TORM plc(TRMD) - 2022 Q1 - Quarterly Report

Strategic Report At a Glance TORM's 2021 performance, strategic framework, and market environment are overviewed, highlighting fleet expansion, commercial outperformance, accelerated environmental targets, and a solid capital structure despite challenging freight rates. Key Figures Key Financial Performance (2017-2021) | Indicator | 2021 | 2020 | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | :--- | :--- | | TCE Earnings (USD per day) | 13,703 | 19,800 | 16,526 | 12,982 | 14,621 | | Net Profit/Loss (USD million) | -42 | 88 | 166 | -35 | 2 | | EBITDA (USD million) | 137 | 272 | 202 | 121 | 158 | | Adjusted RoIC (%) | 0.2% | 9.3% | 5.2% | 0.3% | 2.4% | | Basic EPS (USD) | -0.54 | 1.19 | 2.24 | -0.48 | 0.02 | | Dividend/Share (USD) | 0.00 | 0.85 | 0.10 | 0.00 | 0.02 | Balance Sheet and Cash Flow Highlights (USD million) | Indicator | 2021 | 2020 | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | 2,331 | 1,999 | 2,004 | 1,714 | 1,647 | | Equity | 1,052 | 1,017 | 1,008 | 847 | 791 | | Net Interest-Bearing Debt | 972 | 713 | 786 | 627 | 620 | | Cash and Cash Equivalents | 172 | 136 | 72 | 127 | 134 | Strategic Framework and Highlights TORM's strategy focuses on being a leading product tanker owner, pursuing a greener future, and leveraging its integrated operating platform. - TORM's strategy is centered on being a leading product tanker owner, pursuing a greener future with a zero-emission ambition, and leveraging a superior integrated operating platform (One TORM)[14][15] - In 2021, TORM expanded its fleet to 85 vessels, the largest in its history, while maintaining a net Loan-to-Value (LTV) of 52.3% and USD 210 million in available liquidity[18] - The company has a zero-carbon shipping ambition for 2050 and has already achieved a 37.6% AER (Annual Efficiency Ratio) reduction compared to the 2008 IMO baseline[18] - TORM commercially outperformed its peers in the MR vessel class in all four quarters of 2021, demonstrating the strength of its operating platform[19][25] Letter from the Chairman and CEO Despite a challenging market, TORM's integrated platform delivered strong commercial performance, accelerated environmental efforts, and expanded its fleet. - Despite a challenging market in 2021 due to COVID-19, TORM's integrated 'One TORM' platform delivered strong commercial performance and outperformance on Adjusted Return on Invested Capital (ROIC) compared to peers[27][32] - TORM accelerated its environmental efforts, setting a new target to achieve the IMO's 2030 CO2 reduction goal by 2025 and committing to zero emissions from its fleet by 2050[30] - The company successfully expanded its fleet to the largest in its history through the Team Tanker transaction, financed partly by issuing new shares to maintain a robust capital structure[31] 2021 in Review TORM's 2021 review highlights significant fleet expansion, successful financing, advanced decarbonization efforts, and effective COVID-19 response. - Fleet Expansion: TORM grew its fleet to the largest in its history by purchasing eight MR vessels from Team Tankers and three modern LR2 vessels from Okeanis, while also taking delivery of an LR2 newbuilding[36][39] - Financing: The company raised USD 549 million in financing and refinancing through a combination of bank debt and sale-and-leaseback transactions, demonstrating diverse access to capital markets[36] - Decarbonization Efforts: TORM advanced its green agenda by joining the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping and investing in Flettner Rotors for two vessels, expecting 5-7% energy savings[39] - COVID-19 Response: Over 1,100 seafarers were vaccinated against COVID-19 through company-led drives, supporting operational security[39] The Product Tanker Market in 2021 The product tanker market in 2021 faced weak freight rates due to oil stock draws, despite recovering global oil demand and constrained supply. - The product tanker market in 2021 was characterized by weak freight rates, primarily due to continued oil stock draws which supplied demand locally instead of through seaborne imports. By year-end, clean product stocks at major hubs were 7% below pre-COVID seasonal averages[41][64] - Global oil demand recovered towards pre-COVID levels, touching the 