TORM plc(TRMD) - 2024 Q2 - Quarterly Report

Highlights This section provides a concise overview of TORM PLC's strong financial and business performance, along with favorable market conditions in Q2 and H1 2024 Financial Highlights TORM PLC reported strong financial performance for Q2 and H1 2024, driven by robust market fundamentals and fleet growth. Key metrics like TCE, Adjusted EBITDA, and Adjusted Net Profit saw significant year-over-year increases, reflecting favorable market conditions and strategic fleet management Key Financial Highlights | Metric | Q2 2024 (USDm) | Q2 2023 (USDm) | Change (YoY) | H1 2024 (USDm) | H1 2023 (USDm) | Change (YoY) | | :---------------------- | :------------- | :------------- | :----------- | :------------- | :------------- | :----------- | | TCE | 325.9 | 308.0 | +5.8% | 656.6 | 572.9 | +14.6% | | Adjusted EBITDA | 251.1 | 199.8 | +25.7% | 518.3 | 414.2 | +25.1% | | Adjusted Net Profit | 194.2 | 148.4 | +30.9% | 404.8 | 317.9 | +27.3% | | EPS | 2.08 | 1.78 | +16.9% | - | - | - | | ROIC (Q2) | 29.5% | 33.9% | -4.4 pp | - | - | - | | TCE rates (USD/day) | 42,057 | 36,360 | +15.6% | - | - | - | | Fleet Market Value | 3,730.4 | 3,083.6 | +21.0% | - | - | - | | Consolidated NAV | 3,257.0 | 2,515.1 | +29.5% | - | - | - | Business Highlights TORM expanded its fleet by taking delivery of two LR2 vessels and acquiring eight second-hand MR vessels post-quarter, increasing its total fleet to 96 vessels. The company also continued its scrubber installation program, reaching 68 installations out of 85 planned - TORM took delivery of the last two LR2 vessels (TORM Genesis and TORM Grace) acquired in Q4 2023[1] - Sold a 2006-built MR vessel, TORM Eric, and agreed to sell another, TORM Platte, with expected delivery in Q3 2024[1] - Acquired eight second-hand MR vessels in a partially share-based transaction, expected to be delivered during H2 2024, increasing fleet size to 96 vessels[1] - 68 scrubbers installed out of a total of 85 planned installations by the end of Q2 2024[1] Market Conditions The product tanker market remained strong in Q2 2024, primarily due to widespread rerouting caused by Red Sea disruptions and ongoing geopolitical tensions. Manageable fleet growth on the supply side also contributed to favorable market conditions - Product tanker market remained firm in Q2 2024, mainly driven by widespread rerouting due to Red Sea disruption and geopolitical tensions[1] - Product tanker fleet growth remained at a manageable level, supporting market strength[1] Key Figures This section presents TORM's core financial metrics and ratios, highlighting robust performance and a strengthened financial position in Q2 and H1 2024 Financial Performance Overview TORM demonstrated robust financial growth in Q2 and H1 2024, with significant increases in revenue, TCE, and profitability metrics. The company also improved its equity ratio and reduced its net loan-to-value ratio, indicating a stronger financial position Key Financial Figures (USD million) | Metric (USDm) | Q2 2024 | Q2 2023 | Q1-Q2 2024 | Q1-Q2 2023 | FY 2023 | | :------------------------ | :------ | :------ | :--------- | :--------- | :------ | | Revenue | 437.7 | 384.3 | 881.7 | 774.5 | 1,520.4 | | TCE | 325.9 | 308.0 | 656.6 | 572.9 | 1,083.8 | | Adjusted EBITDA | 251.1 | 199.8 | 518.3 | 414.2 | 846.4 | | Net profit for the period | 194.2 | 185.4 | 403.4 | 339.1 | 648.0 | | Total assets | 3,465.5 | 2,860.6 | 3,465.5 | 2,860.6 | 2,870.1 | | Equity | 2,043.7 | 1,566.3 | 2,043.7 | 1,566.3 | 1,666.0 | | Net interest-bearing debt | 737.4 | 893.6 | 737.4 | 893.6 | 773.4 | | Free cash flow | 292.8 | 89.8 | 318.4 | 62.9 | 434.5 | Key Financial Ratios | Metric | Q2 2024 | Q2 2023 | Q1-Q2 2024 | Q1-Q2 2023 | FY 2023 | | :---------------------- | :------ | :------ | :--------- | :--------- | :------ | | Gross margin | 60.5% | 66.5% | 61.2% | 60.9% | 57.5% | | Adjusted EBITDA margin | 57.4% | 52.0% | 58.8% | 53.5% | 55.7% | | Return on Equity (RoE) | 37.8% | 46.0% | 43.5% | 44.2% | 40.9% | | Return on Invested Capital (ROIC) | 29.5% | 33.9% | 32.9% | 31.6% | 30.4% | | Equity ratio | 59.0% | 54.8% | 59.0% | 54.8% | 58.0% | | TCE per day (USD) | 42,057 | 36,360 | 42,603 | 38,903 | 37,124 | | OPEX per day (USD) | 7,731 | 7,053 | 7,500 | 7,170 | 7,069 | | Net Loan-to-value (LTV) ratio | 20.4% | 29.1% | 20.4% | 29.1% | 27.6% | Share-related Key Figures (USD) | Metric (USD) | Q2 2024 | Q2 2023 | Q1-Q2 2024 | Q1-Q2 2023 | FY 2023 | | :------------------------ | :------ | :------ | :--------- | :--------- | :------ | | Basic earnings per share | 2.08 | 2.23 | 4.40 | 4.10 | 7.75 | | Diluted earnings per share| 2.02 | 2.14 | 4.28 | 3.95 | 7.48 | | Declared dividend per share | 1.80 | 1.50 | 3.30 | 2.96 | 4.42 | | Net Asset Value per share (NAV/share) | 34.6 | 29.8 | 34.6 | 29.8 | 33.3 | Financial Review This section provides a detailed analysis of TORM's revenue, TCE, asset and liability changes, and cash flow performance for Q2 and H1 2024 TCE and Revenue Analysis TORM's TCE rate per day increased by 10% in H1 2024, reaching USD 42,603, primarily