Release Date: August 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hafnia Ltd (HAFN, Financial) achieved a net profit of $259.2 million in Q2 2024, marking the strongest first half result in the company's history.
- The company announced a dividend payout of 80% of net income for the quarter, translating to $207.4 million or $0.4049 per share.
- Hafnia Ltd (HAFN) has a diversified portfolio of 133 vessels with an average broker valuation of approximately $5 billion.
- The company has successfully reduced its leverage ratio, with a net LTV ratio decreasing to 21.3% at the end of June 2024.
- Hafnia Ltd (HAFN) is actively engaged in ESG projects, including a joint venture for developing a hydrocarbon fuels plant and exploring AI-driven operational efficiencies.
Negative Points
- The product tanker market remains cyclical and volatile, influenced by multiple factors such as geopolitical unrest and trade route shifts.
- There is increased competition in the product market due to crude tankers converting their tanks to carry clean cargo.
- The average age of the global product tanker fleet is increasing, which could lead to less efficient fleet dynamics over time.
- Despite strong market fundamentals, global oil demand is showing signs of slowing, with a year-on-year increase of only 0.9 million barrels per day in Q2 2024.
- The availability of methanol bunkering for new methanol-capable vessels remains uncertain, posing a potential challenge for future operations.
Q & A Highlights
Q: What drove the outperformance in the LR2 segment in the second quarter, and how do you see the market developing in Q3 and beyond?
A: The strong performance in the LR2 segment was due to good positioning of the ships and the quarter's accounting principles. Despite the cannibalization from crude ships, we are optimistic for the end of Q3 and the start of Q4 as crude rates are expected to rise, reducing the cannibalization effect. (Jens Christophersen, EVP Commercial)
Q: Why has the LR market been a strong performer since 2022, and what factors are driving this trend?
A: The surge in the LR market is primarily due to high freight rates, which made it beneficial for customers to use larger crude ships for clean cargo. This trend is seen as a one-off due to the significant rise in freight rates. (Jens Christophersen, EVP Commercial)
Q: When do you expect to reach a sub-20% leverage ratio, triggering a 90% dividend payout?
A: We anticipate reaching a sub-20% leverage ratio in the second half of the year, depending on market values. (Perry Van Echtelt, CFO)
Q: What is the impact of the Panama Canal delays on the product tanker market?
A: The delays in the Panama Canal have abated, and we are back to the daily number of transits seen before the drought. The improved efficiency has already been factored into the market. (Jens Christophersen, EVP Commercial)
Q: How has the Russia-Ukraine conflict impacted product tanker demand?
A: Russian volumes on water have doubled compared to pre-sanction levels, increasing demand by approximately 5-6%. The long-term impact is uncertain and depends on future geopolitical developments. (Jens Christophersen, EVP Commercial)
Q: How has the start-up of the Dangote refinery in Nigeria affected trade flows and the product tanker market?
A: The Dangote refinery has created more cargo activity and trading in and out of Nigeria. As the refinery produces higher specification products, there is potential for gasoline to be exported to markets with higher quality requirements, positively impacting the product tanker market. (Jens Christophersen, EVP Commercial)
Q: Will the four methanol-capable new builds run on methanol, and what is the availability of methanol bunkering?
A: It is up to our customers to decide whether the new builds will run on methanol or standard fuels. It is too early to comment on the availability of methanol bunkering. (Jens Christophersen, EVP Commercial)
Q: How are you thinking about potentially adding time charter cover at prevailing period rates?
A: Given the increased time charter rates, we are considering increasing our coverage, but this will be evaluated on a quarterly basis. (Jens Christophersen, EVP Commercial)
Q: What is the timeline for the synthetic hydrocarbon fuel blend JV with Big Hill, and what kind of equity outlay should be expected?
A: Production is expected in 2028-2029. Hafnia's investment will primarily be in shipping, with equity outlay focused on ultra-long-term contracts. (Mikael Skov, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
