The National Shipping Company of Saudi Arabia (4030) Earnings Call Transcript & Summary

Hello, good evening, and ladies and gentlemen. This is Ahmed Hazem speaking from EFG Hermes Research, and we'd like to welcome you all to the First Quarter 2025 Results Conference Call for Bahri Shipping Company. With us on the line today is Mr. Ahmed Al-Subaey, CEO of Bahri. We have Mr. Basil Abulhamayel, CFO of Bahri; we have Mr. Faris Al Gahtani, IR of Bahri. Without further delay, Faris, I'd like to hand over the call to you. Please, go ahead.

Thank you. Good day, ladies and gentlemen. I'm Faris Al Gahtani, the Head of Investors at Bahri and welcome to Bahri's First Quarter 2025 analyst call. Thank you for joining us, and I'd like to extend a special thanks to EFG Hermes for hosting this call. [Operator Instructions] Once our call has concluded, the presentation and all available materials will be available on the IR page of our website. Please refer to our disclaimer, which applies to all disclosures made in today's presentation. Kindly note that all figures discussed during today's call are in Saudi riyal unless otherwise stated. I am joined today by our CEO, Ahmed Al-Subaey; and our CFO, Basil Abulhamayel, to take us through the company's first quarter 2025 results and performance. These results were disclosed on 8th of May on Tadawul's website. We also uploaded there our earnings release, which provides additional insights into our performance. Both documents are also available on our company website. Our full financial statements will be published in the coming few days in both the Tadawul and our company website. At the end of our presentation today, we will open the floor for questions. Before I turn over the floor to our CEO, allow me to give you a brief overview of Bahri. Over the past 47 years, Bahri has grown to become a world leader in maritime transportation and logistics. We are proud to serve over 150 ports worldwide, supported by a dedicated workforce of more than 4,000 people, both onshore and offshore. Our diversified operations are built around 4 core business units: oil, chemicals, integrated logistics and dry bulk, float and new marine services, which runs our desalination business. All of these business units are supported by our industry-leading in-house ship management function. Together, these businesses give us one of the largest and most diversified fleets in the world. Speaking of our fleet at the end of March, we operated 97 owned vessels and 14 long-term chartered vessels, 44 VLCCs, 47 chemical tankers, 13 dry bulk carriers and 7 RoCon vessels. This fleet enables us to connect economies across the globe from North America and Europe to Asia, the Middle East and beyond. Finally, to give you an idea of our financial scale, our revenue in full year 2024 was SAR 9.5 billion and our net profit was SAR 2.2 billion. Our net operating cash flow was SAR 3.5 billion, and we ended the year with a comfortable net debt to EBITDA of 1.7. With that, I'll pass the floor over to Ahmed, Bahri's CEO, to take you through the key highlights of the first quarter.

