Wallenius Wilhelmsen ASA (WAWI) Earnings Call Transcript & Summary

Any more? I think I was actually ahead of time today. If not, there is a short break or a good break actually. So, be back here quarter to two. [Break]

Yes. I'm stealing the show from Anders now. But we got a question before the break that I don't think we answered sufficiently in terms of the structural implications of the trade imbalance. And then one of the guys I pointed to that has a longer memory than me and slightly higher rate was Ole. And Ole came over and told me, but this was the whole reason why you guys made the merger. So, I thought, Ole, I'll call you out on that. And since you have a memory way back, from your perspective, what happened?

Okay. So, I'm not going to tell you what Wilhelmsen thought they were doing, but I'm going to tell you what the analysts saw Wilhelmsen and Wallenius is doing. And we're back in 1997. And the back story, as you heard earlier, was that Wallenius was the only Western operator who had direct contact with the Japanese manufacturers. Everybody else was a subcontractor to the Japanese shipowners who didn't have enough capacity. And Wilhelmsen historically was incredibly strong in Australia. So, they were both unbalanced. Wallenius unbalanced coming back to Japan and Wilhelmsen unbalanced coming back from Australia because there wasn't enough rolling cargo coming out from Australia. But if you combine the 2, you could go fully laden into Australia with a high-value cargo, you could get just something to get you up to Japan and then you could take cars out of Japan to the world. And then you had a triangle trade and they were balanced. So, that was how the first balancing was solved. This was how we explained it. I don't know what the hell they thought they were doing, but this is how we explained it.

And then if you add a little bit of High & Heavy into the mix also coming from the Wilhelmsen side also balancing out, I think that's a good recap of what happened. And as a follow-up today, today, the system value is less being able to bring cargo back because that is structurally going down. The system value is to have a product in Asia and specifically now in China, where you can come several times a week and pick up cars and distribute it wherever in the world. And that's why an OEM struggle to do that because you need a lot of vessels and a lot of different cargo sources to be able to fill up the vessels into all the various ports of the world. And if you are a BYD and you have 7,000 cars on 1 vessel, if you send that to 10 destinations, it's going to be very bad economics. So, this is really the value of an operator system that still is there, less for the front haul, backhaul, but more because of the global distribution needed if you are to be competitive out of China. Next one up is Morten. Please, Morten, so come up. He is our internal ship owner and trying to find capacity that doesn't exist. So, good luck.

Thank you very much. I have the mic. And nice to see you all. I am Morten. I'm the Head of Fleet Ownership. And so today, we'll talk a little bit about our fleet development and a bit about the supply side of our market. So if you have a history back to '97 from these companies, you won't need this slide, but I think I'll bring it up anyway. What is a PCTC or a RoRo vessel or a car carrier? Well, it's a large multistory car park with a big ramp and a propeller at the end. Our vessels usually have 12 to 14 decks like this illustration here shows of our Shaper class. All of them can be filled up with cars, obviously, but we also differ on what we can load apart from cars. Size-wise, the smallest vessels we have can take around 5,000 cars. The largest vessels we have on order can take up to 11,700 cars. And if you're familiar with this area, the biggest car park in the area is at CC Vest, the shopping mall up the street. How many cars can you park there in total? About 1,100. So, Shaper class is around 11 times in volume for the locals. So, as I said, if we sort our vessels a bit, our fleet can be categorized into 3 buckets largely. We have standard car carriers, PCTCs, as we call it. That's where we have the majority of our fleet. They are very good and flexible and light vessels can fill them up with cars. They can do a little bit of High & Heavy cargo, but only on a couple of decks and not the heaviest stuff. And in the other end of the spectrum, we have RoRo vessels that are tailored specialized vessels ready to carry very heavy cargo up to 500 tonnes per unit and 7 meters tall. We have 8 of those that are in specialized trades with a specific set of customers. And in the middle, we have, for lack of a better word, hybrids, which are flexible enough to take most of our High & Heavy cargo, but also good with cars. And that is the, let's say, the segment or the type that we are growing at the moment. Our previous HERO class fit into this category and the 14 Shapers we're about to start on, they are also in this category. You'll also, you can also read this a little bit left to right. We are adding capacity in the large end. And when we are retiring capacity, most of it is in the small end of the spectrum. And that is, of course, because we want to provide to our customers the most competitive freight and the lowest emissions and the size, upsizing the vessel is the most powerful lever we have to reach that. And it's also well suited, of course, with our operational size and cargo base. We are well suited to implement larger vessels, and we have historically broken the mold in PCTC several times, introduced larger vessel types. If you compare us with the peers, we have the largest fleet in numbers and in capacity. And we also have most of these hybrid type vessels. Others are also growing in that category, but we have the largest volume of that, and we will add all the shapers into that category. And in the heavy RoRo segment, which we spoke about, we are quite alone to have that kind of capacity. And we are, of course, intending to continue serving that segment where we have long-standing customer relationships. If we lift up a bit and look at the global fleet, here on the left side, you see the capacity that has come in and gone out per year. This