Finn Petersen Investor Relations Manager
Jacob Meldgaard Executive Director and CEO
Kim Balle Chief Financial Officer
Jon Chappell Evercore
Anders Wennberg Catella
Ulrik Bak SEB
Call transcript
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Ladies and gentlemen, thank you for standing by. And welcome to TORM’s Annual Report 2020. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Finn Petersen. ahead. go Please

Finn Petersen

Relations dialing regarding for name welcome TORM’s the to Finn Thank results in of call Investor am I the Petersen My in fourth conference TORM. Bjarke you and and Manager quarter is XXXX.

to we we we presentation, speak slides usual, two. up open for the As turn the of to at slide end as refer will the will and questions. Please

me to I today, CFO, to Before have our your Safe slide like three. call Please statement. Kim hand I’d and With commencing, Director the attention turn I and Executive you CEO, will to Harbor Meldgaard; Jacob. to over draw Jacob now Balle.

Jacob Meldgaard

you, Well, and to turn Finn, slide four. thank please

today would brilliant XXXX special not Consequently, good market by related all dividing flattering year have impacted the strong levels. tankers Thank and share you a eight based transaction, product foremost, pandemic year and I’m result attractive. year in global for here the a and and at second the downs. a indeed we Team this we for freight for ended The into rate truly as the party product least close announced afternoon. MR morning been came we be this as first from also because we Tankers view XXXX tanker making half for published has in. half. be so First the of here loss acquisition not also dialing happy which to a

for minus per adjusted we the year the versus quarter an the the $XX net quarter, fleet day, rate million profit product of $XX,XXX realized million full tanker for an realized fourth profit Here XXXX, and TCE in of $XX,XXX fourth the of a day. quarter XXXX. in average per $XX number was In isolated fourth the

versus $XX the the half XXXX million realized profit net the million due $XXX for first to strong XXXX. mentioned full year, of However, of we already year adjusted an in

commercial distributed of non-recurring we invested million us total In dividends a continued in was return responsibility on focus focus with of the X.X% TORM for our our shareholders. capital optimization, terms the the and adjusted a $XX parallel Our the our having our social on items known years on financial has have corporate over past years in to continued engagement as environment, had combined also and the ESG. governance and over

and believe This We have, as as stakeholders a to this, publication, on baseline. to experience In well have relevant to we metrics, compared separate announce we report us with XX% increased for XXXX, a business. period which for covers connection ESG to XXXX. an for report by our focus publish decided the the XXXX are reduction for selected we’re accommodate ESG future glad target

XX% on received reduction XXXX, a the savings. Here, we fuel our of focus continued by end through

During also million. the vessels MR one for MR quarter, total $XX.X fourth two older deepwell of we sold XXXX-built vessel. consideration Acquire

on pleased to here with on our One here we’re Tankers the vessels I’ll of expansion of second XXXX. finally, the have quarter slide, was delivered eight the delivered the this elaborate announced beginning one Team was And fourth from I already of then of us during acquisition in MR fleet the to and vessels and specific the the acquisition. next mentioned, further

turn to five. please So slide

a and purchased shares. announced around X we’ll $XX total eight XXXX mentioned, just cash these XXXX-built As issue that to million consideration we today vessels, we of MR million

be $XXX valuation the of price total the share the fleet which of amounts contribution of broker can with as compared $XXX million. million, With net February, the XX to

finance the to large we as have vessel annual flexibility approximately operating be a our as and acquisition, enhanced terms, existing per on our around The creating the and this leverage through specialized increase. scale tank potential such, we from million. TORM extended admin tank Six leverage cargo is commitment what integrated in $X Also, is for that illustrate increased of thereby will will platform to what chemical synergies So which deem as lower as will segregations neutral such, now allow TORM. up vessels obtained within transaction of potential lenders our cost the attractive that the cash operational $XXX One ensuring trading attractive still will transaction trading million To increase greater assessed $XX existing be market options. try by we’ve day, this transaction of to to TORM. figurations our a to