Thank you, Faris. Good day, ladies and gentlemen. It is indeed my pleasure and our pleasure to welcome you to our analyst call for the first quarter of 2025. We are truly excited to have this opportunity to engage with you all. Now before we dive into last quarter's results, I would like to first walk you through Bahri's overarching strategy, the principles that guide us basically. These 4 pillars are at the core of our strategy, each one a key enabler of long-term sustainable growth, resilience and value creation for Bahri. Our first strategic pillar is sustained fleet expansions and modernization with a clear emphasis on value-added growth. We see significant untapped demand for our shipping and logistics services driven by 2 powerful engines of growth. First, our core customers. Today, we carry only a fraction of these total cargoes. By deepening these relationships and delivering world-class reliable and customer services, we are determined to win a larger share of the total volume. Second, the surge in cargo demand in Saudi Arabia, both current and emerging. As the Kingdom undergoes its Vision 2030 transformation with our scale, network and local expertise, Bahri is actually best positioned to capture these growth demand. The challenge here and opportunity is to convert these large untapped demand into growth. To do so, we need a larger, more modern fleet. Accordingly, we will continue investing in vessel acquisition, not only to expand capacity, but also to replace our older vessels with newer vessels that demonstrate improved efficiency and sustained standards -- and sustainability standards. As always, we are a prudent buyer and a reluctant sellers. The second strategic pillar is diversification. We are focused on broadening our business platform to reduce inherent cyclicality of ship industry and build a more resilient multistream earnings profile. At the same time, we are strengthening and diversifying our access to capital, ensuring financial agility to fund growth with the opportunity -- when the opportunity arises. First, we're allocating capital in a disciplined balanced manner across our business lines, creating natural hedge against cyclical downturns. Second, our diversification strategy targets adjacent sectors and geographies where we can unlock operational synergies through leveraging our global presence and customer base. And third, we are leveraging our strength and providing end-to-end logistics solutions. This gives us scale. It gives us efficiencies. It gives us shared performance platform and faster ramp-up, as we move into new verticals of growth. Our third pillar is diving continuously -- is driving continuously profitability improvement. We are focused in 2 powerful levers. The first is commercial optimization, enhancing how we deploy vessels, manage voyages and respond to market conditions. The goal here is to consistently outperform the market so that our results reflect operational excellence and not just cyclical times. The second lever is cost efficiency, to drive operational cost improvement through greater efficiency and adoption of new technologies. Our in-house ship management team is a key enabler to this particular lever, applying best practices and innovation technologies across the fleet at scale to ensure compliance, enhanced performance and effective cost management. Our fourth and final strategic pillar is leveraging partnership and strengthening -- to strengthen and expand Bahri's market access. Our goal is to secure long-term access to major demand channels by deepening existing partnerships and forging new mutually beneficial relationships in key cargo corridors. We're also aligning our strategic initiative with Vision 2030 through our partnership with PIF, the primary driver of Kingdom's transformation, we are positioned to capitalize on emerging logistics and ship opportunities -- and shipping opportunities tied to national development opportunities -- priorities. We are also leveraging our relationship with Aramco and its worldwide network of affiliates and customers to expand beyond the current CIFs and unlock new revenue streams across the broader energy value chain. Our new office in Singapore further adds to our ability to forge and solidify relationships in this critical Asia Pacific region. Together, these 4 pillars form the foundation of Bahri long-term strategy, guiding our investment decisions, sharpening our competitive edge and positioning us for resilient, sustainable growth, while fully supporting the Kingdom's transformation. With that strategic lens, let's dive into our quarter performance. During the first quarter, we delivered robust net profit growth, reflecting the resilience of our diversified business model in a challenging market, very challenging market. Revenue declined 6% to SAR 2.2 billion, yet our EBITDA increased 14% to SAR 1.2 billion and net profit rose 18% to SAR 533 million. I truly applaud the team at Bahri for this achievement. They were able to rapidly pivot ahead of the curve and purposely manage our revenue mix to prioritize