Hafnia Ltd Q4 FY2024 Earnings Call

Welcome to Hafnia's Fourth Quarter and Full Year 2024 Financial Results Presentation. We will begin shortly. Today's presentation will be led by Hafnia's CEO, Mikael Skov; CFO, Perry Van Echtelt; VP Commercial, Søren Winther; and EVP, Head of Investor Relations, Thomas Andersen. They will be happy to answer any questions after the presentation. During this conference call, some statements may be considered forward-looking, reflecting management's current expectations. These statements involve risks, uncertainties and other factors that are largely beyond Hafnia's control and could cause actual results, performance or plans to differ significantly from those expressed or implied. Additionally, this conference call does not constitute an offer or solicitation to buy or sell any securities. Now, I will hand the call over to Hafnia's CEO, Mikael Skov.

Thank you. Hello, everyone. I'm Mikael Skov, CEO of Hafnia. Welcome to our fourth quarter 2024 earnings call, and thank you for joining us today. Joining me today are our CFO, Perry Van Echtelt; our VP of Commercial, Søren Winther; and our EVP and Head of Investor Relations, Thomas Andersen. Together, we will walk you through Hafnia's performance for the quarter. Today's presentation will cover four key areas. I'll begin with a review of our fourth quarter performance and key highlights, followed by an overview of Hafnia and our market position. Søren will then discuss recent commercial developments and share our outlook for the product tanker market. Perry will review our financial results and capital allocation strategy. I will then conclude with an update on our ongoing sustainability initiatives and provide closing remarks. Let's move to the next slide. Before proceeding, I want to direct your attention to our safe harbor statement. Today's presentation will include forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from these statements. This call does not constitute an offer to buy or sell securities. Thank you for your attention, and let's start the presentation. Let me begin by outlining some of the key highlights from the quarter and 2024. Moving to slide number 4. I'm pleased to share that Hafnia delivered another year of strong results, underscoring our operational resilience and ability to generate value through market cycles. While market conditions moderated in the fourth quarter, we achieved a net profit of $79.6 million, bringing our full year net profit to $774 million, marking another year of great results. Our core operations continued to generate strong earnings with a total TCE income of $1.4 billion for the year. This was further supported by our adjacent fee-generating businesses, which contributed $35.2 million in full year revenue. Moving to slide number 5. Next, I would like to highlight Hafnia's key investment attributes. Hafnia is a global leader in the product and chemical tanker market, and we operate one of the largest and most diversified fleets in the industry. As owners and operators of more than 200 vessels across eight pools, we provide a fully integrated shipping platform, which includes technical management, chartering services, pool management and a bunker procurement desk that has serviced over 1,400 vessels, both within our pools and for external shipowners. As of December 31, 2024, our owned and chartered fleet comprised 125 vessels with a net asset value of approximately $3.8 billion. This equates to an NAV per share of around US$7.63 or NOK 86.34 per share. Our own vessels have an average age of 9.1 years, which when compared to the global product tanker fleet average of approximately 14 years, reflects the long runway for operational efficiency and earnings potential for our fleet. Additionally, as part of our ongoing fleet renewal strategy and commitment to a more sustainable maritime future, I'm happy to announce that we welcomed Ecomar Gascogne, the first of four dual-fuel methanol chemical IMO II MRs ordered through our joint venture with Sokatra of France. This marks a significant milestone in our decarbonization journey as these vessels can operate on both conventional fuel and methanol, paving the way for a transition to more sustainable fuel options. Through our active management approach and deep market expertise, we remain committed to driving sustainable growth, leading by example and positioning Hafnia for long-term success. Let's move on to the next slide. The dislocation between our share price and NAV per share in late 2024 presented an attractive opportunity to enhance shareholder returns through share buybacks. In January, we completed our buyback program, having repurchased approximately 14.4 million shares at approximately 70% of NAV for an average of $5.33 per share and a total consideration of $76.7 million. Capital utilized for buybacks in December has been deducted from the total payout before declaring Q4 dividends. This approach ensures our total shareholder returns align with our payout policy, balancing returns and flexibility. This also reflects our commitment to enhancing shareholder returns even amid market fluctuations as we position ourselves for sustainable growth. At the end of Q4, our net loan-to-value ratio stood at 23.2%, increasing from the previous quarter, primarily due to a decline in vessel market values. Given this, I'm pleased to announce a payout ratio of 80% for the quarter. After deducting $49.1 million used in share buybacks in December, we will distribute $14.6 million or $0.0294 per share in dividends. Including share buybacks, our total shareholder payout for the full year reached $640.8 million, representing a payout ratio of 82.8%. Our strong financial position and disciplined capital allocation approach position us well to capitalize on favorable market conditions in 2025 and continue delivering value to our shareholders. Moving to Slide number 7. Søren will now be sharing the industry review and market outlook.

