Hafnia Q1 2025 Earnings Report

Hafnia EPS Results

• Actual EPS: $0.13
• Consensus EPS: $0.12
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: N/A

Hafnia Revenue Results

• Actual Revenue: $340.34 million
• Expected Revenue: $250.80 million
• Beat/Miss: Beat by +$89.54 million
• YoY Revenue Growth: N/A

Hafnia Announcement Details

• Quarter: Q1 2025
• Date: 5/15/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 15, 2025
• Conference Call Time: 3:30AM ET

Hafnia (NYSE:HAFN) owns and operates oil product tankers in Bermuda. It operates through Long Range II, Long Range I, Medium Range (MR), Handy size, and Specialized segments. The company transports clean and dirty, refined oil products, vegetable oil, and easy chemicals to national and international oil companies, and chemical companies, as well as trading and utility companies; and owns and operates 200 vessels. It provides ship owning, ship-management, investment, management, corporate support, and agency office services. In addition, the company provides integrated shipping platform, including technical management, commercial and chartering services, pool management, and large-scale bunker desk services. Hafnia Limited is based in Hamilton, Bermuda.

Hafnia Q1 2025 Earnings Call Transcript

Key Takeaways

• The company reported a Q1 net profit of $63.2 million, marginally above Q4, and said Q2 is on track to improve further, marking a break from last year’s downward trend.
• Hafnir will pay out 80% of net profit as dividends under its stable policy and treat share buybacks as an add-on rather than a deduction from payout.
• Industry volumes have returned to last year’s levels but with shorter voyage distances due to geopolitical volatility, with the expectation of longer hauls once markets normalize.
• A net orderbook of roughly 14% of fleet capacity (accounting for crude conversions) combined with accelerating scrapping means vessel supply should tighten over the next few years.
• “Dark fleet” vessels trading in sanctioned oil and lacking clear ownership pose regulatory and environmental risks, and their potential removal could further reduce available tonnage.

Presentation

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Today, we'll go through the the presentation on the investor website where you can find this, and we'll take take it in two parts. We'll take discuss the numbers, of course, but also the industry review. You are more than welcome to take any question. Put them in the chat, and I'll be the moderator. My name is with H.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

G. Anderson Capital. Welcome, Michael. Nice nice to see you.

[Mikael Skov, CEO at Hafnia]

Thank you very much.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

And let's go directly into it. It's it's the q one season, so so please go ahead.

[Mikael Skov, CEO at Hafnia]

Yeah. Thank you so much. And, yeah, thank you again for inviting us to give a a quick overview and presentation of the first quarter for half year. And if you just quickly look at the numbers, which we just announced this morning. So the first quarter was a net profit of $63,200,000 which is when we look at the result for Q1, it's a marginally better result than we had in Q4.

[Mikael Skov, CEO at Hafnia]

When we look at the the earnings side and cleaning off for one offs, etcetera. And as we're also saying in in the release today that we're already seeing that Q2 is on track to become better than Q1. So I think all in all, is what we kind of take with us from Q1 is that last year's, if you like, slide in tendency in the second half of the year has been broken at least so that we are now on a slow upward trajectory from what we saw in Q4. So at least that's the positive part of it. Before going to sort of the market thing, I think the other thing that I think is important to highlight is the fact that we are paying out 80% of the net profit in dividend, which is in accordance with our dividend policy.

[Mikael Skov, CEO at Hafnia]

And in comparison to Q4, we have not this time deducted the share buybacks that we have done in Q1. So it is a full dividend payout. And then in addition, we bought back shares as well for Q1. So if you like, we listened a little bit to the investor environment that didn't like the fact that we were taking share buybacks and deducting them from our dividend payout policy. So we're now back to having a stable dividend policy.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Cool, Michael. And and this is actually a slide on that. And I I was when I flipped through it, it was just amazing to see you actually paying out more than you make, so to speak, on the bottom line this time. And and and perhaps you could just, you know, reflect a little bit about the the investor feedback you had because you have a lot of dividend investors is my impression.

[Mikael Skov, CEO at Hafnia]

Yeah. And I think as always, and I think I've mentioned this on on this call as well previously that every quarter we obviously debate with the board of directors. Should we have some share buybacks? Is it dividend? And and, you know, you obviously want to optimize and cater for as many investors as possible.