let Obviously, market of turn please market turn as stockpiles. last The product drivers tanker sent time and see be year per second COVID-XX behind but a product on number drivers this the in please mentioned this here, part to six. this different mark. slide in here down of ride, And the we the of now coaster levels freight there some $XX,XXX a to can are reaching by movements product really come large the Now, seven. in the tanker the it, I day quarter roller turn benchmark to to rates below before, all highs of the me the explained development, specifically and it’s has slide

in can phases talk So, we really stock about development. two

demand. trading the benefited This in react the floating inventory and tanker demand is last the unprecedented at global the the COVID-XX, oil product the to the in which as slow unprecedented year time result phase, bills, market refinery phase led stock of quarter with which of in of form second building shock to started was also runs declines inefficiencies. to to storage a same the first The as

along rebounded phase parts market as many started in the the measures The back relaxed were the oil in draw the oil lockdown stock the and with from rebalancing reached second world April. lows phase, of the of demand

where which wave that, COVID-XX tanker of vessels And cannibalization, current in recovery of of oil a is of phase virus. weak, As more in now adding cases aggravated and strengthened is pressure a transportation. the due which refinery low top the we the the the meant did short-term storage, market. many release renewed in and the demand crude transmissible cleanups the stock variants refinery right temporary up for of product number This a reversal further second freight of has and and very a of parts such world This ramp rate floating led new demand and weak of a reflected we moved measures combined not the runs phase. On crude market as to the by of effect margins market remained to large form into lockdown draw are in the unwinding reduce the emergence tanker environment. this is for into resulted headwinds the in

vessels employ primarily in the spot we TORM market. in Here our

most light traditionally LR crude developments, we ones anticipated are in the increase vessels, of our rate in However, chose the our of to XX and weaker which the environment. coverage market significantly fleet affected for

half have We in covered XX% of of days XXXX. first our the

today of in first For XX% fleet have half exposure our vessels of MR the of covered XX we year. the

obvious once to question eight in gets to truly recovery expect demand when difficult the It’s our to please. the exact starts see the point market But and the momentum the levels. be opinion returning? is Slide to So, then reached estimate to product we reopen, return inflection timing. country’s more is, the can normal

a recovery the of in vaccine oil that countries a hit behind acceleration come experienced we many months, look Europe remain the will have most with these I lockdowns similar like mentioned, vaccinations control to India, and in demand will fast seen these large negatively we North that levels in demand the of been the rollout, assume will how with reemergence the with demand. oil This has of virus infections already in the by turn at with herd the macro developing difference we’ve to some and where much be confident with oil to almost the immunity activity America But this can have together back recovery two-thirds in economic recent a countries the covers especially here. scale as reopen. we combine affected global declining XXXX. the China, affected As at of which demand. underlying indeed, Asia pre-COVID-XX, oil the India, coming lead to we end gets pre-COVID-XX slide It hard think countries is compared of kind and recent wider levels demand lag if renewed countries, seen And progress might that there like Please under will seen And not I as if months. regions that regions Nevertheless, likely China, Europe, have reach summer. nine.

is headwinds market. in I the As to with the earlier, normally associated stock which tanker mentioned are phase, we floating

back product latest normal see floating the floating we over at training consider what to that inventory a below we main inventory is at However, storage well and if look the onshore and data, summer. reach we the are peaks almost hubs storage can onshore level

illustrate back of at draw are another refined completely large having here is Asia, capacity long-term XX. slide market to demand later in turn example This million this such of be X the world’s really levels. inventories closes, strengthened to A is Coast as, the a region point now the projects are for slide mentioned barrels total refining are X of to shipping COVID-XX accelerated and now and U.S. much most already From once Most XX% products, the are are And positive mile online, which oil Zealand a are places. per and pace is Middle closure. recovery to West for stock X East other Coast these day time. the pandemic scheduled China, new approximately a U.S., trade, only importers less and which refining at capacity significance of Coast regions capacity is largely West the inventories medium- of diesel please the also XX% regions, capacity ton the to potentially with Nigeria. the scale being momentum. the you in closed regions trade pre-COVID If million by X% case Australia, the the At for and not million perspective, further drivers, the refinery in Europe, Africa. largest good closures, South Although, New of in per And right To down currently go high U.S. notably capacity. gains day located that mainly in Both per world. of XX. risk of refineries is East of and gold positive more actually meaning the the in account which and time, of to exporters There ask suggests of exported today already day has we at come East with post in around oil large Coast a barrels likely in that developments Gulf large flows COVID-XX to same Europe, to U.S. importing of headwinds refinery products. and risk the refinery diesel the finalized, I less turn this few