Thank you, Mikael. I will begin with an update on the current market conditions in the product tanker and clean petroleum product markets, where Hafnia primarily operates and share our outlook for the coming months. The product tanker market experienced an extended period of strong earnings through the first nine months of 2024, supported by high cargo volumes and longer ton miles, as vessels rerouted via the Cape of Good Hope, due to the situation in the Red Sea. In the fourth quarter, tanker rates came under pressure, primarily due to increased cannibalization from the crude sector. Further key market drivers, such as daily loadings of clean petroleum products and oil on water dropped in the beginning of the quarter, mainly due to refinery maintenance and lower refinery margins. Fortunately, clean petroleum product loadings on handy to LR2 tankers rebounded significantly in December. This trend has continued in this quarter – in this first quarter. This recovery was largely driven by reduced crude tanker cannibalization and higher export volumes from the US Gulf. As we can see, the cannibalization has reduced and is now at historical averages of about 1% to 2%, primarily due to improved crude tanker market conditions, technical difficulties for crude carriers to transport refined products and the recent sanctions on larger tankers. Let's move to Slide 9. An interesting dynamic. Here, we observed the evolution of trade patterns. While clean petroleum product loadings and ton days for product tankers recovered following the late Q3 dip, earnings have not rebounded as strongly. This is mainly due to hampered market sentiment and limited cross-hemisphere trading, leaving tonnage static within regions. We have also noticed that latent voyage lengths have reduced after the initial market stress from the Red Sea closure. We believe this is mainly due to increased refinery output in the US Gulf, replacing the Middle Eastern trade volumes servicing European demand. Let's move on to Slide 10. We have conducted a detailed analysis of potential Red Sea reopening supply versus demand impacts. While it's widely known that Red Sea transit volumes remained low since early 2024, it's important to highlight the overall decline in clean petroleum product flows across hemispheres. Our analysts suggest that the potential impact of the Red Sea reopening may be more limited than initially anticipated. Should Red Sea transit become safe and reopen to normal tonnage? We estimate based on 2023 and 2024 data that Suez transit volumes regained will be the equivalent of approximately 227 MRs worth of added transportation demand. The corresponding tonnage demand reduction for volume losses traveling via the Cape of Good Hope is projected to be around 290 MR equivalents. Assuming the cross-hemisphere trade, the volume will return to historical averages, we estimate the net impact of the Red Sea reopening to be marginal at just 10 MR equivalents worth of tonnage demand reduction. Let's move on to slide 11. A significant development in 2025 is the January OFAC listing of additional 183 vessels, which we believe will significantly impact the overall market supply/demand balance. The sanctioned tanker fleet is roughly equivalent in size to the entire newbuild tanker program through 2025. While sanctions primarily affect crude tankers, we see positive spillover effects for clean tankers. The de facto scrapping of sanctioned vessels will reduce crude tanker cannibalization and potentially shift more product tankers into dirty trades, tightening supply in the clean sector. Additionally, we estimate that around 400 non-OFAC listed dark fleet vessels remain engaged in Russian trade. The dark fleet is identified as tonnage with questionable ownership and predominantly older age profile, while the gray fleet is tied to more reputable ownership. This signals the potential for further sanctions from the EU and OFAC, which could further restrict tonnage availability. Let's move on to slide 12. The effects of the OFAC sanctions are already becoming evident. Following the sanctions, China and India have announced that they will exclude sanctioned tankers from imports. We estimate that the replacement of sanctioned barrels will be equivalent to approximately 100 Suezmaxes. Early evidence supports this shift. We have already in February, observed a decline in imports from Russia, Iran and Venezuela to China and India. This impact is also visible in a significant drop in ton miles produced by the sanctioned fleet, and we expect this trend to accelerate. Comparing the total deadweight increase expected from newbuilds in 2025, this de facto scrapping helps support the underlying support versus demand balance. Moving on to slide 13. Taking the aforementioned factors into consideration, the overall supply outlook remains resilient. When we look at known newbuilds through 2025 to 2028 across the tanker segments and factor in scrapping potential and lower utilization of aging vessels, the overall supply picture remains well balanced. Despite the order book for product tankers being approximately 22% as of February 2025, LR2s comprise over 50% of new tonnage expected in the next years. Historically, 70% of LR2 capacity has been absorbed into the dirty petroleum products trade. This statement is further supported by the age profile of Suezmaxes and VLCCs alone. Moving on to Slide 14. Overall, we maintain a constructive outlook for the product tanker segment into 2025. We continue to observe an increasing average age of the global product tanker fleet, and this trend has significant implications as older vessels are underutilized due to customer preference for younger tonnage. Global oil demand also remains robust. For the full year 2024, global oil demand has increased by 0.87 million barrels per day with a further increase of 1.1 million barrels per day expected for 2025. Additionally, refinery maintenance accumulated at the start of the year are expected to be lower in the next months, paving the way for higher refinery runs. This will likely result in increased production and export of refined products, boosting global demand for product tankers. Moving on to Slide 15. Perry will now bring you through the key financials for the fourth quarter.