is in CEU in numbers. The whole global PCTC fleet is now at around 950 vessels and the order book is at about 180 vessels. And you'll see here that we have been through almost 10 years from 2009 to '19, where there were very little or no meaningful fleet growth in the world in this segment. And then came some years with increasing deliveries. So, the deletions here that are illustrated into the future are based on retiring vessels at 30 years of age, which is kind of the normal retirement age for car carriers. But at the moment, we are not in normal times. And basically, even if we retire vessels, most of them will probably find another home with the secondhand traders or with regional players. So, all in all, we are in a period with fleet growth. The order book a couple of years ago was up to 42% of the existing fleet and has now with delivery of the very big 2025 vintage come down to around 20% and is again on the rise with new orders coming in. Today, we would say the order book is around 25% of fleet. If we instead of looking at deliveries, look at contracting, we see we have been through 3 years from '22 to '24 with quite intense contracting of car carriers. And then in '25 last year, we took a breather as an industry and sort of a wait-and-see mode to see how the fleet was absorbed. And we all know and you have probably heard this morning that, that was not a problem. The whole fleet of new building has been absorbed and then some. So, this year, the, let's say, the confidence has returned to the market. And we are again in a period with quite active ordering of newbuildings this year. 73 contracts have been signed as far as we know, so year-to-date. And if you just extrapolate that for the rest of the year, we may end up around 2007 record year. But we are pushing this quite far into the future now and orders are coming in for '30 and '31. So, the lead time is now 4, 5 years, which at least I think we see signs that it's harder for a tonnage provider to secure charters for that far forward and also harder for the yards to price it. So, I think 5 years is sort of a maximum at the moment of what is commercially viable. You may also notice that all these orders, usually, they basically end up with a handful of shipyards, mainly Chinese. And we wish sometimes that there were more providers of PCTC in the market, and we could find more yards interested. But building PCTCs is a bit special. It takes much more man hours than other types of ships because, again, of all the decks that needs to be welded and the structure. And also, it takes up a lot of space at the shipyard sites because you have to put all the decks out next to each other before you can put them into the ship. So, it isn't everyone who's interested in this sport. And it ends up with a few specialist shipyards, most of this. So, with that in mind, no wonder that the prices are holding up for newbuildings. The yards are also, there's also a lot of interest ordering container and bulkers and so on. So, yard prices are holding up. We estimate that 7,000 standard dual fuel LNG vessel costs around $94 million now. And on the charter side, we see strengthening rates again. This 1-year charter rate of $90,000 is probably representative, but a bit theoretical also because the order depth or the liquidity here is basically gone. There isn't vessels available for charter for us for delivery this year or even next year. So, it's, we can see deals for '29 and '30 onwards, but there is very little to add in the short term. So, when our colleagues in the sales department come to us and say, "Why don't you add some more vessels, we would like to ship some more," we had to say, "Sorry, there's, it's not possible." The whole, it's not just us who are basically filled up with cargo, it's the whole industry. And you saw this morning probably that cargo is flowing out of our segment at the moment and into containers and other types of ships. So challenging to secure more capacity than we have on our books. But returning to the start, it's a good timing for us at least. And so we are happy and our customers are happy that we are about to take delivery of the new Shaper series, 3 vessels this year. And by the end of '28, we will take all 14 vessels. The first 6 are of 9,300 CEU, as you know, and the last 8 will be the largest car carriers in the world at 11,700 CEU. So, we look forward very much to this and what better time to get large vessels into this market. That's what I have.

Then there's room for questions, I think.

So, it's interesting what you were saying on the man hours for the car carriers. Is that something that's changed? Because I believe the efficiency by these 4 yards that you mentioned that are very focused on this business have improved a lot? Or has it always been around that same number?

I wouldn't be able to give you a very precise answer there. We see automation coming up when we visit the yards, but how much exactly it has changed, I couldn't tell you very precisely. It is a significant amount of hours going in. We estimate twice the amount as compared to welding up a VLCC, which is a much larger structure, of course.

And I think this is, this needs to be seen in a wider context, the fact that all segments are ordering. So, the yards can actually choose. And so I think what you're saying, Morten, is that in that market, they don't choose PCTCs unless they've done it before. They'd rather do a bulker or a tanker or a container vessel. Because for a shipyard, it's a question how, the biggest limitation you have is the dock, how much can we push through the dry dock or the slip. And then the second is basically the welding capacity in the area. And what we see is that you can push less vessels through the same infrastructure with PCTC than, call it, at least the average alternative.

And so that's interesting because then you have a tight connection to the Korean yards as well. So, the prices that you're quoting on the $94 million, that's a Chinese-built ship. What will you need to pay if you wanted to make or produce that same ship in Korea at the moment, do you know?

We have discussions with Korean yards, but I couldn't give you a precise number. It's significantly higher, both in Japan and in Korea.