recover demand Zealand, Australia in Zealand, most in up replace likely oil additional four down at even the least and be New to lost more remaining the the could in closed the for For by these well. these three the Two potentially to a and Australia, global are New way down still MRs and year New figures for all Australia supply need we closure once of countries these refineries as is significant. pre-COVID-XX refinery take mean refineries just of levels. XX in imports closing If the to out are to XX Zealand

increasing also years diesel both Middle and demand traditional turn new Please this LR the increasingly supported further likely The a supplies due building benefit low new Difficulty] import will the level of [Technical also as uncertainties result currently interest covers in the total tanker Some propulsion from in fleet. be the as for and the of has interest a the vessels, historically segment. to is Asia, and refiners but East. would XX XX the at low slide XXXX This only of systems COVID-XX, fleet which a product X% for book product of (sic) with ratio coincides keep by most as This for of tanker supportive for well the relatively outlook is future in three ordering the in for new to crude recently order years. five tankers [XX]. the been demand supply years the side, to although positive to we next the

growth on year, two seen X% consequence, over of a fleet the on a expect half As years. years COVID-XX volatility in economic we product and X% to five oil see short-term and To the market related three the in our average between activity. the years pace on next the global the the fleet grow to in past TORM its the impact conclude to market, to remarks and tanker expects markets the

the will remain product that provide of low number see over from refinery term. Aside drivers years which positive, to as to the effects, tankers key for order we the longer book, five next support dislocation, three the a the COVID-XX market will years such

dynamics, believe the is utilized to the market I TORM Following well-positioned maneuver opportunities environment capital form through low in strong market current our potential structure.

are turn market market return, leverage XX. to slide strength platform. well-positioned operational will the and any we to through As utilize further Please I believe integrated our

This $X,XXX $X In very in very million peer TCE outperformed quarter elaboration if the in focus continued in XXXX, driven with you deciding platform Looking decent fourth $XX is slide to our the positioning assets key quarter of commercial basins turn general, sheet. average a each million we peer to of specifically XXXX I’ll it average. I’m the with earnings. $XX,XXX pleased of fourth today, leverage, highest earning quarter, the In into that Kim, line our earnings the with delivering a the day. of alone balance the average colleague, now slight third TCE rates the at to for the XX. have had competitive further and in to course, market. And of A quarter TORM’s for we earning compared And performance, factor deliver largest operational the hand achieved of In we for potential. again by of on of TORM’s fourth the translates MR Kim? below operational above my structure, in our the group segment here general now cost continues over and I’m satisfied per XXXX. Suez

Kim Balle

leverage slide product first Please current week Thank XX. increase XXXX already to covered by you, the XXXX the markets. large end Jacob. the after turn for the significant our in a seen profile, spot-based taken have underlying With of rates of to by we TORM has tanker relatively half

year. million XXst was We the for towards profit a the ‘XX, end the in before quarter first are tax the exposed increase of more XXXX To an market a a quarter in this, would the spot XXXX, of rates cater for stronger around significantly $X,XXX December, illustrate the to increase of US$X.X fourth translate million. into of in number $X and as corresponding

further the mentioned Jacob leverage. XX. to the of As acquisition eight MR Please has operational vessels slide turn

acquisition from Tankers, annually. about days the the vessels Before we eight of have Team -- XX,XXX open we earning MR had