Thanks, Søren. As Søren mentioned, the product tanker market softened in the fourth quarter. Despite these challenges, Hafnia has continued to demonstrate a strong performance, achieving solid earnings for the quarter and for the full year. In Q4, we generated TCE income of $233.6 million, bringing our full year TCE income to $1.4 billion. Additionally, our commercial pool management and bunkering businesses continue to perform well, generating $6.9 million in the fourth quarter and $35.2 million for the full year. This all resulted in an adjusted EBITDA of $131 million for the quarter and $992 million for the year. Overall, we've achieved a net profit of $79.6 million for the quarter, which included a $13.6 million gain from the sale of a vessel. This brings our full year profit to $774 million, translating to a return on equity of 34.5% and a return on invested capital of 25%. These results reflect yet another year of strong performance that we will continue to build upon. And if we move on to the balance sheet on the next page. Our balance sheet remains robust despite vessel values declining from the third quarter. As a result of our proactive efforts in optimizing our balance sheet, we remain in a very strong financial position. At the end of the year, our cash balance stood at $195 million with a total liquidity of approximately $517 million. This includes undrawn facilities of $322 million. We've hedged approximately half of our interest rate exposure at a weighted average base rate of just over 2%, 2.01% to be exact, on a SOFR basis. Our hedging strategy has been important in reducing our cost of debt and shielding us from the high interest rate environment, and we will continue to monitor market conditions to manage our financing costs effectively. At the end of Q4, our net LTV increased to 23.2%, while our NAV stood at USD 7.63 per share. Given that our shares were trading at a significant discount to NAV in late 2024, we added the repurchasing of shares at approximately 70% of our Q4 NAV to the mix of shareholder distributions. While the current share price of around 68% of our NAV reflects broader market sentiment rather than our underlying fundamentals, we remain focused on executing our strategy and demonstrating the strength of our business model through consistent operational performance and returns to shareholders. If we move on to the next page to the operating summary. In Q4, our TCE income was based on 10,293 earning days, and we generated an average TCE per day of $22,692. OpEx costs, which consist of vessel operating costs and technical management expenses were based on 9,430 calendar days in the quarter, leading to an average OpEx per day of $8,131. While the spot market softened in the quarter, it is important that we maintain a key focus on cost efficiency. We're constantly evaluating our performance also by benchmarking ourselves, and I'm pleased with our performance relative to peers under these circumstances, allowing us to operate at the most competitive levels. Looking at our Q1 coverage as of the 13th of February, we see tanker rates recovering. We remain optimistic about the underlying strong market fundamentals in the upcoming quarters. And if we move on to the next page. Based on our coverage for Q1 and full year 2025, we're on track to achieve solid earnings in 2025, driven by an anticipated uplift in the product tanker market. As of February 13, 2025, 67% of the total earning days in Q1 2025 have been covered at an average rate of $23,989 per day, and we also have 25% of the full year 2025 earnings covered at an average of $24,062 per day. And if you look at the right side of this slide, it represents as always, the three scenarios outlining our potential full year 2025 earnings. The first is based on analyst consensus forecast, while the second extrapolates the Q1 covered rates on the left to the available earnings days in 2025. The last scenario applies full year covered rates to the available earning days in 2025. In all three scenarios, Hafnia is projected to generate robust net profits estimated to range around $300 million to $400 million. While down from the very high levels of the last three years, we still have a strong outlook on the market, underpinned by the market fundamentals we mentioned in the market section. Mikael, over to you for the next few slides.

