Torm PLC (TRMD) 2026 Q3 法說會逐字稿

Thank you for standing by. My name is Janine, and I will be your conference operator for today. At this time, I would like to welcome everyone to TORM's third quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise.

(Operator Instructions)

Jacob Melgaard, the Chief Executive Officer. Please go ahead.

Yeah, thank you and welcome to everyone joining us here today. As we addressed last time, we believe the OneTORM platform is fundamental to understanding how we create value. So by integrating our commercial, technical and operational capabilities, we can make decisions quickly and optimize the value of each vessel throughout its life cycle. For us, this is not simply about replacing vessels at a certain age.

Through disciplined maintenance, we preserve the quality and commercial flexibility of our fleet, giving us the option to retain well-performing vessels for longer when that creates more value. At the same time, we actively buy and sell vessels and invest in the fleet when we see attractive opportunities. The objective is to maximize the earnings and value of each vessel throughout the cycle.

This approach is supported by our commercial performance. From 2023 through 2025, our MR fleet generated more than $200 million of additional CCU earnings compared with the peer average, and we have continued to outperform during 2026. Finally. Strong operating performance generates cash, which allows us to balance attractive shareholder distributions with disciplined investments in the fleet. That combination of operational performance, active fleet management, and disciplined carousel allocation is at the core of the one-tone model. Turning to slide 4, you can see how that approach has translated into both fleet investment and shareholder returns.

Since the end of 2022, we have expanded the fleet from 78 to 95 vessels while also building a significant pipeline of future deliveries. Importantly, while some of our peers have taken a different approach, we have deliberately maintained more vessels on the water over the past year. In a strong freight market, this has allowed us. To capture more of the economic value from our existing fleet rather than accelerating disposals simply because of each. And we have done this while returning substantial cash to shareholders. 2023, Torm has distributed $17.45 per share in dividends. We've also used the equity market selectively. When it made sense, including issuing shares as part of the consideration for vessel acquisitions. In total, approximately 20 million shares have been issued over the period, helping us capture attractive fleet investment opportunities. So our approach is not to choose between distributions and investment. It is about allocating capital dynamically, maximizing the value of the existing fleet. Returning cash to shareholders and investing when we see opportunities to strengthen future earnings capacity. And that brings us naturally to the third quarter, where we continued to actively manage both the existing fleet and our future delivery pipeline. Kindly turn to Slide 5. During the third quarter, we generated TCE earnings of $353 million. Compared with $236 million in the third quarter of last year. EBITDA was $274 million compared with $152 million while net profit reached $199 million compared with $78 million a year ago. These results came. After an exceptional second quarter and demonstrated that earnings remained at very strong levels throughout the third quarter. We also continue to actually manage the existing fleet. During the quarter, we sold the 2007-built LR1 TOM Venture and the 2008-built MR TOM Lara. Following these divestments, our fleet comprises 95 lesters on the water. At the same time. We continue to advance our fee renewal and growth program. Following the acquisition of six MR resale vessels during the second quarter and our previously announced order for six MR new buildings, we exercised options for an additional two MR new buildings during the third quarter. After end order, we agreed to invest in eight LR2 new buildings through a 50/52 venture and secured options for an additional two MR new buildings taken together, these investments give us a significant pipeline of future fleet deliveries through 2030, supporting both the ongoing renewal of the fleet and our future earnings capacity. So when we look at the quarter, there are really two messages. First, the existing TORM platform continues to generate very strong earnings and cash flow. And second, we continue to actually manage and invest in the fleet. With a focus on future earnings and long-term shareholder value. Let me now turn to the market environment supporting those earnings. And here, please turn to Slide number 7. The product tanker market remains exceptionally strong with recent geopolitical developments adding an additional tailwind to an already robust market.

The important point is that the market was already strong before the latest disruption. Limited effective free growth and sanctions have created a favorable supply-demand balance, while geopolitical developments have introduced further logistical inefficiencies and reduced effective vessel availability. This dynamic has been particularly evident in the cruise tanker market, where rates have reached exceptionally high levels. Lifting sentiment and earnings across the broader tanker sector. This is reflected in our commercial performance, where our fourth quarter bookings secured to date averaged $78,000 per day across vessel classes, demonstrating our ability to capture value in a rapidly strengthening market. At the same time, the historical ranges on this slide also remind us that shipping remains a highly technical and volatile industry.