100 million barrels per day mark by year-end, driven by successful vaccination programs and economic reopening in the US and Europe[45][47] - Oil supply was constrained by OPEC+ production quotas and several disruptions, including extreme weather and a cyber-attack on the Colonial pipeline in the US, which caused temporary spikes in transatlantic MR rates[52][53][54] - A weak crude tanker market led to market cannibalization, as newbuilt crude tankers competed in the clean product trade for most of 2021, adding to rate pressure[62] Market Drivers and Outlook The product tanker market outlook anticipates low fleet growth and strong ton-mile demand, leading to higher TCE rates and a return to profitability in 2022. - The product tanker fleet is projected to grow at a low compound annual rate of approximately 2% from 2022-2024, supported by a record-low order book (6.6% of the existing fleet) and increased scrapping activity[71][76] - Ton-mile demand is expected to grow by a compound annual rate of around 4% from 2022-2024, driven by recovering oil demand and refinery dislocation, as 2.7 million barrels per day of capacity in net-importing regions closes while 4.4 million barrels per day of new capacity comes online in exporting regions like the Middle East and China[79][81] - For 2022, TORM expects higher TCE rates than in 2021 and a return to net profit. The company's normalized PBT break-even TCE rate is approximately USD 15,000 per day[85] 2022 Coverage and PBT Sensitivity | Metric | Value | | :--- | :--- | | Coverage as of 20 Mar 2022 | 34.3% of earning days | | Covered Rate (USD per day) | 17,497 | | PBT Effect per $1,000/day TCE increase | USD 21 million | Business Model and Strategic Choices TORM's business model is built on three strategic pillars: being a leading product tanker owner, committing to a greener future, and operating a superior, integrated 'One TORM' platform, enabling selective fleet growth, financial flexibility, and operational outperformance. Value Chain and Strategic Choices TORM primarily transports refined oil products, with its strategy centered on being a leading product tanker owner, pursuing a greener future, and utilizing an integrated operating platform. - TORM primarily operates in the transportation of refined oil products from refineries to distributors. In 2021, 98.6% of its turnover was generated from transporting clean products[92] - The company's strategy is based on three key elements: being a leading product tanker owner, pursuing a greener future with a zero-emission ambition, and utilizing a superior integrated operating platform ('One TORM')[97][98] Leading Product Tanker Owner TORM maintains operational leverage through its spot market fleet, consolidates the market through strategic acquisitions, and upholds a solid capital structure with significant liquidity. - TORM primarily employs its fleet of over 80 vessels in the spot market to maintain operational leverage and benefit from improved market conditions. The company's normalized PBT break-even rate is approximately USD 15,000 per day[103][104] - In 2021, TORM acted as a consolidator by acquiring 11 second-hand vessels (eight MRs, three LR2s) and taking delivery of one LR2 newbuilding, while selling one older vessel[109] - The company maintains a solid capital structure with a net debt Loan-to-Value of 52% as of year-end 2021, significant available liquidity, and no major CAPEX commitments or near-term refinancing needs[110][131] TORM Fleet Composition (as of 23 March 2022) | Vessel Class | Number of Vessels | DWT (Deadweight Tonnage) | | :--- | :--- | :--- | | LR2 | 15 | ~115,000 dwt | | LR1 | 9 | ~75,000 dwt | | MR | 59 | ~50,000 dwt | | Handysize | 2 | ~37,000 dwt | Greener Future With Zero Carbon Emission Ambition TORM has accelerated its climate targets, aiming for significant CO2 reductions by 2025 and 2030, with a long-term ambition for zero emissions by 2050, supported by technological investments and industry collaborations. - TORM has accelerated its climate targets, aiming to achieve a 40% CO2 reduction by 2025 (instead of 2030) and a 45% reduction by 2030, with an ambition for zero CO2 emissions from its fleet by 2050[140] - As of year-end 2021, TORM had already achieved a 37.6% reduction in its Annual Efficiency