Hello, welcome to the TORM plc Second Quarter and Six months Ended 2023 Results Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. If you would like to withdraw your question, again, press the star one. I will now turn the conference over to Andreas Abildgaard-Hein, Head of Investor Relations. Please go ahead. Welcome to TORM's Conference Call. We are pleased to have you with us, and have been looking forward to presenting to you the results for the second quarter of 2023. We will refer to the page numbers that we present during the call, and at the end, you can ask questions if you are attending the phone conference. If you are joining via webcast, you have access to ask questions during the presentation as well. After this conference call, you will be able to listen to a recording, and as usual, you can find our presentations and other relevant data on our website. Please turn to slide two. Before we start presenting the results, I would like to draw your attention to the Safe Harbor statement. Please turn to slide three. Today's presenters are, as usual, Executive Director and CEO, Jacob Meldgaard, and CFO, Kim Balle. Please turn to slide four. I will now hand over to Jacob. Thank you, Andreas, good afternoon, good morning to all. Thank you for connecting with us for our second quarter 2023 result presentation. Today, we'll present the strongest second quarter in our history, a quarter that continues the performance from the first quarter of this year. We realized a TCE of $308 million in the second quarter, an EBITDA result of $237 million. Adjusted for unrealized gains on FFA contracts of $37 million, our EBITDA result increased 23% to $199 million, while profit before tax increased 72% to $184 million compared to the same period last year. Return on invested capital was 33.9% in the second quarter, before correcting for unrealized gains on financial instruments related to freight and bunker. Our balance sheet remains strong, with a net LTV ratio of 29% and available liquidity of $497 million. This morning, TORM's Board of Directors approved a dividend of $1.5 per share based on the second quarter. We expect to distribute around $126.6 million here in September. In the first half of the year, we have taken delivery of all the seven LR1 vessels acquired in early January, and the three MR vessels that we announced was acquired in March. We also sold and delivered one LR1 vessel, with the fleet ending at 87 vessels at the end of June. During the second quarter, we entered into a collaboration with Seabulk to participate in the Tanker Security Program led by the U.S. Maritime Administration. It means that three of our MR vessels will participate in the program and undergo reflagging to the U.S., while continuing their regular operations under TORM's commercial management when not operating under the Tanker Security Program. We expect this agreement to contribute positively to our earnings. As of 14th August, we have covered 74% of the third quarter at $30,534 per day, which is a reflection of the slightly lower market rates that we saw in the latter part of the second quarter as a result of refinery maintenance, product stock draws, and slightly lower demand for products. As I'll be explaining in a moment, we expect the markets to recover, and we expect a stronger fourth quarter. Please turn to slide five. Since the start of the Russian invasion of Ukraine and the consequent introduction of sanctions against Russian oil products, we've seen a step change in product tanker freight rates towards a higher average level, as sanctions have led to a recalibration of trade flows towards longer distances. This has also brought along a higher volatility level as the product tanker fleet has moved closer to the point of full utilization, where even small changes in the underlying demand and supply are creating high volatility in freight rates. In this environment of increased volatility, being able to position our fleet towards the premium trades and regions is even more important, and this means that having access to the right customers and the right cargo combinations is essential. We can see that we, with our One TORM Integrated Platform, continue to have strong support from our customers. We remain confident that we will have access to the cargoes and trades that in turn enables us to position our fleet in the premium regions. Here, please turn to slide six. When we look more closely at the main market drivers, the geopolitical conflict in Europe and the resulting EU ban on Russian oil products has been the most important demand driver side for 1.5 years now. As a result, the composition of EU imports has undergone a significant change from being mainly short haul to being predominantly long haul. This has translated into a 40% increase in EU import ton-mile during the post-sanction period compared to the same period a year ago. This is despite the fact that EU imports have been 15% lower year-on-year, which was a result of higher imports and product stockpiling ahead of the sanctions, as well as the