due to higher revenue. Total revenue for H1 2024 grew by 14% to USD 881.7m, driven by a 9% increase in available earning days and improved freight rates. Q2 2024 revenue also saw a 14% increase, partly recovering from a temporary decline in freight rates in the prior year - TCE rate/day increased 10% from USD 38,903 to USD 42,603 in H1 2024 compared to the same period last year, mainly due to increased revenue[3] - Revenue for H1 2024 increased by USD 107.2m (14%) to USD 881.7m, driven by a 9% increase in available earning days and improved freight rates[3] - Q2 2024 revenue increased by 14% or USD 53.4m to USD 437.7m, partly due to recovery from last year's temporary decline in freight rates and a 4% increase in earning days[3] - Port expenses, bunkers, commissions, and other cost of goods sold increased by USD 26.4m to USD 222.7m in H1 2024, primarily due to a decrease in unrealized gains on derivative financial instruments[3] Assets and Liabilities Total assets grew to USD 3,465.5m as of June 30, 2024, mainly driven by increased vessel carrying amounts, capitalized dry-docking, and a stronger cash position. Equity increased by USD 377.6m since December 31, 2023, primarily from retained profit and capital increases related to vessel purchases, partially offset by dividends paid. Total liabilities increased due to higher borrowings for new vessel acquisitions - Total assets increased to USD 3,465.5m as of 30 June 2024 (from USD 2,860.6m in 2023), driven by increased carrying amount of vessels, capitalized dry-docking (USD 379.3m), and a USD 263.4m increase in cash position[3] - The carrying value of the fleet was USD 2,528.7m as of 30 June 2024, an increase due to investment in 13 vessels (USD 700.8m) and partly offset by disposal of 11 vessels (USD 159.5m) and depreciation (USD 162.0m)[3] - Equity increased by USD 377.6m to USD 2,043.7m as of 30 June 2024, mainly from retained profit (USD 403.4m) and capital increases (USD 227.8m) related to vessel purchases, offset by dividends paid (USD 267.7m)[3] - Total liabilities increased to USD 1,421.8m as of 30 June 2024, primarily due to increased borrowings of USD 104.3m for new second-hand vessels[3] Cash Flow Statement Net cash flow from operating activities for H1 2024 increased to USD 468.4m, driven by improved net profit. Net cash flow from investing activities improved significantly to USD -150.0m, reflecting lower cash investment in vessels and increased sales of existing vessels - Net cash flow from operating activities for H1 2024 was USD 468.4m (H1 2023: USD 407.3m), primarily driven by improved net profit, offset by working capital binding related to trade receivables[3] - Net cash flow from investing activities for H1 2024 was USD -150.0m (H1 2023: USD -344.4m), an improvement resulting from lower cash investment in vessels, increased sales of existing vessels, and restricted cash[4] The Product Tanker Market This section analyzes the strong performance of the product tanker market in Q2 2024, driven by geopolitical rerouting, and provides a positive medium-term outlook Market Developments in Q2 2024 The product tanker market remained strong in Q2 2024, largely due to rerouting caused by Houthi attacks in the Red Sea, which increased trading distances and absorbed vessel capacity. LR2 ton-miles remained elevated despite lower cargo volumes, while MR volumes increased, pushing benchmark rates slightly above Q1 levels - Product tanker market remained strong in Q2 2024, mainly driven by widespread rerouting due to Houthi attacks in the Bab al-Mandeb Strait[5] - Longer trading distances kept LR2 ton-miles elevated, despite lower cargo volumes, and absorbed crude tankers, lifting diesel from East to West[5] - Volumes lifted by MRs increased by 6% year-on-year, resulting in benchmark MR rates slightly above Q1 levels, driven by higher exports from the USG and Far East[5] - Overall product tanker ton-miles climbed to an all-time high in Q2 2024 due to longer sailing distances and higher trade volumes[5] Market Outlook The disruption in the Bab-el-Mandeb Strait is expected to continue supporting product tanker ton-miles and freight rates in H2 2024. In the medium term, the market is anticipated to benefit from high capacity utilization, manageable newbuilding deliveries, and fundamental shifts in the oil market with new refining capacity in the Middle East - Disruption of trade flows through the Bab-el-Mandeb Strait is expected to continue supporting product tanker ton-miles and freight rates in H2 2024[6] - Medium-term outlook (2-3 years) is positive, benefiting from high capacity utilization and manageable newbuilding deliveries for both product and crude tankers[6] - Market supported by fundamental changes in the oil market, including refinery closures in importing regions and new capacity in the Middle East[6] Outlook for 2024 This section presents TORM's revised financial guidance for 2024, details its earning day coverage, and includes a disclaimer regarding forward-looking statements Financial Outlook for 2024 TORM has narrowed its full-year 2024 