Klaveness Combination Carriers ASA ($KCC)

Good morning, and welcome to the Klaveness Combination Carriers Q1 2026 Financial Results Presentation. So today's agenda will be walked through by Engebret Dahm, CEO; and Liv Dyrnes, Deputy CEO and CFO. So in a few moments, Engebret will start, and he will walk us through the highlights, a business update, following which we'll hear from Liv, who will give us the financial performance as well as the sustainability performance for the quarter. Finally, Engebret will then return, and he will take us through a summary and a look into the outlook going forward. As usual, we are happy to hear from you with your questions. [Operator Instructions] So with that, I will welcome to present Engebret Dahm.

Good morning, everyone, and excuse me for my voice, a little bit of a cold. Hopefully, you can hear me. So to say that first quarter has been an eventful quarter, I think it's an understatement. A lot of things have happened in our business, in the shipping market, in the business of our customers, not to mention in geopolitics. I think we have been shocked to experience that civilian ships shipping with -- normal trading ships with innocent hardworking crew on board has been attacked by Iranian drones and rockets. We've been shocked to see that even after 9 weeks after the outbreak of the hostilities in Middle East, there are 2,000 ships stuck in the Middle East, including our cargo vessel Banastar. We're shocked to see that there are still close to 20,000 seafarers -- innocent seafarers, including our 19 crew on board of Banastar, still stuck in the Middle East. But again, still the first quarter, disregarding the situation of Banastar, has been a good quarter for KCC and a good start of what looks to be a promising 2026. We have earnings per day increased to $33,432 per day, which is above the guiding range that we gave back in February for the earnings for the first quarter. It's an increase of around $5,000 compared to the -- $4,000 compared to the fourth quarter. And it is a very positive development on the earnings side. EBITDA is $29.3 million. We have -- which is up around $6.7 million compared to the fourth quarter and profit after tax ended at $15.6 million, which is up around $5.1 million since the last quarter. The Board has decided to pay $0.25 as dividends, which equates to close to $15 million in dividends for the quarter. Back again to the situation in the Middle East. As mentioned, we have the Banastar, which is stuck in the Middle East. The vessel is currently positioned at the shipyard in Dubai. And we have kept the vessel either at the terminal or at the shipyard throughout these weeks, which we believe is the safest place where we can keep the ship in order to have easy access to first aid, fire brigades and supplies. We have repatriated close to the full crew on board the ship, 23 or 25 people, and we have brought on board 17 new crew members over the recent weeks. We have used the time effectively in order to make repairs on the ship to prepare for the targeted life extension of this old lady. The financial loss of the situation in the Middle East is limited, given good coverage of our War Risk Insurance covering most of the fire of the ship waiting in the Middle East. The situation in the Middle East is not only impacting the ships stuck and shipping; it also impacts a number of other industries, including the aluminum industry that our CABUs are servicing by transporting caustic soda into Australia and also, to a less extent, alumina out of Australia into the Middle East. I would like to touch upon 2 risk elements that could potentially impact the CABU business into the second half of the year. One is the possible impact on Australian alumina refineries sales from the quite dramatic impact of Middle East aluminum smelters from the war in Iran. The 3 main imports of alumina in the Gulf, which is EGA in the Emirates, Alba in Bahrain and Qatalum in Qatar, has all been severely hit by the events in the Middle East. EGA has the plant in Abu Dhabi, has been hit by raining drones and rockets. Bahrain has closed down part of the capacity due to lack of alumina due to the closure of the Strait of Hormuz. And the Qatalum has closed down around 60% of their capacity following lack of gas supplies after Iranian attacks over Ras Laffan. So the total production cuts in the Middle East has reduced by 40% to 60%, which implies a 20% to 40% lower import demand of alumina. To date, we have seen that shipments have continued into the Middle East. There are discharging ongoing in Oman to the Emirates. We -- ships are idling outside the Gulf and -- but also cargoes have been sold on to other customers due to the situation in the Middle East. We are seeing that this situation has not impacted the alumina pricing as you see on the blue line, meaning that, as we understand it and as the market understands it, the situation is under control. But again, we appreciate that, should the resolution to the problem in the Middle East drag out in time, there are risks to the -- further risks to the Middle East aluminum industry and possible repercussion effects on exports and production at the plants in Australia. Second risk goes into the supply of caustic soda into Australia. The sourcing of caustic soda into Australia can be illustrated by this graph, showing that a very big majority of imports of caustic soda comes from the Far East. A very small part comes from the Middle East, limited 3 to 4 cargoes scheduled for this year have easily been replaced by supply from other sources. So the fact that the Strait of Hormuz have been closed have limited impact on the supply of caustic soda to Australia and limited impact on our shipment program. The risks going into