Koninklijke Vopak Uns/Adr

Hello and welcome to the Royal Vopak Q2 2026 Results Update. Throughout the call, all participants will be in listen-only mode, and afterward there will be a Q&A session. This call is being recorded. I am pleased to present Dick Richelle, CEO of Vopak. Please go ahead with your meeting.

Thank you very much. Good morning everyone, welcome to our Q2 2026 results analyst call. My name is Dick Richelle, I'm the CEO of Vopak and I'm joined here by Michiel Gilsing, our CFO. We will guide you through our latest results. Before we start, I'd like to refer to the disclaimer content of the forward-looking statement which you are familiar with. I would like to remind you that we make forward-looking statements during the presentation which involve certain risks and uncertainties. Accordingly, this disclaimer is applicable to the entire call, including the answers provided to questions during the Q&A session. With that, let's move on to the presentation. Before diving into the results, I'd like to start off with a brief recap of our strategy, which is anchored by three integrated pillars, improve, grow, and accelerate. The execution of our strategy has been strong. We have improved our financial and sustainability performance, and invested in gas, industrial and energy transition infrastructure that supports evolving needs of our customers. Let's move to our results. We delivered a strong first half of the year, driven by healthy, sustained demand for our services, reflected in an occupancy rate of 91%. Proportionally EBITDA grew by 5% compared to the first half of 2025. Our cash conversion remains solid at 74%, resulting in an operating cash return of 15.3% on a 12-month rolling basis. We made good progress on our growth strategy. In the Netherlands, we secured the continuation of the Ames Energy Terminal beyond 2027. This is a vital step for enabling European energy security over the coming decade. We've also taken significant strategic steps in large-scale battery energy storage systems, or BES. We successfully acquired Green Energy Storage, a battery development company, and reached a final investment decision on two utility-scale projects in the Netherlands, with a combined capacity of 350 megawatts. Now looking at our outlook. On the back of solid operational performance, and the anticipated contributions from our growth projects were raising the outlook for full year 2026 for EBITDA and operating free cash flow. As always, this remains subject to ongoing market uncertainties and currency fluctuations. Last but not least, looking at our shareholder returns, we've introduced an interim dividend with the first payment of 72 cents per share scheduled this September. Also, We've completed 45% of the 100 million euro share buyback tranche, which is part of our multi-year share buyback program of up to 500 million euro. Let's take a closer look at the breakdown of our results, specifically for the different terminal types we operate. The diversification of our portfolio across geographies and products has again proven to be a structural strength. In a market that is increasingly volatile, it enables us to meet our customers' evolving needs for energy security, affordability and sustainability. We see an overall solid performance across the portfolio with higher results compared to the first half of 2025, when adjusting for the impact of currency translation and divestments. Our strong oil terminal performance was driven by robust activity in key oil hubs like Rotterdam, but also improved results from our oil distribution operations in South Africa. This more than offset the low activity levels we saw in Fujairah, which was impacted by the challenging geopolitical environment. The chemical segment benefited from the contribution of newly commissioned capacity in the US, combined with relatively stable autonomous performance. Supported by long-term contracts, gas and industrial terminals delivered a stable performance as well and achieved higher throughputs year-to-date. All in all, this has led to a proportional EBITDA of €600 million and a healthy operating cash return of 15.3%. Over the past few years, energy and manufacturing markets have faced multiple unprecedented shocks. This had and continues to have a profound impact on the balance between energy security, affordability and sustainability. Together with our partners, we provide the infrastructure that enables our customers to address these evolving needs. To start with security, recent geopolitical conflicts and trade disruptions have made the need for national energy sovereignty incredibly clear. A good example of how we play into this is with our gate energy terminal in the Netherlands. This terminal provides Northwest Europe with the needed flexibility to import LNG, successfully replacing the historical reliance on single source pipeline imports. To give you a sense of scale, this terminal is capable of supplying roughly one third of the Netherlands national gas consumption, which is primarily used for electricity generation and residential heating. In addition to security of supply, energy affordability is paramount. Maintaining access to competitively priced power is vital for safeguarding both industries and households against volatile price shocks. Through our global network of strategically located terminals, we connect supply and demand in energy and manufacturing markets. By facilitating an efficient flow of products, we provide access to diverse competitively priced global supply sources, lowering the dependence on domestic or single source production. A Reeve LPG terminal in Canada currently in the construction exemplifies this. This terminal leverages a significant geographic advantage, reducing LPG transit times from Canada's west coast to Asia to just 10 