Torm Q2 Earnings Call Highlights

Key Points

• Record Q2 performance: Torm’s TCE earnings more than doubled year over year to $512 million, while EBITDA rose to $416 million and net profit reached $338 million. Fleet-wide TCE rates climbed to $59,301 per day amid Middle East trade disruptions and longer shipping routes.
• Dividend and guidance increased: The board approved a $2.40-per-share interim dividend totaling $246 million. Torm raised 2026 TCE guidance to $1.4 billion–$1.6 billion and EBITDA guidance to $1.0 billion–$1.2 billion, supported by strong freight markets and contracted earnings.
• Balance sheet strengthened amid ongoing uncertainty: Net debt fell to $715 million and net loan-to-value improved to 22.4%, while the fleet’s broker valuation rose to approximately $4.1 billion. Management remains constructive on product-tanker demand, though geopolitical risks and disruptions at major trade chokepoints remain significant variables.

Torm NASDAQ: TRMD reported its strongest quarterly financial performance on record for the second quarter of 2026, as freight rates surged amid disruptions to Middle East oil trade flows and vessel rerouting.

The product tanker operator generated time charter equivalent, or TCE, earnings of $512 million, more than doubling $208 million reported in the prior-year quarter. EBITDA rose to $416 million from $127 million, while net profit increased to $338 million from $59 million. Basic earnings per share were $3.31.

CEO Jacob Meldgaard said heightened geopolitical tensions in the Middle East, including disruptions around the Strait of Hormuz, created inefficiencies that increased voyage distances and reduced effective vessel availability. He said Torm’s integrated “One TORM” operating model helped the company respond to shifting conditions and capture opportunities across its fleet.

Record Rates and Dividend Distribution

Torm’s fleet-wide average TCE rate reached $59,301 per day in the second quarter, compared with $34,937 per day in the first quarter. LR2 vessels earned about $67,000 per day, while LR1 and MR vessels each generated slightly more than $57,000 per day, according to CFO Kim Balle.

Operating expenses were $8,315 per day. Balle said the year-over-year increase was primarily due to higher crew-change expenses and consumable costs, though he characterized costs as remaining competitive.

The board approved an interim dividend of $2.40 per share, or a total distribution of $246 million. Balle said the payout represented free cash flow generated during the quarter after debt installments.

Meldgaard said the company has distributed $15.10 per share in dividends since 2023, totaling $1.5 billion. Over the same period, Torm expanded its fleet from 78 vessels at the end of 2022 to 97 vessels at the end of the second quarter.

Guidance Raised as More Earnings Are Secured

The company raised its full-year 2026 outlook, citing sustained freight-market strength and increased visibility into contracted earnings. Torm now expects full-year TCE earnings of $1.4 billion to $1.6 billion, compared with prior guidance of $1.15 billion to $1.45 billion.

• New TCE midpoint: $1.5 billion, up from $1.3 billion.
• New EBITDA guidance: $1 billion to $1.2 billion.
• Previous EBITDA guidance: $800 million to $1.1 billion.
• Remaining open days: 10,271, representing 30% of total days.

Torm said third-quarter bookings secured to date averaged $38,600 per day across vessel classes. Management said the reduced number of open days narrows the potential impact of freight-rate volatility on the company’s full-year result.

Fleet Renewal and Balance Sheet

Torm continued to invest in fleet renewal during the quarter, establishing a phased pipeline of resale and newbuilding vessel deliveries scheduled from the first quarter of 2027 through 2029, with potential deliveries extending into 2030. Meldgaard said rising secondhand vessel prices have made newbuildings relatively more attractive.

During the question-and-answer session, Meldgaard said the company has considered accelerating sales of older vessels given elevated secondhand asset prices. However, he said Torm compares the net present value of a potential sale with expected earnings through a vessel’s useful life, and that analysis has not indicated a need to accelerate divestitures.

Regarding the company’s newbuilding focus on MR tankers, Meldgaard said Torm does not favor a particular vessel category but instead evaluates asset costs and expected cash flows. He said MR investments had offered the most attractive expected returns relative to alternatives at the time of the decisions.

Broker valuation of the fleet rose to approximately $4.1 billion at quarter-end, while net asset value increased to $3.7 billion. Net interest-bearing debt declined to $715 million from $894 million at the end of the first quarter, and the net loan-to-value ratio improved to 22.4%.

The company had $237 million of borrowings maturing over the next 12 months. Balle said Torm generally seeks about 50% leverage when financing vessels, describing that level as a preferred balance between flexibility, funding costs and maturity structures.

Geopolitical Disruptions Reshape Product Tanker Supply

Management said that reduced oil volumes from the Strait of Hormuz disruption have been offset in part by longer routes, rerouting and shuttle operations, which have increased vessel utilization. Torm said oil flows improved from roughly 17% below pre-conflict levels in April and May to around 10% below by July during a temporary ceasefire period, before renewed hostilities again disrupted trade.

Meldgaard said more than 30 VLCCs and around 14 LR2s were involved in dedicated shuttle operations and ship-to-ship transfers. He said a full restoration of pre-closure export volumes through such operations could require two to three times more VLCCs and more than three times the current number of LR2s.

Torm also cited a shift of LR2 vessels from clean petroleum product transportation into crude transportation. By the end of July, approximately 70 fewer LR2s were available for clean petroleum product trades than at the start of the year, management said, reducing effective clean-product capacity by about 5% despite similar nominal fleet growth.

During the call, Meldgaard said the weaker relative performance of MR vessels reflected reduced volumes available for marginal refinery and arbitrage trades. He said greater crude availability and refinery activity would likely be needed before those additional MR cargo opportunities increase.

Management said it remains constructive on the coming months for product tankers, while acknowledging uncertainty around the Strait of Hormuz, the Red Sea, the Panama Canal and other trade chokepoints. Meldgaard said either a resolution of the current disruption or an expansion of regional oil-shuttle operations could support product tanker demand.

About Torm (NASDAQ:TRMD)

Torm A/S NASDAQ: TRMD is an international shipping company specializing in the transportation of refined petroleum products. The firm owns and operates a modern fleet of product tankers, including both Handysize and MR vessels, which are designed to carry a broad range of clean petroleum cargoes such as gasoline, jet fuel and diesel. Torm's core business revolves around voyage and time-charter contracts with major oil companies, trading houses and other energy sector clients around the world.

The company's fleet is deployed on global trade routes, with particular focus on major refining and consumption regions in Europe, North America and Asia.

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