the second half of the year is mainly linked to the supply of ethylene and naphtha, which is needed for the chlor-alkali industry to produce EDC, VCM and PVC, which is the offtake of chlorine, which is necessary in order to produce caustic soda. So far, we understand that the program for the spring and early summer is firm. We don't expect any negative consequences on the lack of naphtha supply in the Far East and also positiveness when we talk to customers and traders that this will also be the case for the second half. But still there's a risk which we need to follow closely. We have a high booking of caustic soda for this year. In fact, overbooked the capacity of our fleet, meaning that we are quite well positioned to handle the situation, should there be impacts of lower production in Australia and lower caustic soda imports. Turning over to the CLEANBUs and the clean petroleum markets. We -- the closure of Strait of Hormuz has had a big impact on trade flows of clean petroleum products. As the graph shows to the left there, as the Middle East has stopped exports and also there has been export ban in China and some other countries, exports out of the U.S. Gulf have increased substantially over the recent months. And this has actually also impacted the CLEANBU trading. Here, we just show the percentage of the CLEANBU days, the spread over the loading ports, the regions of loading. And as we see here, a substantial increase in loadings in Americas. From around 25% in 2025 as an average, we are more than 50% in the first half of the year -- the estimate for the first half of the year. So I'm pleased to see that we have used the flexibility of the CLEANBUs to position the ships into the regions that are -- where the trade flows are ongoing and again, showing the flexibility of our vessels to adapt to changing trade flows and geopolitical events. Looking into the markets, we have had a good market backdrop for our business in the first quarter. The dry market, as we see in the green line, had a very short and shorter-than-normal seasonal dip in January due to the Chinese New Year. The market recovered quickly and at rather strong levels at around $18,000 per day for Kamsarmax. The market also started strongly in the tanker markets -- product tanker markets in the early part of the year. And after the start of the hostilities in the Middle East, freight rates for product tankers skyrocketed. Otherwise, I would like to mention for the business, we have taken delivery of the first CABU, 3 newbuild in February. The second vessel was delivered in April. And the third vessel that was launched in April will be delivered in August. I'm pleased to say that the first ship has now close to completed 3 voyages. That performance in every respect are in line with or above expectations. So it looks very promising for the newbuilds that are coming into our fleet this year. I would also like to mention the positioning of one ship in the first quarter into Americas to start service, the 32 months contract with Hydro Alunorte. So we have -- according to the business plan for this life extension of this 25-year-old vessel, we have taken an investment in the form of a long ballasting from South Africa into U.S. Gulf and which has impacted the earnings for the CABUs for the first quarter. The ships loaded the first cargo from U.S. Gulf into Brazil in the second half of March, meaning that coming into the second quarter, the earnings of this trade will contribute positively to the earnings of -- and the profitability of KCC. Turning to the CABUs. It's been a quarter where we have had a higher share of the capacity in tanker trades servicing caustic soda. We have -- this includes the ballasting of Barcarena. And also, it takes into account that we have had to ballast a couple of ships from Australia due to a tight fleet situation, given the Barcarena leaving the trade in Australia, some dockings and the later delivery of the newbuilds. This has resulted in increased ballasting for the CABUs in the first quarter and also reduced share of the capacity in [ combi-trade ] as we don't count the shipments where we ballast had to be inside our KPI for combination trading. The earnings are in line with expectations, around $29,550 per day. and reduction from the fourth quarter, around $2,400 per day, is -- can mainly be explained by the negative effects of the ballasting of the Barcarena. Otherwise, the CABUs have been supported by strong MR tanker earnings in the Far East through the index or so-called floating rate contracts, also positive effect of a strong dry market and also high fuel prices have had a positive effect on the earnings on the CABUs. On the CLEANBUs, we are seeing that a very high share of the capacity of the CLEANBUs in the first quarter has traded in the tanker market. We did expect a high share of the fleet in tanker trade in first quarter before the events in the Middle East, partly due to the [ physical ] positions of the fleet and partly due to -- we had a high proportion of dry trading in the fourth quarter. What happened in the markets with skyrocketing rates meant that we put more capacity into the tanker trading in the first quarter than we had expected. Looking at -- this has impacted the ballast percentage, which is up 2 percentage points, but also that the share in combination trading has fallen back to the -- just as an effect of a deliberate choice of allocating vessels into the long-haul trades into the U.S. Gulf. Earnings are up substantially compared to the fourth quarter, up with around close to $10,500 per day. And I'm very pleased that this again shows the way we have been able to optimize the trading and the earnings of the CLEANBU fleet in the quarter. So then, Liv, over to you.