Market condition can change quickly, which makes commercial flexibility increasingly important. Turning to Slide 8. If we step back from product angles and look at the broader oil market, the key element here is that Persian Gulf crude exports are recovering towards pre-conflict levels. That matters because crude flows are the starting point of the entire value chain, While it may take longer for the Middle East clean product flows to return to pre-war levels, improved feedstock availability globally enables refiners in other regions to increase utilization and ultimately export more clean products. In that sense, product exports could represent the next leg of the recovery. And importantly. These additional volumes would enter a product tanker market that is already tight and generating attractive earnings. At the same time, operational inefficiencies in the Persian Gulf continue to constrain effective vessel availability. So we potentially have additional cargo demand entering a market where effective vessel supply is already constrained. And that brings us directly to the next slide to Slide 9.

Where here we see the other side of the equation, effective vessel supply. One point we have highlighted repeatedly is that headline fleet growth figures overstate the actual supply available to the clean product tanker market. This slide is a good illustration of that dynamic. While the nominal product tanker fleet has grown by around 7% year to date. The fleet actively trading clean products has actually contracted by roughly 4%. The reason is straightforward. A growing number of LR2s have migrated into dirty trades, effectively removing capacity from the CPP market. In fact, despite significant new building deliveries this year, there are fewer LR2s trading clean products today than at the start of the year.

So the important metric is not simply how many vessels are being delivered, it is how much effective capacity is actually available to the clean market. Turning to Slide 10, the longer-term supply picture is also more nuanced than the headline order book suggests. New building deliveries need to be considered against a significant amount of existing capacity that will require replacement over time. As well as vessels that are currently unavailable to mainstream traders. This is particularly visible in the combined LR2 and Aframax segment, where more than a quarter of the feed is currently sanctioned and effectively removed from conventional trading patterns. We have also spent considerable time discussing the potential return of sanctioned tonnage. Our view remains that the actual market impact is likely to be smaller than the headline numbers suggest. Given the limited pool of younger vessels that could realistically return to midstream traits. The key takeaway here is that fleet replacement remains a powerful balancing mechanism. When combined with the reduced availability of sanctioned vessels, effective fleet growth appears considerably lower than the headline order book could indicate.

Turning to Slide 11, the final point is what the market could look like as the current disruption eventually normalizes. As inventories have been drawn down, replenishment of strategic and commercial stocks could become a meaningful source of incremental demand. We estimate that inventory rebuilding alone could increase global oil trade volumes by roughly 1% to 2% over the next 12 months importantly, product tanker fundamentals were already strong before the disruption. Effective fleet growth remains constrained, while demand continues to be supported by resilient trade activity. We therefore do not view the reopening of the strait as the end of the story. Rather, it marks the beginning of a new adjustment phase that can continue to support tanker demand. To conclude. While the current gear-belief environment continues to support freight markets, our constructive view does not rely on disruption. Whenever tensions in the Middle East begin to ease, we believe the underlying fundamentals will remain supportive with the Chilean trade activity, inventory rebuilding and constrained effective tonnage supply. This includes EU sanctions against Russia, which we believe. Will continue to support longer trading distances and turn miles for the foreseeable future. At the same time, the current environment highlights the importance of adaptability, a strong balance sheet, and operational execution. These are core strengths of Torn and position us well to capture opportunities, navigate volatility, and create value across market cycles. With that, I'll hand it over to Kim, who will take us through.

Thank you, Jacob. Turning to Slide 13. The third quarter delivered another very strong financial performance with earnings significantly ahead of the same period last year. GGE earnings reached $353 million, up from $236 million in the third quarter of 2025.

This was translated into EBITDA of $274 million and net profit of $199 million, compared with $152 million and $78 million, respectively, a year ago. On a fleet-wide basis, we achieved an average TGE rate of approximately $40,100 per day compared with approximately $31,000 per day in the same quarter last year. Performance was strong across the fleet.

The LR2s are earning around $52,600 per day, LR1s around $38,700 and MRs around $36,100 per day. While earnings came down from the exceptionally strong second quarter, Q3 continued to demonstrate the significant earnings power of our platform supported by a strong product tanker market and solid commercial performance. Operating expenses were $7,894 per day, mainly driven by high accrued change expenses and consumer boat costs. Overall, Q3 represents another quarter of strong earnings and cash generation, leaving Tong in a strong financial position. And with that, let us turn to the development in our TG earnings and EBITDA. Turning to Slide 14, this chart puts the third quarter performance into perspective over the past five quarters, while earnings moderated from the exceptionally strong second-quarter EBITDA of $274 million remained materially above the same quarter last year, demonstrating continued earnings strength of the OneTORM platform. That strong earnings generation continues to translate into significant shareholder returns, which brings us to Slide 15.

