TORM plc Q2 FY2025 earnings call

• Fleet optimization: Divested 1 LR2 vessel and 2 MR vessels built in 2008 to phase out older tonnage. • Market landscape: Product tanker rates stable and attractive; benchmark earnings for MR and LR2 vessels resilient with recent uptick. • Trade volumes: Surged to 16-month high in Q3 driven by East to West middle distillate flows and strong U.S. exports. • Refinery closures: European refineries closing by end of 2025, U.S. West Coast refineries closing mid-2026, increasing ton-mile demand. • Refinancing: Secured up to USD 857 million in refinancing with improved terms, extending maturity profile to 2030.

In the second quarter, TCE amounted to USD 208 million. Fleet-wide, average TCE rates were USD 26,672 per day. LR2s had rates above USD 35,000, LR1 slightly above USD 27,000, and MRs around USD 23,000. Revenue contribution by segments was not explicitly given in absolute terms beyond the overall TCE and EBITDA figures, but the vessel segments showed stable and attractive rates across the board.

• Raised full-year guidance: Now forecasts TCE earnings of USD 800 million to USD 950 million and EBITDA of USD 475 million to USD 625 million, up from previous ranges. • Secured earnings: As of August 4, 56% of third quarter earnings base secured at average TCE of USD 30,617 per day, and 66% of full-year earnings base fixed at average TCE of USD 27,833 per day.

• Geopolitical uncertainty: Continues to be a factor with macro environment fast moving. • EU sanctions: Ban on third country petroleum products from Russian crude from Jan 2026 may impact imports. • U.S. trade policy: Uncertainty around potential tariffs on India and evolving trade policies. • Red Sea disruption: Ongoing disruption affecting trade routes. • Sanctions impact: OFAC sanctions led to 75% decline in ton-miles on sanctioned vessels, affecting fleet utilization.

Q: What caused the consistency in TCE over the last 3 quarters and does it restrict flexibility?

A: Jacob Meldgaard noted it's a range-bound market with potential for upside if oil markets change, like OPEC increasing output. It doesn't restrict flexibility as markets can change dynamically.

Q: With the refinancing, will the dividend payout ratio become more favorable?

A: Kim Balle expects the cash flow breakeven to decrease in 2026, leading to a potential higher dividend payout ratio, likely in the 75 to 80 range.

Q: What's driving the upside in MR rates?

A: Jacob Meldgaard said it's due to increased trade volumes, less cannibalization, and more widespread demand in MR segments as larger segments like CPP have less movement.

Q: Are values finding a floor in the S&P market?

A: Jacob Meldgaard thinks rates have stabilized, leading to asset prices creeping down but potentially stabilizing, with potential for rise if freight rates climb.

Q: Have there been changes in trade volumes and miles?

A: Jacob Meldgaard said trade volumes surged, driven by restocking of middle distillates in Northwest Europe from Middle East and U.S. Gulf, affecting both volume and miles.

Q: Timeline of refinery closures and their impact?

A: European refineries closing by end of 2025, U.S. West Coast refineries closing mid-2026, increasing demand for product tanker cargoes.

Q: Impact of Russian price cap change on LR2s and Aframaxes?

A: Jacob Meldgaard said jury is out, but many sanctioned vessels may have hard time returning to conventional trades due to commercial and maintenance issues, potentially affecting Aframaxes crude rates.