Good morning, everyone. My name is Francesco Allamandi. I'm a Managing Director in the Bank of America Investment Banking team based in London. My day-to-day job is to serve our clients in the automotive industry in Europe, but also globally as this is a global market effectively. For the next 20 minutes, I'm going to have a short presentation going over some of the opportunities, the challenges that the current OEM, the current landscape, global landscape is presenting to the OEM industry, clearly building on some of the themes that Lasse and Anders have gone through this morning. I think what's fascinating is, we're going through an unparalleled paradigm shift in the industry, as has been mentioned. I think there are 4 key things to keep in mind here that are shaping some of the dynamics in the industry. #1 is what we call the end of volume growth, but certainly a slower growth in the number of units being produced globally. We've been through a cycle between 2010 and 2017, where the industry sort of benefited from a huge growth driven primarily out of the democratization of Chinese mobility consumption, car consumption. And that has generated operating leverage in the industry and great profits and then margin improvement. And we went through a period of volatility during COVID that we're all familiar with. Today, we're in an environment where markets are growing, are more mature and growing more slowly. By 2029, it's estimated that the industry will essentially only by then recover the same amount of volumes that we had at the prior peak. So, that's a pie that in terms of units, at least is growing a bit slower than in the past. Secondly, there's different technology adoption globally across regions. So, in particular, and here, we have the example of battery-driven vehicles. China will lead, is expected to lead. U.S. will rely more in the future on more traditional technologies and then Europe is a little bit in [ limbo ]. What does that mean for the OEMs? It means that you need to fund more technology or parallel technologies for a little bit longer. The third dynamic is the adoption of these new powertrain technologies has been volatile and uncertain, essentially as testified by the very big write-downs that some of these companies, GM, Stellantis, Ford have announced, for example, this year, we've gone through an investment cycle into EV technology that hasn't really produced the returns that we had promised at the onset. And lastly, we're seeing obviously more geopolitical friction globally, whether it's tariffs, rare earth export control, whether it's software barriers. What that means is, again, from an OEM standpoint, the need to develop different local ecosystems rather than a single one global to compete at a global scale. So, the danger here or the challenge that's faced is there's an increasing capital demand for OEMs to compete in what is a more, theoretically more fragmented market. On top of it, you have the competitive overlay. The Chinese OEMs have taken a large share of volumes from pre-COVID to today in a market which is basically stable in terms of, from 2019 to today in terms of units being produced and sold. The C-OEMs have taken about 12 million more in volumes, clearly lost by the global competitors. When you look at the distribution of that share gain, you have 2, 3 larger players, BYD, Chery, Geely, but you have also a universe of midsized competitors with very attractive products and which have entered the international market. This dynamic to me has taken 2 stages, right? Stage 1 was between 2019 and 2025. A lot of the volume gains, the proportion of that has happened domestically, right, 8 million volumes gained domestically out of the 12 million essentially. But now we're into a second stage where over the past 4, 5 quarters and projected at the end of this year, what has been a slowing demand in the internal market in China has incentivized the C-OEMs to essentially replace volumes lost in the local market to volumes gained internationally, pretty much so far at a 1:1 ratio up to now. And what's driving this? The local domestic market in terms of consumption of vehicles has slowed down over the past, since basically 2025. Multiple factors. A, essentially the subsidy regime was wound down over the past 2 years. There's also a normalization, which comes with that because there was demand essentially pulled forward ahead of the subsidies being phased out and also negative wealth effect as the strength of the Chinese consumer internally is a bit weaker. How do we see that, how does the industry expect that to evolve going forward? Well, if you look at the medium term, '26, '27, '28, volumes or internal demand for cars is expected to be on a recovery, but relatively stable and certainly lower than the prior peak at the end of 2025. So, that's a dynamic that's expected to remain there for the medium period. And, what's also interesting, on the right-hand side, you see the nature of what the Chinese car market is today. It's very much a start-up market where you have 50-plus of the 70 competitors fighting for business, trying to bring innovation. And essentially, only few of them really have the scale, ultimately, car business is still an industrial business, still scale is still a critical factor for profitability. Only a few of them have the scale necessary to turn a profit. Yes, we see the top 3, the ones who have essentially 1 million-plus number of units. But for the rest, they're still yet to turn a profit. So, there's essentially an existential need for the local player to also evolve and capture share outside of the local market in order to come out of this start-up phase as a survivor of the industry. The other side of the equation, it's also the ability to fund this international growth from a capacity perspective. When you look at the firepower or the theoretical maximum firepower of the industry in China, looking at volumes, which could theoretically be double what the internal consumption is today. So we've seen the exports going up. And again, the big gap between the dotted line and the solid bar, that's capacity available to fund or to provide products for this external growth. Where are the products going today? Today, products are going more towards -- or historically up to today, have been going more towards developing markets, LatAm, Russia, Africa, and the rest of the neighboring countries. North America is a more closed market, as outlined before. Europe is clearly the low-hanging fruit, right, where we expect volumes to continue flowing to increase -- to increase flowing. I'd like to note that this is not a dynamic that's -- that only applies to Chinese OEMs, right? This is one that applies to all the international global players also operating in China, which are increasingly seeing China is also an export base for the global market for a number of reasons, right, for the -- they have installed capacity. They have a low-cost environment, a low cost and growing in terms of growing supply chain that's local. And also, most importantly, there's an advanced technology. These suppliers are able to provide really advanced tech. As I think it was -- the VW CEO mentioned, China is becoming the fitness center of the auto industry. So for global OEMs, being there, learning lessons there, competing and taking that lessons abroad and capacity abroad is still going to be -- there's still going to be a strong competitive incentive to do that. Talking about -- remaining on the theme of competition, right? What has happened so far with -- in the first wave of competition in the local market, the competitive forces that have shaped the market have been based on a, ability of local players to really hit the market with new products at a very fast cadence and a very fast development cycle, again, a feature of a start-up market; b, great integration, for example, of your phone in the car, the user experience end of the car and then the integration with the local ecosystem has been an advantage. But largely, I'll say, mainly the catalyst that has empowered local players has been the shift in powertrain, right? So going from an ICE vehicle to a BEV vehicle where you have better battery technology, a structural cost on the battery that's advantageous. And so the initial catalyst was powertrain, where we see the competitive landscape changing today and the forces that shape the market today, they're going more towards the software. And ultimately, the highest application