Thank you. We are moving to Slide number 21. Moving on, I would like to provide insight into Hafnia's sustainability strategy and goals. As a recognized market leader, we understand our critical role in shaping a more sustainable future. We are actively driving the integration of sustainability principles throughout our operations to create a positive impact on our communities and stakeholders. Through collaboration with industry peers, regulators, international bodies and constant engagement with stakeholders, we are committed to developing long-term solutions that will address the maritime challenges, enabling us to not only future-proof our business, but also contribute meaningfully to the world. Slide 22. Next, we understand the constantly evolving landscape of the world and actively seek initiatives where we can future-proof ourselves. We have embarked on several key strategic initiatives that we believe will play a key role in defining the maritime future. Most recently, we have announced the launch of Seascale Energy, a new joint venture bunker procurement entity between Hafnia Bunker Alliance and Cargill Pure Marine Fuels. This aims to transform marine fuel procurement services by delivering customers worldwide with cost efficiencies, transparency and access to sustainable fuel innovations. By aligning our strategic investments with strong industry partnerships, we reinforce our position at the forefront of maritime innovation. Moving to slide number 23. Looking ahead in 2025, Hafnia is operating from a position of strength. While market dynamics remain complex with the evolving nature of sanctions, tariffs and developments in the Red Sea, I'm optimistic about Hafnia's ability to capitalize on the positive trajectory of the market. Our proven operational excellence and financial strength position us well to create long-term value. Having returned over $1.5 billion to shareholders over the past three years, we remain focused on disciplined fleet deployment and capital allocation, while maintaining the flexibility to capture opportunities as they arise. This concludes our presentation. With that, I would now like to open the call for questions.

We will begin our Q&A session now. Thank you, everyone. I will start with the questions that have been posed in the chat in the Q&A section. The first question is, why did you decide to pursue the share buyback program with such bad USD prices?

Yeah, I can take that. I see there's more questions indeed on the share buyback. Why would we do them, or why wouldn't we do it more? It's actually both questions on both sides. We did the share buyback in Q4 as part of the shareholder distributions in our dividend policy, because we saw a big disconnect between the share price and the NAV. So that's why we concluded the total program of around $50 million in Q4 and another $25 million in Q1. Going forward, we have our dividend policy that is connected to our net LTV. So in principle, we focus on cash distributions via dividends. But obviously, where we see a big disconnect, we always, as we have shown, have the opportunity to do the share buybacks as well.

Thank you, Perry. So I will actually move to the Raise Hand function now. Omar Nokta, can you please unmute yourself.

Sure. Thank you. Hi, Mikael and team. Thank you for the update. I have a couple of market-related questions. I wanted to get your perspective on the current situation regarding sanctions, particularly in relation to China and India. What is your view on how these two importers are managing their imports? Are they fully complying with the restrictions on sanctioned ships? Have they increased their demand for compliant vessels? Can you provide some insights on how things are evolving in that area?

I guess that's for me, Mikael. Yes, on a general note, you can say that when it all kicked off in the end of January, there was a pretty big push already for other traders to cover the lost in terms of import volume, especially for crude into India and into China. It seems relatively evident that they are taking Venezuela tons nowadays and to a large extent, also oil from other regions. To support that, you can see that exports out of Iran has dropped more or less to one-third of what it was in January before the sanctions. So there is certainly some adherence to what they have said, and it's self-imposed essentially, right? They have not said no to Russian oil, but they have said no to sanctioned tankers, probably OFAC listed sanctioned tankers.

That's interesting. Thank you. So you mentioned that Iran's exports are down by a third from January. Did I hear that correctly?

Yes. I mean, although February data is not completely to an end yet, right? You are seeing about 750,000 barrels versus about 2 million in January. It's the exact number.