[Mikael Skov, CEO at Hafnia]

But I think we also have to realize that in a world that's already now dominated by a lot of uncertainty in geopolitical events that has a massive effect almost on a day by day basis. I think people are also looking for stability. And I think it's not the time to be too erratic on how you do these things. I think it's better to be stable on the dividend policy. And then as we go forward, if we decide to buy back shares, then we will do it in addition to the dividend payout.

[Mikael Skov, CEO at Hafnia]

So it doesn't become something that's being deducted, but something that will be an add on if we should consider that going forward.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

And just for clarification, the day of dividend is going to be May 23. Is that correct? I think that's

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

what I found. That's correct.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Yeah. Cool. And then, Marn, before we go into the industry review, you wrote in your sort of remarks that it's it's a complex world, and I appreciate that it must be running this business. So what we sort of discussed is to try and make it simple by flipping through a number of a mini chart you have, which is can seem a little bit technical, but it's the intention is to get an understanding of what's driving the business and and into 02/2025. So please bear with us if if it becomes a bit technical today, but we'll try and explain as good as we can, Michael.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Let's start with this industry review review and and and maybe describe a little bit about the recovery you have seen through q one, please.

[Mikael Skov, CEO at Hafnia]

Yes. So I mean the recovery that we have seen is as I said was marginal towards Q4, but at least what it has shown is that we're back to slightly more stable levels if you like in terms of earnings and markets functioning a little bit better. And if you look at these slides, I mean, I think the best way for us to explain where the markets are, say, today versus last year at the same time, the biggest difference is that the uncertainty in the world has actually meant that oil is traveling a bit shorter than what we saw, you know, a year ago basically. And and that has to do a little bit with the fact that when oil prices are so volatile and and they're volatile not because of a supply demand scenario, but more volatile because of news and geopolitical news overnight. There is a tendency among traders to minimize the risk of having oil traveling longer distances because every day is a new risk for the pricing changes.

[Mikael Skov, CEO at Hafnia]

So we are seeing same volumes on both our vessels as we saw a year ago. So same activity in terms of volume, but we're just seeing ships sailing a bit shorter. And in our view as hopefully at some point the world normalizes and come back to more, stable conditions that you'll see that volume start going longer haul again. And that's kind of the thesis that we are looking at when when we try to assess the market going forward.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

And let's just go through some of these slides because this yeah. Let's take them one by one actually, Michael. So please So

[Mikael Skov, CEO at Hafnia]

this is the one I actually kind of pretty well highlights, you know, what I said, right, that we've basically seen if you look at the at the left side, the which is clean petroleum products and and chemicals that that, you know, if you go back and look out through the years, you can see that we're actually here in in '25 having, you know, even higher cargo volumes on board the ship. So in a normal circumstance, well, that would mean that the market would be super, super active. But as I said earlier, unfortunately, they're not going as long sailing distances as they did when the market was really peaking. But if you want to choose between the two, you know, would always want the volume because that's kind of what drives it. And then the ton mile as long as you can explain why the distances are shorter.

[Mikael Skov, CEO at Hafnia]

And in this case, it's not because the the trading pattern or the supply and demand fundamentals are changing anything. It is more about the uncertainty in the world that makes people minimize their risk by not having committed to sailing oil very long distances. And that is what we can see here, right, on the left side as well that the laden and ballast voyage length has gone down. So so those are the two in in combination really that that that indicates where we are. I would like to say though still, if you look at the time charter results that we have today and the result that we came out with, you know, a historical perspective, these are still great numbers.

[Mikael Skov, CEO at Hafnia]

They are still very much worthwhile to have a business that is making $23,024 20 5 thousand dollars per day with cash flow breakevens of around $14,000 on average for the year. So I don't think we shouldn't be too negative. We came from a very high level, but I still think that from a dividend yield perspective as well, it's still a very attractive investment.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Yeah. If you intend take this this this is an ongoing discussion. We've had it for a long time with Russia and and these sanctions, and and and let's dig into that a little bit because there there's many aspects of this, and maybe you can sort of take the high level perspective on sanctions and how you see this, please.

[Mikael Skov, CEO at Hafnia]

Yeah. So, yes, as you say, we have kind of we kind of have two areas of sanctions or dark fleet that we're operating with. One is vessels that are sanctioned by The U. S. And the EU, which is kind of the most important parts of sanctions you can have.