Ratio (AER) compared to the 2008 IMO baseline, well ahead of the regulatory trajectory[144] - To optimize current performance, TORM is investing in technology like Flettner Rotors for two LR2 vessels, which are expected to reduce fuel consumption and CO2 emissions by 5-7%[138][157] - For long-term decarbonization, TORM has joined the Mærsk McKinney Møller Center for Zero Carbon Shipping as a Mission Ambassador to collaborate on developing future fuels and technologies[139][161] Superior Operating Platform TORM's integrated 'One TORM' platform ensures aligned management of all essential functions, enabling market responsiveness, high safety standards, and seamless integration of new vessels, supported by high officer retention. - TORM's in-house integrated operating platform, 'One TORM', manages all essential functions (commercial, technical, sale & purchase) to ensure alignment, market responsiveness, and high safety standards[172][175] - The platform's integration proved crucial during the COVID-19 pandemic, enabling normalized crew changes, management of supply chain bottlenecks, and seamless integration of 13 new vessels acquired in 2021[181][183][190] - TORM maintains a high retention rate of over 92% for its senior and junior officers, which has been vital for operational continuity during the pandemic[186] - In March 2021, TORM acquired eight MR vessels from TEAM Tankers, six of which have chemical trading capabilities (IMO 2), enhancing trading flexibility[189] Our Responsibility (ESG) TORM's commitment to ESG principles is detailed, outlining ambitious 2030 targets for CO2 reduction, safety, and leadership diversity, alongside initiatives in safety culture, environmental performance, employee wellbeing, human rights, community support, and responsible procurement. Responsibility Framework and ESG Targets TORM's responsibility framework aligns with the UN Global Compact and SDGs, prioritizing legal compliance, health and safety, and environmental efforts, with specific 2030 targets for climate, safety, and leadership diversity. - TORM's responsibility framework is rooted in its Business Principles and commitment to the UN Global Compact, focusing on SDGs 4 (Quality Education) and 13 (Climate Action)[205][207] - A materiality assessment identified legal compliance, health and safety, and environmental efforts as the most important ESG topics for TORM and its stakeholders[221][225] Key 2030 ESG Targets | Category | 2030 Target | 2021 Status | | :--- | :--- | :--- | | Climate (CO2 Reduction vs 2008) | -45% | -37.6% | | Safety (LTAF) | 0.30 | 0.37 | | Leadership Diversity (% Female) | 35% | 22% | Health, Safety, and Security TORM demonstrated improved safety performance in 2021 with a significant decrease in LTAF, continued its safety culture program, and adapted security procedures to address incidents. - The Lost Time Accident Frequency (LTAF) significantly decreased to 0.37 in 2021 from 0.65 in 2020, demonstrating improved safety performance[245] - TORM continued its 'One TORM Safety Culture' program, introducing a new safety leadership program for Junior Officers and achieving over 80% completion rate for the Senior Officer course[237][238][239] - In 2021, TORM experienced six incidents of theft/robbery and four incidents of stowaways, with no harm to personnel. Security procedures are continuously adapted to changing threat levels[251] Environmental Efforts TORM is accelerating its environmental efforts to achieve significant CO2 reductions by 2025, having already surpassed regulatory targets, and actively participates in industry collaborations for decarbonization. - TORM is accelerating its environmental efforts, aiming to achieve the IMO's 2030 target of a 40% CO2 reduction by 2025[257] - By the end of 2021, TORM achieved a 37.6% reduction in its Annual Efficiency Ratio (AER) compared to the 2008 IMO baseline, driven by the integrated One TORM platform[261] - The company actively participates in industry collaborations like the Mærsk McKinney Møller Institute for Zero Carbon Shipping and ShippingLab to drive decarbonization[255] People TORM maintained high seafarer and shore-based staff retention in 2021, prioritizing crew wellbeing through vaccination efforts and wellness programs, while also achieving high employee