Thank you. Then over to financial performance for the quarter before I also give you an update on the sustainability performance. The net revenue, EBITDA and profit after tax for the quarter were $47 million, $29.3 million and $15.6 million, respectively. This is an increase of approximately 20%, 30% and 50% Q-on-Q. While the CABUs had stable net revenue from fourth quarter last year to first quarter this year, we saw a considerable increase in the CLEANBU revenues. On a total revenue basis, approximately 2/3 of the increase is related to higher rates, while 1/3 is related to more on-hire days. We had 80 more on-hire days in Q1 compared to Q4, and it's 2 reasons for that. It's the CABU newbuild that was delivered in February, and then we had less off-hire related to dry docking for the CLEANBU fleet. The profit after tax is as well impacted by somewhat higher depreciation. Depreciations increased by $1.3 million or 14%, and it's mainly related to dry docking. Based on this, we achieved an annualized return on capital employed of 11% and a return on equity of 17% for the quarter. If we have a closer look at the EBITDA bridge from Q4 last year to Q1 this year, you will see that the CABU TCE rates increased by a total of $1.5 million Q-on-Q. And as Engebret mentioned, a large part of this is related to the Barcarena positioning voyage. The CLEANBU TCE rates, the 10.5% increase in TCE rates for the CLEANBUs, that's a total Q-on-Q effect of $7 million. The more on-hire days, approximately 50-50, related to the CABU newbuild as well as less dry docking and the negative effect related to other income, that relates to a positive one-off in Q4. Part of it related to loss of hire compensation for an old claim and part of it an old claim bonus related to insurances. When you look at the costs for the quarter, it's quite stable Q-on-Q. Underlying, we saw a decrease in the CABU operating expenses per day of approximately 3% Q-on-Q and an increase in the CLEANBU operating expenses per day of approximately 3%. But this is mainly timing effects between quarters. So a solid EBITDA for Q1 compared to last quarter. Then over to the balance sheet. The balance sheet is still very solid. As you can see in the graph to the left, the equity ratio is 50% at the end of Q1. This is down from 55% at the end of last year. And this decrease mainly is due to $80 million in debt drawdowns related to the newbuilds. These debt drawdowns, they also impact net interest-bearing debt, as you can see in the graph in the middle, which increased by approximately $80 million, and it also impacts the net interest-bearing debt-to-EBITDA ratio that ended at 3.1 for the quarter. If we adjust for the newbuild debt, as we have limited earnings on the newbuild so far as the first vessel was delivered in February and the second was delivered in April, so the last vessel had no earnings in Q1, but a full -- the full debt is acknowledged here, if you adjust for that, you have 2.2 net interest-bearing debt-to-EBITDA ratio. The cash balance included long-term available RCF capacity, ended at $127 million at the end of Q1. That's an increase of approximately $9 million during the quarter. This is supported by a solid EBITDA and debt drawdowns net of newbuild CapEx, debt service, dividends and some negative working capital changes as well for the quarter. But all in all, a very solid balance sheet and cash position. Then over to dividend. As Engebret mentioned, dividend for the quarter is $0.25 per share, in total $14.8 million. This is above 80% of the adjusted cash flow to equity, which is EBITDA less maintenance CapEx and debt service, so in line with our policy. On an EPS basis, it equals approximately 95%, and dividend yield, based on close yesterday, close to 10%. So with this quarter, we have an unbroken dividend history from the -- company was listed in 2019. So we have paid dividends every quarter since then. Then a short update on the sustainability performance. The carbon intensity, the EEOI ended at 6.5 in Q1. This is up from an average of 6.1 in 2025. And there are several reasons for this increase. We employed the CLEANBUs in the tanker trades or a large part of the capacity of the CLEANBUs in tanker trades. We, as well, had the long positioning voyage for Barcarena into the U.S. Gulf. And then as Engebret mentioned, we had a tight caustic soda program in Q1. And all these effects resulted in more ballasting, somewhat higher speeds as well as lower cargo volumes. On a positive note, the Balder is performing very well. That's the first newbuild delivered in February. She had an EEOI of 5.3 for the quarter, much lower than the average of the other CABUs. This is somewhat impacted by good trading efficiency for the vessel, but she, as well, had a very strong technical performance. So this looks promising for the newbuilds, both when it comes to earnings capacity as well as emissions performance. So with that, Engebret, over to you again.