guidance, increasing the lower end of the range for TCE earnings to USD 1.15 - 1.35bn and for EBITDA to USD 850-1,050m, reflecting strong H1 performance and current fleet size. The financial performance remains highly dependent on the volatile product tanker market and various macroeconomic factors - TORM narrows its full-year guidance for 2024 by increasing the low end of the guidance range[8] Revised Full-Year 2024 Guidance (USD) | Metric | New Guidance (USD) | Previous Guidance (USD) | | :---------- | :----------------- | :---------------------- | | TCE earnings| 1.15 - 1.35bn | 1.1 - 1.35bn | | EBITDA | 850 - 1,050m | 800 - 1,050m | - Key macroeconomic factors affecting TCE earnings include geopolitical conflicts (Russia-Ukraine, Middle East, Red Sea), global economic growth, refinery locations, oil price, oil trading activity, bunker price, and global fleet growth[6] Coverage 2024 As of August 11, 2024, TORM had covered 68% of its 2024 earning days at an average rate of USD/day 42,205. For Q3 2024, 64% of earning days were covered at USD/day 38,340, with LR2 vessels showing the highest coverage and rates Total Earning and Covered Days (as of 11 August 2024) | Metric | Q3 2024 | Q4 2024 | FY 2024 | | :---------------------- | :------ | :------ | :------ | | Total earning days | 7,859 | 8,234 | 31,539 | | Covered days | 5,047 | 867 | 21,324 | | Covered, % | 64% | 11% | 68% | | Coverage rates, USD/day | 38,340 | 41,658 | 42,205 | Coverage by Vessel Class (Q3 2024) | Vessel Class | Covered, % | Coverage rates, USD/day | | :----------- | :--------- | :---------------------- | | LR2 | 75% | 45,332 | | LR1 | 50% | 36,324 | | MR | 63% | 35,701 | Disclaimer on Financial Outlook The financial outlook for 2024 is preliminary, unaudited, and based on estimates, subject to various economic, competitive, and regulatory risks. Actual results may differ materially from expectations, and TORM disclaims any obligation to update forward-looking statements - The Financial Outlook for 2024 is preliminary, unaudited, and based on estimates and information available at the time[9] - Actual results may vary materially due to inherent uncertainties, including economic and business risk factors[9] - TORM undertakes no obligation to release publicly any revisions or updates to these forward-looking statements[9] Earnings Data This section details the Time Charter Equivalent (TCE) and operating expenses per earning day across TORM's LR2, LR1, and MR vessel classes for Q2 2024 Vessel Class Performance All vessel classes (LR2, LR1, MR) showed strong TCE per earning day growth in Q2 2024 compared to Q2 2023. LR2 vessels achieved the highest TCE per earning day at USD 51,907, followed by LR1 at USD 42,338, and MR vessels at USD 38,465. Operating expenses per day also increased across all segments Earnings Data by Vessel Class (Q2 2024 vs Q2 2023) | Metric | LR2 Q2 2024 | LR2 Q2 2023 | Change Q2-23 - Q2-24 | LR1 Q2 2024 | LR1 Q2 2023 | Change Q2-23 - Q2-24 | MR Q2 2024 | MR Q2 2023 | Change Q2-23 - Q2-24 | Tanker Segment Q2 2024 | Tanker Segment Q2 2023 | Change Q2-23 - Q2-24 | | :-------------------------- | :---------- | :---------- | :------------------- | :---------- | :---------- | :------------------- | :--------- | :--------- | :------------------- | :--------------------- | :--------------------- | :------------------- | | Available earning days | 1,809 | 1,074 | 68% | 909 | 1,249 | -27% | 5,031 | 5,127 | -2% | 7,749 | 7,451 | 4% | | Spot rates (USD/day) | 55,264 | 48,775 | 13% | 46,019 | 35,060 | 31% | 39,500 | 33,336 | 18% | 43,456 | 35,875 | 21% | | TCE per earning day (USD) | 51,907 | 47,918 | 8% | 42,338 | 36,674 | 15% | 38,465 | 33,862 | 14% | 42,057 | 36,360 | 16% | | Operating expenses per operating day (USD) | 7,986 | 7,490 | 7% | 7,314 | 7,534 | -3% | 7,712 | 6,839 | 13% | 7,731 | 7,053 | 10% | TORM Fleet Development This section outlines TORM's strategic fleet expansion and optimization through vessel deliveries, sales, and new acquisitions, increasing its total fleet to 96 vessels Fleet Changes and Acquisitions TORM continued to expand and optimize its fleet. In Q2 2024, the company took delivery of two LR2 vessels and sold one MR vessel. Post-quarter, TORM agreed to acquire eight second-hand MR vessels, increasing its total fleet size to 96 vessels upon full delivery in H2 2024 - TORM took delivery of the remaining two LR2 vessels (TORM Genesis and TORM Grace) purchased in November 2023 during Q2 2024[12] - Sold one 2006-built MR vessel, TORM Eric, delivered in Q2 2024, and entered an agreement to sell another, TORM Platte, delivered in early Q3 2024[12] - In early Q3 2024, TORM agreed to acquire eight second-hand MR vessels, with the first, TORM Diwata, already delivered. The remaining seven are expected in H2 2024, increasing the fleet to 96 vessels[12] TORM Fleet Development (Number of Vessels) | Vessel Type | Q4 2023 | Changes | Q1 2024 | Changes | Q2 2024 | Changes | FY 2024 | | :-------------- | :------ | :------ | :------ | :------ | :------ | :------ | :------ | | Owned LR2 | 6 | 7 | 13 | 2 | 15 | — | 15 | | Owned