Net profit for the third quarter was $199 million compared with $78 million in the same quarter last year. Basic earnings per share increased to $1.94 from $0.79 a year ago. Based on these results, the Board has approved an insurance dividend of $1.35 per share, more than double the $0.62 per share distributed. For the same quarter last year. This represents a total cash distribution to shareholders of $138 million. In determining the distribution, the Board has taken a proven approach to capital allocation while maintaining a payout ratio of 78%. This reflects the significant new building pipeline ahead of us and our objectives of preserving financial capacity to fund these investments while maintaining a strong balance sheet and healthy liquidity. This allows us to invest from a position of financial strength, which brings me to our balance sheet on Slide 16. Net interest-bearing debt was approximately $697 million, while our net loan-to-value ratio stood at 25.9% at the end of the quarter. Importantly, our loan-to-value calculation already reflects the new building investments we have committed to, both directly and in the joint venture setup.

Once an investment is agreed, we include both committed Capex and the corresponding value on the vessel in the calculation. At the end of the quarter, this includes approximately $650 million of committed new building Capex, bringing total loans and committed or sorry, commitments to approximately $1.3 billion. This is measured against total vessel values of approximately $5 billion, which similarly include the value of the vessels under construction. So the 25.9% loan-to-value already incorporates our committed new building program and demonstrates that we continue to have significant asset backing and financial flexibility. Finally, as shown on the right-hand side, our debt maturity profile remains well-spread over the coming years, including the $200 million bond maturing in 2029. These turn to Slide 17 of our financial outlook, where strong for environment and our high level of coverage provides good visibility for the remainder of the year. Our freight coverage for the fourth quarter provides further evidence of the exceptional market strength. For ELA2s, we have covered 656 spot days and approximately $185,000 per day, contributing to average ELA2 coverage for approximately $112,000 per day. Overall, coverage is very strong for ELR2s at approximately $106,000 per day and MRs at approximately $60,000 per day. Importantly, this shows that the strength extends across our feet and is not solely an ELR2 story. Based on this strong coverage and our expectations for the continued market strength throughout the remainder of the fourth quarter, we are raising the lower end of our full-year TT guidance by $50 million.

We now expect full-year TG of $1.75 to $1.9 billion, compared with $1.7 billion to $1.9 billion following our guidance upgrading the tool. We're also raising the lower end of our EBITDA guidance by $50 million with full-year EBITDA now expected at $1.35 to $1.5 billion compared with $1.3 billion to $1.5 billion previously.

And with that, I will hand it back to the operator for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions)

John Chappell, Evercore.

Thank you. Good afternoon. Good morning, John.

Jacob, you've been pretty consistent with the one-term strategy for several years now. The new building plans that you've announced kind of subsequent to the quarter end seems to be a bit more aggressive, let's just say, not disparaging it, just saying it seems to be a little bit more aggressive than in the recent past. So is this a function of kind of the incredible times we're in right now and.

The view from the management team and the board that investing in new tonnage is the way to recycle the tremendous amount of cash that you're bringing in today? And are there any other potential accelerations, so to speak, of the TORM strategy that we can look forward to as the cash flow remains robust?

Good question.

So no, actually, the feed strategy.

And the strategy about the continued return of capital to shareholders remains the same. What we have seen is that in our fleet, we have a position that is across the LR2, LR1 and MR Segments and that when we look at the fleet profile of our LR2s over the next couple of years, we have approximately 50% of the fleet that will turn 20 years of age and we are simply just of the opinion that the planning process of that sort of keeping, maintaining at least the same position in the market will require us to make substantial investments into the fleet renewal and we are starting that now rather than waiting. For that to a later stage. So this is just really fleet maintenance and on the same token, we have not changed anything about our distribution to shareholders.

Just as a quick follow-up, as you invest in these new builds, is there an ARB opportunity for you to continue to dispose of some of the older tonnage. I understand right now they're earning tremendous returns and there's something to be said for making incredibly high rates on older tonnage that's been fully written down and depreciated, but also could be a source of funds for this new build program, especially as your ships approach 15 or 20 years. So how do you kind of consider those puts and takes?

Yeah, absolutely. I think you've seen that we have divested a couple of vessels that is older in our fleet.

If the rationale for doing it would be the same as we saw in those, i.e. That the value that we would be getting upfront exceeds on a conservative basis what we expect to be earning, we could do more of that, but it's not a necessary tool. In order to establish any type of funding as Kim also alluded to, our loan-to-value standing, including all capitals committed at mid-20, that can obviously change depend on the values of the assets, but I don't see that vessel sales is a necessary action. To support the fee renewal program that we have ongoing. But we will do it opportunistically when it's the right thing.

Thank you, Jacob.

Thank you. Rod Mofetil, Clarksons Securities.

I think, yeah, let's start on the market. It was this Tradewinds article today where you discussed the shuttle and STS operation around Hormuz, which is interesting. I think maybe you can talk about that. I mean, I feel like the crude shuttle runs.

Are fairly well understood.