engagement and progress towards leadership diversity targets. - At year-end 2021, TORM employed 3,420 seafarers and 348 shore-based staff. The retention rate for Senior Officers remained high at over 90%[267][270][282] - A key priority in 2021 was seafarer wellbeing, with over 1,000 crew members vaccinated against COVID-19 and the successful continuation of the 'Well at TORM' wellness program[268][270] - Shore-based employee engagement remained high with a score of 8.4 out of 10. The proportion of female employees was 37%, with 22% in leadership positions, against a 2030 target of 35%[275][288] Human Rights and Business Ethics TORM upholds a zero-tolerance approach to bribery and corruption, actively participates in anti-corruption initiatives, maintains a whistleblower facility, and is committed to respecting human rights. - TORM maintains a "zero tolerance" approach to bribery and corruption, supported by mandatory anti-corruption training for all shore-based staff and officers[297][300] - As a co-founder of the Maritime Anti-Corruption Network (MACN), TORM actively works with the industry to eliminate facilitation payments[298] - The company's whistleblower facility received two notifications in 2021, both of which were investigated and closed without requiring new measures[301] - TORM is committed to respecting human rights as outlined in the UN Guiding Principles and complies with the International Labor Organization's Maritime Labor Convention. No human rights claims were reported in 2021[302][303] Community and Responsible Procurement TORM supports quality education through its foundations in the Philippines and India, and expects its suppliers to comply with international standards on human rights, labor, environment, and anti-corruption. - TORM supports SDG 4 (Quality Education) through its foundations in the Philippines and India. In 2021-2022, the TORM Philippines Education Foundation supported 74 scholars and apprentices[305][314] - In India, TORM sponsors 33 students through the SAMPARC organization and funded the construction of school facilities and a town hall[315][316] - TORM expects its suppliers to comply with international standards on human rights, labor, environment, and anti-corruption, and is beginning periodic supplier assessments based on its ISO 9001 and ISO 14001 certifications[321][322] SASB Index and Responsibility Data This section presents TORM's detailed ESG data in the SASB framework, covering greenhouse gas emissions, air quality, ecological impacts, employee health and safety, and business ethics. 2021 SASB Marine Transportation Metrics | Topic | Metric | Value | | :--- | :--- | :--- | | Greenhouse Gas | Gross global Scope 1 emissions | 1,353,306 tonnes CO2-e | | Air Quality | SOx emissions | 1,488 metric tons | | Ecological Impacts | Fleet with ballast water treatment | 73% | | Employee Health & Safety | Lost time incident rate (LTIR) | 0.37 | | Business Ethics | Port calls in low-ranking corruption countries | 13 | Key Environmental Indicators (Fleet) | Indicator | Unit | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | :--- | | Total GHG Emissions | Ton CO2 | 1,353,792 | 1,336,330 | 1,302,878 | | CO2 emissions, AER - total fleet | g/dwtxnm | 5.05 | 5.34 | 5.28 | | CO2 emissions, EEOI - total fleet | g/cargoxnm | 10.64 | 11.17 | 11.35 | Key Social & Governance Indicators (2021) | Indicator | Unit | Value | | :--- | :--- | :--- | | Total seafarers | Headcount | 3,420 | | Total shore-based employees | Headcount | 348 | | Women in leadership (shore) | % | 22% | | Lost-time accident frequency (LTAF) | Per million exposure hours | 0.37 | | Board of Directors - Women | % | 20% | | Board of Directors - Independence | % | 80% | Review & Risk This section reviews TORM's 2021 financial performance, which saw a net loss due to lower freight rates, and outlines its risk management framework, emphasizing market, operational, financial, and emerging climate-related risks. Financial Review 2021 TORM reported a net loss in 2021 due to significantly lower freight rates, despite fleet expansion, while maintaining a solid capital structure and liquidity. 