[Mikael Skov, CEO at Hafnia]

And then we have what we call the dark fleet, which is really a lot of vessels that are sailing with sanctioned oil, but also have unknown ownership. So basically you don't know who own the ships, they don't have insurance, they're very poor quality and they're basically a dark fleet that is living on breaking the law. And ultimately is that potential risk of environmental disasters and others that most people would have read about in the papers. So we're trying to identify these two groups here, which the OFAC list is The U. S.

[Mikael Skov, CEO at Hafnia]

Sanctioned vessels. And what we're to illustrate here is a little bit we just talked about the demand side, but if you look at the supply side, which is the amount of ships, it's fair to say that over the next four years, the product tanker order book is probably around 19%, twenty % of the current fleet. The relatives that a lot of the ships that are on that order book list will never be transporting clean petroleum products. So by historical data, about 60% of half of those ships will be trading in the crude sector by definition. So we think the net order book is about 14%, which means basically that it's about 3%, three point five % net inflow per year.

[Mikael Skov, CEO at Hafnia]

If we don't have any scrapping before the ships come in, you could potentially see a market that will either stabilize or weaken a little bit over a period of one or two years. But when you kind of look at these numbers here, it's pretty clear that the vessels that will have to disappear over the next three to four years by far exceeds the newbuildings coming in. So in other words, it's more of a timing issue. If the new ships come in before the old ships get scrapped, you could see a potentially oversupply for a short period of time. But if you look at the actual end of that period, the ships that will come in will be much, much less than the shifts that will be going out due to scrapping and poor quality.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

And this is again the illustration of that point, I guess, the the limitations of the overall supply.

[Mikael Skov, CEO at Hafnia]

Yeah. If you look at the bottom left, for instance, there you can see all the sanctioned vessels that are out there today that have not even reached the scrap age. So these are ships that are being sanctioned because they've basically been transporting sanctioned oil. And if the politicians decide that these ships are not going back into trade, just that category alone, you will remove a lot more ships than the entire newbuilding order book coming in this year in 2025. And that's the kind of dynamic that is very difficult to be precise on because some can argue that, well, if we don't believe that politicians and regulators will punish people that have been breaking the law immediately, then you could argue that there will be more ships coming in and weaken the market before.

[Mikael Skov, CEO at Hafnia]

If you believe that in any scenario of any form of ceasefire negotiations that these ships will be pushed out, then you have a very bullish case.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

And what is the timing on on on these decisions in your view, Michael? What are you looking for? How should we as investors look at this?

[Mikael Skov, CEO at Hafnia]

Yeah. I I I think it's I mean, I personally think it's very difficult. Right? Again, I mean, you know, we all read the same things and, you know, one day you think there is a solution on its way, the next day there is not. It doesn't look like it's it's just around the corner.

[Mikael Skov, CEO at Hafnia]

I think the biggest thing to watch out for in all this is that that we have seen the so called dark fleet and the quality of the dark fleet upon close. And there is no doubt that there is a very, very, very real risk of some kind of oil pollution happening with some of these ships. I mean these are vessels that don't have any classification records. They don't have any insurance, as I said, and they don't have any clear ownership. They're hidden in complicated structures, which means that they can walk away from any problem there is and they will.

[Mikael Skov, CEO at Hafnia]

So what can accelerate this is if we have, god forbid, any form of incidents with some of these vessels because at that point, politicians and regulators will most likely act pretty quickly.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Yeah. And just a point of clarification, you distinguish between dark and gray fleet. Could you perhaps elaborate on the difference?

[Mikael Skov, CEO at Hafnia]

Yeah. So the dark fleet are vessels that are trading with sanctioned oil and also have what we call suspicious ownership. In other words, you can see that the ownership structure is in such a way that you can't find the ultimate owner. And that's a very important thing in shipping because basically you always want to know who the ultimate owner is that you're dealing with because you have to check insurance and you have to check that there is proper guarantees around the vessels that is sailing. So the Greyfleet on the other hand are actually owners that can be identified.

[Mikael Skov, CEO at Hafnia]

But also owners that have been if you like transporting sanctioned oil. Some maybe without breaking the law. So actually under these international regulations that under a certain price level you are allowed to transport, for instance, Russian oil. But it it's a great fleet of people that are close to those borderlines. So some would have would have crossed it, some would not.

[Mikael Skov, CEO at Hafnia]

But you can identify the owners. That's kind of the difference. Cool.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Yeah. And, again, it's it's one of these where you're trying to sort of decompose the supply component into what's scrapping and and and so on. Don't know if you have elaboration on this one.