days, compared to 25 days or more from the US Gulf Coast. By reducing the shipping times, the terminal contributes to lower costs for end consumers in Asia. a region where affordable energy is vital to sustaining economic growth and improving living standards. Finally, there's an urgent systemic need to decarbonize, not just to meet national emission mandates, but also to provide energy independence from traditional energy sources. Our entry into battery energy storage systems will enable the ongoing electrification of the energy mix, while securing the long-term resilience of the power grid. To summarize, the infrastructure that we own and operate and the projects that we are developing continue to be highly relevant in the fast-evolving landscape of energy and manufacturing markets. With our diversified portfolio of strategically located terminals, we enable the secure, affordable and sustainable flow of products meeting our customers' evolving needs. Let's take a look at BES, because this quarter, We took significant steps in developing energy transition infrastructure with our investments in battery energy storage systems. This is today's fastest growing power technology driven by the rising penetration of renewables in the energy mix. The ongoing addition of renewable energy sources creates a structural need for storage to stabilize power grids and to manage source intermittency. As a result, BES offers significant potential to deploy capital in line with our return emissions while positioning our portfolio for another frontier of energy storage. With our investment in this space, we pursue a develop-own-operate strategy for utility-scale batteries connected to high-voltage grids. We will develop projects which consist of acquiring the land, securing the grid connections and permits, and designing the infrastructure. A commercial point of view, we're aiming to lock in the majority of the revenues through calling agreements, which are comparable to the take-or-pay contracts in our existing business. For the remainder of the capacity, we will benefit from exposure to the market. We believe our core capabilities provide a competitive edge in the best market. And we have proven capabilities in infrastructure development, strong relationships with key stakeholders, and experience in developing high-capacity projects. Taking this all into account, we view BES as an exciting opportunity for future growth. That brings me to the BES investment commitments we've announced this quarter. We've committed €371 million for the acquisition of green energy storage and the development of two utility-scale projects in the Netherlands with a combined capacity of 350 megawatts, to GES, We gain access to a proven BES development platform and a robust pipeline of projects. We see this as a crucial step in the development of a BES growth platform. The subsequent projects that we've taken FRD on in Veendam and Oosterhout in the Netherlands are expected to come into operation in 2028, after which they will have an attractive cash return that supports our long-term cash return ambition. These investments mark a significant strategic step that we are excited about. Now let's take a look at other developments in our network this quarter. Notwithstanding the volatility and uncertainty on the market during Q2, we continue to execute on our growth strategy. In the Netherlands, we secured the continuation of AIMS Energy Terminal for the period 2028 to 2036. We made good progress on the construction of the and the fourth bank in the gate terminal, which is expected to be commissioned at the end of Q3 this year. In South Africa, at our Durban terminal, we're expanding the capacity for the storage and handling of diesel. And in India, good progress has been made on the construction of the Greenfield terminal for LPG and liquid products in JNPA port in Mumbai. In Canada, At Reef Terminal, we're also making good progress, with more than 90% of the onshore infrastructure now being complete. Due to adverse weather conditions and marine-related operating constraints, commissioning of the terminal is expected in Q1 2027. As a result of additional resources deployed to support jetty construction activities, the total project costs are now expected to be approximately 1.5 billion CAD. For Vopak, our investment is expected to remain unchanged at around 462 billion euro due to favorable foreign currency developments and applicable contractual terms. The project returns remain consistent with those mentioned at the time of the FID. So far, we've committed a total of 2.3 billion euros to investments in gas, industrial and other terminals, as well as energy transition infrastructure. Around 425 million euro of this 2.3 billion has been committed since the beginning of 2026. We're well positioned to achieve our ambition of investing 4 billion by 2030, supporting our long-term operating cash return ambition of 13 to 17%. Looking ahead, We remain well positioned to achieve our long-term ambitions. We've shown strong business performance in the recent years, which we continued in the first half of 2026. The market indicators for storage demand remain firm, supporting the delivery of growth projects and the resilient performance of our existing business. This is reflected in our long-term ambitions of operating cash return ambition between 13 to 17 percent on a rolling 12 months basis. In addition, we're well on track to invest 4 billion euro growth capex through 2030. Also, during our full year results in February this year, we announced a shareholder distributions program of around 1.7 billion euros through year end 2030, consisting of progressive dividends, and a multi-year share buyback program. With that, I'd like to hand it over to Michiel to give more details on the Q2 2026 results.