of software, which is autonomous driving. And so today, in the local market, at the end of '25, 2/3 of vehicles sold featured advanced ADAS function, right, Level 2+ and above, much, much higher level than what we get here in Europe or in the U.S. And we have BYD is one of the examples, but essentially a big suite of sensors and features are offered at base level and with smaller incremental cost at the more premium end of the vehicle. So that's clearly a feature that's defined in the competitive battleground in China today. Above that, you have a growing and nascent robotaxi industry as well, like the ones you see in the U.S., in China, you also see commercial operation from a number of operators in an industry with a number of players, whether it's the tech providers or the actual ones who are more integrated, which do the tech and also the operations on the street. Is this a competitive advantage that's being developed and can be deployed elsewhere in Europe or used to conquer market share globally? I think in the short term, there's still barriers to that. There's data control, there's authorizations, regulation. But what we see is that maybe not the products in the car, but certainly the technology stacks are making their way into the global markets and into Europe. You see Momenta, WeRide, Pony, all of the local players have partnership in place with mobility operators in the European landscape, and we will see these tech stacks operating in our market. Moving on to a bit of our local landscape here in Europe. The market has been relatively resilient in terms of units being sold despite the macro headwinds. Today, again, the incumbents still have a 60% market share, but the Chinese OEMs have been taking shares. Today, they have about basically 18%. They had 3% about 1.5 years ago. The case study that's very interesting. I know that here in the local market, Norway is a very specific market where the BEV penetration is really high. But in more traditional markets such as the U.K., you can see the second highest sold vehicle in the country in Q1 of this year was the Chery Jaecoo, midsized SUVs with a Chinese brand. So done without a European brand, like, for example, Geely would have done with Volvo or has been done with MG. So a non-native brand, -- it's not a BEV. It's a plug-in hybrid. So it's a product that really has been competing in a traditional way in quality. Quality is understood as the ratio between the content versus the price. The PHEV is a particularly interesting story because it has been the loophole in a way, used by the Chinese OEMs to go around to a certain extent, the tariffs that were imposed 2 years ago, at the end of 2024. And today, most Chinese makers have to face some degree of tariffs for electric vehicle only. That's on top of the 10% tariff that's already hit the imports in Europe. That hasn't really slowed down the consumption of Chinese vehicles in Europe. The big question is, will Europe impose new tariffs? Last week, the State of the Union speech points to the problem in a way. It's to be debated whether this is going to result in tariffs. The timeline for that would definitely be similar to the previous one where from '23 to '24, that's when the tariffs will be implemented. So you're looking at perhaps a 9 to 11 months' timeline. Certainly, this would help local manufacturers in the market. But at the same time, the new entrants are expected to, a, absorb the tariffs in a first part, which they can't do because of a cost advantage that they have in the manufacturing. But b, over time, try to localize more into Europe. And these are really the current plans that that we see from Chinese -- from Asian OEMs. That's localization is the ultimate incentive right, of the tariff regime. Why are they doing this? Obviously, tariff avoidance, but also to away from a brand image standpoint, there's also a political acceptability standpoint. I think it's important to note that when you sum up all of the capacity that will be built to 2030, right? So in the medium to longer term, you still have a significant gap to what the market share and to the volume implied by the expected market share of the Chinese player that will be in 2030, right? So you're thinking about 2 million-plus volumes coming from China, about 1 million potentially localized, there's still a significant gap that leaves room for significant imports there. Switching gears a little bit to North America. North America today is -- we could see this as a happy place for legacy manufacturer. A, there's very attractive, most profitable profit pools of the market. Think about the large SUVs, the trucks. These are really marketplaces where the locals, the Detroit 3 is -- have making a lot of profit. Margins have really focused their strategy to maximize their opportunity set in there. It's no wonder that the global OEMs who have been losing volumes in the East are looking to North America as a must-win market for the future to replace sort of profit loss elsewhere. Localization is the price of new entry under this current tariff regime, and we've seen announcements made but pretty much most, if not all of the operators in that market that goes towards bringing more production for production for protection in the continent. There are 2 themes here that I think could shape the dynamic going forward. One is the demand in this market is pretty much K-shaped as much of the demand in the U.S. economy. This is our internal data, but basically, you see that the loan payments for new large vehicles, again, large vehicles are the ones sustaining the profitability of the North American industry today, are heavily skewed towards higher classes. And that reflects really the K-shaped dynamic in the U.S. economy. Now should there be a stock market hiccup, maybe we could see if something changes there and then potential risk on that side of the market. The second dynamic is one about powertrain. And differently from the rest of the world, the car parc and the car sales are going from ICE, not to BEV, but from ICE to namely moving more to hybridization. This is in the medium term, an opportunity for OEMs or could be an opportunity for OEMs, which have global platforms with hybrid technology, and I'm thinking really about the Japanese, the Korean, to a certain degree, the European player, to try to take market share in some of these profit pools, thinking about the midsized compact-sized SUVs. So that's an opportunity for competitive shakeup in the medium term. I think the big question is in the long term, right? In a market which is essentially protected where the development or the capital deployment into electrified technologies or pure -- few fully electric technology is not as incentivized by the market. What's going to happen really in the long term where, let's say, barriers could come down and you see really players who have been in this fitness exercise for a couple of decades now entering the market against, let's say, less fit domestic players. I'd like to conclude with a quick thought and going back to the beginning of the presentation, right, also reflecting our role as M&A practitioners. When you think about the start of the presentation, we mentioned the fragmentation potential of the market, increasing capital resources needed to compete. And you can think of deglobalization instinctively as a result of that. What we're seeing instead is really much more collaboration in the industry. And as players from across the globe, we are trying to get together to solve some of these challenges, right? You see from a transatlantic standpoint, software JVs between examples here, Rivian and VW also with equity links on top. You see sharing of platforms, some of the American guys, namely Ford in Europe using some of the platforms of the European established players, sharing of capacities in factories as well, innovative agreements for the manufacturing and distribution with equity links, for example, Stellantis and their stake in Leapmotor and their JV to produce Leapmotor cars outside of the Chinese market. And also deals where capital has been provided in exchange for licensing tech, the Chinese player like the VW and XPeng case shows. So the concluding remark is that despite the change in paradigm, this industry remains intrinsically global. Global scale still counts and matters. The markets are global, and this will remain like this and so will remain the flow of ideas, technology and ultimately also products. Thank you.

