Hafnia NYSE: HAFN reported its second-strongest quarter on record, with CEO Mikael Skov attributing the result to geopolitical disruption, longer shipping distances and tight product-tanker market conditions.
The company, which transports refined oil products including gasoline, diesel and gas oil, generated net profit of about $278 million in the second quarter. Skov said the quarter was surpassed only by Hafnia’s third quarter of 2022.
“Q2 was an extremely strong quarter for the tanker business overall,” Skov said during the company’s results presentation, citing geopolitical uncertainty and longer tonne-mile transportation demand.
Hafnia owns and financially controls 103 vessels and also operates time-chartered and third-party ships, giving it commercial responsibility for close to 200 product tankers. Its owned fleet had an average age of 9.7 years at quarter-end, compared with an average global product-tanker fleet age closer to 14 years, according to Skov. The company said its net asset value was $4.4 billion at the end of the quarter.
Dividend payout rises to 90%
On the back of the quarterly profit, Hafnia announced a $250 million dividend, representing a 90% payout ratio. The company said it has now returned capital to shareholders for 18 consecutive quarters.
Skov said Hafnia’s dividend policy is based on net loan-to-value levels. Once its net loan-to-value falls below 20%, the payout ratio rises to 90%. The company ended the quarter at just above 13% net loan-to-value.
“When you have the high cycles, as we see now, it’s also an important part to make sure we return capital to shareholders,” Skov said, while noting that the company may invest again when attractive opportunities emerge.
He added that proceeds from vessel sales and dividends received from TORM are included in Hafnia’s dividend payout policy.
Supply disruptions and inventory drawdowns support market
Management pointed to several factors supporting product-tanker demand, including oil inventory drawdowns, refined-product exports from China and high refinery activity in the U.S. Gulf.
Skov said reduced oil supply from the Arabian Gulf has been partly offset through inventory reductions around the world and increased exports from other regions. He said global inventories have fallen to levels that are not sustainable over the long term, potentially requiring a rebuild that would create additional oil transportation demand.
China also has unused refined-product export capacity under its existing export licenses, Skov said. Meanwhile, U.S. Gulf refineries have increased exports to address supply shortfalls, operating at high utilization rates and benefiting from strong refining economics.
The company also highlighted that, while more than 250 vessels technically classified as product tankers have been delivered this year, many of the larger LR2 ships have instead entered crude-oil trading. Skov said Hafnia expects to end the year with fewer ships employed in the product-tanker trade than at the beginning of the year despite those deliveries.
Still, he identified the future vessel order book as a risk and said increased scrapping will be needed over the coming three to four years to offset new supply. Another risk is that vessels currently trading crude cargoes could return to the product-tanker market if crude-market earnings weaken.
- Potential inventory rebuilding could support transportation demand and tonne-mile activity.
- Chinese refined-product exports remain a possible source of additional cargo volumes.
- New vessel deliveries will need to be balanced by ship scrapping over time.
- A resolution of disruptions around the Strait of Hormuz could normalize transportation patterns.
Canal restrictions and energy-security concerns
Skov said constraints at the Panama Canal, alongside disruptions involving the Red Sea and Suez Canal, have contributed to stronger freight markets because ships must travel longer distances to carry the same oil volumes.
He said Panama Canal transit capacity has declined, with some vessels bidding in auctions to move ahead in the queue. While he described the impact on product tankers as less significant than in some other shipping segments, he said the restrictions add to broader inefficiencies in global trade routes.
Skov also said low European gas inventories ahead of winter add to energy-security concerns. In his view, oil and energy prices are “artificially low” if markets are assuming a near-term resolution to the Middle East situation that has not materialized.
If supply disruptions persist and energy demand rises toward winter, oil prices could increase sharply and eventually weigh on consumption, he said. That outcome could hurt transportation demand even if it initially reflects tight physical energy markets.
Coverage strategy and CEO transition
Hafnia said it has sought to maintain between 20% and 30% time-charter coverage at least 12 to 24 months forward, providing a measure of earnings protection amid volatile conditions. The company entered the year and second quarter with roughly 20% to 25% of its fleet covered on time charters.
Skov said the spot market began the third quarter at weaker levels than in the second quarter but later improved. He said winter market conditions appear “extremely interesting,” though the outlook remains dependent on geopolitical developments and the availability of oil supplies from the Middle East.
The company has ordered 10 newbuild vessels while selling older ships. Skov said the orders were intended to maintain fleet modernization as shipyard delivery slots have moved out to 2029 and 2030. He said Hafnia is not pursuing a broader strategy of ordering another 10, 20 or 30 vessels at current price levels.
Skov also confirmed that he is leaving the CEO role, with Søren set to succeed him. Skov said Søren has worked with Hafnia since its beginning and has managed asset management and larger projects. Skov expects to join Hafnia’s board following an extraordinary general meeting scheduled for Sept. 23, subject to approval.
About Hafnia (NYSE:HAFN)
Hafnia is a global shipping company listed on the New York Stock Exchange under the ticker HAFN. The firm specializes in the marine transportation of refined petroleum products, providing safe and reliable shipping solutions across key global trade lanes. Its core operations focus on the carriage of gasoline, diesel, jet fuel and other clean petroleum products, catering to the needs of oil majors, trading houses and independent refiners.
The company operates a modern fleet of double-hulled product tankers, managed to comply with stringent safety and environmental standards.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Continue following MarketBeat
Add MarketBeat as your preferred source on Google to see our latest stories in your feed.
Before you consider Hafnia, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Hafnia wasn't on the list.
While Hafnia currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
The AI wave will soon hit public markets with Anthropic and OpenAI set to go public later this year. However, you don't have to wait to invest. This report shows seven AI stocks that you can buy today while the big model providers get ready to go public.
Get This Free Report