Thank you, Liv. So looking ahead, we start off diving a little bit into our 2 markets, the dry market and the product tanker market. And as mentioned, the effects of the Middle East has mainly been on the tanker market to date. But for both markets, there are uncertainties, especially linked to the possible consequences on the world economy from the situation in the Middle East. Looking at the product tanker market, I would like to mention 3 factors. The impact of the closure of the Strait of Hormuz and also export bans in the Far East has effectively reduced supply by around 10 million barrels per day, which is another once-in-a-lifetime supply disruption. We also see the impact of high oil prices, the green line, that has led to already some demand destruction in the oil markets. The big uncertainties going forward is clearly how will this gap between reduced supply and reduced demand develop over the coming months. The second point is linked to the increase in efficiencies of the fleet. Around 90 MRs, LR1s and LR2s are stuck inside the Gulf. It equates to around 3% of the world's fleet, which is not that significant, but the impact of what's happening in the Middle East is shown through the efficiency of the world fleet. Disruptions of trades have led to far longer ballasts. There have been more waiting time and there's also been impact on some idling. So -- and we have seen that on the impact on the ballasting on the CLEANBU fleet. The graph that we show here probably underestimates partly the development where we see the so-called inefficiency index have increased to close to record levels over the recent months. The last point I want to mention is the continued development where the dirty market continue to absorb an increasing number of LR2s. Over the last 6 months, the number of LR2s trading in DPP has increased by around 70 vessels, and that compares well to the pace of newbuilding deliveries of LR2s, which is around 50 per year in both 2026 and 2027. This is supportive for the product tanker market going forward. On the dry side, as mentioned, has had less effect in the Middle East, but we see the impact on especially the efficiency, just as we saw in the tanker market. Fewer dry ships are stuck in the Middle East. It's around 150 vessels, which equates to around 1.5% of the total world fleet. But we have, in the market, seeing increasing waiting time, ballasts and total effects of disruptions to many industries transporting dry bulk cargoes. Also, the speed of the world fleet is reduced. So in total, having positive effect on the supply growth in -- effective supply growth in the dry market. Another element to mention is, as oil prices have increased, so has demand for coal and also coal prices. A bit unexpectedly, shipments of coal in the Pacific has decreased. In China, we have seen that the domestic prices have increased less than international prices, meaning that the import arbitrage, as you see in the blue line here, has become negative, holding back imports, and meaning China relies more on domestic coal. This has turned over the last weeks. Domestic Chinese coal prices have increased substantially, meaning that we expect -- it is expected that the import arbitrage will become positive again over the coming weeks, likely leading to increased coal shipments into China as we experienced last year, as you see in the graph in the blue line. Lastly, which is not linked to the situation in the Middle East, the dry market is supported by a very strong South American grain season. The graph shows a record-high Brazilian exports that is -- will -- and the season is likely to continue over the next couple of months, supporting the dry market over the next months. With all the uncertainties in the markets, we are clearly happy that we have built up a good contract backlog. Looking