profitability. These results underscore our ability to deliver in a challenging market and showcase the strength and especially the resilience of our diversified operational model, an advantage that clearly sets Bahri apart. We are the first out of the gate and usually last to go down. Basil, our CFO, and my partner here will dive deeper into the financials. But for now, let me briefly add some color to the numbers you saw in the previous slides. Our oil, chemical and dry bulk businesses faced challenging markets during the first quarter, putting pressure on freight rates. We had anticipated Q1 market weakness to a larger extent, and our BUs had prepared and then executed mitigated strategies. Really, it is preparation, preparation, preparation. This is the name of the game in the first quarter. That's how the team navigated through rough seas and optimized vessel deployment, revenue mix and chartering management to maintain profitability. The fleet investments we made in 2024 are already paying off and are providing us with additional levers to drive further optimization. The outcome of these efforts had yielded results across our portfolio. Our revenue declined, but the team was able to expand profit margins and delivered positive EBITDA growth. Although chemicals, chemical revenue and EBITDA declined, they fell at a slower pace than the overall market, illustrating the unit's relatively outperformance. Dry Bulk managed to stabilize its margins and grow EBITDA despite experiencing TCV erosion. Meanwhile, Integrated Logistics swung back to profitability, boosted by early gains from its 2024 transformation strategy and sustained strength in the dry bulk. And finally, Marine Services managed to increase its EBITDA on the back of the first desalination barge entering commercial operations. If you really sit back and look at the performance across Bahri this quarter, there is one primary theme, one word that define us. It is resilience. And we are done -- and we are not done yet. We have high expectations, and we'll continue to excel regardless of how the tides turn. We continue sailing forward with our fleet expansion and modernization this quarter. We added 5 modern vessels in Q1 and 3 more in our operational fleet in April, taking our own fleet to cross the 100 vessel milestones for the first time in our history. Today, we have a larger, younger, more cost-effective and environmentally sustainable fleet that position us to respond to an ever-dynamic shipping market. Finally, our commitment to safety and sustainability continues to set us apart. For the first quarter of 2025, we responded to -- we reported a lost time injury frequency rate of 0.31 energies per million hours. And we are also proud to report 0 fatalities and 0 oil spills during this quarter. I've said this before and I repeated operational excellence and responsible practices are the core principles for Bahri leadership. The management of Bahri, especially myself and Khalid Alhammad, the President of Bahri Ship Management, consider ourselves collectively and individually as ultimate stewards for the safety and security of our seafarers. This is of paramount importance to me and to all of us in Bahri, as we continue to drive safety-first culture at our company. We are deeply proud of the women and men at Bahri. They are the true drivers of our business. They operate our ships, they drive day-to-day decisions, they forge partnerships, they embody the vision of Bahri as a global leader. They are truly key Bahri differentiator and success. Speaking of partnerships and global leadership, we made key moves during the quarter to advance our strategic ambitions. We deepened our long-standing partnership with Petredec, one of the global leaders in LPG shipping and logistics. During the first quarter, we established a dedicated joint commercial team to address Saudi Arabia's growing demand for LPG and ammonia shipping solutions. This initiative builds on nearly 2 decades of collaboration and reflect Bahri's commitment to expand our capability in critical energy transport markets. In another significant step forward, we created a strategic JV between Bahri Logistics and TASARU Mobility Investments and Mosolf Group. This partnership represents a major step in advancing automotive logistics capabilities in Saudi Arabia, especially at the Kingdom's automotive sector -- as the Kingdom automotive sector progresses towards its target of 400,000 vehicles manufactured annually by 2030. The JV will deliver integrated solution services, including shipping, electric vehicle handling, custom clearances, inspections and tailored to meet the specific needs of automotive industry. We also continue to strengthen Bahri global presence with the opening of our new office in Singapore during this quarter. Singapore is a critical hub for the global shipping and energy market, and this expansion brings us closer to our customers in Asia Pacific. With that, I'll hand it over to Basil, our CFO, to take you through the financial details of our first quarter. Basil, the floor is yours.

