Operator: Welcome to Hafnia's First Quarter 2025 Financial Results Presentation. We will begin shortly. You will be brought through today's presentation by Hafnia's CEO, Mikael Skov; CFO, Perry Van Echtelt; VP Commercial, Søren Winther; and EVP Head of Investor Relations, Thomas Andersen. They will be pleased to address any questions after the presentation. Should you have any questions, you can submit them via the chat function or use the raise hand function to be unmuted to ask your question verbally. Questions will be answered at the end of the presentation. You will receive further instructions as required. During this conference call, some statements may be considered forward-looking, reflecting management's current expectations. These statements involve risks, uncertainties and other factors, many of which are beyond Hafnia's control that could cause actual results, performance or plans to differ significantly from those expressed or implied. Additionally, this conference call does not constitute an offer or solicitation to buy or sell any securities. With that, I'm pleased to turn the call over to Hafnia's CEO, Mikael Skov.
Mikael Skov: Thank you, and hello everyone. I'm Mikael Skov, CEO of Hafnia. Welcome to our earnings call for the first quarter of 2025, and thank you for joining us today. With me today are our CFO, Perry Van Echtelt; our VP of Commercial, Søren Winther; and our EVP and Head of Investor Relations, Thomas Andersen. Together, we will walk you through Hafnia's performance for the quarter. Today's presentation will cover four key areas. I'll begin with a review of our first quarter performance and key highlights, followed by an overview of Hafnia and our market position. Søren will then discuss recent commercial developments and share our outlook for the product tanker market. Perry will review our financial results and capital allocation strategy. I will then conclude with an update on our ongoing sustainability initiatives and provide closing remarks. Let's move to next slide, which is Slide number 2. Before proceeding, I want to direct your attention to our Safe Harbor statement. Today's presentation will include forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from these statements. This call does not constitute an offer to buy or sell securities. Thank you for your attention. Let's start the presentation. Let me begin by outlining some of the key highlights from the quarter. We now go to Slide number 4. Despite a challenging market environment, Hafnia delivered solid financial results demonstrating the resilience of our business model and operational strategy. In the first quarter of 2025, we achieved a net profit of $63.2 million, a reflection of our operational strength, amidst ongoing uncertainty. Our first quarter results reflect approximately 500 off-hire days due to scheduled drydocking and repairs, yet we still generated TCE income of 218.8 million, underscoring the strength of our core operations, even during a maintenance intensive period. Our performance was further supported by our adjacent fee-generating pool and bunkering businesses, which contributed $7.9 million to our overall results. Moving to Slide number 5. Next, I would like to highlight Hafnia's key investment attributes. Hafnia is a global leader in the product and chemical tanker market, operating one of the largest and most diversified fleets in the industry. As owner and operators of more than 200 vessels across eight pools, we provide a fully integrated shipping platform, which includes technical management, chartering services, pool management, and a bunker procurement desk that has serviced over 1,500 vessels in 2024, both within our pools and for external ship owners. Seascale Energy, our new joint venture with Cargill, is expected to commence operations in May and will be one of the world's largest bunker procurement companies. These initiatives reflect Hafnia’s commitment to delivering cost efficiencies and innovative fuel solutions to our customers. At the end of the quarter, our own and chartered fleet comprised 125 vessels with a net asset value of approximately $3.4 billion. This equates to an NAV per share of around $6.96 or NOK73.03 per share. Our modern fleet presents significant opportunities for enhanced operational efficiency and higher earnings potential. This is reflected in the average age of our own vessels, at 9.3 years, compared to the global product tanker fleet average of approximately 14 years. As part of our commitment to a more sustainable maritime future, we also look forward to welcoming the Ecomar Guyenne this month. This vessel is the second of four dual fuel methanol chemical IMO II medium range product tankers ordered through our joint venture with Socatra of France. As they are designed to run on both conventional fuel and methanol, these vessels will pave the way for a transition to more sustainable fuel options. Let's move on to the next slide, which is slide number six. At the end of the first quarter, our net loan to value ratio stood at 24.1%, increasing slightly from the previous quarter, primarily due to a decline in vessel market values. Based on our payout policy, I'm pleased to announce a payout ratio of 80% for the quarter. This represents a total dividend of $50.6 million for the quarter, which corresponds to $0.1015 per share. Notably, we have elected not to deduct the $27.6 million that has been used for share buyback from this quarter's dividend calculation, which effectively increases our total payout ratio to 123%. This decision underscores our confidence in the market and enables us to maintain financial flexibility while delivering strong returns to our shareholders. Søren will now be sharing the industry review and market outlook.
