CMB.TECH NV Q4 FY2024 earnings call

• Financial Results: Fourth quarter profit was $93 million, full year profit within CMB.TECH over $870 million. Liquidity at $281 million, contract backlog at $2.05 billion, CapEx at $2.1 billion outstanding, financial covenants in order with book equity on total assets of 30.5%.
• Newbuild Deliveries: Took delivery of 7 newbuild vessels in Q4 and 2 more in Q1, part of diversification and decarbonization strategy. 20 newbuildings delivered in 2024, with roughly 20 newbuildings expected annually in next years.
• Asset Sales: Sold older Suezmax vessels in Q4 generating $71 million capital gain, and other assets in Q1 generating $46.5 million capital gain.
• Dividend Policy: Board decided not to declare a dividend for Q4.
• Contract Backlog: Close to $1 billion on tankers, $0.5 billion each on containers and chemical tanks.

Tanker Division:

• In Q4, VLCCs averaged around $37,000, and by Q1 fixed rates for VLCCs sat around $31,000. Suezmaxes averaged $38,000 in Q4 and $32,900 to -date. Had 14 VLCCs and 21 Suezmaxes on the water, with 5 VLCCs and 2 Suezmaxes for delivery in 2026 and partially 2027. Sold older Suezmax vessels in Q4 generating a capital gain of $71 million, and other assets in Q1 generating $46.5 million. Oil demand and supply expected to grow, supportive for tanker markets. Order book to fleet on VLCCs looks good, on Suezmaxes higher but manageable.

Dry Bulk Division:

• As of Jan 23rd, had 12 Super Eco Newcastlemaxes on the water, another 16 to be delivered. In Q4, time charter equivalent was close to $30,000. Q1 traditionally slower, but rates started to pick up. Order book to fleet on Capesizes at historic low of just under 8%, average age of fleet reaching 11.3 years. Seaborne iron ore demand positive with new supply from West Africa expected to play a big role.

Container Division:

• Have 4 vessels on the water, 6,000 TEU ships fixed on long-term 10-year charters, with another ship to be delivered in end of Q2/beginning of Q3. Market surprised in 2024 due to Cape of Good Hope re-routings, cautious on market as Red Sea situation remains uncertain and most indicators negative.

Chemical Tanker Division:

• Have 6 chemical tankers on the water, another 2 vessels delivering end of 2025/beginning of 2026, and two bitumen tankers. Market performing well, some vessels on long-term time charter, some in spot pool, still positive.

Offshore Wind Division:

• CTV market had better-than-expected Q4 and Q1, with inquiries for 2025, average rates around $3,000. First CSOV to deliver in May/June, CSOV market rates sideways, supported by offshore oil and gas market as well as offshore wind.

• Contract backlog stands at $2.05 billion.
• 2024 saw 20 newbuildings delivered, with roughly 20 newbuildings expected annually in the next few years.
• Bullish on tanker and dry bulk markets.
• Cautious on container market.
• Positive on chemical tanker and offshore wind markets.

• Market uncertainty for tanker and dry bulk markets.
• China oil imports year-on-year slightly down.
• High stockpiles in dry bulk market.
• Uncertainty in enforcement of sanctions and their impact on dark fleet operations.

Q: Just on your equity ratio covenant. How should we assume or think about the way you manage that going forward? Is it fair to assume that you keep selling a few older vessels each quarter? Or do you are looking forward to do some kind of a large transaction so you can get some more financial flexibility?

A: Good question. We manage our equity ratio based on prospects of operational profits and vessel sales. We have a diversified portfolio of vessels. We'll continue to manage it by selling some older vessels and making operational profit, but also capital gains on sales.

Q: You talked about new potential projects. In which segments are you currently looking at? And which segment is the most attractive today?

A: It's all of them. We think it's both on the tanker side and on the dry bulk side and on the chemical tanker side, even on the container side, we have a lot of discussions, but nothing has materialized yet, but we're very hopeful that in the next couple of months, we will be able to land some deals.

Q: On the FSOs, is it technically possible that there is an extension of the contract and the work they are doing? And when could contract negotiations for an extension start? And on dry bulk, are there may be some spillover effects from other cargo trades moving in the iron ore trade or the smaller vessels moving into the iron ore trade?

A: On FSOs, the answer is yes, the ships can be extended or their lifetime can be extended. We are not having any discussions as we speak because the charter still runs for a long time. On dry bulk, rates under pressure due to seasonality. Mining companies not shipping more iron ore out at current prices due to investment, logistical concerns, and price history. There's immense new iron ore supply from Guinea coming on stream which will be a big game-changer.

Q: Your Newcastlemaxes, are they still operating for Fortescue? Or is the -- are the charters now more diverse?

A: It's a mix. Some of them are with Fortescue, some are not. It's a mixed bag of some vessels fixed on voyage per voyage basis and some with consecutive voyages, all on spot market in terms of pricing.

Q: What is the company's 2025 Q1 and Q2 short-term strategy in securing new routes, especially for your VLCC ships?

A: We go where the cargo is. We have seen a shift with less barrels coming out of the Middle East, more from the Atlantic Basin. Strategy determined by Tankers International Pool for VLCCs and from Antwerp for Suezmaxes.

Q: Now, I realize you are selling some of your older VLCCs and Suezmaxes. Now, is this a trend that will continue over the course of the next quarter in order to accomplish your greener fuel cell and ammonia running ships? Is this a continuing trend?

A: For sure. It's not only to invest in greener applications, but just because we like to operate a young fleet. We will continue to look at possible sales of our older fleet, but not at any price and not at any time.

Q: When do you expect the new site in Africa to contribute to additional revenue?

A: Hope to be operational with hydrogen production facility in Namibia towards end of June/beginning of July. Project will not meaningfully contribute to revenues until 2028/2029 when larger projects come on stream.

Q: How big is the difference in rates for your eco vessels? And when do you expect the overall scrapping in all segments to begin in earnest?

A: Premium for Super Eco Newcastlemaxes can be up to $10,000 - $15,000 a day. Usually, people scrap ships when market is very bad. With age profile of fleet, scrapping will accelerate even in average markets as from fourth special survey for dry bulk ships.

Q: How do you overcome the relatively small float in your overall shares when it comes to institutional buying?

A: It's a good question. Having a listed platform with only 8% free float reduces institutional investor participation. We would like to tackle this, but today our share price is undervalued, so using primary capital raises to increase free float is not creating more shareholder value.

Q: Despite sanctions, the dark fleet is still operating relentlessly. What other than a sinking would stop that severely?

A: Sanctions and their implementation/enforcement can accelerate a shift more to normal vessels, making trading of dark vessels very difficult if not impossible.