Okay. Got it. Thank you. And then just a separate question. You had mentioned the cannibalization of crude going into product would slow or obviously stop perhaps altogether as a result of sanctions and the ships getting pulled away. I guess it sounded like the whole cannibalization theme had already ended or seen that it kind of ended last year or late in the year. Are you still seeing pressures from that today in the product market?

You can say that on a general note, the cannibalization is more or less back to normal averages, what you would expect from a newbuild program or anything to the tune of that. So you would see a hard trail-off in December and into January. Recent data will show that you actually have a little bit of an elevation in February. But if you drill into that, it will carry a couple of VLCCs that is going from the AG to the Red Sea. That doesn't count as cannibalization because it's an adjacent trade that is not really involving the international trading fleet, if you want. So I would say from December until date, you're back to or close to normal averages, as you would expect. I think it's merely related to a stronger crude market as well, of course, in that sense. And that's also why we believe at the end of last year that it would actually have come off earlier than it did eventually. But now we are where we are.

Yeah. Okay. Well very good. Thank you. I will pass it back.

Frode Mørkedal, may I ask you to unmute yourself please.

Yes. Thank you. On the buyback, just to clarify, are you able to continue that program? Or do you have to declare a new buyback program if you wanted to? And secondly, what's the intention with the shares you intend to cancel?

Hi, Frode, thank you for that. In response to your last question, yes, most of the treasury shares will be canceled. Regarding the share buyback, we had a program that ran until late January with a budget of up to $100 million. If we decide to continue, we will discuss it with the Board and announce a new buyback program moving forward.

Okay. Understood. And just generally speaking, what's the verdict on the buyback versus dividends? Do you feel differently now after completing the buyback? Or do you still see that as a good tool in the toolbox?

Yes. I'll take that. Thanks, Frode. It's important to understand that we discuss our dividend policy with the Board every quarter. However, our established dividend policy is firm and will remain consistent. The share buybacks are generally more opportunistic for us. When we observe share prices dropping to levels like we have now, where we bought at a 30% discount to NAV, we would consider it. But it is more of an opportunistic strategy when share prices seem significantly undervalued rather than a permanent initiative. So, the dividend policy as you know it, along with share buybacks, is something we approach on an ad hoc basis if we feel the share prices are excessively low relative to the company's value.

Yes, I agree. I completely understand. If you cancel the shares, you will see the effect with higher EPS, assuming everything else is equal. Regarding the market, the slide you presented on the Red Sea is quite interesting. Just to clarify, your conclusion is that when the Red Sea reopens, its impact on the market will be minimal, correct?

Correct. So basically, the volume that has been lost due to the Middle East and the Far East in reality being less competitive due to longer trade routes, first of all, higher freight, but certainly versus U.S. refiners delivering into Europe to a large extent. If you get that volume back, which you highly likely will because the arbitrage East to West will open quite significantly once the trading route becomes shorter, then you will be very close to a status quo versus where we were in Q3 and Q4 last year.

Great. Thanks, guys.

Thank you, Frode. Lewis Gregory, can I ask you to unmute we can hear you now. Yes, we can hear now, yes, yes.

Okay. I wasn't quite sure how to unmute my phone. Yes, you would think I would know that by now. Good afternoon everybody. I was hoping to talk a little bit about just given the focus on the buyback in Q4 and really how asset prices have trended. It looks like since maybe the middle of last year at least MRs for, we'll call them modern tonnage has started to kind of pull back realizing that no cycle is the same. But as you guys think about asset prices over the next 12 to 18 months, are you seeing the potential for asset prices to stabilize? And really, what I wonder is, I think sometimes people focus on asset prices and they see markers from brokers. This decrease in asset prices, has there been any breadth in the S&P market around these indicated lower prices?

Thank you for the question. This is Mikael. I believe it’s an excellent question because, historically, there are factors related to asset values and freight markets that come into play. Currently, we are observing a situation similar to what occurred in the dry bulk market, where freight markets experienced a decline last year and are now recovering. Asset prices fell at the end of last year, leading to an increase in our net loan-to-value ratio above 20%. However, there isn't much activity in the market right now. The asset prices are likely going to reflect theoretical valuations rather than actual transaction values because sellers are unwilling to accept lower prices, and buyers are looking for significant bargains. This is largely due to the market's uncertainties that Søren has just outlined. It appears we are in a standstill, as there is no incentive for anybody to sell assets at lower prices, especially when considering the potential removal of sanctioned vessels over the next 2 to 4 years, which greatly exceeds the current order book for new builds. For transactional value to improve, we need to see more action in freight markets and long-term time charters before actual market values start reflecting real transactions.

