Hafnia Limited(HAFN) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, the company reported a net profit of $109.7 million, contributing to a full-year net profit of $339.7 million, indicating solid performance [4][21] - The adjusted EBITDA for Q4 was $149.7 million, with a return on equity of 14.8% and a return on invested capital of 11.2% for the full year [21] - The net loan-to-value (LTV) ratio increased from 20.5% at the end of Q3 to 24.9% at the end of Q4, primarily due to the investment in TORM [22] Business Line Data and Key Metrics Changes - The company divested older vessels as part of its fleet renewal strategy, selling 2 MR vessels and committing to sell additional vessels [5] - Fee-based businesses contributed $6.9 million in fee income for Q4 [21] - The company owned or chartered 123 vessels with an average age of 9.7 years, below the industry average of 14.1 years [6] Market Data and Key Metrics Changes - The product tanker market remained seasonally firm in Q4, supported by growth in refined oil exports and higher crude oil exports [11] - Clean petroleum product volumes on the water reached their highest levels in 9 years, reflecting resilience in global oil demand [13] - The overall net fleet growth for product tankers remained limited due to the impact of crude tanker sanctions [14] Company Strategy and Development Direction - The company aims to maintain a transparent dividend policy, declaring an 80% payout ratio for Q4, resulting in a total cash dividend of $87.7 million [7] - The company is pursuing strategic opportunities, including a potential combination with TORM, which could create a market leader in scale and performance [5][46] - The sustainability strategy focuses on maintaining high operational and environmental standards while advancing technological capabilities [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for Q2 2026, citing strong earnings leverage in the current market with secured rates above operational cash flow breakeven [25][28] - The company anticipates that the impact of sanctioned vessels and ongoing LR2 transitions will help ease effective market supply despite newbuild deliveries [28] - Management highlighted the importance of scale and capital market track record for future positioning in the energy complex [46] Other Important Information - The company returned 88.1% of its net profit to shareholders through dividends and share buybacks in 2025 [9] - The company has a strong liquidity profile with $104 million in cash and $324 million in undrawn capacity, totaling around $430 million [22] Q&A Session Summary Question: Discussion on the LR2/crude Aframax spread - Management noted that the spread between LR2s and Aframaxes is causing more ships to enter Aframax trade, indicating a tight market in the Middle East [30][31] Question: Potential shifts in seasonality - Management acknowledged geopolitical unrest could lead to a stronger than normal Q2, with various factors positively impacting Aframaxes [32][33] Question: Impact of EU regulations on MRs - Management indicated that the European market for MRs remains weak, primarily due to reduced volumes from Russia and strong supply from the US Gulf [34] Question: Increased scrapping of sanctioned vessels - Management confirmed that a couple of sanctioned ships have been allowed to be scrapped in India, but overall scrapping remains limited [36][37] Question: Why not move more LR2 into Aframax trade - Management explained the decision to charter out LR2s on long-term contracts as part of a housekeeping hedge strategy [39] Question: Commercial performance versus peers - Management stated that Hafnia's performance is competitive with peers like TORM, with close results across segments [43]