Yes. Hi. Thank you. So let me start with my presentation. So I'm an economist, I'm a macro person. So I'm thinking we're going to look at China from a macro perspective, a bit of a bird's eye view. And this picture that I picked is not by accident. It's from BYD's Shenzhen Gigafactory. It's a bird's eye view of that. I think because I'm a bit jealous of our shipping team in DNB Carnegie, who's going there. It's a factory that is approximately the size of London in scale. So it produces an enormous amount of cars and vehicles for export. So let me begin with what we think is important for the macro perspective on China. And this is really something that I think is defining what's happening within China and outside. Because if you look at what's happened in the past, I would say, 6 years, something very dramatic has changed in what's driving China macro. So if you go back even further in time and you ask economists sort of what is the big risk? What keeps you up at night? A lot of people will tell you, oh, there's so much debt accumulating in China. They're building all of these houses that no one wants to live in, these ghost towns. When that goes bust, it's going to be a big, big cost. It's going to really hinder growth, not only in China, maybe even in the world. And that's precisely what's happened in the last 6 years. In 2021, the Chinese government themselves decided this is a bubble, the risks are high, and they're just going to poke it and also contain the fallout of it. So if you look at the chart behind me to the left, it shows you what happened with housing investments in the pink line, and that's halved. And this is important. I mean, at its peak, it was like 1/4 of Chinese GDP. So when that halves, that's a big impact. But if you look at what's been happening in the global economy, in the Chinese economy, a proxy for Chinese GDP electricity demand just kept growing. Actually, it hasn't really slowed down even. That, I think, tells you a lot about what's been happening internally in China. It's managed to basically shift 1 engine of growth, real estate into other engines of growth. Manufacturing is important, of course, but so is cars, so is robotics, so is AI, so is biopharma. Everything else got more resources, more investments. And basically, what we think is that China ran Hunger Games on tech. They were saying, yes, welcome. We have a big start-up community. We're happy to invest. We're happy to let there be some overcapacity, but there's going to be sort of competition that gets the winners up and out. Now the thing that we need to remember is that this has costs. And I think that's where we think the Chinese economy and the export story is kind of focused too much on. So if you think about what happens in the hunger games if someone wins, but someone is going to go hungry. And what's happened with China is that overall, margins for everyone has really been squeezed. And for households, in particular, when we look at real wage growth, that's basically halved. Prior to 2021 or 2020, prior to the pandemic, it was around 6% of real wage growth every single year. Now we're at 3%. And what does that mean? Well, it means that households have much less income growth. But in addition, the biggest storage of wealth for households, their house has declined materially in value. So low incomes, but also a big cut to their wealth. And what does that do to Chinese households? Well, they save more. The chart to the right shows you that. And if we think about the auto sector, it's kind of the textbook example of this, a sector where demand, chart to the left is basically flat. I'll come back to the decline this year. And the supply, the manufacturing, is growing into the sky. But I think there's a bit more to this. There's a bit more than just demand is too small, supply is too high, and therefore, much more is being pushed out into the rest of the market. So let me start with the demand story. So I think the previous speaker already mentioned it, there's been a lot of changes to subsidies in China, purchase subsidies. One thing is that China has had this big program where we trade in old vehicles, and the government will pay a lot of the price of the new vehicle. It's set up in a way where especially the cheaper cars is going to get more subsidies. In addition, if you buy an electric vehicle or a plug-in hybrid, you're going to be exempted from the purchase tax. And what I think is important is that when we look at what's happened to these subsidies in total from 2025 to this year, that decline is about 30% to 40%. And if we calculate it as a share of the value of the vehicle, it's actually quite high. For cars that cost less than RMB 100,000, it's about 13% of the value. So why do I make a point out of this? Well, because when we think about a car here in Norway, that's less than RMB 100,000, like NOK 145,000. We think that's a really cheap car. What is that? But for China, for the average Chinese household, if you look at what that costs in terms of their average wage, they have to save 1.4x their annual wage to buy that car. And some of the most expensive segments, I mean, it's almost like buying a house here in Norway. So when the subsidies change, in our view, that's really had a big impact on demand this particular year. What does that mean? Well, it also means that in some of the segments where demand has fallen more, we've seen that the cars have gone out. So one of the most popular cars that are being sold in Europe, in the U.K. and Germany, at least, as well as in Brazil is this BYD Seagull. It's this baby car, very small and very cheap. And it actually occupies a market that doesn't really exist. It's not really being served there. We also see that the XPeng, which is around RMB 120,000, that's being dubbed the Tesla killer. It's coming out also in a greater extent. And of course, we have Xiaomi. So this is the car that looks like the Porsche Taycan but drives better than the Porsche Taycan or at least it beat it in the Nürburgring. That one is actually part of a segment where demand is also declining, and it's also coming to Europe. And we have the Tesla Model Y, which is actually