leverage shares $XXX Vessel little had key quarter more Outstanding of we end -- XXXX conservative in December, around this the value have per we value position TORM’s net the $XX.X which asset TORM the XXst were net value and we liquidity as I in trading December, $XXX around before some This finally, balance at XX% net corresponds X% the short TORM And week operational during US$XXX was XXst enabled for earnings of slide generated loan-to-value is I balance December, With increase at us days And of and our with at our share a illustrated decreased cash returning $XX conservatism this to just our combined purchase give profile. additional us form XXst review XXXX. earning loan-to-value us this in have just our gives strategic this of of new and the and DKKXX.X following billion program more maintain on as February capital XXrd during approach significant $XX,XXX during XXXX, we at solid slide further vessels XX. operational the to QX out value structure, turn a while returning first derisked our lifting time the as in $X.X -- million just of XXXX. We to just through per was slides, renewal a close provides level of DKKXX. TORM’s details. position, by portion to that which as of ongoing had six console asset MR like The conservative terms will metrics earnings a current quarter, a day. ‘XX In amounted focus strong will our including solid building insights the $XX,XXX XXXX December, gross to by believe of dividends. our the -- months now to from vessels. and market to buildings the our capacity leverage, values below annually. In such on the committed or To market has the around to flexibility supports is a of a fourth have $XX days as a fleet program, weighted shareholders debt and stock as our level. a operating XXst in to year. million key estimated Please of arise, downside XXXX, execute commitments $XXX advantage XX% as Please of CapEx such to has commencing coverage generation to of just attractive related average performance financial to would that same enabled financial million fourth turn to TORM with sheet debt vessel XXXX. long-term below cash eight by per consider of flow, CapEx a XX. announced and outstanding this has for million million QX a into call, new and they opportunities the take and

XX. So please turn to slide

in million our million, $XXX XXXX, we total the liquidity of TORM related had available undrawn to purchased at we have $XXX commitment December our were relating $XXX MR on $XXX $XX of million of recently As XXXX-built liquidity million, including million. cash credit facilities and vessels drawn had was financing XXst to as December, that XXXX, total of XXXX. XXst CapEx new our already The buildings

the new on scrubber for vessel. pay we last to $XX vessels MR In XXXX-built retrofit addition water on buildings, million also installations our the to CapEx and related to for expect

of MR XXXX-built second first delivered The in the quarter finance has as and vessel mentioned. been XXXX

assume liquidity purchasing overview, enlarge manageable, are but transaction room some not included and at the we for XXXX, refinancing Please the commitments TORM with neutral. value strategic the arise. CapEx profile today the that same the strong fully in have funded turn market. provides new opportunities After We With the which can time have major and slide cash is refinancing Team the in position in to having you to transaction pursue eliminated all XX. liquidity financial while Tanker enhancing opportunities the XXXX, of until very flexibility the beginning provides finalized

do I which we not purchase until the operator for displayed, let will into XXXX, taking that, remains eight repayments As the any when And vessels account. open with have questions. major up MR


Instructions] line the from of Evercore. Jon question from Chappell We a [Operator first have

Jon Chappell

you. afternoon, Good Thank everybody.

Jacob Meldgaard

Good morning, Jon.

Jon Chappell

Two questions today.

Let me were Kim that topic discussing. start with the you on just

the much then along and company still you cetera. think time have in you underlying today. ships of power additional be continue about spending tale bouncing firepower this think and presentation seem on the Jacobs stock market liquidity, today, But this months your I’m new just even halves of commitments, bottom to to with is stronger of XX whether et debt the market the do to maybe part depths out leverage a maybe opportunistic. it plays schedule, how of market, still market true acquire about liquidity year spread does this What at your to of or and invest actual announced think cycle? morning we’re be So it wondering downturn for we’re like the how or and amortization the when the in given CapEx the would you assuming today the you this the the do the two acquisition the

Kim Balle

you, question. very Thank Jonathan. a That’s good

also demonstrates we talked today I all, market, about through in that the transaction the are all think, of as First XXXX. we’ve

opportunities happy are neutral is there, party there the are cash are as we we a when such. and also So I mentioned also that it is transaction. share quite based

into, while the So with still structure. we’re of XX% having are and leverage have there. markets we looking the conservative a still We around capital

and and test have Of our course, we transformation. capital policy we constantly a on evaluate

with will market arise demonstrated by that definitely broader the looking are the opportunities we you So the have we the and end de-coverage or seen vaccines, year, post-COVID-XX or the can are should that markets, into firm the say actually are the find are with and still there. and also for set presentation, the in believer of we’re anything we post at has in increased after coverage the market so much we of we rollout a still

we think I So should…

Jon Chappell

Got you. it. Thank

Kim Balle

instead guided putting how number much on more a … leverage, by. be I it’s our of would