out on the contract coverage for the dry capacity of the fleet, we have only one fixed-rate contract in our portfolio, but we have added some FFAs to increase the fixed-rate coverage up to around 1/3 of the capacity. We have addition, some floating-rate contracts that adds to the contract backlog. But again, as we have told you before on the dry side in KCC, we normally rely on long-established customer relations and repeat business with customers and with the support of the dry bulk activity, the sister company in Klaveness. On the tanker side, we -- as mentioned last time, we built up a record high contract coverage for the CABUs on the shipment of caustic soda into Australia. So we actually booked more than we needed for the growing CABU fleet. And the split for the CABU contracts were around 40% fixed rate and 60% indexed -- floating rate. This leaves us in a very good situation, as mentioned, should we end up with some effects on the caustic soda program from the situation in the Middle East. We also built the fixed-rate coverage on the CLEANBUs with a fixture of the 2-year charter of one of the CLEANBUs. And if you take everything into account, and which you see here on the graph, we have around 34% of the total tanker capacity of the KCC fleet on fixed-rate coverage for second half, 22% is floating rate contracts and 44% is spot-based. So we believe we are in a good situation on the contract support. Turning over lastly to the outlook for the second quarter. We are, as the figures show, with a high probability, going -- set for a record quarter for the company and where the time charter earnings looks likely to surpass the peaks we experienced in 2023 and 2024. The CABUs will continue their solid performance with especially healthy earnings on your floating rate caustic soda contracts, supported by a strong MR tanker market. Also, we will have positive effects on a very positive dry market and as mentioned, also positive contribution from higher fuel prices for the CABU business. But as mentioned also, there are negative effects on the CABUs from less predictability on the shipment dates, cancellations of some caustic soda cargoes, which are moved out in time, which impact the waiting time, the ballast percentage of the CABUs in the second quarter that, all other things equal, had a negative impact. But still, with 76% of the days booked, we are happy guiding on earnings of between $32,500 and $34,500 for the quarter. Looking to the -- on the CLEANBUs, we have, as mentioned, repositioned the vessels due to the lower volumes in our traditional trades from Middle East, India into Americas and also from the Far East into Australia. So we have positioned the ships, showing the flexibility, as mentioned, of the CLEANBUs and booked solid earnings for the CLEANBU fleet to date. So with 64% of the days fixed, we are guiding between $49,000 to $54,000 per day. Over the next weeks, we expect to fix a couple of more CLEANBUs that will increase the percentage of days fixed and solidify the earnings visibility for the quarter. So in total, we are set to have a -- after a good start in the first quarter, we are set to have an even better quarter in the second quarter. And we appreciate the uncertainties in the market. But we believe that, despite this, we are well positioned in KCC for whatever comes, with the strong contract backlog, with the flexibility of the ships and the efficiency of the ships. And we believe that we have a good chance to continue to deliver on the promised value creation of our business, which means higher time charter earnings over time with low volatility and contributing positively to the value creation of our business, delivering the best risk-adjusted returns in the dry bulk and tanker shipping. So that summarizes the presentation, and we are ready for some questions.