Okay, great. I have one more question. Looking at the MR rates in the Atlantic and the Pacific, they seem to be similar right now. My question is about the dark fleet. Do you have any insight on how much of the dark fleet is trading in Asia versus the East? As the dark fleet unwinds, could we see the Asian markets perform better than the Atlantic markets, which has not been the case over the last couple of years?

The Asian or the Far East market and the U.S. Gulf market to take that, the last part of it first has been the strongest over the past two years really. And you can say in terms of the dark fleet, we are counting 400-plus ships that are trading in and out of Russia at the moment being the kind that has a bit of a questionable ownership structure, a little bit older age. Predominantly, these ships are actually loading out of the Baltic region and the Black Sea. It's more to the crude side when you look at the Asia Pacific Russian loadings, which is more sort of a Suezmax and an Aframax game, which is certainly trading above the price cap. So, I think it's a worldwide thing really. If you have a full sanctioning of this fleet as well, whether or not that happens, it's hard to say. But if it happens, then it's more a total demand thing than anything else. Then you would have to have replacement barrels coming from something else, which would be the normal fleet, but it's our sort of fleets that would take over that trade.

Okay, great. Super helpful. Have a great day.

Thank you.

Thank you, Gregory. Clement, can you please unmute yourself.

Hi, hello. Can you hear me?

Yes, we can.

Hi, good afternoon. Thank you for taking my questions. I wanted to ask about your fleet positioning. You have a fairly modern fleet, especially including the vessels owned via the joint ventures. And I was wondering, how do you feel about your current split between LR2s, LR1s and MRs? Would you like to, let's say, bolster your exposure to any of those in the medium term?

Thank you. Yes, I think the way we normally answer these questions about the assets is really that we see the product tanker market as being one market, basically in the sense that what happens in the LR2 market eventually will also have an effect on the MR market and vice versa. So, we're not really that sensitive about whether it's one size or the other that we invest in. It's actually more about pricing versus earning capability. To give you an example, back in late 2021 when we bought 12 LR1s, the whole reason for that was not necessarily that we just wanted to strengthen our LR1 fleet. It was actually more that the pricing was almost similar to an equivalent age of a medium-range ship at the time. So, the extra earning value by paying the same price was just much more attractive in the LR1 segment, which is why we went for that. But you can say in an ideal world, we wouldn't mind having equal distribution in all asset classes. But for us, it's really only about pricing and earning capability when we invest in ships.

Makes sense. Thanks for the color. In the past, you had mentioned some of your time chartered in vessels had purchase options priced below market pricing. Asset values have declined a bit from the highs. And I was wondering how does current pricing compare to the options? And secondly, should we expect any of those to be exercised throughout 2025?

Yes. Hi, thanks for the question. In general, the prices or the purchase prices that we have in these options are still in the money despite the correction that we saw in the last quarter. So, we keep that in mind as long as we have the options and there's value, we have time to consider whether we buy them out or not. But overall, still in the money, yes.

Thank you. I'll turn it over. Thank you for taking my questions.

Thank you, Clement. Can you please unmute yourself?

Yes. Hello. Can you hear me?

Yes, we can.

Okay. Thank you to the gentlemen over at Hafnia for the presentation and the updates. How probable would you say that it is that moving closer to Q1 results for the current year that your guidance may not be as soft as it is right now? Because, I mean, I'm a long-term minority shareholder investor in Hafnia. It's a top line position for me. Fundamentally, I think it's a very quality play on the long term.

What is happening is that the price is currently down by 10%, which coincides with the end of your share buyback program that I thought would enhance market sentiment. I'm trying to comprehend this situation, especially since it's a significant drop for one day. You mentioned several factors, including the dark fleet, which I believe also contribute to this. It just seems unusual, and I'm curious if this decline is primarily due to soft guidance and the various uncertainties for the next 12 to 18 months. I wonder if the guidance might improve as management gains more clarity on the upcoming year. Thank you so much for that. This is Mikael. So I'm not sure exactly what guidance you're referring to, but I'm assuming it's more of the analyst guidance in general or some of the covered rates. But I think in any case, yes.