2021 Financial Highlights vs. 2020 (USD million) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | 620 | 747 | -127 | | TCE Earnings | 379 | 520 | -141 | | EBITDA | 137 | 272 | -135 | | Operating Profit/(loss) (EBIT) | 1 | 139 | -138 | | Net Profit/(loss) | -42 | 88 | -130 | | Total Assets | 2,331 | 1,999 | 332 | | Equity | 1,052 | 1,017 | 35 | - The decrease in TCE earnings was driven by a 31% drop in average TCE per day, partially offset by 5% more available earning days due to fleet expansion[358] - TORM maintained a solid capital structure with a Net Loan-to-Value of 52.3% and available liquidity of USD 210 million. The company has no major debt maturities until 2026[356][369] - The Board of Directors recommended that no dividends be paid for 2021, in contrast to the USD 0.85 per share paid for 2020[405][9] Risk Management TORM's risk management addresses principal market, operational, and financial risks, with a growing focus on long-term climate change impacts and cyber security. - TORM's principal risks include market volatility (tanker freight rates, bunker prices, asset values), operational risks (oil major approvals, vessel accidents), and financial risks (liquidity, funding)[449][450] - The company identifies climate change as a key emerging long-term risk, focusing on three main areas: the potential for peak oil demand, obsolescence of vessel technology due to new fuel requirements, and reduced access to financing as investors and banks prioritize green investments[437][442][443] - To monitor long-term risks, the Risk Committee reviews "disruption indicators" such as EV uptake and biofuel consumption to assess if developments are accelerating towards peak oil demand, which could impact strategy[442][493] - IT and cyber security risk is acknowledged as a significant business risk due to increasing interconnectivity. Mitigating activities include business continuity plans and assessments of critical systems[435] Governance Governance Structure TORM's governance is led by its Board of Directors, supported by four committees, and largely compliant with the UK Corporate Governance Code, with key activities in 2021 focusing on strategic fleet expansion, financing, and ESG priorities. - The Board of Directors sets strategy, with day-to-day management delegated to the Executive Director. It is supported by Audit, Risk, Nomination, and Remuneration committees[465][467] - In 2021, TORM was compliant with 39 of 41 provisions of the UK Corporate Governance Code. Non-compliance related to the annual re-election of all directors and the Chairman's role on the Remuneration Committee[469][574][591] - Key Board activities in 2021 included overseeing the acquisition of 11 vessels, securing financing through bank debt and sale-leasebacks, and intensifying focus on ESG, including masterclasses on future fuels and new technologies[486][487][488] - The Risk Committee developed a 'Disruption Indicator model' to monitor long-term trends like oil demand and EV uptake that could signal a more aggressive development towards peak oil, potentially impacting company strategy[493] Committee Reports This section details the activities of TORM's four board committees, covering financial reporting integrity, risk management, board composition and succession, and executive remuneration. Audit Committee Report The Audit Committee focused on the integrity of financial reporting, particularly the impairment review of vessels and the going concern assessment, concluding no impairment was needed for the main fleet. - A key focus was the impairment review of vessels. The committee concluded that the Main Fleet was not impaired as its value in use (USD 2,276 million) exceeded its carrying amount, and the Handysize vessels were also not impaired[518][519][850] - The committee reviewed and confirmed the appropriateness of preparing financial statements on a going concern basis, after assessing forecasts, liquidity, and covenant compliance under various stress scenarios[516][517] - The committee determined that establishing a formal internal audit function could be deferred, with assurance provided by the Group Internal Control function and external reviews. This decision will be revisited in 2022[537] - Total fees paid to the external auditor, Ernst & Young LLP, were USD 1.0 million, with USD 0.8 million for audit services and USD 0.2 million for non-audit services[550][551][815] Risk Committee Report In 2021, the