Thank you, Ahmed. It's my pleasure to welcome you all to our first quarter 2025 analyst call. I'll now take you through the financials of the quarter. In the first quarter, we recorded revenues of SAR 2.2 billion, a 6% year-on-year decline, mainly from lower revenues from oil and chemicals business. These were partially offset by growth in Integrated Logistics, Dry Bulk and Marine Services. Bahri managed to offset the revenue decline with profit margin expansion, resulting in EBITDA growth of 14% compared to Q1 last year. EBITDA growth was driven by Integrated Logistics returning to profitability, cost containment at Bahri Oil, new revenues from marine services and increased income contribution from associates, particularly our investment in Petredec. Net profit grew at a rate of 18% higher than the 14% EBITDA growth rate. Overall, these movements reflect benefits from our diversification efforts and fleet investments with relatively weaker results from oil and chemicals cushioned by better performance from the other business units. Our cash flow results reflect continuing ramp-up in vessel investments. Net operating cash flow was SAR 490 million compared to SAR 690 million in the prior year. The decrease was due to higher cash requirements for working capital in Q1 2025. Capital expenditures amounted to SAR 1.7 billion compared to SAR 754 million in Q1 '24. The bulk of the Q1 '25 CapEx was for full payment of our VLCCs delivered to us during the quarter. Our net debt balance rose to SAR 9 billion from SAR 8 billion at the end of 2024 and SAR 6 billion at Q1 2024. The increase in net debt in addition to cash from operations was used mainly to fund CapEx. Let's now look at our investments and financial position on the next slide. During the first quarter, we added 5 vessels, 4 VLCCs and 1 dry bulk carrier. We also divested an older VLCC as part of our fleet renewal strategy. In April, we deployed 3 additional VLCCs that were delivered to us in March. This brought us to the 100 owned vessels mark. Furthermore, we are expecting delivery of 3 more VLCCs in the upcoming quarters. We are also looking at acquiring a multipurpose vessel for Integrated Logistics. In total, including the 14 chemical tankers we have under long-term leases, Bahri operated 111 vessels at the end of Q1 2025, up from 109 vessels at the start of the year. Given the increased vessel investments, our net debt-to-EBITDA ratio stood at 1.85x at the end of Q1 '25. This remains a healthy level from a financial risk perspective. Additionally, our liquidity position remains strong, supported by a SAR 3 billion 5-year revolving credit facility, which we secured in January to support working capital and capital expenditure requirements. In all, we believe our financial condition remains supportive of our fleet investment strategy of pursuing opportunistic, disciplined, value-accretive acquisitions, maintaining a balance between fleet investments, profitability and a healthy balance sheet. Let me now go to the performance at each of the business units. To provide you context on how BU performance impacted the group, let me first turn your attention to incremental year-on-year BU contributions to the group. The top waterfall chart shows negative incremental revenue contributions from oil and chemicals, partially offset by positive contributions by the other business units, including Dry Bulk and Integrated Logistics. Others in this top chart largely reflect marine service revenue. We will explain each of these when we get to the BU slides. The bottom chart demonstrates incremental EBITDA contributions with chemicals providing negative contribution, while other businesses, especially Integrated Logistics recorded positive EBITDA growth. The SAR 151 million incremental EBITDA for others include profit contributions from marine services and affiliates such as Petredec. Let's now take a deeper look at how Bahri Oil performed. During the first quarter, Bahri Oil delivered positive EBITDA performance despite reduced revenue. On average, market rates were weaker year-on-year for the quarter, which contributed to an 11% year-on-year decline in revenue to SAR 1.1 billion. Despite this, EBITDA increased by 1% to SAR 599 million on the back of EBITDA margin improvements to 55% from 48%. This margin expansion was mainly driven by a higher use of owned tonnage rather than lower-margin chartered vessels. This shift to own tonnage was enabled by the expansion of its fleet to 44 VLCCs by the end of the first quarter from 39 vessels a year ago. Also helping was an improved cost profile for the VLCC fleet. Over the 12 months from end Q1 '24 to end Q1 '25, Bahri Oil added 8 modern scrubber-fitted eco VLCCs and divested 3 older vessels, resulting in a younger, more efficient operating fleet. Looking beyond Q1 '25, 3 more VLCCs have joined the operating fleet last April and another 3 VLCCs have been secured for purchase with expected delivery dates in the following quarters. Turning to the Chemicals unit. The business unit recorded revenue of SAR 696 million in the first quarter of the year, representing a 13% year-on-year decline. This was primarily driven by lower freight rates amid continued softness in the chemicals and clean petroleum product shipping market. EBITDA also decreased by 20% to SAR 357 million, reflecting a margin contraction to 51% from 56% and a 14% year-on-year drop in realized TCE rates. Despite these headwinds, our internal analysis indicates that the BU outperformed the broader market, which saw a significantly steeper year-on-year declines in spot rates. We attribute this relative outperformance to proactive chartering and commercial optimization measures we put in place ahead of anticipated market weakness as well as cost efficiencies realized through the BU's fleet expansion and modernization efforts over the past 12 months. Integrated Logistics revenue reached SAR 266 million for the quarter, representing a 38% increase compared to the prior year, propelled by the continued business expansion of Bahri Logistics, its non-shipping segment and full fleet utilization at its Shipping segment, Bahri Line. Importantly, Bahri Integrated Logistics reported positive EBITDA of SAR 62 million during the quarter, a SAR 78 million improvement over a negative EBITDA of SAR 16 million during the prior year. This earnings turnaround was driven by strong revenue growth, coupled with improved cost performance, which in turn was due to full utilization of Bahri Line fleet in the first quarter of this year compared to Q1 '24 when only 2 -- when 2 bulk -- breakbulk carriers were dry docked part of the time and its new multipurpose vessel was deployed only midway throughout the quarter. Improvement in lease warehouse utilization following increased customer uptake and one-off expense in Q1 '24 and reversal of cost accruals in Q1 '25, which boosted incremental EBITDA. Looking ahead, Bahri Line plans to acquire an additional multipurpose vessel this year to further expand into the project cargo market. Meanwhile, Bahri Logistics is progressing with the completion of the Jeddah Islamic Port bonded zone warehouse and the new agency office in Yanbu, primarily to support Bahri Oil operations. Bahri Dry Bulk delivered strong revenue growth in the first quarter of this year, driven by an increase in cargo contracts and a larger fleet, which helped offset the impact of lower shipping rates. Revenue rose by 13% year-on-year to SAR 94 million, while EBITDA increased 7% year-on-year to SAR 29 million, with the BU maintaining a resilient EBITDA margin despite a 20% decline in TCE rates for its own vessels. This margin resilience reflects dry bulk's successful pivot towards optimizing chartering profitability. While last year's focus was on expanding cargo volumes and securing long-term contracts supported by increased use of chartered-in vessels, this year, the emphasis has shifted to maximizing returns from operations through more agile and profit-driven chartering strategies. With that, I will hand back to Ahmed for his closing remarks. Thank you.

