Euronav Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 8, 2024

There are 5 speakers on the call.

Operator

Welcome, everyone. So apologies for a 1 minute delay. We're just testing the sound, so

Speaker 1

I hope

Operator

you can hear us. Welcome to this Q2 2024 earnings release. I'm joined here today by our CFO, Ludovic Savries. My name is Alexander Savries. I'm the CEO of CMB Tech.

Speaker 2

And the

Operator

topics of today's call will be

Speaker 1

a financial

Operator

highlight, first of all, of the quarter, also highlighting everything we have done during the quarter. And then we will zoom in on all our Marine divisions, division below division, and give you a market outlook to finish off with a conclusion and a

Speaker 2

Q and A. If you've seen the

Operator

press release this morning, you have seen that the heading was transformation in full swing. And indeed, our company is in full transformation. We've had an incredibly busy second quarter ratifying the name change from Euronav to CMB Tech. The ticker symbol has already changed. The real name change will take place on the 1st October.

Operator

But meanwhile, doing a lot of business, adding a contract backlog to our already large contract backlog. We have ordered new vessels. We have sold older tankers. We have taken delivery of many, many ships. And last but not least, we have also concluded our partnership with Anglo Eastern.

Operator

So a lot to talk about, and I would like to hand over to Ludovic for the financials.

Speaker 1

Thanks, Alexander. Focusing on the Q2 figures, we are happy to announce that we had another strong quarter with a net profit of €184,000,000 This brings the half year profits to close to $680,000,000 Taking the last 12 months, we will conclude this $1,200,000,000 profit if we start from Q3 until today. Adjusted for capital gains, there have been quite a lot of capital gains as you all know. The Q2 profit ends at roughly $70,000,000 Apart from the strong operational results, we were also happy to pay a dividend of $4.57 declare another dividend of 1 $0.15 in Q2 that was paid in early Q3, bringing the total dividends and distribution for the half year $5.72 We ended the month of June with $420,000,000 in liquidity. The contract backlog that Alex has mentioned stands today at roughly $2,100,000,000 of contracted revenue, forward revenue, whereas the outstanding CapEx from end of Q2 stands at $2,700,000,000 It is roughly $900,000,000 every 12 months going forward.

Speaker 1

And last but not least, in the first half year, we concluded a share buyback program of 8,000,000 shares for roughly $126,000,000 Continuing on that, as Alexander mentioned, we had a delivery in Q2 and the last couple of weeks of 7 newbuilding vessels. That is a continuation of the large newbuilding program we have. We sold the CMA CGM Baikal, which is a container vessel upon delivery. We were able to successfully complete the sale of Euronavsham Management to Anglo Eastern that was concluded in Q2 bringing an extraordinary profit of $20,000,000 The successful completion of the 3 VLCCs that were earlier announced got concluded in Q2 as well bringing a capital gain of 79,000,000 The LSAS is another VLCC result. So the MOA has been signed, but the delivery will happen in Q1 twenty 25 with a nice profit as well.

Speaker 1

On the new business, we've added one more CSOV to our Elevation Series, the Future Proof Elevation Series, which is number 6 in the series and another 2 hydrogen powered CTVs. Previously announced as well we have signed a collaboration agreement with Diamond Shipyards for building 4 hydrogen powered tugboats.

Speaker 2

We take

Speaker 1

you to the next slide where we show as previously in earnings calls what fleet we have today on the water with 30 tankers, 6 Newcastle Maxes, 4 container vessels actually now since yesterday, 54 workboats, 4 chemical tankers and 3 ferries and tugboats. On the right side, you can see that this will continue to grow the total fleet on the water to reach 117 vessels end of this year, 136125 to come close to 160 vessels end of 'twenty 6. Zooming in on the P and L figures as previously shown, we want to highlight here without going into too much detail that for Q2 we were profitable in every single segment and that the Q3 quarter to date results are still very positive. Alex will continue segment by segment to explain this. The contract backlog as we've shown and discussed, we've added $161,000,000 of additional long term contracts on Suezmax newbuilding, Suezmax underwater and another chemical tanker which for delivery in Q1 'twenty six is on 7 year charter to Ultra Tank.