fact that EU oil demand has seen some weakness so far this year. Similarly, Russia has been successful in redirecting its clean products to markets in North and West Africa, Turkey, Brazil, the Middle East and Asia, again, increasing ton-miles. Although here in the second quarter, we have seen some slowdown in Russian volumes due to spring refinery maintenance, which released part of the tonnage engaged in the Russian trade into the mainstream market, thereby putting a pressure on freight rates. Kindly turn to slide seven. I've already mentioned that EU imports, after the introduction of sanctions, have been lower than usual, partly as a result of the stock building ahead of the sanctions, which meant that a portion of demand was supplied by stockpiles instead of by imports. By now, the stockpiles have been drawn down to below average levels. Hence, in the months ahead, this will give a tailwind to the product tanker market. As a consequence of low diesel stocks in Europe, the Middle East to Europe, diesel arbitrage spreads have in recent weeks widened to the highest level since the sanctions against Russia were officially introduced. This is likely gonna encourage increased trade flows, further amplified by seasonally increasing diesel consumption in Europe towards the winter months, which will be supplied by long-haul sources, hence boosting ton-miles. Should China increase its export quotas, that would be a further upside to the market. Please turn to slide eight. We've already seen the product tanker market rebounding here in the first half of the third quarter, with increased product flows out of almost all main exporting regions, encouraged by global complex refinery margins reaching record seasonal levels. Underlying this development is the global oil demand scaling record highs, averaging an all-time high of 103 MMbpd in June. It is not only driven by China, also, oil consumption in industrialized countries has returned to growth. Subsequently, clean product volumes loaded on LRs and MRs globally have rebounded from the lower levels seen during the second quarter. Please turn to slide nine. Further supporting the product tanker market is the fact that since the start of this year, of 2023, a considerable number of LR2 vessels have switched from clean to dirty trades. This has reduced the clean trading LR2 fleet by a net of 9%, with recent crude export costs in Russia and Russian crude trading above the G7 price cap. However, this factor is not likely to provide further support to the product tanker market in the coming months. As Aframax rates have weakened significantly, we can potentially also see some switching back to the clean trades should these export costs stay for longer. Here, please turn to slide 10. When we turn towards more fundamental drivers, not related to geopolitical conflicts, we have for some time been emphasizing the importance of the changes in the global refinery landscape, with closures in some of the main importing regions and new capacity being added in exporting regions. Much of this new capacity is located in the Middle East, and up until now, has been slower to start up than expected. Hence, we have not seen the full effect of these new refiners yet. It is important to mention that all these new refiners that are ramping up now. Furthermore, the new capacity is, to a large extent, concentrated around middle distillates, which we believe will be part of the higher long-haul diesel arbitrage flows that we expect for the coming months and years. Please turn to slide 11. Here, let me turn to the supply side drivers. After years of, you could say, subdued new building activity, product tanker ordering at shipyards has picked up this year, and currently, the order book stands at 10% of the fleet. However, what is important to note here is that the current order book is spread across 3.5 years of deliveries. This translates into a 2.8% growth rate on an annualized basis. Also important to mention here is that with order books at shipyards filled up for the next 2.5 years, any new additional orders are to be delivered not before 2026. Furthermore, a number of the recent new building orders has involved yards, which are really newcomers to the product tanker market. When we look at the fleet supply in the second half of this decade, there may be even more availability for product tanker orders at shipyards, as subsequently, we could see higher deliveries of newbuild vessels, not least due to the need to renew the aging fleet. However, this will coincide with a significant increase in recycling potential as the fleet built in the 2000s is reaching their natural scrapping age. Consequently, the next fleet growth could even turn negative in the second half of this decade. Please turn to slide 12. Another aspect important to mention in connection with the recent pickup in the LR2 ordering is that giving the versatility of the LR2 fleet, which can trade both clean and dirty products, the LR2 order book should be seen in connection with the dirty Aframax order book. The combined