Jon Chappell

makes to Right. of And maybe together. trying my but just sense. That bit second multi-parter, for one, a you, Jacob, tie a little everything

two a a new -- MRs prompt given So the even with of of the a were than XX seven that that’s a another just debt perspective, perspective, between spot ship probably the looks or vessels limited those last from those building it much I call today. better XXXX. were from the return vessels, or probably the a acquisition understand it age from return and sweet built associated

out to know less today report it next stages rolled that. a about of the that comes you would to than for older and lot obviously efficient ships to ESG understand decarbonisation However, as think are you we the we’re maybe better the start everything when

the different So about company can on balancing in versus assets spectrum? capital help just returns the age tie you’re evolution together thinking of you next stage investing when across the us

Jacob Meldgaard

follow. are constantly with we Yeah. and act management exactly in obviously, apart, Thanks is And this balancing that, discussing. the Jon. for Excellent that

current makes at the needs. and years your two most on return sort the calculations these at it’s think see clear point group in a that’s if our things clear, or whether currently then for with the the does sweet were suitability on age it’s you you value least pricing we paper our is, One Then sense. with you I to the as to, books I opinion, how vessels, get to it XX deal those probably least just our most fit capital, the think that in in where So of of customer platform. spot, around, that terms

least So these something assets, And for actually the XX our assets now seen Last XX.X. that. changed say, from just can I up obviously for that vessels. us. eight may at age platform. That a until we period actually year, that at is somewhere over seems that is longer The time. we a coincidence that be return be meaningful were would to superior least a up of eight they’re on those sold that’s working by to years But we split model and well average how get we’ve see between to XX years we that

the with to tools up that So quality to need live of still the to combine to then we playing to first that’s right needs and safety up clients economic I need foremost, of the owners. our and kind return and for the provide that think and we shareholders we’re our that, and job

time. puzzle clearly, some yes, Now, piece the better from is over the about technology fact simple of ESG. This derived ships on in efficiency, becoming last efficiency the

do XX% as can already we XXXX meaningful consumption versus something are by not vessels. we’ve XXXX actually the we vessel by -- a let’s to that And That targets one is make from our and in see the specific. it can on lower relative XXXX. it lower to platform There what that where for have of in in advances. XXXX, the basis. is certain XXXX ‘XX But further age all XX% built to technological is having benchmark with in you our case, on built So few a difference we say

ready of further around that we tie we also the is which example emissions whereby decreasing living to constantly age, two group where and a is lower actually, is take we committed vessel advantage our right be to fleet to irrespective up funding, can will down part living that arbitrage bank between footprint driving are and have getting not versus up that two are sort penalized place with of course these mechanism existing the on we will targets, doing with CoX sort on right ESG the to future we get will of gaining Another capable of we’re with to that assets, we criteria I penalized. of when of that an our there’s thing, of a a those still the margin, this be our whereas lowering then economic

platform. these obsolete all-in-all, well don’t in with to I’m over need ties together these I being trading we the of strategically us for years, think, comfortable vessels and adjust. as I So, and course, in any this over see the coming our coming But way the years for

Jon Chappell

it. Very Got helpful.

Jacob Meldgaard

hope some I answer granularity a long to put a question, on. simple it That but was

Jon Chappell

the answer question. an important thorough was that That know Thank don’t you. question I was a to simple?

Jacob Meldgaard



Thank you for your question.

We from ahead. Wennberg of line have question from Anders go Catella. another Please

is line Your open.

Anders Wennberg

are like you Can just asset in here. value elaborate with below wonder value? Anders I discount you And XX% Why I’m little bit that trading on Hello. net your have that or asset that something share that given you acquisition. about producing? is partly why paying stock and a net not is the

Jacob Meldgaard

back Yeah. specific number Well, market. Yeah. Thanks price you go million our shares about to and of they it’s and actually announcement in current are shares we issued issue if the at for the X that. not the

share million. with slide to net contribution see that price turn the you you’ll $XXX is If five, the

If valuation a is TORM of -- issued, the obviously versus new you take the of take $XXX. shares then value share you cash it it cash, comes the on then cash and $XXX

this embedded that have we we shares So discount of regions have in the the in negotiated. share number

Anders Wennberg

Thanks. Okay.