Yes.

Yes, exactly. So I think in any case, I mean, I think what we are seeing at the moment, and I know it's a bit difficult these days because there's a lot of uncertainty around. Our view is exactly the same as your view in the sense that there seems to be a lot of uncertainty at the moment in the world, and therefore, people rather say, well, we will take the safe process of not sitting on too many exposures rather than being a bit safe on our portfolio. We don't understand. There's no factual reason why share price should drop today, for instance, or for that matter, what they did last week when we look at the long-term perspective of this business. We appreciate there's some uncertainty around the Red Sea and the war in Ukraine. But I think as we try to illustrate here in our presentation, going back to where things were is not bad for our industry. What is bad is actually that when there's uncertainty and people stop taking long-term positions. So we are not sitting saying we'd love everything to go on as they were. We think when things go back to normal, which hopefully they will soon, the big issue here is that 16% of the tanker fleet are either in the dark fleet or sanctioned. And depending on what regulators decide and what happens to that fleet, that is way, way, way, way above any form of newbuild entrants into the market. At the same time, as you have a demand scenario that's still strong when it comes to oil in general. So as you're saying, we can only assume this is like more spot day trading philosophy and sentiment rather than long-term perspective because for us over the next 2 to 4, 5 years, I mean, almost half of the fleet will have to go out for scrap and the order book is nowhere near to be able to replace it. So that's kind of our long-term perspective on it. Realizing in between, of course, that geopolitical uncertainties will always in a way, provoke different reactions from different investors. But like you said, we certainly don't think there's any justification whatsoever on the development of the share price that we've seen lately.

Thank you very much for adding color on this. Thank you.

Thank you. And just a reminder to please keep yourself on mute because I think there has been some confusion with the person asking the question and some other people on the call. Jan, may I ask you to take yourself off mute. Jan, can you hear us? So Jan, we can't actually hear you. If you would like to put your question into the chat or the Q&A instead. In the meantime, I will move over to a question that we've received in the chat from Oscar. We have hi, how are you – hi, how are you expecting the impact of possible tariffs on upcoming quarters? And as the share price is now lower, are you looking for share buybacks for Q1? Thanks.

Tariffs are a challenging topic because they often involve political factors. Generally, uncertainty and market turmoil tend to benefit shipping. If products from Mexico to the US Gulf need to be sourced from elsewhere, it increases the transportation distance. The demand for those products remains unchanged. Canadian crude oil is now entering the Midwest US under the tariff situation. The Vancouver export port is already accommodating nighttime operations, increasing their capacity to load more Aframax tankers each month. This situation seems favorable for shipping. However, the specifics of tariffs are very political, making it hard to predict the outcome. Additionally, potential tariffs on Chinese-built ships could significantly impact a variety of vessels, including tankers and cargo ships, but it's uncertain when these changes may occur. I hope that provides some clarity.

There was also another question, Gina, I think, on share buyback, right? And I think we did answer that previously that share buyback will be part of more of an opportunistic approach. So whenever we and the Board feel that the timing is right, price is right, then as I said, then we may look at it, but it will be more on an ad hoc basis.

Okay. And Mikael, we have a second question after about some of the buybacks of shares occurred in Q1 2025. As I understand, this comes out of Q1 dividends that will be paid. Can you confirm how many cents per share will the buyback reduce the Q1 dividend? Second question, what is your breakeven TCE rate currently?

Yes. Sorry, it's Perry. I don't have the exact cents per share, but we bought back roughly $25 million of shares back in the quarter. So divided that by the net shares outstanding, you will have the number per share.

Thank you, Perry. Do we have any more questions either via the chat, the Q&A or the raise hand function? Okay, I'm not actually seeing anything.

Yeah, there's two extra questions…

Two…

… coming in, Sina. One more on buybacks …

Okay. Okay.

… and one on the U.S. listing, I can take that.

Okay.