order book is currently at 11%, which compares with 5% of the combined fleet reaching 25 years old during the same period. If we consider that this segment normally has a lower average scrapping age, which has historically been 21 years, theoretically, up to 23% of the fleet could be removed from the market in the next 3.5 years. Please turn to slide 13. To conclude my remarks on the product segment market, we see that the main demand and supply drivers on the product segment market continue to be supported. The trade recalibration that already started last year and that has led to a step change towards higher average freight rates, will continue to support the market also this year, with new large refineries ramping up in the Middle East being an important driver in this development. We are on track to reach the full trade recalibration effect, although we saw some fallback in the second quarter on lower trade volumes, both into Europe and out of Russia. Far here in the third quarter, we've seen trade volumes starting to rebound and key oil market indicators, such as refinery margins and arbitrage spreads, point towards further increases in trade volumes being transported over longer distances. As we also discussed, the positive demand side is complemented by a supportive supply side situation, securing a low fleet growth for at least the next two to three years. With that, let me hand it over to you Kim. Thank you, Jacob. Please turn to slide 14. Focusing on our earnings development during the second quarter of 2023, we once again obtained strong performance. TCE increased to $308 million in the second quarter, which is higher than both the previous quarter and the same quarter last year. Sequential increase from the first quarter of 2023 is mainly due to unrealized profits from financial instruments related to freight and bunker of $37 million. Our EBITDA for the second quarter was $237 million, including these unrealized gains. After adjusting for this, our adjusted EBITDA was $199 million, and over the past four quarters, we have achieved an adjusted EBITDA of a total of $920, or sorry, $933 million. During the same period, TORM declared dividends of a total of $578 million, including the dividend announced earlier today, while also increasing the fleet from 81 to 87 vessels and reducing our financial leverage. Please turn to slide 15. If we look at our largest vessel class, the MR class, they have performed strongly, also when comparing to our peers. Including the latest four quarters, TORM has consistently outperformed our peers by an average rate of $33,862 per day, equaling a premium of TCE of $75 million. Needless to say, we are very pleased with this performance and see this as a validation of our business model and our One TORM platform, prediction models, consistent positioning of our vessels in the basins that give the highest earning. Please turn to slide 16. If we dive further into the details of our TCE rates, the average rates for MRs for the second quarter were $33,862 per day, for LR1s, $36,674 per day, and for LR2s, $47,918 per day. The average across the fleet rate was $36,360 per day. Based on our rates and coverage as of 14th August 2023, we have fixed a total of 74% of our Earning Days at $30,534 per day in the third quarter across the fleet. All of our vessels classes rates were on average around $30,000 per day. Hence, the softer market we saw towards the end of the second quarter will naturally have an impact in the earnings for the third quarter. Part of the mentioned coverage has been made with FFA contracts, and as per 14th August 2023, the coverage for the coming quarters was 825 LR1 earning days, fixed at approximately $45,000 per day, and 1,478 MR earning days, fixed on approximately $40,500 per day on average. In the second quarter, we had 7,398 earning days, and we expect to have 7,685 earning days in the third quarter, based on full effect of the vessels acquired during the second quarter and taking into account that the LR1 was sold and is expected to be delivered in the third quarter. Please turn to slide 17. We continue to evaluate our opportunities for fleet expansion and renewal. Thus, we have acquired and taken delivery of a total of 10 second-hand vessels in the first quarter of this year, and has sold one vessel. This means that as of 13th June 2023, the value of the 87 vessels that we had in our fleet reached $3.1 billion, which is an increase of $875 million since the same time in 2022. The vessels acquired in the first half of this year alone have increased by 8% in value since we acquired them. The vessel value increase result in a Net Asset Value of $2.5 billion at the end of June 2023, which is $1 billion higher than the same time last year. Since the end of the quarter, one vessel has been sold, and it's expected to be delivered in August. By the end of the third quarter, 2023, we expect to have 86 vessels in our fleet. As mentioned, we will distribute around $127 million or $1.5 per share based on our cash balance at the end of the second