a quite expensive car in China as well as the Maextro, which is a Huawei model. So what we're seeing is demand is declining the most in the cheaper segments, and it's pushing some of these cars out, but it's also quite competitive and also the more expensive segments. The bigger story, I think, is not just that demand is declining in China, but that there's been a massive change in drivetrain technology. And I think it's kind of difficult to wrap your head around it because of the scale of China. So as analysts, we typically think something big doesn't really change that fast. Acceleration is not that quick. But if you look at what's happened in terms of Chinese demand for vehicles, in just 6 to 8 years, it's basically transformed the entirety of the Chinese transport sector more or less. So the chart to the left shows you domestic demand, the total in gray, but you have the ICE vehicles and the traditional hybrids in blue, battery electric and the plug-in hybrids in various shades of pink. And it's kind of fascinating that in just sort of the course of business cycle, the demand for ICE vehicles went for like 25 million cars per year to, what, below 6 almost. That's a massive swing. If you think about the size of that, that's more than the supply the OEMs that produce in Germany, in Japan and the U.S. put together in 1 business cycle. And these factories are not sort of transforming themselves into new EV factories. Those have grown in addition. So there's been a really big change here in the drivetrain. And we think that, that is one of the reasons why especially ICE vehicles are driving the exports. And a lot of people will say, wow, well, that's a massive change, 6 years, that's not a lot. But when you think about what's been underneath this, it's been pushed through by policy that started back in 2001. That's when China really started saying, "Oh, maybe we should have some more students in engineering courses, material sciences. We need to look more at batteries." In 2015, China had a major pushout of sort of charging infrastructure. That's also when they started mandating supply chain localization. So if you wanted to produce an electric car, the battery you used had to be made in China. They did a lot to make sure that suppliers were built up in China. And that's why when 2021 hit and the housing market was popped and the Chinese car manufacturers suddenly could see more access to capital as support to build up their factories was kind of ready to build. And that's also what we think is happening when we look at exports. So the chart to the left shows you exports. And I think really, surprisingly, I mean, if we just look at what's being mentioned in the media, everyone is talking about this massive wave of Chinese EVs that's coming to Europe. But if you look at the actual data, the largest increase in exports from China is just normal ICE vehicles. Of course, battery electric and plug-in hybrids have also grown, but these are kind of 2 very different stories. On the one hand, we have all of the stranded productive capacity in China producing ICE vehicles that can be sent out. And on the other hand, you have very competitive EV vehicles that are also being pulled out. And as the previous speaker noted, actually, the European markets, the Western markets in general is not that big a deal for China. Going forward, I think it's also worth noting that these are the markets that China are targeting. So if we look at what's driving sort of demand for vehicles in developing markets, the chart to the left kind of shows you that. It's the number of households, millions of households that enter what we call middle class. So this is when you buy your first nice car. And if you look at what's going to happen in the next 10 years on our estimates compared to what's happened in the past 10 years, actually, China is not really that big a driver of the growing middle class. It's really the other emerging markets that are more important in terms of the scale of growth. And if we look at what China is exporting today in the regional split, it's quite fascinating that China's exports to these other emerging markets are really that very important. What are they doing there? Well, 1 is building brand recognition. You have the sales team in line; you create the logistics that you need. But 2, what we're seeing is also that China is able to adapt the supply with the demand in the various regions. So ICE vehicles go predominantly to Latin America, lots to Africa as well, whereas Chinese EV and plug-in hybrids are increasingly also going to Latin America and especially emerging Asia. So one of you or some of you might ask, well, EVs in developing economies, are they capable of penetrating that fast? I mean is the infrastructure for charging there. I think to me, the big surprise is, yes. In Vietnam, for example, EV penetration is 40% of new car sales. So developing economies, having seen what China has done, are perhaps also able to build the infrastructure needed to go over to plug-in hybrids and EVs. And the war in Iran, all the better reason to do so. Now what will happen then with these Chinese exports? Are there going to be tariffs that are going to make the Chinese exports less competitive? Well, we think there are definitely some. But fundamentally, I think it's important to highlight what China actually has been doing with tech. So from a macro perspective, we look at ex-factory gate prices. So that's an index of how things -- how expensive things are when they come out of the factory. And if we look at the chart to the left, we see what's happened with ex-factory gate prices for autos for cars in China. And normally, an economist keen on sort of inflation and central bank rates, we would expect prices out of the factory, hopefully, to continue rising about 2% every year. That's the best-case scenario. And if we look at what's happened with the Chinese cars, they've been declining in price every single year in the past 12 years. And a lot of people will say, well, that's because there's too much competition. They're cutting prices, there are price wars because they just have to subsidize and they have