Yes. Thank you, Engebret. We do have some questions. And I'll just remind the attendees that may be joined us later, your questions do come through directly to us. They're not visible to the whole audience. So the first question, Engebret, bunker prices have moved significantly recently. Can you explain the impact on KCC and how you're managing that exposure?

We have, as all shipowners in March, especially have been hit by escalating, what we call, delivery premiums. One is the total level of fuel prices that have increased. And in addition, there has been competition for the availability of fuel in various bunkering ports that has increased delivered price further. That has been a negative effect that is implemented into the results in the first quarter. It also had some minor effect into the second quarter. But I think the main message of our business is that due to the fact that -- or this goes for the CABUs now for the second quarter, given the high ballast of the CLEANBUs, given the high efficiency of the trading with substantially lower time selling [ empty ], we actually take benefit from higher fuel prices. And that basically is a result of that standard ships get basically compensated for higher fuel prices in the spot rates. Given that we do not ballast, we basically can capture that value in our business, which increases the earnings of our business, the higher the fuel prices. Otherwise, when it comes to how we manage the bunker risks, we do hedge our bunker exposure on all fixed-rate contracts, but we lead with the bunker exposure, which are implied in the floating rate contracts.

We'll stay a little bit on this topic with a couple of questions about Banastar. So can you quantify the impact of the MV Banastar on CABU TCE when including the insurance?

The way -- in the first quarter, the impact is relatively limited. The ship is basically off-hire for most of March and the impacts are more coming into the second quarter. So in March, we have this, we call, self-covering period, around 14 days. In addition, we will cover also partly -- part of the time we did repairs in March. Coming into April and the next months, we will be fully covered by the off-hire component of the War Risk Insurance. That will basically pay us a compensation that equals around the earnings levels of the remaining part of the fleet, meaning that we would, in a big picture, have limited, if any, negative earnings impact in the second quarter of the situation on the Banastar.

And Banastar is not included in the guided TCE, right?

Yes.

As it's considered off-hire. So that will be in other income in Q2.

Yes. So it will be -- as we said, there will be a separate line where the impact of the compensation of the insurance will be shown.

We had another question, which was very similar, and I think you just answered the points on that. But there was another one for Banastar. Are there any updates on the life extension progress for vessels approaching 25 years? And how does Banastar's current situation in the Middle East affect this?

As we have said before, our target is to add Banastar into the trading in Americas together with the Barcarena from -- start in 2027. In order to do that, we need more contract backing, and we are working with customers to secure that. We have not yet finalized, meaning that we cannot confirm that we actually will make the life extension of the Banastar. It's a target. We continue to work on it. And we do hope that when we come after the summer, we can confirm the decision to do that life extension and to relocate the ship into trading between U.S. Gulf and Brazil.

And then we can move on to the CLEANBU here. We have a question. Have you fixed any long-haul CLEANBU voyages, giving you some visibility into Q3?

We have fixed at least 2 long -- very long voyages, where we have -- before we have relocated ships from a position in Asia have booked the ships. And these are shipments that are 80 to 90 days. The -- these two shipments will go into the third quarter, but not extensively. So it will be more the next shipments that are coming up over the next weeks that will have more days in the third quarter.

And then a question here on the dry dock schedule. So the dry dock schedule seems to have moved earlier compared to the previous quarterly presentation and you're simultaneously taking in the newbuilds. How should we think about the combined impact on earnings and dividend capacity in the coming quarters?

Given uncertainty around caustic soda shipment program, we decided to move forward one of the dockings that were supposed to be in the third quarter into the second quarter. Apart from that, there are no big changes to the docking program. The docking and environmental retrofit of one vessel is taking slightly longer time. That is another change. I think it's clear that there will be more off-hire days in the third quarter than -- sorry, in the second quarter compared to the first quarter, which, all other things equal, will have a negative effect on the dividend capacity. But again, as people -- when people are calculating, will note the substantial increase in the guiding earnings that will have the opposite effect. I don't know, Liv, if you have anything to add.

No, no. That's correct. We have more off-hire related to CLEANBU drydocking in Q2. So that will -- yes, in Q2, but then we have the CABU vessel that is delivered in April and the one in February. So all in all, I think it's slightly up on-hire days Q-on-Q.

And then we can stay on the newbuilds. We have one more question here. How do you see growth prospects for the fleet now?

The growth prospects for the fleet, as mentioned before, is linked to newbuilding prices. So when we -- of course, we follow these markets very closely. And when we looked at the situation this autumn, we were seeing gradually pricing and also shipyard willingness to build special ships like ours improving day by day. What happened at the end of the year and into this year, as we all know, the tanker market skyrocketed and also contracting of tankers have increased. That has reduced the possibility for KCC to contract ships at attractive terms. So meaning that we don't foresee that -- anything when it comes to contracting and fleet expansion will happen over the next 6 to 9 months. But we are confident that we will find good timings if we look a couple of years ahead in time.

That's it. Thank you very much.

Thank you.

Thank you.