Thank you, Basil. Let me close by leaving you with key takeaways about Bahri and our performance in the first quarter. First, our diversified business model is proving its resilience and driving income growth. While global economic uncertainty and the potential tariff-related trade barriers continue to create a dynamic and volatile environment, our diversified engine demonstrated not just strength, but more so resilience. Even as shipping market softened, our core segment continued to deliver solid performance. Further our adjacent business lines such as logistics services and desalination, along with strategic investments like Petredec contributed to earnings growth and helped offset volatility across the portfolio. This is how we managed to grow bottom line despite top line pressure. Second, our region strength are increasingly setting us apart despite global uncertainty. Trade policy risk include potential new U.S. tariffs is a valid concern. However, the GCC trade corridors remain relatively well favored, particularly in crude and petroleum product flows. Our geographic location places Bahri at the heart of global trade droughts, and this advantage is becoming more strategic as global cargo flows shift. We are expanding the edge further. Our new Singapore office deepens our engagement with Asia Pacific markets and places us closer to key customers in the crude product, chemical and vegetable oil segments. Finally, Saudi Arabia is transforming, through progress towards the Kingdom's Vision 2030. We have seen the launch of giga projects such as the NEOM project, increasing manufacturing across multiple segments, including electrical vehicles and a fast-growing entertainment sector with upcoming global events. All of these are generating new cargo flows that Bahri uniquely positioned to serve. Bahri is a logistic backbone that enables these initiatives, moving critical material equipment and finished products that turn national ambition into reality. Third, our business model remains opportunistic, agile and more so disciplined. As Basil noted, we are fine-tuning our chartering strategy, while expanding our own fleet in a measured, value-focused manner across our business lines. With our recent vessel acquisition, we have reached the impressive milestone of 100 owned vessel. Actually, we crossed it. This major milestone reflects Bahri's growth, scale and the industry leadership. Backed by a strong balance sheet and a prudent leverage, fleet expansion and modernization remain a key pillar of our long-term strategy to achieve profitable growth. Looking ahead, we see significant untapped potential across all our business units. The runway across every one of our business units is still wide open. We have only begun to tap opportunities that will fuel Bahri's next wave of growth. With our resilient business, diversified income stream, strategic regional footprint and disciplined capital development, we are confident that Bahri's strongest performance is still ahead of us. Actually, you have seen nothing yet. We are just getting started and the best is yet to come for our company, Bahri. With that, let's open the floor for your questions.