Thank you, Dick. Also from my side, good morning to all of you. And as Dick mentioned, we have had a strong performance in the first half year of 2026. We reported a healthy occupancy rate, increased our EBITDA and further improved our free cash flow generation. These results highlight the strength of our well-diversified portfolio, particularly in times of increased uncertainty and volatility. Simultaneously, we continue to invest in attractive and accretive growth projects while returning value to our shareholders. Let's take a closer look at the performance of the portfolio. Our operating cash return on a 12-month rolling basis slightly increased to 15.3% Thank you for watching. And as we will highlight throughout the presentation, this is primarily driven by adverse currency translation effects, divestment impact, and specific material one-off recorded in the first half of 2025. Moving to our business unit performance overview. Here we can see the impact of currency translation and divestments on a year-on-year basis, which amounts to 20 million euros. A large part of this growth can be explained by the strong EBITDA contribution of €19 million from our growth projects, particularly in the US, China and India. Taking into account the €22 million related to the one-off out of 2025, we arrived at an autonomous growth of approximately 5% for the whole portfolio. The performance across the existing network was strong, primarily driven by strong oil markets which benefited our Europort oil hub terminal in the Netherlands and oil distribution terminal in South Africa, partly offset by the weaker performance in Asia and the Middle East due to geopolitical tensions. The performance of the other BU's is primarily driven by lower claims of our incaptive insurer. We are continuously focused on generating predictable growing cash flows to create value for our shareholders. In the first half of 2026, we showed a further improvement in our EBITDA to cash conversion, which is now around 74%. This improvement was driven by decreased operating capex and IVRS 16 lease expenses compared to the first half of 2025. The 2.4% decrease in EBITDA was therefore partially offset by higher cash conversion, leading to a decrease in operating free cash flow of 1.6%. If we subtract from the operating free cash flow the taxes and financing costs, we arrive at the proportional free cash flow which would be available for shareholders. Based on the 317 million euros of free cash flow generated in the first six months of this year and the existing market cap or actual market cap at the end of Q2, our free cash flow yield currently stands at around 12%. This yield is supporting our robust shareholder distributions in a period of increased growth investments. A brief reminder on the capital allocation framework. Our capital allocation framework consists of four distinct pillars. Aiming to maintain a robust balance sheet is our first priority. Second priority, distribute value to shareholders via a progressive dividend Thirdly, invest in attractive growth opportunities. And last but not least, deliver additional shareholder value through a multi-year share buyback program of up to 500 million euro through year-end 2030. Moving on to our first priority of the capital allocation, the balance sheet. Our proportional leverage, which reflects the economic share of the joint venture debt, increased to 2.87 times. reflecting a ramp-up of our growth investments. If we exclude the impact of assets under construction, which do not contribute yet to our EBITDA, the proportional leverage of the running assets is at 2.17, which has remained stable over the last years. Our ambition for the proportional leverage range is still between 2.5 and 3 times. To facilitate the development of growth opportunities, that enhance our operating cash return, Vopak's proportional leverage may temporarily fluctuate between three and three and a half times during the construction period, which can last two to three years in our business. This is all in line with our disciplined capital allocation framework. Moving on to the second pillar of our capital allocation policy, our progressive dividend. As disclosed in our full year 2025, Results, we are increasing the payment frequency of our dividends with the introduction of an interim dividend. We will pay out our first interim dividend of 72 cents per share on 24th of September 2026. This amount of 72 cents is equal to 40% of the prior year final dividend, which was €1.80. This is all in line with our progressive dividend policy, under which we intend to grow the dividend per share by at least 5% per year. The annual dividend growth rate over the last five years has been close to 10%. The third priority of our capital allocation policy is investing in growth opportunities, which are a key part of our value creation. We have the ambition to invest 4 billion euro on a proportional basis by 2030 to grow our base in gas and industrial terminals and to accelerate towards energy transition infrastructure. At this point we have already committed around 2.3 billion euro to growth investments since 2022 of which around 650 million has been commissioned and is already contributing to our results. Around 1.7 billion euros of growth projects are currently under construction, with close to 1 billion of them delivered, will be delivered during 2026 and 2027. In addition, for 2028 and beyond, another 700 million euro of projects are expected to come into operation. These projects will be delivered in line with the provided capex to EBITDA multiple, and will support our long-term Operating cash return and mission of between 13 and 17%. That brings me to the outlook for the full year 2026. As mentioned by Dick, the market indicators for storage remain firm. Supporting the delivery of growth projects and the resilient performance of our existing business are moving in the right direction. This gives us the confidence to increase our full year 2026 outlook with proportional operating free cash flow projected at around 820 million euro and proportional EBITDA expected to range between 1.18 billion and 1.22 billion euros. Bringing it all together in this slide, We had a strong first half year of 2026 with solid cash generation and a portfolio that remains well positioned to cater for increased volatility in the market. In addition, we continue investing in attractive growth opportunities while returning value to our shareholders with the recent addition of an interim dividend payment. And with that, I hand over back to Dick.