TORM plc(TRMD) - 2025 Q1 - Quarterly Report

Q1 2025 Performance Highlights This section summarizes TORM's Q1 2025 financial, market, and operational results, highlighting key performance indicators and forward coverage Financial Performance TORM's Q1 2025 net profit and TCE earnings declined significantly from the prior year due to lower freight rates Q1 2025 vs Q1 2024 Financial Results | Metric | Q1 2025 (USDm) | Q1 2024 (USDm) | | :--- | :--- | :--- | | TCE Earnings | 214.0 | 330.7 | | Adjusted EBITDA | 137.7 | 267.2 | | Net Profit | 62.9 | 209.2 | Q1 2025 Key Performance Indicators | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Average TCE Rate | USD 26,807/day | USD 43,152/day | | Return on Invested Capital | 10.3% | 33.8% | | Basic EPS | USD 0.64 | USD 2.34 | Market and Operational Highlights Geopolitical factors influenced market conditions while the company divested three older vessels, adjusting its fleet size - Trade volumes on routes affected by the Red Sea disruption declined by about one-third by early 2025, negating distance-driven gains, though a rebound began in March 2025[4] - Potential market influences include the reopening of the Red Sea, easing of Russian sanctions, and tighter U.S. sanctions on Iran and Venezuela, which could redirect trade and reduce crude tanker cannibalization of the clean petroleum products (CPP) market[5][6] - TORM sold three MR vessels (TORM Ragnhild, TORM Resilience, TORM Thames) during Q1 2025, resulting in a current fleet size of 91 vessels[11] Fleet Valuation (as of 31 March 2025) | Metric | Value (USDm) | | :--- | :--- | | Fleet Market Value | 3,112.4 | | Net Asset Value (NAV) | 2,511.1 | Forward Coverage The company has secured substantial charter coverage for Q2 and the full year 2025, providing earnings visibility - As of May 5, 2025, 57% of Q2 2025 earning days were covered at an average rate of USD 28,026/day[9] - For the full year 2025, 43% of earning days have been fixed at an average rate of USD 27,829/day[10] Key Financial Figures This section presents a detailed breakdown of TORM's consolidated financial data and key performance ratios for Q1 2025 Consolidated Financial Data Key financial metrics for Q1 2025 are presented, showing a decline in profitability compared to the prior-year period Key Financial Data (USDm) | Metric | Q1 2025 | Q1 2024 | FY 2024 | | :--- | :--- | :--- | :--- | | Income Statement | | | | | Revenue | 329.1 | 444.1 | 1,559.2 | | TCE Earnings | 214.0 | 330.7 | 1,134.8 | | Adjusted EBITDA | 137.7 | 267.2 | 844.2 | | Net Profit | 62.9 | 209.2 | 611.5 | | Balance Sheet | | | | | Total Assets | 3,486.7 | 3,507.8 | 3,469.6 | | Equity | 2,142.2 | 2,065.0 | 2,074.8 | | Net Interest-Bearing Debt | 831.7 | 757.9 | 947.6 | Key Financial Ratios and Share Data | Metric | Q1 2025 | Q1 2024 | FY 2024 | | :--- | :--- | :--- | :--- | | Return on Equity (ROE) | 11.9% | 44.9% | 32.7% | | Return on Invested Capital (ROIC) | 10.3% | 33.8% | 24.3% | | TCE per day (USD) | 26,807 | 43,152 | 36,061 | | OPEX per day (USD) | 7,891 | 7,260 | 7,477 | | Loan-to-value (LTV) ratio | 27.0% | 21.6% | 26.8% | | Basic EPS (USD) | 0.64 | 2.34 | 6.54 | | Dividend per share (USD) | 0.40 | 1.50 | 5.10 | | NAV per share (USD) | 25.7 | 34.5 | 29.3 | Financial Review This section provides an in-depth analysis of TORM's Q1 2025 performance, balance sheet, cash flow, and dividend distribution Performance Analysis Financial performance declined in Q1 2025, driven primarily by a significant drop in daily Time Charter Equivalent rates - The TCE rate per day decreased by 38% to USD 26,807 in Q1 2025 from USD 43,152 in Q1 2024[18] - Revenue decreased by 26% (USD 115.0m) to USD 329.1m, mainly because freight rates in Q1 2025 were below the exceptionally high levels of Q1 2024, which were boosted by Houthi attacks and rerouting around the Cape of Good Hope[19] Balance Sheet and Liquidity The company maintained a robust balance sheet with increased equity and a strong liquidity position of USD 679.3 million - Total assets increased by USD 17.1m to USD 3,486.7m as of March 31, 2025, mainly due to a USD 71.1m increase in cash, offset by a USD 57.4m reduction in the carrying amount of vessels[21] - The market value of TORM's fleet was USD 3,112.4m, which is 12% above its carrying value[23] - Total liquidity as of March 31, 2025 was USD 679.3m, including USD 317.0m in undrawn credit facilities[23] - Equity increased by USD 67.4m to USD 2,142.2m, primarily from the net profit of USD 62.9m for the period[24] - Total liabilities decreased, mainly driven by a USD 44.0m reduction in borrowings from ordinary debt repayments and repayments related to divested vessels[25] Cash Flow Statement Operating cash flow decreased due to lower profit, while investing activities generated a net inflow from vessel sales Net Cash Flow Summary (USDm) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operating Activities | 83.1 | 186.6 | | Investing Activities | 43.4 | -160.9 | | Financing Activities | -47.3 | 252.8 | Dividend Distribution The Board of Directors approved a Q1 2025 interim dividend in line with the company's distribution policy - An interim dividend of USD 0.40 per share was approved for Q1 2025, totaling an expected payment of USD 39.1m[30] - The dividend represents 62% of the net profit and will be paid on June 4, 2025[30] Market Analysis This section examines product tanker market developments in Q1 2025 and provides an outlook on key future drivers Product Tanker Market Developments Q1 2025 The Q1 2025 product tanker market saw lower trade volumes and rates compared to the prior year amid geopolitical shifts - Clean petroleum product trade volumes fell 4% YoY in Q1 2025, neutralizing the positive ton-mile effect from the Red Sea disruption[33] - Product flows on Middle East/India to Europe routes, affected by the Red Sea situation, remained 11% below YoY levels despite climbing from Q4 2024 lows[34] - US product exports were impacted by refinery maintenance but saw strong gains towards the end of the quarter[35] - Competition from new crude tankers carrying clean products ('crude cannibalization') increased during the quarter but stayed below the peak levels of Q3 2024[35] Market Outlook The market outlook is shaped by geopolitical uncertainty, European refinery closures, and potential US policy changes - The closure of three refineries in Northwest Europe is expected to create a higher diesel deficit, likely leading to increased imports and ton-miles[36] - Geopolitical factors, including the new US administration's policies on trade and sanctions, are expected to continue driving market uncertainty and could have indirect effects on the product tanker market[36][37] Full Year 2025 Outlook This section details TORM's narrowed financial guidance and charter coverage for the full year 2025 Financial Guidance TORM has narrowed its full-year 2025 guidance for TCE earnings and EBITDA based on year-to-date performance Full-Year 2025 Guidance | Metric | 2025 Guidance (USDm) | 2024 Actual (USDm) | | :--- | :--- | :--- | | TCE Earnings | 700 - 900 | 1,135 | | EBITDA | 400 - 600 | 851 | - Key macroeconomic factors affecting the outlook include geopolitical conflicts, global economic growth, refinery activities, oil price development, and global fleet growth[44] 2025 Coverage Details A detailed breakdown of fixed earning days and rates for 2025 shows 43% of total earning days are covered 2025 Coverage as of 05 May 2025 | Vessel Class | Q2 2025 Coverage | Q2 2025 Rate (USD/day) | FY 2025 Coverage | FY 2025 Rate (USD/day) | | :--- | :--- | :--- | :--- | :--- | | LR2 | 64% | 36,831 | 51% | 35,535 | | LR1 | 46% | 29,714 | 36% | 26,079 | | MR | 57% | 24,150 | 41% | 24,665 | | Total | 57% | 28,026 | 43% | 27,829 | Operational Performance This section reviews detailed earnings data by vessel segment and outlines recent fleet development activities Detailed Earnings Data by Segment Operational metrics show a year-over-year decrease in spot rates across all vessel classes