Thank you Ahmed Al-Subaey for the presentation. Now we will open the floor for the Q&A. Ahmed, you can lead on that, if you don't mind.

[Operator Instructions] Maybe until we get some more questions in the Q&A box or people start raising their hands, I'd like to take this opportunity maybe to ask about the views on the volatility that we're seeing in the shipping market, especially on VLCCs. We're seeing TCE rates go up and go down quite aggressively throughout the -- since the beginning of the year at the very least. So Mr. Ahmed or Mr. Basil, can you please shed some light on what's going on there?

Yes. I mean volatility and TCE rate swings is part of our business. This is part of the every quarter, not just the first quarter. But we -- our contracts are designed in such a way that enables us to ride this wave. We really, really truly anticipated this in December and November of last year, and we designed our contracts and we locked in our tonnage accordingly, which enabled us to really be able to ride away, so to speak. So I'm glad that it turned to be the right call. It's actually allowed oil to turn in a strong performance in Q1, really better than the market expectations, not in line with our expectations because we're always aiming for higher. But it looks like we are really set up for a good first half, not just first quarter going forward.

And if I may add to what Ahmed just said, this is the name of the game for us. We are not a trader here. We are in for the long haul. We've been through many cycles. It's part of our daily business. But also to recognizing this, we have put together a financial flexibility and liquidity program to make sure that we're able to weather these volatile times. In fact, we have a position where we can invest in down cycles -- strategically invest in down cycles when things are looking bad and getting ready for the upswing. So I think we're well positioned given where we are.

[Operator Instructions]

We were so good, Ahmed, that no questions are needed, it looks like.

It seems that investors are a bit fatigued. Aramco's call was right before your call. But yes, very, very insightful presentation. So we have a question coming from Sayed Ahmed.

Just a quick question on this announcement earlier today by the Trump administration regarding the tariff that was reached in Geneva. Any comment on that? And does that -- how does that shape your outlook for trading -- trade-related activity moving forward overall across all your business segments?

Well, Sayed, overall, I mean, it's -- we welcome such news. This is -- anything that's good for trade is good for shipping so -- especially between 2 giant economies like the U.S. and China. So we're excited as you are. But like Basil just mentioned and we -- these little bumps in the road don't really impact our business immediately. I think we'll see this maybe later on. But so far, our business was going well even with these trade barriers, so to speak. Like I said, we are more of a long-term shipper. We're not a short-term player. So these things did not impact us greatly, given where we are, given our customers and our -- these products were flowing out of the Kingdom, whether it is oil, whether it is foreign products, whether it's chemical, whether it is dry bulk and coming back to the Kingdom. So I would say great news. We're hoping this will have the impact towards the second half of the year where volumes continue to go up. But as far as immediate impact, I think the only thing I would say that immediately got impacted is the Dow Jones and the markets around the world. But as far as shipping is concerned, we're really good.

Yes, if I can add, I think the market that hit immediately was sort of the container market going into the U.S. from China. Of course, that took a huge hit, which is a segment that we're not exposed to. We don't do container shipping, but we'll have to wait and see how the year plays out. But immediately, there's been minimal to no effect on us.

So we have a question coming from [ Taha ].

I think you partly answered the question that I had in my -- So overall, I think that within the business segment that you operated, you don't see overall this whole tariff saga impacting you too much from what I -- what is that, if you can elaborate a bit more on that going forward also obviously versus [indiscernible] obviously majority of the countries, there's still some tariffs, [indiscernible] is working. So how are you seeing it for this year, overall trends in the freight rates? And secondly -- second question that I had, I think we recently saw some news around IMO being more conservative on...

Your voice is not clear. So can you please repeat the first question? Okay.

Okay. I'll repeat. So the first question was that overall, I think you partly answered. But overall, your views on the business segment that you are operating in because of the tariff thing. I think you mentioned that you were not impacted was that the view, that overall you feel that slowdown in global economic growth will not affect you too much, one. The second question was on -- I think recently we saw news on some IMO restriction on carbon emissions and sulphur related use, so your views on that, will it impact you once that is implemented? And third question was any update on improving your foreign ownership limit issue because I think that is one of the key issues which is limiting your potential in the market, the three questions from my side.

Improving what, Taha?

Foreign ownership.

Foreign ownership, yes. No, I think the first one, as you mentioned, Taha. Thank you for the questions to start with. The first one is pretty much answered in the previous question that we -- there is all our segments, whether it's the food, whether it is the chemical, whether it is oil, it really had very little impact on the volatility of the tariffs. The volumes are pretty much the same volumes as we anticipated. So what we did is we pivoted. We give up some routes that we -- or some volumes we could have taken, especially in the chemical front, because of low profitability. And we decided to really go to the high sector because we're still the dominant shipper in the Red Sea. And the Red Sea still gives -- makes shippers nervous. So being really good in the Red Sea, we try to dedicate most of our vessels, especially the chemical to that front. As far as sulfur is concerned, I'm hearing some noise. Taha, you want to mute maybe? With the sulfur, no, it's -- I think directionally, we hit it on the nail. I think we're -- decarbonization will continue. In our business, we're all looking for that elusive new fuels. But at the same time, we're investing heavily in modernizing our fleet basically because it is far more eco, far more efficient. To the degree if you bought a VLCC that is 20 years old versus one that is 5 years old, you're talking about 10%, 15% of efficiencies that you get right off the bat when it comes to fuel and plus everything we build these days, we don't build anything that it's not dual fuel. So we're really setting ourselves up because when you buy these vessels, they're there for 20 years or so, and we want to really be able to have the flexibility to switch from one fuel to another. So we are pursuing that. The last one regarding the foreign, I'll leave that to Basil, maybe you can.

