Torm profitable in 1Q2024

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Financial results

In the first quarter of 2024, TORM grew time charter equivalent earnings (TCE) to USD 330.7m (2023, same period: USD 265.0m) and realized an EBITDA of USD 265.8 m (2023, same period: USD 198.5m) and a net profit of USD 209.2m (2023, same period: USD 153.6m).

Again, in this quarter the product tanker market remained robust, albeit with freight rates retreating towards the end of the quarter compared to the high level at the start of the year. The overall positive market development reflects a continued high ton-mile demand as geopolitical tensions and refinery dislocation affect shipping routes and add to voyage distance. Also, product tanker fleet growth remained at a relatively low level, thus supporting the positive supply and demand situation.

In this market TORM achieved TCE rates of USD/day 43,152 on average (2023, same period: USD/day 41,717), and available earning days increased to 7,697 (2023, same period: 6,732). Our vessel class LR2 achieved TCE rates of USD/day 54,443, the LR1 vessels achieved TCE rates of USD/day 48,583, and the MR vessels achieved TCE rates of USD/day 39,121.

Return on invested capital amounted to 33.8% (2023, same period: 29.2%), thus adding to the positive trajectory seen in previous quarters.

During the quarter the number of outstanding shares (excl. treasury shares) has been increased to 92.2m which together with the realized net profit led to an increase in EPS to USD 2.34 (2023, same period: USD 1.87), thus reflecting a satisfactory development driven by tailwind from favorable market conditions as well as strong execution based on the One TORM platform, which allows for effective management of the fleet across vessel classes.

Market

The product tanker market encountered significant disruptions in early 2024 due to Houthi attacks on commercial vessels in the Bab al-Mandeb Strait, leading to widespread rerouting away from the Red Sea. This, coupled with longer trade routes stemming from Russian sanctions, increased trade distances. Red Sea transits dropped significantly, particularly affecting the LR2 segment. These challenges drove elevated fleet utilization and volatile freight rates.

Moving into the second quarter, the product tanker market remained strong although volatile. Return of the US Gulf refineries from spring maintenance boosted diesel exports to Europe, coinciding with Middle East refinery ramp-ups. Anticipated higher export quotas from China and ongoing Red Sea disruptions may offset lower Russian volumes due to refinery outages caused by drone attacks. Over the medium term, the market is expected to benefit from high-capacity utilization and manageable newbuilding deliveries for both product and crude tankers, supported by fundamental shifts in the oil market such as refinery closures in Australia and New Zealand and new refining capacity additions in the Middle East.

Vessel transactions

During 2023 and in the first quarter of 2024 TORM has both increased the long-haul fleet significantly and further improved the environmental profile of the total fleet. By the end of April, the delivery of all the vessels was completed, thus significantly adding to TORM’s tonnage, and thereby increasing TORM’s operating leverage in order to benefit from an expected continued strong market.

After the end of the quarter, TORM has entered into agreement to sell one MR vessel (TORM Eric, built in 2006 by STX, South Korea) with expected delivery to the new owner in the second quarter of this year.

Following all the transactions TORM will have a total of 89 vessels.

Distribution of Dividend for the First Quarter of 2024

TORM’s Board of Directors has today approved an interim dividend for the first quarter of 2024 of USD 1.50 per share to be paid to the shareholders corresponding to an expected total dividend payment of USD 140.9m. The distribution for the quarter is equivalent to 73% of net profit and reflects the Distribution Policy implemented in 2022 by which excess cash is shared with investors on a quarterly basis.

The payment date is 04 June 2024 to all shareholders of record as of 22 May 2024, and the ex-dividend date is 21 May 2024.

Financial Outlook 2024

As of 06 May 2024, TORM had covered 42% of the 2024 earning days at USD/day 43,189. Hence, 58% of the 2024 full year earning days are subject to change. Consequently, as 18,117 earning days in 2024 are unfixed, a change in freight rates of USD/day 1,000 will – all other things being equal – impact the EBITDA by USD 18.1m.

Also, as of 06 May 2024, 55% of the Q2 2024 earning days were covered at USD/day 43,695. For the individual vessel classes, the Q2 2024 coverage was 58% at USD/day 51,078 for LR2, 51% at USD/day 45,975 for LR1 and 54% at USD/day 40,477 for MR.

Based on the earnings realized in the first quarter of the year and the coverage achieved for the coming quarter TORM narrows its full-year guidance by increasing the low end of the guidance range, thus TCE earnings are expected to be in the range of USD 1.1 – 1.35bn (previous outlook: USD 1.0 – 1.35bn), and EBITDA is expected to be in the range of USD 800 – 1,050m (previous outlook: USD 700 – 1,050m) based on the current fleet size, including published acquisitions and divestment of vessels.