Speaker 1

This is our commitment that a lot of our clients like to work with our future professionals and hopefully we can increase this contract backlog in the months to come. This slide again is to show that while we are building a long term contract backlog on some modern assets, we're still very much spot exposed. We have still 75% of open days for 2024. This goes to 80% in 2025. And you can see in 'twenty six, we ended the year with a total days of 30,000 shipping days where the biggest obviously spot exposure is in our dry bulk division and also our tanker division.

Speaker 1

I'll pass on the word to Alexander who can continue to go into the various segments.

Operator

Yes. Thanks, Ludwig. Let's start with Tankers. Still today, our biggest division. We have put some numbers on there that you saw in the previous slide, but split between the VLCCs and the Suezmaxes.

Operator

You will see that in the Q2, we equaled roughly $50,000 a day on the VLCC spot market, close to $50,000 as well on the Suezmax spot market. And for Q3 to date, we have fixed 61 percent of our Versus at 34,000 and about half of our Suezmaxes at 41,000, which even with the seasonal slowdown that we are seeing this summer are still very good rates. On the activity, we've mentioned the 2 new charters that we have signed, 1 for our newbuilding Suezmaxes for 5 years, 1 a 2 year contract on the fraternity, which is a 2,009 Suezmax. We have completed the sale of our 3 N type VLCCs in the Q2 with a capital gain of €79,000,000 We also signed an MOA on the sale of the VLCC Alsace, which will deliver in Q1 next year. And then obviously just maybe go back one last point I wanted to mention is that recapping we still have 5 new ammonia powered eco VLCCs on order and apart from the 2 Suezmaxes that are delivering this year we have another 2 coming in 2026.

Operator

You can go to the next slide. We have a snapshot here on where the market is. You can see that the earnings are definitely compared to the last 10 years above average and healthy rates. A lot of green lights when we look at the demand indicators, but some red lights as well. It will come as no surprise to you that the oil supply from the OPEC is not a positive, definitely not for the VLCCs.

Operator

We see that the China oil imports year on year are a little bit down. But all in all, if we combine some of the positive demand signals with the very low order book coming on stream, we are still in a very healthy supply demand environment. Next slide. Here we have basically tried to make a theoretical assumption. If we would scrap all vessels that are older than 25 years, how would the fleet evolve and then put the expected growth and the growth numbers are coming from organizations like the IEA and what would that give.

Operator

And basically, all the way up to 2028, if we would scrap ships that are 25 years and older, on the Versus, we would lose 10% of the fleet. On the Suezmaxes, it would be 2% to 2.5%. So the fleet would be in decline if, again, all these ships would get scrapped. What happens on the demand side is that you can see that peak oil is not there yet. We still see growth in demand and all the agencies are still forecasting some growth in demand.

Operator

That means that we will need in the tanker industry for the next 5 years more tankers. And when we look at the order book, the order book is still relatively low. We have seen some new orders, but again according to this model, we would see that we are in structural shortage of ships, which should bode well for our markets going forward in the next years. Next slide. We go to the dry bulk division, which is a rapidly growing division.

Operator

You have seen that we have taken delivery of new vessels. We have 6 new Castle Maxes on the water now. Still another 4 will come on stream this year. And we have in total 28 new buildings for the next couple of years coming on the water. Our earnings were very good in the Q2.

Operator

You can see it there. We had $36,000 earnings on our Newcastle MAXs. The 3rd quarter was a bit softer, but still earning more than $30,000 It's active, as I said, on the delivery side. The growth is driven, I will show you in a couple of slides, by different dynamics in the market. But all in all, we can definitely not complain for Bossimar, our dry bulk division.

Operator

We go to the next slide. Indicators on the demand side, you can see them on the screen. Positive indicators coming from China, definitely in the first half, but still year on year July as well on iron ore imports, coal imports, Brazil and Australia still exporting more. There are of course some signals that are a little bit more worrisome when we look at the steel production in China, the steel inventories and the iron ore inventories that are all up and should normally signal a rather weaker market. But compared to the growth in the fleet, overall the dry bulk markets are still very healthy.

