the change is that new orders entered into before are now also registered in our system. The majority of the order book is still related to the medium stainless steel segment, while we have a relatively modest increase for super-segregators, and for all practical purposes, a net zero when it comes to large stainless steel. When it comes to our outlook, we still see that volumes are resilient. We still see that despite the geopolitical uncertainty and tariff negotiations, we still see that we have relatively solid volumes out there. We do see that IMF has revised GDP growth expectations upward once again. And we also see that there are indications that the tariff negotiations between the U.S. and China have a slightly reduced risk compared to what we saw one and two quarters ago. We were expecting global seaborne chemical trade volumes to see a slight decrease in 2025. This has not been the fact so far and now we are expecting a flat development when it comes to this year's volume. We also see that we have higher oil production. We see that India is shifting towards non-Russian oil. And this is, as we all know, supporting the VLCC segment. We have seen a spillover to the CPP segment. And historically, an upswing in crude and CPP have historically had a spillover effect also. over some time into the chemical tanker segments. As mentioned, we believe that the swing tonnage will remain low for the rest of this year. So to summarize the demand outlook, we see stable development when it comes to chemical trade. We see a small uptick when it comes to GDP growth, and we see a stable development when it comes to the tariff effects on our markets. There is an upswing when it comes to the chemical tanker fleet, and we do believe that swing tonnage will remain at existing levels. So to summarize this presentation, we did deliver a robust financial result in the third quarter, which was very much in line with what we delivered in the second quarter. Time charter earnings were stable, while the average time charter earnings per day saw a decline of 7%. We saw an increase in volumes that was particularly driven by an increase in our contract volumes, and we also saw an increase of commercial revenue days of approximately 7%. This was yet another quarter where we had a few contract renewals. Those that we had were renewed more or less at rollover terms, and we are now entering into the renewal season, which will last until the end of the first quarter next year. On the terminal side, we still deliver solid underlying financial results. These were this quarter supported by a moderate revenue growth and also slightly lower operating expenses. We do have on-off items at the holding level, which are negatively impacting the consolidated EBTA and ONF results on the terminal side. Market outlook, we have put a seasonally slower season behind us, and we do see some upticks in activity in our markets. We do see positive effects from the increased OPEC production, and we do expect that swing tonnage will remain at moderate and low levels. And by that, we expect the fourth quarter financial results to be more or less in line with what we saw in the third quarter. So that concludes our presentation, and we now turn to the Q&A, and then I welcome Nils and Terje back.

Thank you Harald. And just for our listeners and viewers out there, you can still use the question button on the webcast to post any questions as we proceed with the Q&A. We have some questions that have come in. I think the first one will go to you Harald and it relates to We recently saw that the US and China port fees were postponed for now. And the question is, how does this impact Oddfjell?

That is correct. And I briefly touched upon that when I gave an update on the freight rate development. Oddfjell was exempted, or chemical tankers were exempted, chemical tankers operated by Western operators were exempted from the U.S. port fees. So the U.S. port fees did not have a direct effect on Oddfield's operations. And then we saw the introduction of China port fees. Those port fees were mainly aimed at US controlled tonnage and we were also not affected directly by the Chinese suggested port fees. Having said that, there are plenty of other operators that are somewhere or another impacted by those port fees. And this, as I explained earlier today, this has an impact on how the total world chemical tanker fleet is distributed. And by that, we have seen a change where the overall tendency is that more vessels are east of Suez and less vessels are west of Suez. So no direct impact, but yes, considerable indirect impact.

Okay, thank you. And then we have one question concerning cashback events, so that goes to you, Tai. The cash break even came down somewhat this quarter. How do you see the development going forward?

The reason we saw the cash break even coming down this quarter was due to several factors. One was that we had more revenue days. We also had a decrease in both OPEX and GNA. And we had less dry docking activities. So this was our kind of a good quarter when it comes to cash break even. We are going that we expect stable cash break even when we are looking at the 12 months rolling. We expect that to be stable in the coming quarter. But going further into next year, we will see an increase in number of vessels that we have discussed, 10 new vessels being delivered. So we will have more revenue days that should lead to a lower cash break even going forward. We have a long-term target to reach 21,000 US dollar per day. Whether we'll reach that in 26 or not, I will not be specific about, but we will still continue to target that $21,000 per day in cash break even.

Okay. Thank you. The next question on my list here is, yeah, it's of a geopolitical nature, I would say. So back to you, Harald. And it concerns the Red Sea and the Suez Canal. So the question is, how would Outfield be affected by a potential reopening of transits through the Red Sea and the Suez?

My anticipation is that the effect on the chemical tanker segment will not be that significant. There are estimates indicating that an opening of the Red Sea will add some 1.5 to 2% capacity to the market. And that, I think, If the Red Sea is opening, then that is a positive sign for the world economy. So I think that the reopening of the Red Sea will not have a significant impact on Right now the Red Sea is closed and we have not so far at any point considered to re-enter the Red Sea and we will continue to have that attitude until we see that there are major changes in the security situation in that area.

Okay. Thank you. And I believe that was the final question. So, yeah.

Thank you for following this presentation. Thank you for the attention. And I welcome you back to our fourth quarter presentation early February next year. Thanks a lot for joining us today.