First Ship Lease Trust (D8DU.SI) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome, and thank you for joining FSL Trust Half Year 2023 Financial Results Live Webcast. My name is Roger Woods, and I'm the Chief Executive Officer of FSL Trust Management, the Trustee Manager of FSL Trust. We have announced the unaudited half year 2023 financial results for FSL Trust yesterday evening and the relevant materials are available on our website www.firstshiplease.com as well as on the SGX website. During this live webcast, we will discuss the trust activities and operational and financial performance in the half year 2023. After the presentation, we will take questions from the audience. Before we begin, please note that today's discussion contains forward-looking statements based on the environment as we currently see it and certain assumptions, which are subject to risks, uncertainties and external factors. The actual future results may therefore differ materially from today's views and expectations communicated in this presentation and you are advised to read the disclaimer in the financial results presentation. Please note that this live webcast, including the Q&A session will be recorded, and the recording will be available on our website from Monday afternoon. We start the presentation by looking at the operational and financial highlights at the half year 2023. On the operational side, we've been -- we have seen a declining product market from the very high levels at the end of 2022. The market still benefit from cargo dislocations and change trade patterns, which lead to increased ton-mile demand. This results in earnings at good levels historically despite the headwinds of higher inflation and weak consumer confidence. We can see here that the fleet utilization in the fourth quarter -- fourth -- in the second half or first half was 100%. On the financial side, we ended the first half year with a net profit of USD 1.8 million. The adjusted EBITDA was USD 3 million for the period. In terms of capital structure and the liquidity position of trust on the 30th of June 2023 was USD 31.5 million, while the interest-bearing debt was USD 12.1 million. So we are now having 0 net debt. Taking a look at the operational performance of the fleet on Page 4 of the presentation, adjusted EBITDA for the trust fleet and specialized tankers was $3.2 million. The adjusted EBITDA and the ownership days of the vessels under bareboat charters, which are all specialized ships remain stable. Moving on to the fleet employment, the trust contracted future revenue as at the 30th of June stood at approximately USD 28.6 million. The revenues are spread over the next few years and includes USD 22.8 million of firm contracted revenue and up to USD 5.8 million of optional contracted revenue. The optional revenues are dependent on the charter at the relevant vessels extending those charters. In terms of vessel employment, we are pleased to confirm the charter for 1 of our specialized tankers that was due to mature at the end of 2023 has now been further extended for another 11 months. This slide, we can see the employment profile of the individual ships per the trust fleet as at the 30th of June 2023, and this includes the new extension on the Cumbrian Fisher. Moving on to the financial performance review. You can see the development of the revenue, the adjusted EBITDA and the net income over the last 6 months and in comparison to the first half of 2022. The impact of the smaller fleet is now being reflected in the revenue and adjusted EBITDA. Net profit for the first half of 2023 was USD 1.8 million and the adjusted EBITDA of USD 3 million. In terms of financial leverage of the trust, which is presented on the graph of the left-hand side of Slide 8, the trust had a 0 net interest-bearing debt at the end of the half year 2023. In terms of balance sheet on the right-hand side of the slide, the equity ratio was very healthy, and with USD 28.6 million in contracted future revenue, the financial position of the trust provides optionality as well as downside protection in the face of macroeconomic headwinds. With this, we come to the last part of the presentation on Page 9, you can see the development of tank charter rates in the recent past. As discussed before, the markets have substantially improved since the Russian invasion of Ukraine. And we've seen strong freight rates and market values across all segments. The war continues to lead to cargo dislocations and changed trade patterns, which have had a positive impact on ton-mile demand for tankers. However, now the market has faced slowing global macroeconomic headwinds and soft demand from China, this has brought the markets back down, although still at satisfactory levels historically. There remains some downside risks for the demand of tankers amid the high energy prices, consumer inflation and OPEC+ production cuts. The tanker market supply side fundamentals look relatively healthy in the next couple of years due to record low order book, especially in the smaller size specialized vessels. But longer term, we've seen many orders placed in 2023 in the first half, showing that there is a danger for too many ships to be ordered, should we see high markets return this winter. These new buildings would impact the market from 2026. This comes alongside the new environmental regulations, which keep evolving and the technological uncertainties around the choice of future fuels to meet the CO2 reduction targets remain. This makes the decisions around new vessels challenging for more prudent owners. Ladies and gentlemen, this concludes the half year financial results. And we are now open for any questions you may have. [Operator Instructions] We appear to have no questions so far. So with that, we come to the end of our results webcast and thank you for joining us. We wish you a good day, and look forward to speaking to you again next year. Goodbye.