Risk Committee focused on liquidity and financing amid the pandemic, reviewed Forward Freight Agreements (FFAs) and customer credit risk, and assessed cyber security and sanctions compliance. - In 2021, the committee focused on liquidity and financing to mitigate risks from the COVID-19 pandemic, reviewing liquidity forecasts and stress tests at every meeting[556][558] - The committee reviewed risks associated with Forward Freight Agreements (FFAs), implementing more frequent reporting to monitor potential liquidity impacts[559] - An updated customer credit risk policy was approved, refining the methodology to include more focus on industry/country risk and predefined financial ratios[565] - The committee reviewed TORM's cyber security program, sanctions compliance setup, and policies for IT, finance, and credit risk[561][566][569] Nomination Committee Report The Nomination Committee focused on Nasdaq board diversity rules, governance, succession planning, and employee engagement in 2021, confirming compliance with diversity requirements and high employee satisfaction. - The committee's key focus areas in 2021 were Nasdaq board diversity rules, governance, succession planning, and employee engagement. There were no changes to the Board of Directors[574] - TORM already met the 2021 SEC-approved Nasdaq board diversity rule, which requires at least one diverse director for boards with five or fewer members[583] - The committee reviewed the results of the Employee Engagement Survey, which scored in the top 25% of companies using the same platform, indicating high employee satisfaction[582] Remuneration Committee Report The Remuneration Committee oversaw executive pay, aligning it with performance and long-term strategy, and reviewed the company's bonus structure and long-term incentive programs. CEO Remuneration 2021 vs 2020 (USD thousand) | Component | 2021 | 2020 (Adjusted) | | :--- | :--- | :--- | | Base Salary | 1,243.4 | 1,129.0 | | Taxable Benefits | 44.0 | 41.0 | | Annual Performance Bonus | 1,161.3 | 1,137.5 | | Total Remuneration | 2,448.7 | 2,307.5 | - The CEO's 2021 performance bonus was DKK 7.28 million (USD 1.16 million), equivalent to 100% of his base salary, based on performance metrics (60%) and Board discretion (40%)[609] - A new Long-Term Incentive Program (LTIP) grant of 255,200 Restricted Share Units (RSUs) was issued to the CEO, vesting over three years starting January 2022[619] - A key activity in 2021 was discussing a new bonus structure to better align employee pay-outs with TORM's financial performance using selected KPIs, while allowing for discretion on non-financial contributions[595] Other Governance Matters This section covers TORM's investor information, shareholder structure, and statutory reports, including its dual listing, controlling shareholder, distribution policy, and compliance with financial reporting standards. - As of December 31, 2021, TORM's share capital comprised 81,233,269 A-shares. OCM Njord Holdings S.à r.l. (Oaktree) is the only shareholder with over 5%, holding 66% of the share capital[659][673] - The company's distribution policy is to distribute 25-50% of net income semi-annually. However, due to the net loss in 2021, the Board decided not to recommend any distributions for the year[675] - The Directors' Report confirms that the financial statements have been prepared in accordance with UK-adopted International Accounting Standards and give a true and fair view of the Group's financial position[716][719] - The Section 172 statement outlines how directors have considered the interests of stakeholders (shareholders, employees, suppliers, customers, lenders, regulators, and community) in their decision-making throughout the year[680][681] Financial Statements Consolidated Financial Statements The consolidated financial statements for 2021 show a significant downturn in performance with a net loss, primarily due to lower revenue from weaker freight markets, despite growth in total assets driven by vessel acquisitions. Consolidated Income Statement Highlights (USD thousand) | Item | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Revenue | 619,532 | 747,356 | 692,610 | | Operating profit/(loss) (EBIT) | 1,396 | 138,907 | 205,891 | | Profit/(loss) before tax | -40,745 | 89,529 | 166,806 | | Net profit/(loss) for the year | -42,089 | 88,114 | 166,022 | Consolidated Balance Sheet Highlights (USD thousand) | Item | 2021 | 2020 | | :--- | :--- | :--- | | Total Assets | 2,330,999 | 1,998,643 | | Non-current assets | 1,967,680 | 1,754,984 | | Total Equity | 1,052,180 | 1,017,469 | | Total Liabilities | 1,278,819 | 981,174 | | Non-current liabilities | 971,626 | 784,466 | Consolidated Cash Flow Highlights (USD thousand) | Item | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash flow from operating activities | 47,948 | 235,801 | 171,091 | | Net cash flow from investing activities | -290,593 | -119,802 | -322,823 | | Net cash flow from financing activities | 297,975 | -83,332 | 84,491 | | Cash and cash equivalents at year end | 144,844 | 89,514 | 56,847 | Notes to Consolidated Financial Statements This section provides detailed disclosures supporting the consolidated financial statements, covering accounting policies, critical estimates, impairment testing, leasing activities, financial risk analysis, share capital structure, and related party transactions. - Going Concern: Management confirms the appropriateness of the going concern basis, supported by sufficient liquidity (USD 210 million) and headroom on covenants, even in downside scenarios. The potential impact of the war in Ukraine is considered to be covered within stress test calculations[742][743][744] - Impairment Testing (Note 8): The value in use for the Main Fleet CGU was calculated at USD 2,276 million, providing a headroom of USD 269 million over its carrying amount. The test is sensitive to a USD 1,000 per day change in freight rates, which would alter the value in use by USD 285 million[850][865] - Financial Risk (Note 21): A USD 1,000 per day change in freight rates would impact the following year's profit before tax by USD 27.2 million. A 10% change in bunker prices would impact it by USD 22.6 million[935][939] - Borrowings (Note 16): As of year-end, total borrowings stood at USD 1,135.4 million. The company has fixed the interest rate on 84.9% of its debt through swaps and fixed-rate leases[897][954] Parent Company Financial Statements The parent company, TORM plc, reported increased total assets and equity in 2021, driven by loans to subsidiaries, and a turnaround to profit for the financial year. Parent Company Balance Sheet Highlights (USD thousand) | Item | 2021 | 2020 | | :--- | :--- | :--- | | Total Assets | 1,895,647 | 1,661,510 | | Investments in subsidiaries | 937,589 | 1,031,005 | | Loans to subsidiaries | 943,566 | 552,939 | | Total Equity | 1,141,784 | 1,025,428 | | Total Liabilities | 753,863 | 636,082 | - The parent company's profit for the financial year was USD 37.0 million, compared to a loss of USD 15.5 million in 2020[981] - As a guarantor, TORM plc has provided guarantees for loans to subsidiaries and for future lease payments totaling approximately USD 472 million[1003] Other Financial Information This section includes the Independent Auditor's Report, a detailed fleet overview, and a glossary of terms and Alternative Performance Measures (APMs), providing an unqualified opinion on the financial statements and reconciliations for key metrics. - The Independent Auditor, Ernst & Young LLP, issued an unqualified opinion, confirming the financial statements give a true and fair view and were prepared in accordance with relevant accounting standards[1011] - The key audit matter was the carrying value of vessels. The auditor challenged management's Cash-Generating Unit (CGU) determination and key assumptions (freight rates, discount rate) and concurred with the conclusion of no impairment for the main fleet[1026] - As of December 31, 2021, the TORM fleet consisted of 84 vessels, including 14 LR2, 9 LR1, 59 MR, and 2 Handysize tankers[1042][1044][1046] Reconciliation of Key Alternative Performance Measures (2021, USD million) | APM | Calculation/Reconciliation | Value | | :--- | :--- | :--- | | TCE Earnings | Revenue (619.5) - Voyage Expenses (240.9) | 378.6 | | EBITDA | Net Loss (-42.1) + Tax (1.3) + Fin. Items (42.2) + D&A (135.5) | 136.9 | | Net Interest-Bearing Debt | Borrowings (1,148.4) - Loans Rec. (4.6) - Cash (171.7) | 972.1 | | Net Asset Value (NAV) | Broker Vessel Value + Other Assets - Liabilities | 1,007.5 |