Yes. We are...

The foreign participant...

Yes. So this is something we're working on. Like I said, we don't have 100% visibility as of now. But given that if you look at the Tadawul market, I believe we're the only company that's still not open. And so based on that, we're hoping to get a positive response from the government to open it up, but we don't have final approval, but this is something we're anticipating a response on soon within this year, we hope.

I would be more forthcoming. I would say stay tuned. As Basil mentioned, we're the only company that doesn't -- that does not open for [indiscernible] that is not open for foreign participation. So stay tuned. This is aligned with the Kingdom's sort of strategy. So it's at the final stages, I think, of decision makers. Obviously, this is not something we control here in Bahri. But we've been following up on it, and it looks like some good news might come our way and maybe next time we talk, something about, certainly within this year, we'll update you on that front.

Am I audible? Is it my turn now?

Yes, please go ahead.

I have a few questions. The first one is regarding the addition of VLCC. I assume these are used VLCCs. So if you can shed some light on the average age right now of the fleet? That's the first question. The second question is regarding the chemicals. You did say that even though the EBITDA declined, it did perform better than other peers because of how you were anticipating this decline and you worked throughout the quarter, the contract. So if you can shed some light of spot versus contract? And how is it going to look for the coming quarter from a strategic point of view, that would be helpful.

Thank you. Always great to have a woman in our business. So rather thank you for it at least, very good points. I would like to say first, your first question was regarding VLCCs, right?

VLCCs, yes.

We could not have had a better really deal than the one we've made on a timely basis. And I'll tell you why on a number of fronts. First of all, it reduced our overall VLCC fleet from very high teens, 18 to really -- to 15 that's why we're getting those 9. And the timing is actually -- the age -- the average age of these vessels is about 9 years. And the reason we wanted to...

9 years for the new vessels, sir.

For the new vessels, yes. And the reason we wanted to do so is first, we want to really build at IMI. So eventually, these vessels will be -- when it's time for them to depart from our fleet, IMI will be ready to manufacture VLCCs and deliver to us. So from that point of view, we're keeping in mind our ultimate goal here to manufacture the IMI. Second, like I just said, we got right about 15% and some of them 18% benefits on our fuel consumption because they are more eco, more -- all of them are scrubber fitted. So to me, this is something that is -- that hit us immediately. Third, we managed, as we mentioned in our last call, to really secure non-Aramco oil contracts for the first time, mainly [indiscernible] in China continuing to advance talks with -- hopefully, that will materialize in the next time we talk with PetroChina, with Unipec, with Hengli. So those vessels could not be more timely for us to really deploy them. So there were, if anything, plus, plus, plus, and it helped us -- that increased volume of tonnage helped us really deliver this good performance that you have seen in the first quarter. On the chemical, really, I must salute the team, they have been extremely agile. We really moved from TCE to more owned vessels because we get more profitability from those. And we were able to renegotiate some of these contracts we have on TCE, which the partners were really ready to do so. A lot of it is because of the Red Sea entrance. So that really helped us to -- and changing those routes that what really made chemicals more resilient and deliver a performance that outperformed the market by quite a bit.

So compared to the global peers, you are operating more in Red Sea, which you mentioned generally for vessels. It applies to chemicals, I would assume. And this is helping you be better than peers globally.

Yes. And there isn't too many competition. We're the only game in town.

Can you...

You know, somebody mentioned that the peace is not the absence of war. Peace is the absence of the threat of war. And so long as the threat is there, people are nervous. And they want to take the safety route, which is something we have perfected really with the Red Sea. So we're able to deliver value that others can't.

Can you comment on how the chemicals is now performing in terms of spot versus long-time charter in terms of operations?

Well, we'll do more spot than normal, but I don't have the numbers handy. We can get back to you...

But, generally, as a strategy...

Strategy, normally when things are bad, you want to really do things on a short term. It's one thing to be profitable when the going is good. But when you're facing this headwind, we really need to be an uncertainty and not a great deal of visibility. So we tend to really shorten everything. We shorten those. We don't want to lock in anything for a long time at these rates. So we take routes on a spot basis. We do things in more spot than we normally do. But I can -- we can get back to you with the numbers if you are interested.