[Mikael Skov, CEO at Hafnia]

Well, I think on the left side, we can see where the order book is from '25, '20 '6, '20 '7, '20 '8. That's what we know. And then on the right side we are trying to illustrate for the entire tanker fleet what does it look like in terms of scrapping for the next few years? What technically should be scrapped and move out? And as I said earlier, scrapping age is a theoretical thing, because it's not like there is a law saying at this age, you have to disappear from the market.

[Mikael Skov, CEO at Hafnia]

So we can't say that everything will happen according to that. But what you know is that you hit the scrapping age of say twenty three, twenty four years, it's suddenly extremely expensive to keep the ships going. You will be facing a lot of restrictions on the client base. For instance, the big oil companies will not accept ships over a certain age. So what we are seeing as an alternative is even if a vessel say it's 24 years old and has not yet been scrapped, what we are seeing is that they lose their employment status.

[Mikael Skov, CEO at Hafnia]

So if for instance a vessel has over a year say three sixty days that it's sailing and making money for the company, then we are seeing that vessels for instance on the right side that have a scrap eight suddenly only have maybe down to 30% or 40% of that sailing time. So it's almost like an indirect scrapping for some of these ships. They're simply just not being utilized as much. So even though ships don't get scrapped and and is not in in the statistics of being scrapped, we are seeing that they will virtually disappear from the market indirectly because they're not being used.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Yeah. And, Michael, maybe this is a good opportunity to to take I read your statement on on on the front page, and you're saying that the the higher rates, the global turmoil has sort of dampened the activity in terms of ordering. Could you perhaps comment on what you see of ordering activity in in the market right now?

[Mikael Skov, CEO at Hafnia]

Yeah. We haven't seen a lot for for a long time. So we when we look at this order book here, that's obviously kind of what it looks like and more reflects what was being done last year. There are I think the uncertainty basically has kind of had its effect on ordering ships. So we're not seeing a lot of ordering at all in the product tanker space or in the tanker space in general.

[Mikael Skov, CEO at Hafnia]

And quite frankly, I think the people that really needed to order ships for replacement purposes already did it last year and the year before. So, personally, I think you need to see lower prices from the shipyards, which is not in the cards at the moment before you're gonna kinda see people maybe going back to ordering again. So right now, it's a bit of a standstill between shipyards and ship owners in general.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

And how has this impacted your appetite for ordering new new vessels?

[Mikael Skov, CEO at Hafnia]

So so we, you know, since end of twenty one, early '20 '2 when we bought, you know, 44 ships, we haven't been buying anything. We've been selling over the last two years some of the older ships and ships that we didn't see as our core ships going forward. And at these levels for us, we still think that it's too expensive to go in and buy newbuilds at the moment. We're not really we're not really tempted to that. And that's why our our dividend policy stands.

[Mikael Skov, CEO at Hafnia]

And basically, you know, we're just kind of continuing to to harvest on the 25 to 30 shifts that we financially control. And, you know, just quite happy really to return capital to shareholders.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

And just out of curiosity again, there's been a lot of of stuff about China and India not accepting Russian ships or the dark fleet. Can you perhaps elaborate a little bit on on the impact you have seen, now we've had that for, I don't know, a quarter?

[Mikael Skov, CEO at Hafnia]

Yes. So so that's an impact that we are seeing increasing, and I think that's also one of the the impacts when I mentioned before that ships are being used less and less. The fact that China and India are now moving away from accepting vessels in the dark fleet will ultimately lead to these ships losing the percentage of utilization. So so that's actually part of it. And and, you know, it's obviously a very important thing because India and China were definitely those two countries that were taking most of, the dark fleet, into the area.

[Mikael Skov, CEO at Hafnia]

So it's been a big improvement. So certainly for us, it's something that that ultimately will keep on reducing the utilization of these ships.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Yeah. And this this is this is another big theme globally about this acceptance from The US of Chinese ships. Maybe you can just briefly touch upon this.

[Mikael Skov, CEO at Hafnia]

Yeah. So well, is true that the the The United States Trade Representative came with a proposal a while ago back in April where they basically wanted to punish people that had Chinese built ships in their fleet and Chinese operators and owners in general. What happened is that then when there was a hearing and they modified it, they checked around with with a lot of different advisers. And the proposal that is now on the table, which is a revised proposal, is actually more dealing with very, very big ships. And there have been some kind of there have been thresholds put in that basically means that for Hafnir, for instance, the vast majority, more than 90% of the vessels we have that are built in China will fall under the exemption rule that they have now introduced.