Operator

Demand is growing faster than the supply of the fleet. Next slide. 2 things I want to highlight today is the age of the Capesizes and then the new projects in Western Africa. Starting with the Capesizes, you see the age profile here of all the Capes. If you fast forward to 2,030, you will see that by then, more than 800 Capesizes will have reached the age of 20 years.

Operator

By that date, more than 2 thirds, even 3 quarters of the fleet will have reached the age of 15 years. But I think we're focusing on this full special survey, the 20 year deadline, 800 ships by 2,030. Look at the order book, which today is still relatively low. It's 125 Capesizes and Newcastle Maxes. This again from a supply point of view, an aging fleet, a low order book should definitely be supported for our markets going forward.

Operator

The next one. On the demand, I wanted to highlight in this call one specific new project which has been talked about for many years, but which is finally coming on stream. It's the Simandou project in Guinea, which is basically 2 consortia that will start exporting iron ore starting ramping up as from this year, next year and then all the way up to 2028 coming fully on stream going to 120,000,000 tons per year of iron ore exports, which are expected to go nearly all of it to China. What does that mean in the bigger scheme of things? It means that by 2028, we might need only for the Cemento project an extra 170 vessels.

Operator

I just spoke about the order book. This demand signal should again be a very good and positive signal for the market. You can also see why the distance is twice the distance than for instance Australian iron ore. And of course we are highlighting as well that there is a very nice little bunkering station that will be ready to supply ammonia in Namibia which sits on their trade routes. So very interesting for CMBTech and for our Bosimar division to watch this Simandu project.

Operator

Next slide. A couple of words on the Chemical Tanker business. The Chemical Tanker business like the Product Tanker business and the Crude Tanker business is doing well. There's healthy demand that we are seeing in the market. The supply of vessels is limited.

Operator

It is of course a less volatile market than the crude oil markets. Our exposure in Bouquem, which is our chemical tanker division has been fixed. The one that we announced in our press release is this new charter for 7 years to Ultra Tank for 1 of our new buildings delivering beginning 2026. The sister vessel will go in the Ultra Tank pool, which will bring our fleet of 10 vessels to 7 ships fixed and 3 spot. Of course, in Bouquem, we also have our 2 product bitumen tankers as well.

Operator

You can see the breakeven rates, which are giving us very good returns on the spot market and a decent return for our charters. Next slide. The container market is one of our smaller divisions. As Ludwig said, we took delivery of the 4th and will and will contribute very healthily to our net profit. But if you look at the market in general, there's some very negative indicators.

Operator

I would say, definitely, the container fleet order book is huge, which usually doesn't bode well for our markets. The demand indicators are a mixed bag. There's some good, some bad, but the big game changer in the container market is obviously what is happening in the Red Sea. As you can see at the bottom of this slide on the right, containership Suez Canal Transits numbers in TEU have gone down by more than 90% year on year. So you can see that the disturbance there is huge and it's having a massive impact on ton mile demand growth.

Operator

You can see year on year, we are 16% in ton miles higher than last year in July. Nobody knows how long it will last. What is sure is that it's lasted for a lot longer than people expected. And I don't think we see an end in sight in the coming months unfortunately. I want to finish off with offshore wind.

Operator

That's our little CTVs. We have 6 CTOVs on order. 1 CTOV was added in the Q2 to our order book. Our CTOVs are not fixed yet, but the CTVs are running on a mixture of spot and time charter business. You can see the breakeven rates and what we have earned in the Q2 and in the Q3 is doing very nicely, the offshore wind market, and we are seeing some good demand indicators again this year, new projects coming on stream, more demand for offshore wind supply vessels.

Operator

I'm summing this up in this last slide. We have decided that this would be a recurring slide that we would show you every quarter. Our assessment on where we are in the traffic lights, and you can see that all the lights are green. I did tell you why we believe that it is basically the balance between demand and supply and in every sector where we are active as CMBTech, we see a good supply demand balance, which is generating good results. At the bottom, you can see our exposure.