We have a few questions coming in the Q&A box or the chat box. How do you see charter rates, TCE rates going forward in 2025? I believe management, you already alluded to it, but if you want to add anything on that?

Predicting TCE rates is like predicting oil prices. If I knew it any better, I'll be in Las Vegas making money. So really the name of the game here is not to predict these rates because it's completely difficult and the global events that has happened now reality are really can change those big time. I think the key here is how to stay agile, how to be able to respond ahead of your -- ahead of the curve and how to be ahead of your competitors. And I think that's the decision-making where how can I make these decisions? I'm not a big fan of outlooks anymore because they're not worth -- the minute an outlook is written, it becomes obsolete. I'm more of scenario planning and what if this happens, what if that happens, and that enabled us to really prepare. So when these things happen, we have a plan. And that's how we are tackling those TCE rates going forward. But the outlooks are there, everybody can look at them, but we take them with a grain of salt. And we have been outperforming those TCE rates across our portfolio.

Thank you, sir. We have a couple of questions, and I'll combine them because they tackle the same points. Sarah and Alan, they're both asking on the additions of vessels. Sarah was basically asking, you mentioned 3 more vessels in the coming quarters. Basically, she wants a confirmation if the total fleet is effectively reaching 100. And then Alan is basically asking what is the targeted number of VLCC vessels that you have by the end of 2025, the remaining projected CapEx for the year and any indication regarding revenue and margins for desalination projects?

Let me try to answer part of these questions. I think regarding the question from Sarah, 100, so the 3 will be an additional 3. So it will be 103 post the first quarter. There will be 3 additional VLCCs. This is catering to the growth that we see coming in from third-party customers. So the number is 103, not 100. Okay. What's the other one? What's your target number in terms of...

What's your target number in terms of...

Can you go down a little bit.

I'll say the question again. So basically, Alan was asking what's the targeted number of VLCCs by end of 2025. That was the first part of his question. The projected CapEx?

Yes, like I just said, I think with that, we'll try to answer your writing because we are opportunistic throughout the year. If I see a good sell, I might sell some of my fleet going forward. And if I get a good cargo deal, I might keep them. So we really are not merit to a certain number of VLCCs by the end of the year. What we want to do is to continue to deploy them in a profitable way. And if the asset prices are attractive, we'll end up selling them to take advantage of that. So that is really dependent on what opportunities we find until the end of the year.

But I think overall, the full year CapEx for this year definitely will be lower than last year. We will run a much bigger buying spree. Lastly, on the barges, yes. So the barge business is a tariff business. If you imagine, it's a water purchase agreement just like a power purchase agreement. So the margins are fixed for a certain IRR, and that's the model for the desal barges. So the idea here is to have a fixed stream of revenue coming in, and we look at this part of the portfolio to be sort of a buffer through the volatility that we see in the other sectors of the business. This is a business now that -- the recent update is we have all 3 barges commissioned now, and we'll be starting generating -- already started generating some cash flow, but it will get bigger as the months go by.

Yes. I think the second half of the year, you'll have revenues coming from all 3 barges. So this is take-or-pay scheme. So [Foreign Language] has locked in with us for 20 years that the clock ticks from now basically. So over the next 20 years with inflationary also rates going forward. So this is part of trying to shave off the cyclicality on the shipping business. We want -- logistics and desalination gives us a steady stream that enables us to at least lower the cyclicality of the shipping business.

And with that, I don't believe we have any further questions. So Mr. Ahmed, back to you for any closing remarks.

No. Look, I just want to say thank you all for your support. I think Bahri continues to be a truly center of the story with the performance that, of course, what Basil mentioned, our record-breaking performance in '24. We continue to do so in the first quarter. Let's -- we're going to do our utmost to work harder for our investors and shareholders to make sure that we turn in a good performance in the first half, and we'll stay agile and roll with the punches, so to speak, in the second. Thank you. See you in Q2.

Thank you. Thank you all for attending today's call. All materials will shortly be uploaded to our website. And if you have any follow-up questions, please contact us via [email protected]. With that, I will conclude today's call. Thank you all for your time, and goodbye.