Søren Winther: Thank you, Michael. Let me start with an update on the current market conditions in the product tanker and CPP segments, where Hafnia primarily operates, and then share our outlook for the months ahead. The first quarter experienced an increase in trade volumes and ton miles, supported by strong global demand, resulting in an improved spot market. Sentiment has improved further in the second quarter, setting a positive tone for the remainder of 2025. As we can see, CPP on water has rebounded strongly from Q4 through Q1 2025, primarily driven by reduced crew tanker cannibalization and higher export volumes. While such trends typically signal improved earnings, this difference between recovering CPP volumes and lacking earnings primarily reflects market sentiment rather than fundamental weakness. Creating a potential upside opportunity as sentiment normalizes. Moving on to next slide, slide nine. Improvement in demand fundamentals is further illustrated here. When we examine cargo volumes against ton miles, we observe an upward trend over the years. Since April 2018, cargo volumes for CPP and chemicals have steadily increased, reaching their highest levels in April 2025. Ton miles have also increased across the years due to ongoing refinery dislocation, but remain lower than 2024 levels, which are largely due to geopolitical unrest that resulted in vessels rerouting away from the Red Sea. We anticipate this high CPP ton mile to persist, driven by export volume gains fueled by ongoing refinery production increases in the Middle East. On the other hand, DPP cargo volumes have slightly declined over the years. In early May, OPEC+, led by Saudi Arabia, announced a second consecutive monthly increase in output. We expect this move to support crew tanker rates in the near term and have positive spillover effects on the product tanker market in the medium term, as increased crew supply is likely to drive higher refinery activity. Moving on to Slide 10. A key change in global trading pattern in 2024 has led to the reduction of laden voice lengths. The initial market disruption caused by Red Sea closure led to vessels rerouting around the Cape of Good Hope. This has gradually diminished through 2024 into 2025. Instead, there has been limited cross-atmosphere trading, leaving tonnage static within regions. As a result, average laden voice lengths have decreased by about 10% from a year ago. On the tonnage supply front, the year-to-date effect on clean tonnage supply has been very marginal. This is largely driven due to 100% of LR2 nuclear deliveries or the equivalent thereof in 2025 entering the dirty trade. For dirty tonnage, the earlier OFAC sanctions and the corresponding import ban by China and India on sanctioned tonnage have had a more profound impact on DPP than on clean products. We estimate that the DPP market has experienced an approximate 10% drop in supply. Moving on to Slide 11. The OFAC sanctions primarily target crude tankers, which are expected to have a positive spillover effect on the product tanker market. When considering the decreased usage of older vessels, the sanctioned crude tanker fleet is equivalent to the entire crude new build program scheduled through 2025. We can therefore anticipate reduced crude tanker cannibalization and increase in the shift from clean to dirty trade, as we have already observed with the year-to-date LR2 deliveries. The percentage of sanctioned fleet tonnage miles measured against global tonnage miles currently stands at 2.15%. We expect this figure to decline further through Q2 2025, given that the trade wind-down period only concluded in March. Compared to the total debt rate increase, the current worldwide fleet of 2.68% for 2025, the underlying supply-demand balance for the year remains solid. Moving on to Slide 12. Despite the older age profile of the sanctioned fleet, we do not expect this to significantly impact scrapping levels. However, de-facto scrapping seems evident and supports the underlying supply-versus-demand balance. Additionally, we estimate that around 400 dark fleet vessels remain engaged in Russian trade, despite not being listed by OFAC. The dark fleet is identified as tonnage with questionable ownership and a predominantly older age profile, while the gray fleet is associated with more reputable ownership. This signals the potential for further sanctions from EU and OFAC. Moving on to Slide 13. The supply outlook remains positive, considering known new builds from 2025 to 2028 across the tanker segments from handy to VLCC. Debt rate supply totals approximately 97 million. Based on assumed scrapping ages at 23 years for LR1s, 2s, Suezmaxes and VLCCs, and 25 years from handy's and MRs, we estimate potential scrapping at around 167 million debt rate over the same period. An additional 87 million debt rate could be scrapped between 2029 and 3031. It is worth noting that we did not account for differences in utilization between new builds and older vessels. Moving on to Slide 14. A recent geopolitical key development is the USTR's proposed port fee, announced on April 17th, targeting Chinese-built vessels as well as Chinese operators and owners. While we expect limited direct impact on the product tanker market, the full implications remain difficult to predict at this stage. However, we can provide an overview of the magnitude of existing and future new build tonnage from Chinese yards. If implemented, the proposal could lead to another global reshaping of trading routes, increasing ton miles. Moving on to Slide 15. Perry will now bring you through the key financials for the first quarter. Over to you, Perry.