Operator

You see on the tanker side, Euronav division, we have about 1 quarter of our vessels, which are fixed on time charter. The rest is trading spot. The dry bulk everything so far is spot. Containers everything is chartered. Chemical tankers is 70% chartered, 30% on the spot market.

Operator

And on our offshore wind, apart from our CTVs, the 6 series of these we have are still spot have not been fixed, but the first one is only delivering next year in Q2. Let's go to next slide. An overview of our fleet list which you can read at your leisure. The presentation is on our website with the detailed delivery dates of the order book. Next slide.

Operator

And then basically moving to the conclusion and then opening the floor to you for some questions. Our shareholders, I think, should be happy. We have paid a very nice dividend over the first half, thanks to the exceptional profits that we made after the sale of our VLCCs to Frontline. We still made a very nice profit in the second quarter of 140 $184,000,000 You know that we are committed to remain listed on the Brussels Stock Exchange and in New York. We recently changed our ticker symbol to CMBT.

Operator

The name change of the company will take place on the 1st October, so Euronav will become CMB Tech and then the Euronav name will be our division. The portfolio, we discussed it at length. One thing I should highlight is apart from everything you see on the water delivering the good cash flows, we also have a very strong decarbonization optionality value built in, in our fleet as and when the new legislation will start to accelerate as from next year few EU maritime directive etcetera. So we do see a lot of upside on our future improved fleet. And then the outlook for all our markets is probably exceptional.

Operator

We should cherish it. It's been a long time since all shipping markets were actually in a positive supply demand balance, and so we are definitely enjoying the ride. With this being said, I would like to conclude. Thank you for listening to us and I'm opening the floor for questions.

Speaker 3

Yes. Everyone who would like to ask question can read their hands now. Please make sure if I call out your name or phone number to first introduce yourself prior to asking your question. So the first one is Christophe Samois. You can now unmute and please ask your question.

Speaker 4

Hello, good afternoon and congratulations with the good results. A few questions, if I may. You mentioned the Namibian bunker facility, which is well located in Namibia. So how far along are you with the timeline? I recall that the FID would be taken in the Q4.

Speaker 4

Maybe you can elaborate a little bit more on timing there. Then secondly, the Newcastle Maxes that have been that are on the water now? Or are they also part of the FortisQ consecutive voyage charter pool? Thank you.

Operator

Thank you, Christophe. Let me answer first on Namibia. In Namibia, there's 3 projects we are working on. 1 is the hydrogen refueling and production station, which we hope will be operational by the end of this year. That's a relatively small scale project for local demand, so hydrogen for local applications.

Operator

The second, what you are alluding to is the tank terminal for ammonia. Indeed, expecting FID 4th quarter, maybe Q1 next year. And the timing, if we take FID on that time, we'll probably somewhere delivery in 2028. So that is kind of the time horizon we are looking for on that tank terminal, which we can use indeed as a bunkering point. And then the 3rd project, where we are still working on the feasibility and pre feed is the ammonia factory locally in Namibia based on solar power, water and electrolyzer park is something for next year.

Operator

So no FID in the very short term on that project. And going on the FMG CVC pool that you mentioned, the relationship with FMG is a good relationship like with a lot of other iron ore mining companies. We do quite a few spot business with them and indeed we have some vessels on short term CVCs, But these are short term. We are talking maximum 1 year. These are not long term.

Operator

And it's not the full 6 vessels that we have today. It's a couple of these ships.

Speaker 4

Okay. Thank you. And then maybe as a follow-up to this question, we have seen the announcement of Fortescue teaming up with COSCO on the construction and deployments of green ammonia proposed vessels. Partiscue is a long term, long time customer journey partner of you. How should we read into this?

Speaker 4

Does this mean CMV Tech is out of the picture there for this Or can you elaborate a little bit on how you see this or interpret this?