to settle the cars at a loss out there to gain market share. We think that might be part of the story for why prices have intensified in terms of the decline. But when we think about what's driving a big part of the cost in China, the battery cost, it kind of followed the same trajectory. Just in a couple -- sort of since 2021, battery costs have fallen by about 40% in China. That's something quite dramatic. And if we look at how that sort of compares to the battery costs in Europe or North America, I think it's a really big point to say it's dropped there as well in Europe and North America, learning by doing, it spreads everywhere. But the gap between how much a battery pack costs to produce in China versus Europe has actually widened further in the past 3 years. So it's even cheaper, even more competitive now. And what's driving that? Well, every time you go to a Chinese car manufacturing company, the showroom, the first thing you see, I think many of you guys may have seen it, is the wall of patents, which tells you this is our company's particular patents that we have. And we think that is important. But the International Energy Agency, which provided these numbers, they've also looked at other things that may be important. And their calculations show that China, having worked on sort of controlling the full value chain of battery production, they have access to materials in a cheaper way. There's vertical integration. That accounts for about 1/3 of their cost advantage. That's quite difficult to replicate. Another 1/3 of their cost advantage is just China is better at doing things. There's scale, the wall of patents does matter. And then the last 1/3, they're saying is, well, probably some subsidies here and there and probably also a cheaper renminbi. So what does this mean? Well, the way I'm thinking of it is if China is hoping to continue building its electric vehicle industry, this is really the foundation of what makes it competitive globally. And perhaps, it will be fine. It'll be happy to act as the Western multinational companies have done before, moving factories to Brazil, moving factories to the Middle East, maybe licensing the platforms that you use to produce as long as one of the key components, batteries are still Chinese. That brings me to Europe because this is probably where the problem of tariffs or the question of tariffs is most pressing. And I think the chart to the left is quite fascinating because that shows you the share of Chinese brands. So that includes brands like Polestar, which we don't really think about as Chinese but are owned by Chinese -- by the Chinese. And their share of the European sort of both U.K. and Norway car markets. And I sort of plotted a couple of things in there because I thought it was fascinating. So for a very long time, the Chinese brand share of the European market was very little, less than 2%, 3%. But even after the European Union slapped punitive sort of tariffs on the Chinese cars, the share kept growing quite significantly as well. Some would argue that's because China quickly switched over to plug-in hybrids. But it just kept growing until we got to the point where the EU and Volkswagen Anhui decided that you know what, what if we just agree that when China sells to Europe, you set a minimum price. We set some sort of volume that you can export, but at a minimum price so that we can protect our domestic car manufacturers. I thought that was fascinating because for a Chinese producer or in this case, Volkswagen in Anhui, that is basically saying we are guaranteeing you a wonderful profit that you'll never have in China. Best case scenario ever. So now when we're thinking about, okay, will the EU seek voluntary -- they want voluntary export restrictions. So they want the Chinese to say, you know what, actually we'll cap how much we sell to you guys. The question is, will there be a minimum price maybe also involved? Or will there be other horse trading that happens? And one of the things that I think is worth noting is type of horse trading that happens on precisely batteries that I spent some time on. So when we look at the broader picture, a lot of people will say, well, you know what, batteries are actually a general-purpose tech. So if you think about robotics, if you think about manufacturing, if you think about drones, a lot of sort of key strategic applications, it requires a battery to function. And if we think about where China is on the supply chain of batteries, 83% of all batteries today are produced in China. But the cell materials, so the components, the anodes and the cathodes, almost 100% of them are produced in China. A lot of the materials are being mined elsewhere, but they're processed in China. So if we're thinking about what the EU might want in their negotiations with China, 1 thing is localization of firms, localization of jobs, but another thing is probably also Chinese IP. So this has gotten a name in Europe called the Reverse Deng Xiaoping because it's kind of like what Deng Xiaoping did back in the day, which is saying, you know what, we'll give you market access, but what we really want from you is tech transfer. So let me end there with a couple of takeaways from my part on the macro side. For me, I think there's a lot of things that point to a structural change here. There's a lot of things that tell us that the Chinese car industry is quite competitive. And yes, there is very clear demand weakness now in 2026, but that is quite mechanical. The more important thing here is that China has managed to change the transport sector completely. And if we look at what's going to happen for exports, the Chinese government is very clear. They want to focus on emerging markets. The West is nice, but it's the rest that really matter. And trade barriers, yes, we might see more of them, but the competitiveness that underpins Chinese tech, it's very hard to just tariff away. And when we look at what might happen with the EU and China, watch out for some type of compromise involving IP. So with that, I'm a little ahead of time. So maybe we have time for the question. One question. All right. Thank you very much.