quarter. Consistent with our distribution policy, our distribution is derived from the liquidity available for distribution, adjusted for a minimum cash reserve of $1.8 million for 87 vessels, as well as cash reserved for future vessels acquisition and restricted cash. Over the past 12 months, TORM has utilized the strong markets to strengthen our financial position, while at the same time paying out a total of $578 million, equivalent to 74% of the net profit generated in the period. In the second quarter, we completed the refinancing of bank and leasing facilities for $480 million, and further secured a $73 million facility that can be used for additional secondhand vessel financing. After the completion of the refinancing, total debt increased by $70 million, of which $50 million are related to purchase of the three secondhand MR vessels that were delivered during the second quarter. Interest rate hedges cover 70% of the floating rate debt at a rate of 1.4% over the coming five years, combined with our fixed rate leasing, 83% of our debt is fixed over the coming years. Please turn to slide 18. Summing up, the performance we delivered in the second quarter was historically strong compared to the second quarter results in the past. It is a reflection of a continuous strong product tanker market and the largest fleet in TORM's history that resulted in an increase of EBITDA of 54%. Recent softer markets have provided TORM with 74% coverage at $30,534 per day for the third quarter of 2023. Thus, we expect the delivery result in the third quarter to be slightly softer than in the second quarter. However, market fundamentals and dynamics are pointing towards a stronger fourth quarter, where both seasonally increasing demand, lower product stocks, and arbitrary spreads are supporting a stronger market. We are pleased that the strong earnings and balance sheet have allowed us for another quarterly dividend payout of $1.5 per share. Over the past year, the total dividend payment has reached $7 per share. All in all, our delivered results confirms TORM's strong operating model consistently performs better compared to our peers. Thus, our MR fleet has outperformed the peer average with $75 million over the past year. We attribute this to our One TORM platform and our dedicated TORM employees. With that, we will let the operator open up for questions. Thank you. If you have a question, please press star one on your telephone keypad. If you wish to remove yourself from the queue, simply press star one again. One moment, please, for your first question. Your first question comes from the line of John Chappell of Evercore ISI. Your line is open. Thank you. Good afternoon. Jacob, first question for you, two-parter. On the one hand, you said that you have liquidity, and you're gonna continue to focus on fleet expansion. On the other hand, you said publicly, the new buildings are too risky, just given the uncertainty over the next 25 years. The question is: What's the sweet spot for you as you look to further fleet expansion? Is it kind of the 10-12-year-olds that you've been buying recently? Secondly, you know, you mentioned the order book's up to 10%. Is there a risk that people have or other owners have too much short-term focus, and that's what's driving the order book higher and aren't really focusing on the risk associated with fuel propulsion, et cetera, you know, more than five years out? Thanks, John. Yeah, good question. Number one, if we were to have, have the luxury of identifying assets that, that we think could be contributing positively to the platform, I think currently, yeah, it's, it's unchanged. It's vessels that are probably in the built, let's say, between 2010 and 2015, around that. That, that feels like the sweet spot for us. We think that the market will be strong for at least a number of years, and, and that would lead us in that direction. If you then take your other point around the order book having grown, as I mentioned, yes, it is gross 10%. What is unusual, it's not so much that it's 10%, but it is that it's spread out over such a long period. As I mentioned, annualized, 2.8%. I don't see here in the, let's say, initial three years, that it's gonna change from that. Really, you are looking at investors or market players putting their money on solar towards the end of 2026 into 2027. They, you know, let's see what, what happens. I think the shipyard capacity in general is gonna be a, a scarce commodity because there is less availability on the shipyard side. There's been restructurings, especially on Asian shipyards, having gone down in their overall gross capacity. At the same time, you are gonna. I think for the foreseeable future, you are gonna see that, that shipyards tend to favor more infrastructural type of projects like LNG carriers, that for sure is globally also a needed, a needed sort of... vehicle to provide gas into areas, for instance, in Europe, where you have previously been dependent on gas from, from Russia. I think all in all, yes, I expect the order book to creep up, but I do