alongside rising operating expenses Tanker Segment Performance (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Available earning days | 8,061 | 7,697 | +5% | | Spot rates (USD/day) | 25,519 | 44,274 | -42% | | TCE per earning day (USD/day) | 26,807 | 43,152 | -38% | | Operating expenses per day (USD/day) | 7,891 | 7,260 | +9% | Fleet Development The company continued its fleet management strategy by divesting three older MR vessels, reducing the total fleet to 91 - TORM's fleet management strategy involves regularly divesting older vessels and acquiring high-quality second-hand vessels to maintain a stable and attractive average fleet age[52] Fleet Composition Change (Q4 2024 to Q1 2025) | Fleet Type | Q4 2024 | Changes | Q1 2025 | | :--- | :--- | :--- | :--- | | Owned Vessels | 70 | -3 | 67 | | Leaseback Vessels | 24 | 0 | 24 | | Total Fleet | 94 | -3 | 91 | Condensed Consolidated Financial Statements This section presents the unaudited Q1 2025 financial statements, including segment reporting and explanatory notes Financial Statements Overview The core unaudited financial statements for Q1 2025 are presented, including income, balance sheet, and cash flow - The Income Statement shows a net profit of USD 62.9m for Q1 2025, down from USD 209.2m in Q1 2024[65] - The Balance Sheet as of March 31, 2025, reports total assets of USD 3,486.7m and total equity of USD 2,142.2m[69] - The Cash Flow Statement indicates a net cash flow from operating activities of USD 83.1m for Q1 2025[74] - Segment reporting reveals that the Tanker segment generated an operating profit (EBIT) of USD 79.1m, while the Marine Engineering segment contributed USD 4.1m in Q1 2025[76] Notes to the Financial Statements Key disclosures provide context on the going concern basis, vessel sales, debt covenants, and subsequent events - The financial statements are prepared on a going concern basis, with the Board confident in the company's ability to operate and meet covenants until at least June 30, 2026[87] - During Q1 2025, TORM sold and delivered three vessels for USD 44.9m, resulting in a profit of USD 9.4m[98] - As of March 31, 2025, TORM was in compliance with all financial covenants related to its borrowings[103] - Subsequent to Q1 2025, TORM sold a 2008-built LR2 vessel and the Board declared the Q1 2025 dividend of USD 0.40 per share[113][114] Glossary and Alternative Performance Measures (APMs) This section defines key terms and non-IFRS financial metrics used in the report, providing reconciliations for clarity Definitions and Reconciliations Key financial figures and Alternative Performance Measures are defined and reconciled to their comparable IFRS figures - Time Charter Equivalent (TCE) earnings are defined as revenue less port expenses, bunkers, and commissions and is a standard industry metric to compare performance irrespective of charter type[141] - EBITDA is defined as earnings before financial income and expenses, depreciation, impairment, amortization, and taxes, while Adjusted EBITDA further removes unrealized gains/losses on derivatives[125][128] - Net Asset Value (NAV) is calculated using broker valuations for vessels and is used to measure the development of assets and liabilities; as of March 31, 2025, NAV per share was USD 25.7[137] Disclaimers and Statements This section contains the management responsibility statement and a safe harbor statement regarding forward-looking information Responsibility and Safe Harbor Statements Management confirms the accuracy of the financial statements and provides a safe harbor caution for forward-looking statements - The Responsibility Statement confirms that the interim report gives a true and fair view of the Group's financial position and performance, prepared in accordance with IAS 34[56][59] - The Safe Harbor Statement warns that forward-looking statements are subject to risks that could cause actual results to differ materially, including market fluctuations, geopolitical events, and regulatory changes[60][62]