Thank you.

question go Bak have line We the a from Please of from SEB. Ulrik ahead. next

Ulrik Bak

changed spread And my your for your the a large of you that at but view? bunker widening investing which if delta -- your installed Jacob, rates taking low your sulfur, investments? non-scrubber day also Kim fitted question. has scrubber have fleet that already, Hello, and upon has increased scrubber between fitted I between you Finn. you know high and of vessels with moment? now touch can share Yes. scrubber has the and Thank that spread, impacted view has the the on And the

Jacob Meldgaard

a Thanks No. for Yes. lot question. that

taking upon have this we scrubber step then, So program. back a looked

where beginning have time. if investment go very don’t plans saw to that a further choice. this made and total move $XX $XXX balance look years it our made we be then to we we couple high more change, strategic thing come we’re geographical sulfur of part to made million. we that $XXX, this of may where based of and it I right in would up. at have spreads above upon tendency around We’ve early as reopen you the program fleet, the close since upon of to first, rising. XX not daily strategically spot Currently, sulfur depending scrubber. that We be and do to And any I year, may, a back spread. we’ve the these a a again, we introduction location was about than we’ve we on seems scrubber to to end this that $XXX now, a spread did particular happy for decided phase, strategic $XX versus low came investment decisions that $XXX being have high of vessels then, are it upon as world, the down with up when ago would us course, in actually the to, a to and XXXX, last That something that think, in the But the of point this of and We a the strategically seen, and

$X,XXX then, it’s and let’s vessels, We program and $X,XXX non-scrubber getting in larger currently scrubber lead have for that have think, having virtue scrubber that in the to And is time -- now. installations. own daily and between $X,XXX our think on I small we MR. earning, say, on around there a a the this well, by production between is, segment it’s of about clear further short no and spread I further point But right your somewhere plan

Ulrik Bak

second the question high so historic rate fairly prices to, my an a And aging scrapping year then is average historical scrap far. despite And that’s clear. yeah, which fleet. compared also very low been about That’s you. has Thank and having this very Okay. low environment,

might what to point the the owners the is be increase tendency regarding and So, trigger scrapping? for scrapping your view what

Jacob Meldgaard


which communicating change we are we not for the market. that do XX a scrapping would size materially age, the scrapping we So, down that even that that in XX, current average see throughout is this type somewhere see of

still are modeling. we So

XX, would, on when we out talk But scrapping trading global is age then as the the when more are or say, models happens from different scrapped We the what that, at as utilized market vessels taken of, vessels segments say, very that averages have that trade from of storage around is the capacity let’s how and vessels. when experience, of, I in can have XX, these you turn around lowered course, our local the are age, scrapping our about they’re XX vessels take not market. which the average in away

disappear list from once they around XX. of the they So age are XX, at only our

would, sort a that we which of hockey scenario. taking realistic stick of this, be the opinion beneficial not on So market, are a course, the of we that is but to not a are

Ulrik Bak

clear. Very questions for you. further Okay. me. No Thank


the question. Thank questions There [Operator no are Instructions] you for further your at moment.

Finn Petersen

regarding one in as quarter, the second is are LRXs have coverage the first and the quarter our MRs question question? the answer levels of We well you fixed which in the second from in quarter, the as -- web,

Jacob Meldgaard

that. definitely touch can We Yeah. upon

for levels the is that we the QX to, is already have a LRs In above -- for QX, with cover we what into in cover cover for usual have for as our high cover a higher quoted we segment, QX come platform. declared than are with have in decision significantly today that at And took the freight which strategic we is the the LRs, So But again, our today. alluded above less came cover. have up year we levels what announcement. MR we I to a

Finn Petersen

Thank very And much. you question. no further there’s

forward this telling about here we’re QX So again and this to call year. and see thank you to today’s for you ends looking participating you later all the


the today. Thank for you participating. concludes for That’s conference

all may disconnect. You