TORM plc (TRMDA) Earnings Call Transcript & Summary

I would like to welcome you to the Annual General Meeting of TORM plc. I am Annette Malm Justad, a Director of TORM plc. It's now midday and as we have a quorum, I will now declare the meeting for open. There is a video conference call has been set up for this meeting as set out in the notice of the meeting. Shareholders cannot legally attend the meeting or vote on the business of the meeting virtually. However, it has been agreed that those persons on the conference call can attend the meeting informally. Present from our Board today, we have myself, Annette Malm Justad, a Director of TORM plc. In addition, we have Nick Lindsay from Elemental. I don't know if you can see him where we go, our Company Secretary; and Christopher Everard, our General Manager. The Board have jointly decided that only one director should attend on behalf of the Board, and that's why you see me here. The agenda, yes. We will -- this is the agenda of the day. We will start with a review of the year. And I will share our reflections on 2024, a year of solid performance despite significant volatility and offer perspectives as we look ahead to 2025. 2024 was a year of both accomplishment and challenge. We delivered a very satisfactory financial performance, achieving an all-time high in-time charter earnings of USD 1,135 million. This was underpinned by our ongoing fleet expansion and optimization, bringing our fleet to 94 vessels by year-end. For the full year, we generated an EBITDA of USD 851 million and a net profit of USD 612 million, corresponding to a return on invested capital of 24.3%. These strong results highlight the resilience and agility of our integrated platform, which has allowed us to adapt swiftly to an increasingly complex and uncertain global environment. At the same time, 2024 demonstrated perhaps more than ever that we operate in a highly volatile industry, shaped by external factors beyond our control. Geopolitical tensions, shifting trade flows and evolving regulatory frameworks created an environment of both risk and opportunity. The year began with tight supply-demand fundamentals and favorable trade patterns, driving exceptionally strong market conditions through the first half of 2024. During this period, freight rates remained elevated with fleet-wide rates exceeding USD 40,000 per day. However, as we progressed into the second half of the year, we saw rates moderate. By the fourth quarter, the typical seasonal upswing in rates paid to materialize. Freight rates softened further impacted by reduced trade volumes on routes affected by the Red Sea disruption and the return of crude tankers to dirty trades. Fleet-wide rates decreased to USD 25,775 per day in Q4, marking a 40% decline from Q1 levels. Despite this, our diversified fleet and operational efficiency enabled us to deliver solid earnings in the quarter, achieving an EBITDA of USD 142 million and a net profit of USD 77 million. Geopolitics continued to play a defining role in Tanker markets. The Red Sea disruption initially had a strong positive effect on ton miles as vessels rerouted via the Cape of Good Hope, decreasing trading distance. However, as crude tankers entered the product market to capitalize on higher rates, much of the incremental ton-mile demand shifted away from product tankers. By year-end, trade volumes on routes affected by disruptions have declined, neutralizing the earlier gains. Looking ahead, we view a potential normalization of the Red Sea trade routes as largely neutral for product tanker ton-miles. Though any recovery in European diesel imports, particularly from the Middle East, could present an upside. While easing sanctions against Russia might reduce some gains in the trade business, the geopolitical situation remains fluid. Conversely, the new U.S. administration's tougher stance towards Iran and Venezuela is expected to reduce crude cannibalization, supporting product tanker utilization. Geopolitical developments are likely to continue influencing trading patterns and freight rates. While some may support tanker demand, others could constrain it, making adaptability and operational resilience essential in navigating the volatile landscape. On the supply side, while the product tanker order book remains elevated, it is important to use this in context. The average age of the global fleet is at its highest in 2 decades with 50% of the fleet now more than 20 years old. These older vessels typically experience lower utilization and many are subject to sanctions, particularly in the LR2 Aframax segment. This aging fleet is expected to offset new deliveries in the coming years, keeping net fleet growth relatively contained. We believe this dynamic will be a key factor in maintaining balanced supply fundamentals. While alongside geopolitical drivers will shape the product tanker market in 2025. Despite soft markets in the second half of 2024, TORM's strong balance sheet and disciplined capital allocation remains a cornerstone of our strategy. Our liquidity position, prudent financial buffer and conservative threshold liquidity levels ensure we are well positioned to navigate the market cycle. For 2024, we returned close to 80% of free cash flow to shareholders, thus at par with our payout ratio the year before. Our approach aligns distributions with financial performance, maintaining transparency and sustainability in capital allocation. Looking at vessel values, we saw a modest decline of 4.6% in Q4, bringing total fleet value to USD 3.6 billion. Our debt maturity profile remains manageable with USD 168 million in borrowings maturing this year and larger maturities not occurring until 2029. This provides us with financial flexibility to invest when the right opportunities arise. Sustainability remains central to our long-term strategy. In 2024, we achieved our IMO 2030 target of a 40% reduction in carbon intensity, more than 1 year ahead of schedule. We have also made significant strides in safety, gender diversity and environmental responsibility. Our latest sustainability report reflects our increased focus on transparency and alignment with the corporate sustainability reporting directive. We are committed to continued progress on measurable ESG targets, reinforcing TORM's position as a responsible leader in the shipping industry. As we look ahead to 2025, we remain cautiously optimistic. Based on current market trends and our fixed coverage as of early March, we expect time charter earnings in the range of USD 650 million to USD 950 million and EBITDA of USD 350 million to USD 650 million. These projections reflect an expectation of lower average freight rates relative to 2024, as short-term geopolitical disruptions ease and supply-demand dynamics rebalance. That said, the high degree of geopolitical uncertainty and the speed at which new developments can impact the market means we must remain agile and vigilant. Our integrated TORM platform, strong capital structure and operational excellence give us confidence in our ability to respond to these challenges and capitalize on new opportunities as they arise. Some closing remarks. In conclusion, 2024 was a year of strong performance despite a softening market in the latter half. We delivered solid returns to our shareholders, maintained our financial strength and continue to enhance our sustainability performance. While 2025 presents a more uncertain environment, TORM is well positioned to navigate the road ahead. Our disciplined approach, combined with the resilience and flexibility of our platform will enable us to deliver continued value to our shareholders. Thank you all for your support and confidence in TORM. Then, we are on notice. I would like to start the formal proceedings of the Annual General Meeting. The notice of the Annual General Meeting, together with the explanatory notes, was issued on March 17, 2025. Accordingly, the requisite notice of the meeting has been given. I therefore propose that the notice of the meeting should be taken as read. Thank you. And here are our voting procedures. To reflect the use of TORM's shareholders more accurately, voting today will be done by way of a poll on each of the resolutions to the meeting. I am appointing Nick Lindsay, the Company Secretary, to act as scrutineer. I here confirm that as the Chair of the AGM, I will vote all proxies received as per the proxy instructions. And that, in addition, I will vote in favor of all resolutions for the proxies where I have a discretion to do so. I would also like to ask Chris Everard, General Manager of TORM plc to confirm that as a corporate representative of OCM Newer Holdings, SARL, he will be voting in favor of all of the resolutions to the extent that he is permitted to do so.

