TORM plc(TRMD) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 2020, TORM reported a positive EBITDA of $102 million and a profit before tax of $57 million, translating to $0.76 per share, which is higher than the adjusted full-year result for 2019 [11][59] - The return on invested capital was positive at 15.4% for Q1 2020, considered an attractive level [11] - The average TCE rate for the product tanker fleet was $23,643 per day, with the MR segment achieving an average TCE rate of $22,461 per day [10][16] Business Line Data and Key Metrics Changes - The LR2 segment achieved average rates of $29,108 per day, while LR1 rates were $24,329 per day, and Handysize segment rates were $20,649 per day [16] - TORM's MR segment outperformed the peer group average, achieving rates of $22,461 per day compared to a peer average of $18,821 per day, resulting in additional earnings of $19 million in Q1 [52] Market Data and Key Metrics Changes - The product tanker market experienced significant volatility in Q1 2020, influenced by COVID-19 and OPEC+ events, leading to a strong start to the year [9][15] - As of early May 2020, TORM's total coverage for Q2 was 69% at $29,188 per day, with MR segment coverage at 65% at $26,511 per day [26][58] Company Strategy and Development Direction - TORM has focused on maintaining efficient operations and safety during the COVID-19 pandemic, with a strong operational focus enhancing results despite market challenges [8][6] - The company has committed to installing scrubbers on 49 vessels, with 37 already installed, to enhance operational efficiency [13] - TORM's strategy includes positioning vessels in basins with the highest earning potential, with a balanced approach to exposure in East and West markets [54] Management's Comments on Operating Environment and Future Outlook - Management noted that uncertainties around COVID-19's impact on the global economy and oil demand remain, with the timing and speed of recovery being key factors for the product tanker market [25][27] - The company expects continued volatility in the market in the short to medium term, but sees positive long-term drivers such as low order book and refinery dislocation [51] Other Important Information - TORM refinanced $496 million in debt, extending maturities until 2026, providing a solid foundation for future operations [14] - The net asset value was estimated at $993 million as of March 31, 2020, corresponding to $13.3 per share, with shares trading at DKK 54 [66] Q&A Session Summary Question: Duration of contract coverage and desire to lock-in elevated rates - Management indicated that liquidity for longer-term deals has been subdued due to economic uncertainty, affecting the shipping markets [75] Question: Capital allocation and dividend policy amidst uncertainty - Management stated that the dividend policy remains at 25% to 50% of net profit, but evaluations will be made in August based on market conditions [79] Question: Q2 fixings and market dynamics - Management explained that Q2 bookings reflect rates from March, with operational storage affecting realized rates [91] Question: Expectations for supply and demand balance in the oil market - Management noted that it is too early to provide precise data points, expecting volatility due to ongoing economic uncertainties [106] Question: Logistical issues and demurrage rates - Management observed that logistical issues have eased slightly but remain high, with demurrage rates following market trends [118]