Perry Van Echtelt: Thanks, Søren. As Søren mentioned, geopolitical instability impacted the product tanker market during the first quarter. Nevertheless, Hafnia has effectively navigated these challenges, achieving stable earnings that reflect our operational resilience. In Q1, we generated a TCE income of $218.8 million, and additionally, our commercial pool management and bunkering businesses continue to perform well, generating earnings of $7.9 million for the quarter. That brings our adjusted EBITDA to $125.1 million, ending the quarter with a net profit of $63.2 million. With these results, we achieved a return on equity of 11.1%, and a return on invested capital of 9.6%. We continue strengthening and optimizing our balance sheet. At the end of the quarter, we had a cash balance of $188 million, with total liquidity of approximately $500 million when we include undrawn facilities of over 300 million. We've hedged 56% of our interest rate exposure at a weighted average base rate of 1.83%, and our hedging strategy has played an important role in controlling our costs in a higher interest rate environment. The strong hedge position combined with continued deleveraging will help us managing our forward interest rate risks. If we move to the next page, our delivering efforts have enabled us to significantly reduce our net debt levels over the past two years, from $1.3 billion in the first quarter of 2023 to $856 million at the end of Q1 this year, while at the same time maintaining a high level of dividend payouts. While challenging market conditions have resulted in a decline in vessel values of approximately 9% since Q4 2024, we've managed to maintain a healthy LTV ratio at 24.1% at the end of this quarter. Besides maintaining our strong financial position, we are focused on effectively controlling our cost levels to enhance our cash flows and profitability. We continue to focus on and operate at highly competitive cost levels, also compared to our peers, with substantially lower combined OpEx and G&A per day. This helps us keep breakeven levels low throughout the cycles and maintain a high level of cash conversion. Balance sheet management and cost competitiveness has also enabled us to achieve a stronger return on equity. If we then move to the next page, to the operating summary, in Q1, our TCE income was based on 9,514 earning days, generating an average TCE of $22,992 per day across the segments. OpEx costs, which consists of vessel operational costs and our technical management expenses, were calculated based on 9,180 calendar days in the quarter, leading to an average OpEx of $7,987 per day. Also, with a significant portion of our own vessels built in 2015 and 2016, many of our vessels will be undergoing their second dry dock during this period. As a result, our Q1 results has also been impacted by a significant number of vessels in dry docks or under repairs, leading to approximately 500 or higher days during the first quarter. We anticipate a similar level of dry dockings and repairs in the second quarter, resulting in approximately 630 or higher days in Q2. Looking at our Q2 coverage as of 1st of May, we can see tanker rates recovering. We're confident in the underlying strong market fundamentals, which are expected to bolster our performance in the upcoming quarters. Then move to the next page. So, based on our coverage for the upcoming quarters, we're on track to achieve strong earnings in 2025. As of the 1st May of this year, 57% of the total earning days in Q2 ‘25 have been covered at an average rate of $24,839 per day across the segments. And for Q2 to Q4 of ‘25, 27% of the earning days were covered at an average rate of $24,902 per day. On this page, you can see a presentation of three scenarios outlining Hafnia's potential earnings for the year. The first is based on the consensus forecast of equity analysts, while the second extrapolates the Q2 covered rates on the left to the available earning days in 2025. And then the last scenario applies to Q2 to Q4 covered rates to the available earning days in 2025. In all three scenarios, Hafnia's projected to generate robust net profits for the year, estimated to be in the range of $320 to $340 million. With strong global demand and a recovery of spot rates in the second quarter, Hafnia's well positioned for solid returns in 2025. Mikael, over to you for the next few slides.
