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

Good morning, ladies and gentlemen. Welcome, and thank you for joining FSL Trust's Half year 2024 Financial Results and 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 2024 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 2024. After the presentation, we will take questions from the audience. Before I 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 there may, therefore, differ materially from our today's views and expectations communicated in this presentation, and you are advised to read the disclaimer in the financial results presentation. Please note also that this live webcast, including a Q&A session will be recorded and the recording will be available on our website from Thursday afternoon. We start the presentation by looking at the operational and financial highlights of the half year to the end of 30th of June 2024. On the operational side, we have seen a softening of the product market from very high levels at the end of 2023 but the market still benefit from the cargo dislocations and changing trade patterns, which have led to increased tonne miles. This results in earnings still at good levels historically despite the headwinds of higher inflation and weak consumer confidence. For FSL, the fleet utilization was 100%. On the financial side, we ended the first half of the year with a net profit of USD 1.4 million. The adjusted EBITDA was USD 3.1 million for the period. In terms of capital structure, the liquidity position of the Trust on the 30th of June was USD 5.9 million, whilst the interest-bearing debt was USD 7.5 million. Taking a look at the operational performance of the fleet on Page 4 of the presentation. The adjusted EBITDA of the Trust fleet and with the specialized tankers was USD 3.3 million. The adjusted EBITDA and ownership days for the vessels under bareback charters which are all the specialized tankers remains very stable. Moving on to the fleet employment Trust contracted future revenue as of the 30th of June stood at approximately USD 20.5 million. The revenues are spread over the next few years and include USD 14.7 million of firm contract revenue and up to USD 5.8 million of operational contracted revenue. The optional revenues are dependent on the charter of the relevant vessels extending those charters. Moving on to the next Slide 6 is the employment profile of the Trust fleet as at 30th of June 2024. 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 2023. The impact of the smaller fleet is now being reflected in the revenue and adjusted EBITDA. The net profit for the first half of 2024 was USD 1.4 million, and the adjusted EBITDA was USD 3.1 million. In terms of financial leverage of the Trust, which is presented in the graph on the left-hand side of Page 8, the Trust had close to 0 net interest-bearing debt at the end of the period with $1.5 million being the debt. In the terms of balance sheet on the right-hand side of the slide, the equity ratio was very healthy with the USD 20.5 million in contracted future revenue. The financial position of Trust provides optionality as well as downside protection in the face of any macroeconomic headwinds. With this, we come to the last page on the presentation on Page 9. Here, you can see the development of the tanker charter rates in the recent past. As discussed before, the markets have substantially improved since the Russian innovation of Ukraine, and we've seen strong freight rates and market values across all sectors driven by these various geopolitical amounts. However, now the market has its facing a slowing global macroeconomic headwinds and soft demand continues from China. This has brought the markets back down during this year, but they are still at very high historic levels. The tanker market supply side fundamentals look relatively healthy for the next couple of years due to record low order books, especially in the small-sized specialized vessels. But longer term, we've seen many orders placed in 2023 and so far in 2024. And showing there is a danger for too many ships to be ordered. These new buildings would impact the market from 2026. The new environmental regulations are continuing to evolve and technical uncertainties around the choice of fuel choices to meet CO2 reduction targets. This makes decisions around investments in new vessels challenging with the more prudent owners. Ladies and gentlemen, that concludes the first half financial results presentation. We are now open for any questions you may have. [Operator Instructions] We don't appear to have any questions from unitholders currently. So we've come to the end of the results webcast, and thank you for joining us today, and we wish you a good day, and look forward to speaking to you again, at the end of year results in February. Goodbye.