So then it's left to me to try to wrap it up, not with a disclaimer, but with this. Before I do so, I'd like to thank the person who's been behind this, certainly, Kelly and Francesco for bringing in new perspectives. Thank you. But also the 3 people over here that you don't see, but basically, those are the brains behind both me and Anders and others. So please, Ryan and the team get up and let's give them a good hand of applause, Ida too. All right. So I will try to -- so these are both Elisa and Ryan are part of Anders' team and Ida is on comms for those of you. Three key themes we've heard today that shapes our market. No doubt, China is the one driving the market today. And we have talked a lot about shipping because we have focused on the exports. And I just want to add 1 thing. We are more than just shipping, as you know. We also have a significant logistics and supply chain solutions business. The stronghold of that is in the U.S. So for the U.S. for U.S. market, we are very well positioned to serve that too. And certainly, also with our logistics capabilities around the world, we're fully able to help Chinese players grow way beyond the terminal side. So I just wanted to mention that. But today, we're really focused in on the shipping part of our business and those markets. And the key there is that we have constrained capacity. And then the natural consequence is that rates are increasing. So let me give you then a little bit more of the background for that, and I'll end with a repeat of our market view. What we have seen today is that the Chinese are basically taking over in every market and everywhere. Sitting in Europe, we tend to overfocus on Europe and talk about what happens when we have tariffs. Europe is not key to the Chinese. It's 70% of the current exports and other markets are growing faster. So the Chinese export story is not about Europe, it's about global competitiveness. And I would claim that if you go 10 years back, it was cost advantage. Now it's product innovation and technology advantage. They used to be cheap cars. Now they are better cars. And that's why you have seen that this has grown first in China, built scale and now they're scaling this overseas. And we -- based on the discussions we have with customers, they expect this to continue certainly for the rest of this year and into the next year, into the next years. This has caused a massive spread between the need for RoRo capacity or PCTC capacity out of China and the supply, meaning that the growth of exports are far surpassing the growth of the fleet that is coming in. We -- if you had asked us 2, 3 years ago, we were a bit uncertain of what happens in '26 when we have this first wave -- '25 and '26, first wave of vessels coming in. The answer was nothing. And the reality is that we're still lagging behind the growth in demand. So what we saw in -- now during 2026 is that more cars are moved into container, and we have a complete new segment of other bulkers and others doing cars. And I can assure you, I've never met a single OEM in the world that prefer anything but PCTC. When you move 10 million cars out of the country, you really focus on flow. Putting it into a box, out of a box, it creates damages, it's more costly and it's slower. Lifting it onto a bulker, just imagine. So all Chinese customers and OEMs are fighting for PCTC capacity. That's why they have started also now to do some time charters themselves out of desperation, not because it's a good idea. And here, you need to understand the value of an operator. We're an operator. We have around 130 vessels. We have tens of customers. We don't have 1 single vessel more or less ever in our history with 1 customer on board because you are taking big volumes out of China or Korea or Japan or Europe for that matter, and you spread it out to the world. And you need to do that frequently because if you don't come in every second day, the port is filled up. And you can't do that with 20, 30 vessels, but you can do that with 130 vessels. So what's unique with the big operators like us that these companies can never replace is, 1, the frequency we're there several times a week. Second, we can fill it with other OEMs going to the same port. So you don't need to take 1 vessel to 10 ports, but 1 vessel to 1 port with 10 customers. So that's why we're not afraid of OEMs being our competitors. We don't think they will. But we will have, for sure, Chinese competitors being operators. We already have very good competitors sitting down the street, even in the audience, and we are happy to have competition. But I think it's important to say that we are not concerned about our customers becoming our competitors. And we believe, based on what our customers tell us that these volumes that have moved beyond PCTC, the day there is capacity, they will come back. So not only are we seeing a growth in demand, but also a growth in unmet demand for global shipping of cars and equipment. And as Anders pointed to, we have not yet seen China moving at scale on high and heavy. This is the one to watch. And when we talk to customers in China, they are now saying that the first stage, they are maybe 10 years after the auto industry. If you talk to big global players, Western players in the high and heavy industry, they are now doing everything they can to settle the market before the Chinese comes. So we don't think that this Chinese story is anywhere near to end. This squeeze in capacity has caused a massive change in the cost of capacity. So when you look on the right-hand side, that's the TC, time charters, what we need to pay if we were to find a vessel. But Morten told you, there are no vessels, we can't find them. But if there were 1, they're expensive. And don't confuse that with our earnings. This is our cost. Our earnings is on the left-hand side, that's the rates. And when we did contract, the current contracts that were 1-year contracts, most of them in China were 1-year contract a year ago. This is where we did them. We're now renewing these contracts. And as you can see, the spot rates out of China for transport and PCTC, very small market, but it's a very good proxy on what's going on. The sentiment in which we are doing contracts in the fall of -- typically, you do it in the fall and then they start end year in 2026 is materially different than what it was in 2025. And we need to admit that we probably read the market wrong as everybody else because the sentiment last year was not as strong, but the fundamentals were still there, but we just didn't see it sufficiently. So that leads us to our business. We had some questions this time around last year on what about that 40% open capacity you have in '27. Today, for us, that is a massive opportunity. It's not a question of if we can fill that 40%, it's a question of who do we give it to. And that's what we talked about earlier in terms of leverage. And of course, that's not always easy because there are quite a few customers we need to let down. And we are currently prioritizing real hard and trying to make long-term partnerships with those who we believe are long-term players in this industry. And no doubt, an increasing amount of that are Chinese players. And they have realized they need to do something differently than what they did last year. And so what we have seen so far this year, and I will not speculate what will happen for the end of the year, but so far to date, all players have seen that the rates have gone up, you've seen that, but also duration of contracts has been extended. And the need for partnerships and deeper relations with somebody like us has really changed in 1 year in China. So I would say I've never seen a change in sentiment among customers in 1 year than what has happened over the last year. Fundamentally different market that we're now renewing in. So when rates are up, durations are out and partnerships are deepening, also we are selling much more of our non-shipping scope to these customers. The only thing to add to that is that the book of business in 2026, as you saw, was sold last year. So whatever happens in this market does not affect 2026. And we have given you a guidance on what we believe for this year, and that's an EBITDA around USD 1.6 billion. At the same time, we will repeat what we said in Q2. We have a very strong outlook. With that, thank you all for coming, and thank you for all those who have been on the stage for excellent presentations.