LR1 | 5 | -2 | 3 | — | 3 | — | 3 | | Owned MR | 47 | 1 | 48 | -1 | 47 | 7 | 54 | | Total Owned | 58 | 6 | 64 | 1 | 65 | 7 | 72 | | Leaseback LR2 | 6 | — | 6 | — | 6 | — | 6 | | Leaseback LR1 | 7 | — | 7 | — | 7 | — | 7 | | Leaseback MR | 11 | — | 11 | — | 11 | — | 11 | | Total Leaseback | 24 | — | 24 | — | 24 | — | 24 | | Total Fleet | 82 | 6 | 88 | 1 | 89 | 7 | 96 | Statements and Disclosures This section includes the Board's responsibility statement confirming the interim report's fairness and a safe harbor statement regarding forward-looking information Responsibility Statement The Board of Directors confirms that the interim management report provides a fair review of the Group's business development, financial position, principal risks, and related party transactions for the first six months of 2024 - The interim management report includes a fair review of the development and performance of the Group's business and financial position[14] - It also describes the principal risks and uncertainties for the remaining six months of 2024 and material related party transactions[14] Safe Harbor Statement as to the Future This release contains forward-looking statements protected by the Private Securities Litigation Reform Act of 1995. These statements reflect current views on future events and financial performance, but are subject to significant uncertainties and contingencies, including geopolitical conflicts, economic conditions, and regulatory changes, which may cause actual results to differ materially - Matters discussed in this release may constitute forward-looking statements, protected by the Private Securities Litigation Reform Act of 1995[15] - Forward-looking statements are based on various assumptions but are subject to significant uncertainties and contingencies beyond control, making actual results potentially different[15] - Important factors that could cause actual results to differ include changes in governmental rules, economic conditions, geopolitical conflicts (e.g., Russia-Ukraine, Middle East, Red Sea), and market fluctuations[15] Condensed Consolidated Financial Statements This section presents TORM's unaudited condensed consolidated income statement, statement of comprehensive income, balance sheet, statement of changes in equity, and cash flow statement for Q2 and H1 2024 Condensed Consolidated Income Statement TORM's Q2 2024 revenue increased to USD 437.7m, leading to a net profit of USD 194.2m. For H1 2024, revenue reached USD 881.7m with a net profit of USD 403.4m, demonstrating strong year-over-year growth in profitability Condensed Consolidated Income Statement (USD million) | Metric | Q2 2024 | Q2 2023 | Q1-Q2 2024 | Q1-Q2 2023 | FY 2023 | | :-------------------------- | :------ | :------ | :--------- | :--------- | :------ | | Revenue | 437.7 | 384.3 | 881.7 | 774.5 | 1,520.4 | | Operating profit (EBIT) | 204.3 | 199.8 | 427.0 | 363.3 | 698.6 | | Profit before tax | 193.1 | 184.4 | 403.9 | 339.5 | 652.0 | | Net profit for the period | 194.2 | 185.4 | 403.4 | 339.1 | 648.0 | | Basic earnings per share (USD)| 2.08 | 2.23 | 4.40 | 4.10 | 7.75 | | Diluted earnings per share (USD)| 2.02 | 2.14 | 4.28 | 3.95 | 7.48 | Condensed Consolidated Statement of Comprehensive Income Total comprehensive income for Q2 2024 was USD 192.2m, slightly higher than Q2 2023. For H1 2024, it reached USD 402.3m, indicating a positive overall financial performance, with fair value adjustments on hedging instruments being a notable component Condensed Consolidated Statement of Comprehensive Income (USD million) | Metric | Q2 2024 | Q2 2023 | Q1-Q2 2024 | Q1-Q2 2023 | FY 2023 | | :------------------------------------------------------------------ | :------ | :------ | :--------- | :--------- | :------ | | Net profit for the period | 194.2 | 185.4 | 403.4 | 339.1 | 648.0 | | Fair value adjustment on hedging instruments | 2.7 | 12.5 | 9.2 | 6.3 | 3.1 | | Fair value adjustment on hedging instruments transferred to income statement | -5.2 | -5.4 | -10.1 | -10.2 | -22.0 | | Other comprehensive income/(loss) after tax | -2.0 | 4.9 | -1.1 | -3.3 | -14.4 | | Total comprehensive income for the period | 192.2 | 190.3 | 402.3 | 335.8 | 633.6 | Condensed Consolidated Balance Sheet As of June 30, 2024, TORM's total assets increased to USD 3,465.5m, primarily driven by growth in tangible fixed assets (vessels and capitalized dry-docking) and cash. Total equity also saw a significant increase to USD 2,043.7m, while total liabilities rose to USD 1,421.8m, mainly due to increased borrowings Condensed Consolidated Balance Sheet (USD million) | Metric (USDm) | 30 June 2024 | 30 June 2023 | 31 December 2023 | | :---------------------------- | :----------- | :----------- | :--------------- | | Total intangible assets | 4.0 | 3.6 | 3.6 | | Vessels and capitalized dry-docking | 2,528.7 | 2,149.4 | 2,070.2 | | Total tangible fixed assets | 2,540.2 | 2,163.9 | 2,170.3 | | Total non-current assets | 2,549.6 | 2,172.4 | 2,178.9 | | Cash and cash equivalents incl. restricted cash | 532.4 | 269.0 | 295.6 | | Total current assets | 915.9 | 688.2 | 691.2 | | TOTAL ASSETS | 3,465.5 | 2,860.6 | 2,870.1 | | Total equity | 2,043.7 | 1,566.3 | 1,666.1 | | Borrowings (Non-current) | 1,083.0 | 856.2 | 886.9 | | Total non-current liabilities | 1,134.1 | 908.9 | 938.7 | | Borrowings (Current) | 175.0 | 297.5 | 172.7 | | Total current liabilities | 287.7 | 385.4 | 265.3 | | Total liabilities | 1,421.8 | 1,294.3 | 1,204.0 | | TOTAL EQUITY AND LIABILITIES | 3,465.5 | 2,860.6 | 2,870.1 | Condensed Consolidated Statement of Changes in Equity TORM's equity increased by USD 377.6m in H1 2024, reaching USD 2,043.7m. This growth was primarily driven by net profit for the period (USD 403.4m) and capital increases (USD 227.8m), partially offset by dividends paid (USD 267.7m) Condensed Consolidated Statement of Changes in Equity (USD million) | Metric | 01 Jan 2024 | Net Profit | Capital Increase | Dividend Paid | 30 June 2024 | | :------------------------------------ | :---------- | :--------- | :--------------- | :------------ | :----------- | | Equity as of beginning of period | 1,666.1 | - | - | - | - | | Net profit for the period | - | 403.4 | - | - | - | | Capital increase | - | - | 227.8 | - | - | | Dividend paid | - | - | - | -267.7 | - | | Total changes in equity for the period| - | - | - | - | 377.6 | | Equity as of end of period | - | - | - | - | 2,043.7 | - Capital increase of USD 227.8m in H1 2024 included a USD 217.2m non-cash share issue for purchasing 11 vessels[19] - Share premium reserve was reduced by USD 320.0m to create distributable reserves for future dividends and share buy-backs[19] Condensed Consolidated Cash Flow Statement TORM generated strong net cash flow from operating activities of USD 468.4m in H1 2024. Investing activities resulted in a net outflow of USD 150.0m, a significant improvement from the prior year. Financing activities had a net outflow of USD 56.8m, leading to a substantial increase in cash and cash equivalents Condensed Consolidated Cash Flow Statement (USD million) | Metric | Q1-Q2 2024 | Q1-Q2 2023 | FY 2023 | | :------------------------------------ | :--------- | :--------- | :------ | | Net cash flow from operating activities | 468.4 | 407.3 | 805.0 | | Net cash flow from investing activities | -150.0 | -344.4 | -370.6 | | Net cash flow from financing activities | -56.8 | -144.3 | -489.4 | | Net cash flow from operating, investing and financing activities | 261.6 | -81.4 | -55.0 | | Cash and cash equivalents ending balance | 527.1 | 239.1 | 265.5 | | Cash and cash equivalents including restricted cash ending balance | 532.4 | 269.0 | 295.6 | - Investment in tangible fixed assets was USD -262.3m in H1 2024, lower than USD -333.6m in H1 2023[21] - Proceeds from borrowings were USD 302.2m, while repayment of borrowings was USD -101.4m in H1 2024[21] - Dividends paid amounted to USD -267.7m in H1 2024[21] Segment Reporting This section provides a breakdown of TORM's financial performance and position by segment, highlighting the dominant contribution of the Tanker segment Segment Reporting – Condensed Consolidated Income Statement The Tanker segment remains TORM's primary revenue and profit driver. In Q2 2024, the Tanker segment generated USD 434.3m in revenue and USD 204.8m in operating profit. For H1 2024, its revenue was USD 874.6m and operating profit USD 428.3m, significantly contributing to the Group's overall performance Segment Income Statement (Q2 2024, USD million) | Metric | Tanker segment | Marine Exhaust segment | Intersegment elimination | Total | | :-------------------- | :------------- | :--------------------- | :----------------------- | :---- | | Revenue | 434.3 | 9.0 | -5.6 | 437.7 | | Operating profit (EBIT) | 204.8 | 0.9 | -1.4 | 204.3 | | Net profit for the period | 194.7 | 0.9 | -1.4 | 194.2 | Segment Income Statement (Q1-Q2 2024, USD million) | Metric | Tanker segment | Marine Exhaust segment | Intersegment elimination | Total | | :-------------------- | :------------- | :--------------------- | :----------------------- | :---- | | Revenue | 874.6 | 14.6 | -7.5 | 881.7 | | Operating profit (EBIT) | 428.3 | 0.9 | -2.2 | 427.0 | | Net profit for the period | 405.2 | 0.4 | -2.2 | 403.4 | Segment Reporting – Condensed Consolidated Balance Sheet As of June 30, 2024, the Tanker segment accounted for the vast majority of TORM's assets and liabilities. Its total assets were USD 3,453.0m, and total equity was USD 2,041.0m, reflecting its dominant role in the Group's financial structure Segment Balance Sheet (30 June 2024, USD million) | Metric | Tanker segment | Marine Exhaust segment | Intersegment elimination | Total | | :---------------------------- | :------------- | :--------------------- | :----------------------- | :---- | | Total non-current assets | 2,558.7 | 8.2 | -17.3 | 2,549.6 | | Total current assets | 894.3 | 22.2 | -0.6 | 915.9 | | TOTAL ASSETS | 3,453.0 | 30.4 | -17.9 | 3,465.5 | | Total equity | 2,041.0 | 10.0 | -7.3 | 2,043.7 | | Total non-current liabilities | 1,131.9 | 2.2 | — | 1,134.1 | | Total current liabilities | 280.1 | 18.2 | -10.6 | 287.7 | | Total liabilities | 1,412.0 | 