How is it for clean products right now? How big is it?

What type of inefficiency do you see?

Yeah.

Yeah, thanks.

When we go specific on the CPP accessing the Persian Gulf, then pre-war it was standing.

I thought it also sold around 2.5 million barrels of clean product on a daily basis that we're transiting then we saw just pretty much the same pattern as on fruit that it went to very close to the notable volumes right at the beginning and that it has come up from summer and up until now to around 1 million compared to the 2.5 million. So the latest surge that we have experienced on the crude side, i.e. That more or less maybe there's a little piece missing, but more or less you are on crude at the same supply of crude out of the region, including the Yanbu facility and the FTS that is taking place as pre-war, it's not the case for a clean. So it stands around 40% and has done some for a period of time. If the current political and military conflict stays the same, I am not confident that we will see a significant uptick or uplift from this 1 million to let's say back to where it was. With the same pattern that we saw on crude, simply because A, the risk involved with transportation of refined fuels and the risk of having whether it's a drone or a missile attack simply has much higher consequences for the asset in question, number one. And number two, the refinery side in the Middle East, I'm sure the producers there are a little wary about going back to coming back to let's say 100% of production because you are a sitting dog should the situation deteriorate on the contact side that then you would be much more critically vulnerable having your facility up and running. So let's see, but to me, it feels like if the political and also military situation would stay where it is now, you would not necessarily see an increase of the clean product exports, but we will continue to see the crude. But of course, the important piece in this is that crude is now being made available with some certainty. To the various refiners in, for instance, in Asia, and they can, on their side, start to behave more commercial in their export volumes, which is actually what we have been benefiting from over the last one to two months, that there is a recovery in that activity.

Right.

So it sounds like.

If space of Hormuz reopens to more normal levels, it's actually a positive thing. You'll get more PPP volumes out and it's not like the logistical bottlenecks or inefficiency around the STS operation is more important than the volume part, right? So if that's correctly...

I agree with that.

If we only zoom in on this particular area of focus, then clearly if you saw that the exports of CPP out of the refineries were both available and safe, you would see a significant higher uplift in ton-mile from the additional volume than from the inefficiency that is currently in play for in vessels.

That's good.

Yeah, next question was on, I guess, one of your peers last week talked about fairly good pre-year and fighter time charter deals being offered or for new builds in, let's say, next year, 2027 deliveries, etc. Are you seeing the same.

And just, I guess, more broadly, would you consider more clients of their business?

I assume you still gave a spot-oriented model, but how do you see this?

Yeah, currently, we, of course, explore all avenues with our clients, but we've not seen something where our fundamental beliefs about normalization.

And the utilization rates that that would dictate, time share would need to be more supportive, obviously, than our model. And at this stage, we're not seeing much of the forward curve being significantly above where our own models around supply demand comes out.

But that can change, obviously.

We will be very dynamic around that if the right opportunities arise, but it's not like we're seeing that the forward curve currently has a lot more value to offer than our own sort of model apparatus around the freight dynamic that we expect in a normalized market where you click off the inefficiencies we've just discussed, we are still seeing. A robust earning that is at par of what the TC brings up.

Final question is on the Elo2 newbuild joint venture.

Is that something you were invited into and that's why it's a 50/50 structure rather than let's say full ownership?

Well, it's something where we have been in dialogue with a partner for considerable peers about various ways to work together. The thing here is what is important for us on our assets is that we have full control of the value chain when we operate them on the one-tone platform towards our clients, so that we've got technical, commercial.

Sort of the full in-house model. And this particular day, we've come to an agreement where we, once the vessels have been delivered, have that and that we will share the economic of that venture with our partners. So it's actually something that has been in the making for a longer period. And where we share the view about the fact that the One Home platform is the best place to have these assets.

Just a follow-up, can you maybe quantify the equity portion of your, let's say, Capex for this JB?

No, we have confidentiality agreements on this as many of our other commercial contracts. So unfortunately, I'm powered up to give it.

Fair enough.

No worries.

Thank you very much.

Thanks a lot.

Thank you. Climent Mollins, Value Investor's Edge.

Hi, good afternoon and thank you for taking my questions.

Most has already been covered, but I wanted to ask regarding the latest MR2 options you secured.

Those are exercised for now, right? And if that's the case, until when can those options be exercised?

So we have time still within this quarter to evaluate whether we will. Exercise the two options that you refer to.

Okay, that's helpful. That's everything for me.

Thank you for taking my questions.

Thank you.

Thank you.

There are no further questions at this time. I will now hand the call over back to Jacob Meldgaard for closing remarks.

Yes, thank you very much to everybody who showed an interest and listened in. Have a fantastic day.

Thank you for your participation for today you may now disconnect.