Mikael Skov: Thank you. We're now on Slide 21. Moving on, I would like to provide insight into Hafnia's sustainability strategy and goals. As an established market leader, we recognize our responsibility in shaping a more sustainable maritime future. We actively drive the integration of sustainability principles across our operations to create a positive impact on our communities and stakeholders. Through collaboration with industry peers, regulators, international bodies, and constant engagement with stakeholders, we aim to develop long-term solutions that will effectively address the challenges facing the maritime sector. This approach enables us to not only future-proof our business, but also contribute meaningfully to the world. Slide 22. Next, we understand the importance of adapting to the dynamic global landscape, and we're actively pursuing initiatives to future-proof ourselves. We have embarked on several key strategic initiatives that we believe will play a key role in defining the maritime future. As mentioned earlier, we will soon commence operations at Seascale Energy, which, leveraging the combined strength of both Hafnia and Cargill, will transform marine fuel procurement services and benefit customers worldwide. By aligning our strategic investments with strong industry partnerships, we reinforce our position at the forefront of maritime innovation. Slide 23. Looking ahead to the rest of the year, Hafnia is operating from a position of strength. Despite navigating macro headwinds and vessel maintenance in Q1, Hafnia delivered $63.2 million in net profit while maintaining our 80% dividend payout ratio. Market fundamentals remain strong with constrained fleet supply and rebounding spot rates, offsetting geopolitical uncertainties. Our proven operational excellence and strategic investments position us to create sustainable long-term value while returning significant capital to shareholders. We remain optimistic about Hafnia's ability to capitalize on the positive trajectory of the market. This concludes our presentation. With that, I would now like to open the call for questions.
Operator: We will begin our Q&A session now. [Operator Instructions]. Our first question we have from Omar Nokta. Omar, please, can you take yourself off mute?
Omar Nokta: All right, thank you. Hi, Mikael and team. Thanks for the update. You know, clearly, things have improved here recently. We can see that in the spot market. We see that in your bookings. And 2Q is looking a bit more positive. But I wanted to ask about the LR2s. Even though it's a relatively smaller part of your fleet, it's looking much stronger. You showed a pool average of about 53,000 for the week of May 5, which I think really stands out. Can you just give a sense of how you're trading those shifts and what's caused such a big move?
Søren Winther: I guess I can take that one, Michael. You can say on the LR2s, we trade them predominantly in the Eastern hemisphere at the moment in the CPP segments and not much in the dirty trade as it is. And the $53,000 that you are seeing is a combination of good front haul legs on the tonnage. However, the market is stronger, especially in the Middle East where the function of refinery turnaround is coming to an end in the region and especially in China as we go through now. Combined with higher refinery margins due to falling crude value or flat price, now has put the LR2 market somewhere between 35,000 and 37,000 on a round-trip basis in the Eastern region. So 53,000 is a little bit high and elevated because of shorter balance decks.
Omar Nokta: Okay, thank you. I appreciate that insight. And then maybe just a follow-up, kind of maybe a bigger picture. The Hafnia fleet is static here with no changes really since last quarter. And static, obviously, is not a bad thing. You have a significant critical mass. The JVs have been an area of growth here, but the core fleet, I guess, itself hasn't changed. Do you expect to keep things like this? Any further aim to add or sell ships or fine-tune by selling older and replacing with newer?
Mikael Skov: Yes, thank you for that question, Omar. No, I mean, as you say, we were pretty active in building up the fleet back in '21, beginning of '22. And we've kind of been focusing really on harvesting on that for the last two years and as you know returning capital to shareholders rather than buying new ships. So I think our view has kind of always been the same that if there were attractive deals out there, we would look at them. But we have more been focusing on selling older tonnage during the last two years because we felt prices were attractive and as far as we're concerned, that's probably still the view right now that we're happy with what we've got. We think we have an average age of 9.1 years. We'll probably still look to offload some of the older ships as just as a normal fleet renewal. And then we'll be open if there are attractive deals. But I don't think you're going to see us here in the short term being active in buying assets as such as straight cash buys. That's not the idea. The idea is to continue to utilize what we have of a strong fleet and earning power and then return capital to shareholders.
Omar Nokta: That sounds great. Okay. Thank you, Mikael. Thanks, team.
Operator: Thank you, Omar. I'll move on to Frode. Frode, can I ask you to please unmute yourself?
Frode Mørkedal: Yes. Thank you, guys. [Indiscernible]
Operator: Frode, can you repeat your question? I think we lost you in the first part.
Frode Mørkedal: I talked about the Q1 dividend decision and the fact that you left out buybacks from the return calculation was a nice surprise. I guess I had two questions on that. First, how are you thinking about buybacks in general as a capital return tool? And then second, can we take this as a sign that you will focus more on dividends going forward?
