Hafnia Limited Q2 FY2025 earnings call

• Strong second quarter results with adjusted EBITDA of $134.2M and net profit of $75.3M. - Adjacent fee-generating businesses contributed $7.9M. - Seascale Energy, the bunker joint venture with Cargill, commenced operations in mid-May. - Fleet development: Dual-fuel methanol MR IMO II newbuild program proceeded as planned, with vessels delivered in May and July. - Key investment attributes: Global leader in product and chemical tanker market, diversified fleet, in-house technical and commercial management, proactive market evaluation, diversified business model including pool platform and Seascale Energy, and transparent dividend policy. - Financials: 13.2% return on equity and 10.6% return on invested capital; net LTV unchanged at 24.1%; liquidity over $450M at end of Q2; secured $715M revolving credit facility in July. - Sustainability: Focus on building a sustainable maritime future, with initiatives like Seascale Energy.

For the second quarter, Hafnia achieved $134.2 million in adjusted EBITDA and generated a net profit of $75.3 million. The adjacent fee-generating business, including the commercial pool and bunkering operations, contributed $7.9 million to overall results. Hafnia operates 126 vessels with an average age of 9.4 years, has a net asset value of approximately $3.3 billion, and an NAV of USD 6.55 or NOK 66.07 per share. The net LTV ratio remained at 24.1% at the end of the second quarter.

• As of August 15, 75% of Q3 earning days secured at an average rate of $25,395 per day. - Remainder of year: 48% of earning days covered at an average rate of $23,623 per day. - Analyst consensus indicates robust net profits in range of $305M to $310M for full year. - Refinancing of $715M revolving credit facility expected to improve cash breakeven to roughly $13,000.

• Market uncertainties affecting earnings. - Sanctions on tankers impacting fleet supply and utilization. - Potential impact of unforeseen refinery outages or shutdowns on market dynamics.

Q: Congrats on the good trading performance and Q3 guidance. Can you quantify the improvement to cash breakeven rates after refinancing?

A: Refinancing brings down funding costs by 50-60 basis points, and cash breakeven is expected to go towards roughly $13,000.

Q: On the market, seaborne trade appeared up but tonne-miles up 1% in July. Elaborate on improving long-haul movements on LR IIs into Q4?

A: Europe drawing heavily on inventories in Q2, refinery outages in Nigeria, and other factors causing Europe to draw tight on distillates and gasoline, driving east-to-west movements and improving tonne-miles.

Q: Spot market shift where MRs and Handys driving higher vs LRs stagnant. Explain?

A: LR Is and LRs have been resilient, MRs are catching up. LR Is and LRs have remained at high levels, MRs are now improving.

Q: Does Hafnia reverse-cannibalize into dirty trade?

A: Can swap between segments, but careful as some segments are confined. LR IIs can switch between Aframax and clean trade, but need to be cautious.

Q: Sanctions impact on tonnage removal from markets?

A: OFAC sanctions have existed longer, but any sanctioning makes ships unwelcome in trading. Sanctioned ships are often double-listed, and over 20-year ships have lower utilization.

Q: Expectations on scrapping potential given market strength and sanctions?

A: If sanctioned tonnage loses Russian playground, tonnage over 20 years may go into adjacent static trades, leading to accelerated scrapping.

Q: U.S. stance on IMO net-zero framework and expectations for October meeting?

A: Hafnia assumes IMO will vote through the proposed net-zero framework even without U.S. support.

Q: Anticipated return of value to shareholders via dividend, share buybacks?

A: Focus on dividend policy, with share buybacks possible in addition; current dividend policy is key.