20.4 | -10.6 | 1,421.8 | | TOTAL EQUITY AND LIABILITIES | 3,453.0 | 30.4 | -17.9 | 3,465.5 | Notes to the Financial Statements This section provides detailed notes on TORM's accounting policies, significant estimates, and specific financial statement line items, including staff costs, vessels, borrowings, and contingent liabilities General Information The interim report for H1 2024 is unaudited and prepared in accordance with IAS 34. TORM has implemented new accounting standards and amendments, but their application has not had a material impact on the consolidated financial statements for 2024. The Group expects to be eligible for the Transitional CbCR Safe Harbor for Pillar Two income taxes - The interim report for H1 2024 is unaudited and prepared in accordance with IAS 34 as adopted in the UK and EU[26] - New standards and amendments (IAS 1, IFRS 16, IAS 7, IFRS 7) effective 01 January 2024 have not had a material impact on the consolidated financial statements[26] - TORM expects to be eligible for the Transitional CbCR Safe Harbor for Pillar Two income taxes in most jurisdictions for FY 2024, with no material impact expected[26] Going Concern TORM maintains sufficient liquidity and expects to comply with financial covenants for at least 12 months from the report's approval date. The Board of Directors has a reasonable expectation that TORM will continue in operational existence, considering various scenarios and geopolitical risks that have so far positively impacted the product tanker market - As of 30 June 2024, TORM's available liquidity, including undrawn facilities, was USD 690.4m, with a total cash position of USD 532.4m[27] - Net interest-bearing debt was USD 737.4m, and the net debt loan-to-value ratio was 20.4%[27] - The Board of Directors expects TORM to continue in operational existence and comply with financial covenants for at least 12 months, based on cash flow forecasts and sensitivity calculations[27] - Geopolitical risks, particularly following Russia's invasion of Ukraine and conflicts in the Middle East, have so far positively impacted the product tanker market[27] NOTE 2 - STAFF COSTS Total staff costs for H1 2024 amounted to USD 45.3m, an increase from USD 36.9m in H1 2023. The majority of these costs are administrative expenses, with a smaller portion included in operating expenses. TORM had a pool of 3,291 seafarers as of June 30, 2024 Staff Costs (USD million) | Metric | Q2 2024 | Q2 2023 | Q1-Q2 2024 | Q1-Q2 2023 | FY 2023 | | :---------------------------- | :------ | :------ | :--------- | :--------- | :------ | | Included in operating expenses| 2.6 | 2.1 | 4.9 | 4.2 | 8.6 | | Included in administrative expenses | 18.8 | 18.7 | 40.4 | 32.7 | 69.3 | | Total staff costs | 21.4 | 20.8 | 45.3 | 36.9 | 77.9 | - As of 30 June 2024, TORM had a pool of 3,291 seafarers (30 June 2023: 3,186)[28] - Total compensation to the Board of Directors and CEO expensed during the period amounted to USD 2.3m (H1 2023: USD 1.7m), excluding share-based compensation[28] NOTE 3 - VESSELS AND CAPITALIZED DRY-DOCKING The carrying amount of vessels and capitalized dry-docking increased to USD 2,528.7m as of June 30, 2024. TORM sold one vessel and delivered three others in H1 2024, generating a profit of USD 27.6m. No impairment indicators were found, and no reassessment of recoverable amounts was deemed necessary Vessels and Capitalized Dry-docking (USD million) | Metric | 30 June 2024 | 30 June 2023 | 31 December 2023 | | :------------------------------------ | :----------- | :----------- | :--------------- | | Cost: Balance as of beginning of period | 2,622.1 | 2,421.2 | 2,421.2 | | Additions | 428.3 | 352.1 | 476.0 | | Disposals | -7.2 | -23.0 | -31.9 | | Carrying amount | 2,528.7 | 2,149.4 | 2,070.2 | - During H1 2024, TORM sold one vessel and delivered three vessels sold in 2023 for a total consideration of USD 88.4m, resulting in a profit of USD 27.6m[29] - One vessel sold in H1 2024 is recognized as an asset held for sale at a carrying value of USD 12.4m, expected to be delivered in Q3 2024[29] - TORM found no indication of impairment and no need to reassess the recoverable amount as of 30 June 2024[29] NOTE 4 - PREPAYMENTS ON VESSELS Prepayments on vessels decreased to zero as of June 30, 2024, from USD 86.0m at the beginning of the year. This change reflects additions of USD 55.0m and transfers of USD 141.0m to vessels Prepayments on Vessels (USD million) | Metric | 30 June 2024 | 30 June 2023 | 31 December 2023 | | :-------------------------------- | :----------- | :----------- | :--------------- | | Balance as of beginning of period | 86.0 | — | — | | Additions | 55.0 | 37.4 | 126.6 | | Transferred to vessels | -141.0 | -33.0 | -40.6 | | Carrying amount | — | 4.4 | 86.0 | NOTE 5 - BORROWINGS Total borrowings increased to USD 1,258.0m as of June 30, 2024, from USD 1,059.6m at year-end 2023. The majority of borrowings are long-term, with significant amounts falling due after five years. A senior unsecured bond issue of USD 200m was successfully listed on the Oslo Stock Exchange in June 2024 Borrowings