Mikael Skov: Thank you for that, Frode. And yes, so basically what we have decided is that we are maintaining our dividend policy. And as far as share buybacks are concerned, then that will be more on an ad hoc basis. I think I've said before, we always discuss the two. And I think the last time we felt that the disconnect between NAV and the share price was significant. Therefore, we wanted to do a share buyback, but we both realized that particularly in these turbulent times, it's important for investors in general to have clarity. So that's why we've kind of decided that we'll stick to our dividend policy. And if we do any share buybacks, it will be in addition to that, not as a deduction.
Frode Mørkedal: Okay. That's good. A second on the market, I guess. This chart you had on Page 8 is interesting, where you showed the tom days versus the chopper rates, right? So it's a pretty big disconnect there right now. And I think you mentioned that sentiment is one of the reasons why rates are lowered and the demand. So maybe you can elaborate on that if you can, and basically how you reconcile that difference? That's the question.
Søren Winther: Yes, you can say the difference is a little bit difficult to reconcile. What you can you can surely say is that you're sitting about, what is it, 4% lower than the pinnacle of all markets in April last year, in terms of oil and water, which indicates a fundamental strength in the supply demand balance, given that the net addition of debt weight to the CPP market over 2025 has been limited to none, right? I think we are in a situation where charters feel more comfortable. There's not this feeling of fix today to avoid disappointment tomorrow. In that sense, you also have an owner's sphere, if you like, that is quite happy just to earn somewhere in the 30s on an LR1 and mid-high 30s on an LR2, which creates a little bit of lead to the market, which literally is the sentiment. It also tells a story about that you don't need a lot of outside factors or geopolitical intention or anything on top of this before you have a strong chance of a spike in the market. But on a general note, if you look at the spot desk here on a daily basis, you are sitting now with a position list in the Middle East that is as tight as it was in April last year. You're just not seeing the same TT, and that is what we call sentiment.
Frode Mørkedal: Okay, that's good. That's at least hopeful. Thank you.
Søren Winther: Thank you.
Operator: Thank you, Frode. Kristoffer, may I ask you to unmute yourself?
Kristoffer Barth Skeie: Yes. Hello, and thank you guys for taking my question. Good presentation, and it seems like really good bookings on the LR2s and MRs, especially compared to pairs. In terms of where do you see the market heading now, can you comment a bit on this OPEC plus reversal? I guess this will have an impact on the product space as well. So, do you have any view on sort of how that will impact product loadings out of the Middle East over the summer months?
Søren Winther: Yes, I think there is a two-tier thing, really. Another million barrels as announced by OPEC plus really in the middle of this summer is first and foremost obviously positive on the crude tanker side, which for us means if you look at the LR2 segment deliveries this year, you are looking at 20 new deliveries and 25 ships have actually gone into the dirty trade. And the expectation would be for this trend on the equivalent side of the LR2s to go into dirty trade still, especially now that you have more volume coming on that trade. Principally, we like when the market is pushed from the top, i.e. the UFCs down to the sewers, down to the airfares, and so on and so forth, because it gives a little bit more longevity typically in the sustainable market. At the same time, when you have OPEC plus pumping out another million barrels, it also needs to be refined. And refinery margins typically go up when flat price goes down, which we are also seeing currently. That creates more trade volume, more arbitrage trades. So, fundamentally, we are more positive on the structural side for the balance on the basis of this news that is really just a week old, right?
Kristoffer Barth Skeie: Sure, thanks. And just a quick one on pool earnings. Obviously, it's a bit more difficult to track what these handy are earning now. Can you give some flavor on what you're seeing now, especially on the handy?
Søren Winther: Yes, on the handy, hang on, hang on, sorry. Just give me a split second before you caught me in my not-call market. At the moment, you're looking similar to the MRCO and the low 20s for handy. More confined market, if you like, right? I mean, it's obviously very condensed to a little bit of dirty trade in the Far East, but mainly Mediterranean and Europe.
Kristoffer Barth Skeie: Sure. Great, that's all.
Søren Winther: Thank you.
Operator: Thank you, Kristoffer. I don't see any more raised hands. Just quickly checking the chat and the Q&A box. I don't see anything there either. So, we have then come to the end of today's presentation. So, thank you to everyone for attending Hafnia's first quarter financial results conference call. You can find more information available online at www.hafnia.com.