Operator

Okay. So first and foremost, you should ask Fortescue and COSCO what the deal entails. I'm reading the same papers as you. Obviously, we are talking both to COSCO and to Fortescue. What we understand, it's a collaboration agreement about the topic, which is very close to our heart.

Operator

And we see this development as a very good development that other people are following suit and are also committing now time, efforts and I hope money to deploy more ammonia powered vessels, but also the whole ammonia supply chain to green our industry. I think this market is huge. If Fortescue does a deal with COSCO, I don't think that means they would not do deals with us. If COSCO does a deal with Fortescue, that doesn't mean that COSCO would not deal with us. So I think we're all dealing together.

Operator

The most important element from that announcement for us is that the more people start investing real money in the ammonia supply chain and in decarbonizing shipping the better it will be and eventually also for CMBTech we need this pie to become bigger.

Speaker 4

Okay. Thank you. No further questions for me now.

Speaker 3

Okay. The next one is, Clement Molinck. You can now unmute and ask your question, please. Okay. Then we will move on for now to Guy Britz.

Speaker 3

You may please unmute and ask your question. Then we will move to Alexander

Operator

Alex, can you hear us?

Speaker 4

Hello? Yeah.

Speaker 2

There you are. Can you hear me?

Speaker 1

I can't hear you.

Speaker 2

Yes. Go ahead. Okay. If you can hear me, I was just wondering on in trade wins recently we could read that you were linked to 20 ship chemical tanker deal. I was wondering if you have any comments on that supposed transaction?

Operator

Yes. So I can confirm that there are discussions ongoing with Exxon, But it's not about 20 ships, it's about 7 ships. But nothing has been signed firmly yet. So the information is and trade winds is not really correct. But I can confirm that there's been discussions with Exxon about a chemical tanker project, but it's about 7 ships not 20.

Speaker 2

Exciting stuff. Is there can you say anything about the size of those vessels?

Operator

No, not yet. But as soon as we have news on that and that contracts would be signed and I stress contracts have not been signed yet, we will definitely give you more information.

Speaker 2

Okay. Thank you. That was all my questions. Thanks.

Speaker 3

Ms. Guillemot, I see you raised your hand again. Can you please unmute and ask your question please? We're moving on. The number ending in 8,703.

Speaker 3

You may please unmute and ask your question please.

Speaker 1

Maybe for the ones who are trying to get a voice over, if you want to post a message just on the meeting, and then we will try to, to respond it now. If that still doesn't work, obviously, we'd be happy to, answer over email, all your questions.

Operator

Okay, very good. Thank you very much for joining this call. Thank you for your questions. As Ludovic said, if you have any other question, Joris on the Investor Relations, Ludovic and myself are there to assist you and answer any question you might have. Hope to speak to you soon.

Operator

Enjoy the sunny weather if you're in a sunny place. Thank you. Bye bye.

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Key Takeaways

  • Transformation in full swing: The company will rebrand from Euronav to CMB Tech on October 1 while executing newbuild orders, vessel deliveries, asset sales and finalizing its Anglo Eastern ship-management partnership.
  • Robust financial results: Q2 net profit of €184 million, half-year profit of €680 million and trailing-12-month profit of €1.2 billion; paid $5.72 of dividends in H1, ended June with €420 million liquidity and completed an $126 million share buyback.
  • Fleet expansion and renewal: Operating 101 vessels today across tankers, dry bulk, containers, chemical tankers and CTVs, with growth to 117 vessels by end-2024 and ~160 by end-2026 backed by a €2.1 billion contract backlog and €2.7 billion remaining CapEx.
  • Market dynamics supportive: Achieved spot rates near $50k/day for VLCCs and Suezmaxes and above $30k/day for Newcastlemaxes in Q2; structural ship shortages are likely as older tonnage is phased out and demand grows (e.g., Simandou iron ore exports).
  • Decarbonization optionality: Secured orders for five ammonia-capable VLCCs, two hydrogen-powered CTVs plus collaboration on hydrogen tugs, positioning its fleet for evolving EU maritime emission regulations.
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