Maturity Profile (USD million) | Maturity | 30 June 2024 | 30 June 2023 | 31 December 2023 | | :-------------------------------- | :----------- | :----------- | :--------------- | | Falling due within one year | 175.7 | 197.3 | 172.5 | | Falling due between one and two years | 153.3 | 166.7 | 146.5 | | Falling due after five years | 350.3 | 286.4 | 370.1 | | Total | 1,269.5 | 1,161.0 | 1,066.9 | | Total borrowings | 1,258.0 | 1,153.7 | 1,059.6 | - A senior unsecured bond issue of USD 200m in January 2024 was successfully listed on the Oslo Stock Exchange in June 2024[29] NOTE 6 - FINANCIAL INSTRUMENTS The fair value of derivative financial instruments, including forward freight agreements, bunker swaps, forward exchange contracts, and interest rate swaps, totaled USD 34.6m as of June 30, 2024. These instruments are primarily recognized in other receivables and other liabilities on the balance sheet Fair Value of Derivatives (USD million) | Derivative Type | 30 June 2024 | 30 June 2023 | 31 December 2023 | | :-------------------------------------------- | :----------- | :----------- | :--------------- | | Forward freight agreements | 0.3 | 26.9 | 1.7 | | Bunker swaps - fair value through profit and loss | -0.3 | -5.7 | -0.2 | | Interest rate swaps - hedge accounting | 35.1 | 49.2 | 35.3 | | Total | 34.6 | 70.5 | 36.8 | - Derivative financial instruments are recognized in 'Other receivables' (USD 35.5m) and 'Other liabilities' (USD -0.9m) on the balance sheet as of 30 June 2024[29] - The fair value hierarchy for these derivatives is Level 2, and there are no changes in the methods and assumptions used for fair value determination[29] NOTE 7 - EARNINGS PER SHARE Basic earnings per share for Q2 2024 was USD 2.08, and diluted EPS was USD 2.02. For H1 2024, basic EPS was USD 4.40 and diluted EPS was USD 4.28, reflecting an increase in net profit attributable to shareholders and a higher weighted average number of shares outstanding Earnings Per Share (USD) | Metric | Q2 2024 | Q2 2023 | Q1-Q2 2024 | Q1-Q2 2023 | FY 2023 | | :------------------------------------ | :------ | :------ | :--------- | :--------- | :------ | | Net profit for the year attributable to TORM plc shareholders (USDm) | 194.5 | 185.8 | 404.3 | 339.4 | 648.3 | | Weighted average number of shares outstanding (million) | 93.7 | 83.5 | 91.8 | 82.7 | 83.6 | | Basic earnings per share | 2.08 | 2.23 | 4.40 | 4.10 | 7.75 | | Diluted earnings per share | 2.02 | 2.14 | 4.28 | 3.95 | 7.48 | NOTE 8 - PROVISIONS TORM successfully resolved a cargo claims case in Q1 2024, resulting in an award in its favor and the reversal of provisions amounting to USD 6.3m in 2022 - TORM was involved in cargo claims relating to a discharge of cargoes, with legal action initiated in the UK and India[30] - During 2022, TORM settled one claim and reassessed provisions for the remaining part of the case complex, leading to a reversal of provisions amounting to USD 6.3m[30] - The remaining part of the case complex was resolved in arbitration during Q1 2024 with an award in favor of TORM[30] NOTE 9 - CONTINGENT LIABILITIES TORM is involved in various legal proceedings and disputes, but management believes their outcome will not have a material impact on the company's financial position, results of operations, or cash flows - TORM is involved in certain legal proceedings and disputes[30] - Management's opinion is that the outcome of these proceedings will not have any material impact on TORM's financial position, results of operations, and cash flows[30] NOTE 10 - CONTRACTUAL OBLIGATIONS AND RIGHTS As of June 30, 2024, TORM had contractual obligations for committed scrubber installations and other minor investments totaling USD 29.0m. The company also had contractual rights to receive future payments as a lessor of vessels on time charter, totaling USD 152.0m Committed Scrubber Installations and Other Minor Investments (USD million) | Maturity | 30 June 2024 | 30 June 2023 | 31 December 2023 | | :-------------------------------- | :----------- | :----------- | :--------------- | | Within one year | 17.4 | 16.7 | 23.6 | | Between one and two years | 1.7 | — | — | | Between two and three years | 6.8 | — | 2.0 | | Between three and four years | 3.1 | — | 8.1 | | Between four and five years | — | — | 2.0 | | Total | 29.0 | 16.7 | 35.7 | Charter Hire Income for Vessels - as Lessor (USD million) | Maturity | 30 June 2024 | 30 June 2023 | 31 December 2023 | | :-------------------------------- | :----------- | :----------- | :--------------- | | Received within one year | 88.6 | — | 37.8 | | Received between one and two years| 38.3 | — | 24.1 | | Received between two and three years | 25.1 | — | — | | Total | 152.0 | — | 61.9 | NOTE 11 - SUBSEQUENT EVENTS Subsequent to the quarter-end, TORM agreed to acquire eight second-hand MR vessels for USD 340m, with deliveries expected in Q3 and Q4 2024. The Board also declared a dividend of USD 1.80 per share, totaling USD 169.8m, in line with its distribution policy - On 15 July 2024, TORM agreed to acquire eight second-hand MR vessels for USD 