I confirm, I will do so.

There are 3 options for each resolution: to vote for the proposed resolution, to vote against the proposed resolution or to withhold a vote. A vote withheld is not a vote in law and will not be counted in the calculation of the proportion of the votes for or against a resolution. The slides that will appear on the screen set out the votes representing all the proxies received and the vote of OCM Newer Holdings SARL. Do we need - no, we don't need to. Okay. So we go for the next one, which is the resolutions. We will now proceed to vote on the resolution, which I will formally propose to the meeting. The full text of each of the resolutions is set out in the notice of the meeting, a copy of which you all have received. Resolutions 1 to 9 are proposed as ordinary resolutions, for each of those resolutions to be passed, more than half of the votes cast must be in favor of the resolution. For resolutions 10 and 11 are proposed as special resolutions. For each of those resolutions to be passed, at least 3/4 of the votes cast must be in favor of the resolution. Okay. So then we are at #1. The first resolution is to receive and adopt the annual report and accounts for the year ended 31st of December 2024. I now propose that the annual report and accounts for the year ended 31st of December 2024 be received and adopted. I confirm that as set out in the summary, this resolution has been passed. We are at the next one. This is to seek approval of Directors' Remuneration Report. I now propose that the Directors' Remuneration Report as set out in the annual report and accounts for the financial year ended 31st of December 2024 to be approved. I confirm that as set out in the summary, this resolution has been passed. Number 3. The Board of Directors recommends that Ernst & Young LLP be reappointed as the auditors of the company until the conclusion of TORM's next Annual General Meeting. And that the directors to be authorized to fix their remuneration. Resolution 3 deals with their appointment and Resolution 4 deals with their remuneration. I now propose that Ernst & Young be reappointed as the auditors. I confirm that as set out in the summary, this resolution has been passed. Now it's the auditors remuneration to be fixed. I confirm that I set out in the summary this resolution has been passed. Resolution 5 to a concern the reelection of Christopher H. Boehringer, myself, and Jacob Meldgaard as directors, each of whom retires and being eligible, are offering themselves for reelection at this Annual General Meeting. The Board of Directors recommends that each of the directors to be reelected as Director of the company. A, I propose that Christopher Boehringer to be reelected as a Director. I confirm, as I set out in the summary, this resolution has been passed. I now propose that Göran Trapp be reelected as a Director and that seems that he is as well. I can confirm that. As this next resolution relates to my reelection, I will now hand over the chair to Christopher Everard.

I now propose that Annette Malm Justad be reelected as a Director, and I confirm that as set out in this summary of this resolution has now been passed. And I hand back to Annette.

Now I propose that Jacob Meldgaard be reelected as Director. And I can confirm that as set out in the summary, this resolution has been passed. Now we are at Resolution 9, subject to the cancellation of treasury shares under Resolution 11, taking effect. I propose that any claims the company may have in connection with those treasury shares be released. Yes, there we go. I've confirmed as set out in the summary, this resolution has been passed. I propose that the company's share premium account be reduced by USD 180 million. And I can confirm that as I set out in the summary, this resolution has been passed. And we are at 11. And for the final resolution, I propose that the company's treasury shares be canceled. I can confirm that as set out in the summary, this resolution has been passed. Okay. Then we are getting to the end. That concludes the business of this meeting. The final results of the meeting will be announced to the market through our regulatory information service and posted on our website as soon as practical. Thank you, everyone, for attending our Annual General Meeting. Thank you.