expect it to be quite manageable when you consider what is happening then to the aging fleet here in the second half of the decade. Mm-hmm. Okay, thank you for that. clearly something- My second- Yeah. Right. Yeah. My second question has to do with the next six months, much shorter timeframe. It feels like everything's set up for another seasonal recovery, whether it's the inventory draws, the refineries opening, the IEA's, you know, sequential growth in demand, another Northern Hemisphere winter on a continent where I think there's more risk to diesel supplies this year than last year. What can go wrong with a seasonal recovery this year? Is it strictly the economy? Is it something related to China? You know, where can we not have the type of seasonal uplift that we've seen in the last couple of years in the fourth quarter and into the early part of next year? Yeah, that's a good question. I would probably look towards generally, I would look towards whether there is some danger on the crude side, that the, the transportation of crude continues to be subdued, that the Aframax have, have been faring really, really well, as you, as you can see also from, from the various results, of, of companies engaged in there. It, it feels as if right now it is a standstill a little on, on the crude transportation in, in the medium-sized vessels, in the Aframax. Mm. If that continues, it would encourage people to try to penetrate the, the clean market. I think the jury is out on that over the next couple of months. I think that is one, one to watch. China, I'm not so concerned because it's a crude story, and right now we're not really seeing a lot of export of clean being available in the market for our type of vessels. That would be actually be a tailwind. I think China, China cannot, can almost not be, how can I say, supporting the product tanker market less than what they're doing now, because there's very, very little exports. I think that I think the potential for them opening up for more exports, given where their economy is, is that, that seems like a more likely scenario than going the other direction. Okay. That would not be a concern to me. All right. That's good. Thank you for your thoughts, Jacob. Thank you. Thanks for the question, John. There are no further dial-in questions at this time. I will now turn the call back to Andreas for any online questions. Thank you. We have a few questions. First one is for, for you, Jacob. Do we see a considerable challenge of augmenting the supply adequately in the near future due to the contraction of shipyard capacities? Could you provide more detail on that? Yeah, I think that's, that's a very good comment. We've already mentioned that more or less all capacity in the short to medium term have already been booked at, what I would say, shipyards that are capable of delivering a product into the product tanker market. That means that you are looking at either Tier 2 shipyards that could potentially maybe add a little to the order book, or you are looking at really long-dated contracts delivery back end of 2026 or into 2027. I think the restructuring sort of, of the shipyard scene is benefiting the product tanker, because it was especially middle-sized Korean shipyards that 10 years ago were the big contributors to the order book. Those shipyards have either closed down or have turned their focus predominantly to other places. There's actually only very few shipyards left that are focused on product tankers, which is significantly different than if we dial the clock back 10 years. That's number one. Number two is that there is a need, as I mentioned, also under the previous caller, to still build infrastructural projects, which I personally think the LNG market as being. There is a strong demand from both producers of gas in the Middle East, and also the importers, for instance, in Europe, to actually get control of deliveries also in 2026, 2027. I think, I think there will be more contracting into the product tanker market, but the fact that there is maybe less supply to go to, less opportunities of shipyards that can build it, and that you are competing currently for the available capacity in, in sort of, the high end of the shipbuilding market, that, that does give me some comfort, too, that we will see a rising order book, but it's not going to be. It can simply not explode in the medium term. Thank you. We have a few questions I will, I will combine here. How do you look at consolidation in the current market environment? Are you currently looking at opportunities? Then also, you have been in the market for selling some older vessels 15-20 years. Will you continue to sell in that age range? Yeah. Okay, they are very different questions, obviously, but if we take consolidation, the door is always open at TORM for consolidation. I think the fact is that we are doing really well. I can, I can see that, that, of course, our peers in the market are also benefiting from, from these strong currents. I think even though that I could, I would say, have an open invitation