340m (USD 238m cash, 2.65 million shares), with deliveries expected in Q3 and Q4 2024[31] - On 29 July 2024, TORM took delivery of one of these eight second-hand MR vessels[31] - TORM's Board of Directors declared a dividend of USD 1.80 per share, totaling USD 169.8m, expected to be paid on 11 September 2024[31] NOTE 12 - RELATED PARTY TRANSACTIONS During the first six months ended June 30, 2024, there were no related party transactions other than ordinary remuneration to the Board of Directors and the CEO - No other related party transactions occurred during H1 2024 than ordinary remuneration to the Board of Directors and the CEO[32] Glossary This section provides definitions for key financial figures and alternative performance measures used throughout the report, enhancing clarity and understanding Key Financial Figures This section defines key financial figures used in the report, such as TCE per day, Gross profit percentage, EBITDA percentage, Operating profit percentage, Return on Equity (RoE), Return on Invested Capital (RoIC), Equity ratio, and Earnings per share (EPS) - TCE per day is defined as TCE excluding unrealized gains/losses on derivatives divided by available earning days[33] - Return on Equity (RoE) is calculated as Net profit for the year divided by Average equity[32] - Return on Invested Capital (RoIC) is defined as Operating profit less tax divided by Average invested capital[32] Alternative Performance Measures Group This section provides definitions and reconciliations for alternative performance measures (APMs) used by TORM, including Net profit for the year excluding non-recurring items, Gross profit, Return on Invested Capital (ROIC), Adjusted Return on Invested Capital (Adjusted ROIC), EBITDA, Adjusted EBITDA, Invested Capital, Net interest-bearing debt, Liquidity, Free cash flow, and Net Asset Value (NAV) - Net profit excluding non-recurring items provides additional meaningful information by excluding non-recurring fluctuations like impairment, profit from vessel sales, and claims provisions[33] Reconciliation to Net Profit (USD million) | Metric | Q2 2024 | Q2 2023 | Q1-Q2 2024 | Q1-Q2 2023 | FY 2023 | | :------------------------------------ | :------ | :------ | :--------- | :--------- | :------ | | Net profit for the period | 194.2 | 185.4 | 403.4 | 339.1 | 648.0 | | Profit from sale of vessels | -10.5 | -3.5 | -27.6 | -3.5 | -50.4 | | Net profit for the year ex. non-recurring items | 183.7 | 184.3 | 376.3 | 338.0 | 595.9 | EBITDA Reconciliation (USD million) | Metric | Q2 2024 | Q2 2023 | Q1-Q2 2024 | Q1-Q2 2023 | FY 2023 | | :-------------------------- | :------ | :------ | :--------- | :--------- | :------ | | Net profit for the period | 194.2 | 185.4 | 403.4 | 339.1 | 648.0 | | Financial expenses | 18.9 | 18.0 | 37.2 | 30.5 | 60.9 | | Depreciation and amortization | 46.8 | 37.0 | 89.9 | 72.1 | 149.3 | | EBITDA | 251.1 | 236.8 | 516.9 | 435.4 | 847.9 | | Fair value adjustments on freight and bunker derivatives | — | -37.0 | 1.4 | -21.2 | -1.5 | | Adjusted EBITDA | 251.1 | 199.8 | 518.3 | 414.2 | 846.4 | Net Asset Value (NAV) Calculation (USD million) | Metric | 30 June 2024 | 30 June 2023 | 31 December 2023 | | :------------------------------------ | :----------- | :----------- | :--------------- | | Total vessel values (broker values) | 3,730.4 | 3,083.6 | 3,080.9 | | Cash and cash equivalents incl. restricted cash | 532.4 | 269.0 | 295.6 | | Borrowings | -1,274.3 | -1,167.2 | -1,073.5 | | Total Net Asset Value (NAV) excl. noncontrolling interest | 3,257.0 | 2,515.1 | 2,858.0 | | Total Net Asset Value per share (NAV/share) | 34.6 | 29.8 | 33.3 | Alternative Performance Measures Tanker segment This section defines APMs specific to the Tanker segment, including Time Charter Equivalent (TCE) earnings and Net Loan-to-value (LTV). TCE earnings are a standard shipping industry measure, and TORM provides adjusted TCE earnings to enhance comparability by accounting for fair value adjustments on freight and bunker derivatives - Time Charter Equivalent (TCE) earnings are defined as revenue less port expenses, bunkers, and commissions, including freight and bunker derivatives[44] - Adjusted TCE earnings are presented net of fair value adjustments on freight and bunker derivatives to increase comparability[44] TCE Earnings Reconciliation (USD million) | Metric | Q2 2024 | Q2 2023 | Q1-Q2 2024 | Q1-Q2 2023 | FY 2023 | | :------------------------------------ | :------ | :------ | :--------- | :--------- | :------ | | Revenue | 434.3 | 375.0 | 874.6 | 758.8 | 1,491.4 | | Port expenses, bunkers and commissions| -108.4 | -67.0 | -218.0 | -185.9 | -407.6 | | TCE earnings | 325.9 | 308.0 | 656.6 | 572.9 | 1,083.8 | | Fair value adjustments on freight and bunker derivatives | — | -37.0 | 1.4 | -21.2 | -1.5 | | Adjusted TCE earnings | 325.9 | 271.0 | 658.0 | 551.7 | 1,082.3 | | Available earning days | 7,749 | 7,451 | 15,446 | 14,183 | 29,152 | - Net Loan-to-value (LTV) ratio is defined as vessel values divided by net borrowings of the vessels, expressing TORM's ability to act and invest[44][45]