Hafnia Q2 Earnings Call Highlights

Hafnia Q2 Earnings Call Highlights

Key Points Strong quarterly results: Hafnia reported approximately $278 million in net profit for Q2, its second-best quarter on record, supported by geopolitical disruptions, longer shipping distances and tight product-tanker conditions. Large shareholder return: The company declared a $250 million dividend, equal to a 90% payout ratio, after net loan-to-value fell to just above 13%; Hafnia has returned capital for 18 consecutive quarters. Market outlook remains mixed: Inventory drawdowns, Chinese exports, high U.S. refinery utilization and canal disruptions support tanker demand, but future vessel deliveries, potential crude-to-product fleet shifts and weaker spot rates pose risks. CEO Mikael Skov is also set to leave, with Søren expected to succeed him.

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.