for consolidation, I can, I can hand on heart say that there is no active dialogue. I think in the current environment, that most investors are pretty happy with the, with the positions that they have. That's my instinct. I don't expect a lot of activity on that. If you look at the disposal, well, we are obviously utilizing our vessels for as long. We have the luxury in TORM that we've got a One TORM platform, so we are not discriminating against the age. We are looking at what gives us over time, the highest return on our invested capital, and that includes vessels that are between 15 and 20. If you look at it, then historically, I think the, the average age of assets that we have been selling are somewhere in the very high teens. It seems logical that when and if we dispose of assets, it's in that age bracket. I would, I would expect over time that there will be further disposals of vessels in that age range. That, that seems totally plausible. Thank you. We have one more question for you, Jacob. Are you mostly committed to spot markets and hedge with FFAs? Yes. That has been at least, the way we have played the market since, let's say, first quarter of last year, when we saw the market have a step change. We think that there is a value to be had in being open to the spot market with this high volatility. Just as an example, we're experiencing that exactly, let's say two months ago, in the middle of June, the spot market for our MRs in the US Gulf would be hovering around earning of $20,000, and today as we speak, it's probably closer to $50,000. I think to, to sort of close down that optionality of being able to also have these spikes in the market, we, I think we benefit as a company, and our shareholders benefit from still being able to, to be open to that. Then we, from time to time, do hedge, if when and if we think that the, that the value on FFAs is significantly close to where we think the market will be, then we will utilize that. Could we do TCs? I think clearly, if some of our, our clients, top-tier clients came to us and, and requested tonnage for a longer period, of course, we are willing to do that at a price also. Thank you. A question for you, Kim. Your staffing cost has increased significantly since one year ago. Is this something you can put some more details on, and do you expect the D&A to stay around at the current level? Thank you very much for, for that question, and well, well spotted. If we take SG&A admin cost in general, that is one of the common KPI, KPIs we have across the One TORM platform. Every employee has that as a KPI, meaning that we are in TORM, super focused on maintaining and strict, have a strict cost focus. The underlying SG&A level is very much under control. We have key KPIs on it, and we want to maintain it more or less at the levels we've had for quite a while. As we published in conjunction with the annual report, TORM plc's Board of Directors have decided at that point in time that they wanted to grant an exit program for selected employees. In TORM, a retention program running over 3.5 years, and when you have a program like that, you need to provision for that in your accounts, and we've done that, over the 3.5 years. You will see that the SG&A is higher, in the coming period, but it is non-cash, and it is a provision for, for that potential program, and that will, expire in 2026. It is a, it is a one-off program. Well spotted. Thank you very much. Yes. One more question for, for you, Jacob. There's a widespread conversation regarding challenges post 15 years. Yet how substantial are the expenses associated with, extending a ship's service life? Yeah. We are very comfortable with the calculations that we are doing. Obviously, we have a significant number of vessels that in our fleet today that are over 15 years, and we also have experience with previous vessels, having them operating efficiently in our fleet when they are over 15. The way we see it is actually that it is quite dependent on the general maintenance of the individual vessel. I don't think you can, like, put a one to one or say on every vessel is gonna be X or Y. What we see is that in order to pass what is called the CAP 1 requirements, when you are 15 years old, there is an extra associated cost, a CapEx of between $500,000-$1 million, that is dependent to that. Of course, you are also extended, extending the useful life towards the general market, the same market as a vessel that is below 15 years by doing it. So far, we've been very pleased with the results that we get out of it on the One TORM platform. I don't think that it can be easily replicated, so I don't think that what I'm explaining here necessarily fits one to one with the, with other operational platforms. All in all, the NPV for us of making this additional investment at 15 years have made sense. Thank you very much. There are no further questions. This concludes the earnings conference call regarding the results for the second quarter and first half year of 2023. Thank you for participating. You may now all disconnect.