Yeah. I think we discussed a lot about the share buybacks. And as Michael indicated, we have a very consistent distribution policy in terms of how much we pay out of our net profit. Focus will be on cash dividends. And as and where we think that there's a very big disconnect, we have the tool of the share buybacks as well. So that is, I think, what we can say about it rather than having any strict mechanical way of looking at that. And then, in terms of the U.S. listing, so we've been listed in the U.S. now for about 10 months. We've definitely seen stronger interest from investors in the U.S. Also, the trading in the shares has been much stronger since we listed both in Oslo and the U.S. with actually the bulk of the trading already going through the U.S. Stock Exchange.

Okay. Thank you, Perry. We have a second half of the question from Boris, about the TCE breakeven. What is your breakeven TCE rate currently?

I have to look that up one second. So there's one other question as well on the breakdown, then I'll look at the number.

What's your cash breakeven?

Yeah. Sorry, I said I have to look that up,…

Okay.

… if you look at the next question that …

Sorry, we have what is the ....

… I will answer that later.

We have what is the percentage breakdown of fleet trading on the spot market versus the fleet trading on period charters in 2025?

I think that you forward.

Yes, I can answer that. We haven't published these numbers yet, but for the remainder of the year, excluding what we have already secured in the spot market, I believe we’ve fixed 25% of the full year at $24,000 per day. For the hedging component, which goes beyond what’s been fixed in the spot market, we’re likely covered around 13% to 14%, coming from a mix of time charter contracts and the rest being spot exposure.

Thank you, Michael. We have another question from Molly regarding considerations for a Canadian listing. The American listing does not allow Canadian dividend tax credits.

Yes, I can take that one. We're at the moment, not pursuing listing on another stock exchange. So we have Oslo and the New York Stock Exchange at the moment. Then I see a question on the offset of buybacks in January against Q4 dividend. So for the Q4 dividend, we've offset what we spent on the buyback in Q4. So that's close to $50 million. For the Q1 dividend, we will set off the amount that we spent in Q1 on the share buyback, which is roughly $25 million.

Thank you, Perry. We have a question from Jan who has asked, what has surprised you the most regarding the development of the rates since they have changed a lot since the second and third quarter earnings call, and there was no mentioning of an expected drop in rates.

What has surprised us the most is the strong buildup towards the end of Q3 and into Q4 in terms of oil, water, and ton miles. The market was likely tighter in December than what the rates have indicated. In our analysis from November, we noted the potential for cannibalization to decrease, with ton miles already increasing, and loaded volumes on the rise. The significant surprise for us has been the sentiment regarding tight markets, which could compare to much higher earnings we've seen, yet this was not reflected in TCEs despite the fundamentals improving and showing expected progress. This pickup in the market occurred later, into January. While the market did increase, it did not rise to the level one might have anticipated given the recent environment.

Thank you, Søren. I am not seeing any more questions in the chat or the Q&A.

Well, we have one open question.

Sorry, one open one up. Yes.

For Q4, we were close to breakeven on operating cash flow. Before dry docks, we were around $14,000, and it is expected to be in that range, possibly a bit higher for Q1.

Okay, great. Thank you, Perry. I'm not seeing any other questions coming through. I think I'll just take a couple of seconds to see if anything else comes through in the Q&A or the chat or the Raise Hand function. Okay. We have one from Frank Lopez. Can you speak to any plans that might be in play for a global recession in 2025?

So I think as far as Hafnia is concerned and our long-term strategy has always been to have a strong focus on our cash flow breakevens and to make sure that on the balance sheet part that we could basically make it and wave it through any down cycle that may occur. And if you look at the way that Hafnia has kind of built the business over the years, and I alluded to it a little bit before is that back in 2021, which is the last time we had a negative market, we were basically in a position to go out and be offensive and aggressive in a market and buy assets when the industry itself was suffering from poor results. So for us, it's really about the balance sheet discipline. It's not about only recession in 2025. That's just the general position of how we want to run the business. We prefer to have more spot exposure and the counterweight to that has been to have control over the cost side and low cash flow breakeven at levels where we feel that even at the lowest point we've seen historically, Hafnia will still weather through it and more than that, hopefully also be able to reposition, modernize and even increase the fleet as we go into a period of the next, say, two to five years where we do see there will be still a shortage of product tankers going forward.

Thank you, Mikael. I'm not seeing anything else coming through. So thank you, everyone, for your questions. So we have come to the end of today's presentation. Thank you so much for attending Hafnia's fourth quarter 2024 financial results conference call. You can find more information available online at hafnia.com. Thank you, everyone.