[Mikael Skov, CEO at Hafnia]

So effectively it's now the way it looks today, it's really a non event for Hafner. We have a couple of ships that may or may not be included because of, you know, finance solutions that we have on these ships. But that's something that, you know, we can change if it becomes realistic. So so for half now, the the that whole proposal has become a a nonevent and we we will not have any impact on how we run shifts and how the results will be.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Okay. Fair enough. But, Michael, if you should just reflecting on the fact that it's a complex world and we've been through a lot of, big issues here. What what is your sort of if you have to summarize sort of your outlook demand supply from now, what do you see?

[Mikael Skov, CEO at Hafnia]

Well, so what I see is that on the short term, you know, I think we probably have to to just accept the fact that that things will be volatile and news will come out overnight. Obviously, being in shipping and investing in ships, we can't really make investment decision based on one year and two years. We make them on longer term basis. And when we look kind of from one to three year out, you know, it's clear there will be some new builds coming in, some older ships and and Darfleet will disappear. But after that, after three or four years, I mean, technically half the fleet would have disappeared and only maybe 14 or 15% would have been coming back in.

[Mikael Skov, CEO at Hafnia]

So in the longer term perspective, if one believes that oil demand would just stay as it is today even without an increase, we will once again be shorter ships. But it's the period in between that you can argue whether ships come in before ships go out. The good thing for us is, you know, compared to us is that being in shipping and being transporting refined oil products, you know, gasoline, diesel oil, heating oil, etcetera, is that we're used to volatility. Right? And I think, you know, it's probably a lot worse for industries that are used to more stability that this is happening.

[Mikael Skov, CEO at Hafnia]

Like, our our life has always been like this because we're in the front end. And every time something happens, it has an immediate impact on how much gasoline, diesel, and gas oil people buy. So, you know, I think the good news is we're used to handle, you know, a volatile world with a bit of uncertainty and and and navigating it as well.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

That's a skill coming in handy right now.

[Mikael Skov, CEO at Hafnia]

Yeah.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Just I don't wanna go through the financial summaries, but but I think there was one thing that maybe came as a surprise to me, and that's your docking right now. And you're sort of you have outlined here the the the need for some docking days over the coming period. And it's quite high right now, actually.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Is that is that a fair comment?

[Mikael Skov, CEO at Hafnia]

No. It is quite high. And it's because we have a lot of vessels that were built in 2015. Right? That's kind of they're hitting the dry dock schedule now.

[Mikael Skov, CEO at Hafnia]

Yes. So this is a big dry dock year for us. And and there's no doubt, of course, well that that, you know, in q one, if we didn't have those all five days out, you know, the result on absolute numbers would obviously have been larger. But, you know, this is again it it's it's a normal turnaround. And and I guess, you know, the issue is the more shifts you have, kind of the more you run into these.

[Mikael Skov, CEO at Hafnia]

But but it is true, and that's why we make sure that people understand it. The good news is on the back end of that, you know, you have a number of years with shifts that are totally up to speed and and at the same time, hopefully, we'll we'll be environmentally in a much better position. Use less oil for propulsion, right, which is also part of the importance going into to get the ships and the hulls and everything clean so that you are more efficient when you are sailing around the world.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Cool. I always like this. I think it's actually an excellent, outline of how, expectations are in the market, which is very important to to get. Do you have any comments to this? I I think the coverage is more or less in line with what we've seen normally.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Is that

[Mikael Skov, CEO at Hafnia]

Well, so so the only comment I have is that it's the first time I've actually seen this slide where it seems like everyone kind of is close to agreement, right? Mean normally the are a lot more. But actually this time around it looks like that the analyst consensus versus our covered rates for our q two, but also covered rates for the rest of the year are pretty much aligned. So I I don't know what to read into it, but at least it's we we normally have a lot of orions on it. But this time, it seems like people are much in agreement.

[Mikael Skov, CEO at Hafnia]

But that's

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

that's nice to be in line for for once. Could we take some questions, Michael?

[Mikael Skov, CEO at Hafnia]

Sure.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

I think that they that that there are are some questions here, and I'll just take them and shoot, if you don't mind. You see, very low inventories of distillerate going into the driving season. How would that influence you?

