TORM Plc Q3 FY2024 earnings call

• TORM delivered strong financial performance with TCE at US$263 million and EBITDA at US$191 million despite lower freight rates in the latter part of the quarter.
• Geopolitical tensions, including Ukraine-Russia conflict and Middle East issues, have driven product tanker rates and trade rerouting, but also caused rate volatility.
• Acquired eight second-hand MR vessels for US$340 million, with six delivered and two expected by year-end as part of fleet replenishment.
• Dividend of US$1.20 per share declared for the quarter.
• Crude cannibalization affected product tanker demand in Q3, but normalization is seen in Q4, though rates are also impacted by lower CPP volumes due to refinery outages and maintenance.
• Newbuilding activity in the product tanker market, order book status, and fleet age trends discussed, with older vessels potentially moving to sanctioned or cabotage trade.
• Refinery industry changes, like new capacity in net exporting regions and closures in net importing regions, affecting product tanker trade.

In the third quarter, TCE amounted to US$263 million, with EBITDA reaching US$191 million and net profit US$131 million. Fleet-wide, average TCE rates were close to US$34,000 per day. LR2s had rates close to US$41,000, LR1 set over US$33,000, and MRs at more than US$31,000. LR2s made up a larger share of the total earning days this quarter compared to the same quarter last year. Revenue contribution details for each segment were not explicitly broken down by percentage but the performance of different vessel types was highlighted in terms of TCE rates and earning days.

• TCE earnings for 2024 expected to be US$1.11 billion to US$1.16 billion and EBITDA US$810 million to US$860 million.
• Fourth quarter 2024 expected earning days: 8,086, with 52% fixed at a fleet-wide rate of US$29,044 per day.
• Full year 2024 coverage: 87% at a fleet-wide rate of US$38,379 per day, compared to 2023 fleet-wide rates of US$37,124 per day.

• Geopolitical scenario changes can significantly impact rate environment.
• Potential cannibalization from crude carriers affecting product tanker demand.
• Refinery utilization rate declines in mature demand regions increasing likelihood of further capacity closures.
• Uncertainty from Trump's presidency impact on geopolitics and trade policy affecting tanker market and global economy.

Q: How are you thinking about the product market thus far into 4Q, with cannibalization by VLCCs and Suezmaxes impacting product tanker demand in 3Q but those ships now going back to normal trades yet rates have fallen?

A: Q3 was affected by crude cannibalization, which is less of an issue in 4Q. However, rates haven't reacted well because volumes out of the Middle East (a large CPP export market) fell by about 8% in October. Softness in rates is also due to lower volumes from refinery outages and maintenance.

Q: You've been active with fleet renewal, including acquiring 8 MRs this past summer. Do you have eyes on more transactions or prefer to wait and save given the softer market now?

A: Need to see new clearance prices of assets before engaging in transactions. Currently, no specific plans for more acquisitions or sales, but staying agile.

Q: Previously successful at using share-based currency in vessel acquisition, but with product market trading down recently, how thinking about this strategy going forward?

A: Don't see share-based currency as a potent tool currently given discrepancy between public market pricing and NAV. Something would need to change before considering such deals again.

Q: Follow-up from Emily Harkins which was not a follow-up A: N/A