[Mikael Skov, CEO at Hafnia]

Well, I think it's it's a little bit from what I said earlier that the normal, you know, the normal trading pattern pattern also for for middle distillates, you know, would would would actually be moving stuff from the Eastern and Western Hemisphere. And we haven't seen a lot of that. Right? So I think there's no doubt that these shorter distances that vessels are trading have put a bit of a lid on the inventory situation as well. So you know, if anything inventories being low in a volatile world always has the risk, which is positive for us, that in a sudden need of anything you're going to have to transport what you need.

[Mikael Skov, CEO at Hafnia]

Right? So technically low inventories always create an upside potential for for transportation because if something happens and you need it, you're gonna have to sail it to get to the to the destination.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Yeah. Then building on this Chinese, there's a question on how what is the percentage of Chinese built ships in your portfolio?

[Mikael Skov, CEO at Hafnia]

So it's about 30%, between 2530%, and which is relatively in line with China's market share in general. So we don't have much more, more less than what the average kind of ship owner will have that builds in China. So that's it's just between 2530%.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Cool. And then back to this investor policy about the question goes with the as price to NAV is below one. Do you consider more share buybacks?

[Mikael Skov, CEO at Hafnia]

Well, as I mentioned, it's something that we will I mean, we aren't discussing every single time. And I think I guess our view is that we do want to see what I would call a substantial discount to NAV before we will consider share buybacks. But it's more of an ad hoc discussion, whereas the dividend policy is a permanent one in terms of that structure.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Then as to scrapping, the rates are lower now. So there's a question on do you expect the scrapping to accelerate through 2025 or perhaps change, because of the lower rates?

[Mikael Skov, CEO at Hafnia]

I mean, we do we don't see that we can avoid scrapping because, basically, there are so many older ships out there that it's got to be a matter of time before that happens. But I also do recognize that if the freight market is high, it also reflects the fact that there is a demand for vessels. So I do think there is a dynamic that if freight rates continue to rise and stay high, owners that are having older ships will try as much as they can until the last minute to try to get it going. I think scrapping will be driven more by regulators and by the inability to use older ships that have been sailing the dark fleet rather than scrapping driven by very low freight rates that in a way makes it more attractive for a normal owner to scrap a ship that is otherwise trading in the normal markets.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

And then perhaps a final question, Michael, on the Red Sea impact on the tanker and both actually your your market and the the the crude tanker. Do do you have any reflections on what what's what's actually happening in the Red Sea as we speak, and what will a sort of possible peace mean for for for you?

[Mikael Skov, CEO at Hafnia]

Yeah. So right now, I mean, we're not we're not seeing a massive amount of of attacks or any other let's say violent maneuvers around shipping in general. So it's been what I call if I can use that term a bit more calm in terms of hitting ships. Hafnir and any other of our competitors everyone is still sailing around Cape Of Good Hope. It's way too early to for us to consider to go through.

[Mikael Skov, CEO at Hafnia]

So I don't see that as any at all immediate thing. That being said, and I think we had a slide on it the last time and maybe we have one here as well. So basically what happened is when the Red Sea and the Suez Canal had all these issues and people started to sail around Kemper Good Hope. That was obviously initially great because vessels were sailing longer with the same volume of cargo. So that's naturally good for the shipping markets.

[Mikael Skov, CEO at Hafnia]

What we have seen now though is that the volumes that we would normally have going to the Red Sea and Suez Canal, it's not the same volumes going to Cape Of Good Hope. So we have lost volumes and that's mainly because a lot of volume from The Middle East going into Europe for instance. It simply just doesn't make any sense to send it all the way around the Cape Of Good Hope. So that trade has been killed if you like, which basically means that all the benefit we had from going to Cape Of Good Hope, if we reverse all this and go through the Suez Canal, technically we will be getting that trading activity back that we lost to our Cape Of Good Hope. So it would kind of even itself out.

[Mikael Skov, CEO at Hafnia]

In our calculation, this actually would be neutral if we were to reverse the vessels to the Suez Canal and get those trading barrels back that we had originally before this happened.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

This concludes this presentation, Michael. I would like to thank you very much for joining, and thank you very much to all the audience. If you want to review this, this will be everywhere on all channels. So if you have any questions, you can also refer to the Hafneer Investor Relations site. There's many, many things to dig into.

[Tue Østergaard, Founder & CEO at HC Andersen Capital]

Have a good day, Michael, and thank you very much.

[Mikael Skov, CEO at Hafnia]

Thank you.

Participants

Executives

• Mikael Skov, CEO

Analysts

• Tue Østergaard, Founder & CEO at HC Andersen Capital