Hafnia Stock

Hello, everyone. Welcome to Hafnia's Second Quarter 2026 Financial Results Presentation. We will begin shortly. You will be brought through today's presentation by Hafnia's CEO, Mikael Skov; CFO, Perry Van Echtelt; Soren Winther, VP, Commercial; and Thomas Andersen, EVP, Head of Investor Relations. They will be pleased to address any questions after the presentation, which will be moderated by myself, Sheena Williamson-Holt, Head of Communications at Hafnia. [Operator Instructions]

During this conference call, some statements may be considered forward-looking, reflecting management's current expectations. These statements involve risks, uncertainties and other factors, many of which are beyond Hafnia's control that could cause actual results, performance or plans to differ significantly from those expressed or implied. Additionally, this conference call does not constitute an offer or solicitation to buy or sell any securities.

With that, I'm pleased to turn the call over to Hafnia's CEO, Mikael Skov.

Thank you, and hello, everyone. We appreciate you joining us for Hafnia's Second Quarter 2026 Earnings Call. I'm Mikael Skov, CEO of Hafnia. With me today are our CFO, Perry Van Echtelt; our VP of Commercial, Soren Winther; and our EVP, Head of Investor Relations, Thomas Andersen. Our second quarter 2026 results were published earlier today and are available on Hafnia's website. On today's earnings call, I will first cover the main developments in the quarter before Soren walks through the market and Perry reviews the financials. I will then touch on our strategic initiatives before concluding the call for questions.

Let's move to the next slide. Before we proceed, I would like to go through our safe harbor statement. The information discussed on this call is based on information we have today, which may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Nothing presented in this call should be construed as an offer to buy or sell securities. Next slide. I will start with the key highlights from the quarter.

And now we go to Slide #5. The second quarter was another very strong quarter for Hafnia. The market has not yet normalized 6 months after the start of the conflict in the Persian Gulf. We are still experiencing disruptions to Gulf flows and rising tensions have reestablished the Red Sea chokepoints, dislocating oil flows across the world. Against this backdrop, we delivered a net profit of $277.8 million, the strongest quarterly results since the third quarter of 2022. We also continued to optimize the fleet by divesting older vessels. During the second quarter, we sold 1 LR1, 2 MRs and 3 Handy vessels, recording a gain on sale of $39.3 million. In the third quarter, we completed the sale of our 50% interest in 2 MRs held through the joint venture with Andromeda, resulting in a $13.3 million gain for Hafnia.

Let's go to the next slide. Hafnia's platform remains highly integrated with ship owning, commercial pool management, technical management, bunkering and adjacent businesses all aligned. At quarter end, we owned 103 vessels and had 9 vessels time chartered in with an average owned fleet age of 9.7 years. Our net asset value at quarter end was approximately $4.4 billion or around $8.89 per share, corresponding to approximately NOK 88.47 per share. Alongside our own fleet, we commercially manage around 60 third-party vessels. Seascale Energy, our bunkering joint venture with Cargill, also continues to develop as an increasingly relevant platform in a volatile fuel and freight environment.

Let's move to the next slide. Now moving to shareholder returns. Our net loan-to-value at end of Q2 stood at 13%, decreasing from 20.2% in the previous quarter, primarily due to strong cash flow generation from both operations and vessel sales. With leverage now below the lowest threshold in our dividend framework, we will declare dividend based on the maximum payout ratio of 90% of net profit. That translates into a dividend of $250 million or $0.5003 per share. Together with the first quarter dividend, total dividends for the first half of 2026 amount to $0.788 per share, which represents an annualized yield of around 21% based on a share price of $7.5. This is the 18th quarter in a row in which Hafnia has paid dividends, underscoring both the cash-generating quality of our platform and our commitment to returning capital.

I will now hand over to Soren to take us through the industry review and outlook.

Thank you, Mikael. Let's move on to the first slide, which is Slide 9. It has been 6 months since the conflict in the Persian Gulf began and the market remains fragmented with volumes east of Suez constrained. While the memorandum signed between the U.S. and Iran in mid-June briefly facilitated a partial reopening of the Hormuz Strait, the agreement quickly broke down, reestablishing the Middle East chokepoint. Alternative routes have also come under pressure as renewed tensions involving the Yemen and Houthis have prompted vessels to avoid the Bab el-Mandeb Strait, redirecting Red Sea exports northward through the Suez Canal and SUMED pipeline.

Despite these disruptions, market fundamentals remain sound. The underlying support comes from several sources, depleted inventories that will eventually have to be replenished, longer and less efficient trade flows, increased ballast passages, continued migration of LR2s into dirty trades and the clean tanker fleet that is effectively smaller than it was at the end of last year.

Let me walk you through these dynamics in more detail. Next slide, please. Let us first look at world oil demand and crude flat price and inventories. The demand recovery is following a familiar pattern to COVID-19 in 2020, which took roughly 4 quarters to normalize. The IEA believes that demand bottomed out in Q2 2026 at 99.3 million barrels per day, but is expected to move back to 106 million barrels per day by Q4 this year as crude flat price eases from the highs. The inventory picture is equally important. Inventory levels have depleted over the past months, and we expect the eventual restocking to support ton-mile when looking ahead. The expected restocking is front-loaded. Around 260 million barrels worth of OECD stocks are expected to be rebuilt by mid-2027, with more than 100 million barrels in Q1 2027 alone. This signals stronger tanker demand.

Let's move on to Slide 11. The same conclusion appears when we look at the implied global inventory draws based on lost transport volumes. In the past 180 days since the start of the conflict, seaborne volumes fell by about 7.1 million barrels per day, whereas demand only fell by 3.4 million barrels per day. The remaining 3.7 million barrels per day gap was effectively supplied from inventories. In essence, the supply crunch was partially met by reduced demand and partially by stock draws. In return of Middle East volume and the recovery of world oil demand, reversing seaborne trade volumes and drive transportation demand. This is why the inventory rebuild is central to our outlook.

Let's move on to Slide 12. The correlation between the supply-demand balance and earnings does not follow a historical pattern. Normally, an oil supply deficit means fewer barrels moving, causing tanker earnings to soften. This time, we saw the deepest deficit of about 5 million barrels per day in Q2, while Aframax earnings remained strong. That deficit is narrowing and the supply deficit in Q3 stands at 2.2 million barrels per day with a forward curve moving into surplus by Q4 and through 2027. Against that backdrop, tanker earnings are better described as easing, supported by Middle East refining activity, which is expected to return in 2027, depending on the geopolitical landscape.

And we move to Slide 13. Looking at daily loadings. The global clean departures have recovered meaningfully from the low point in May to 18.4 million barrels per day by the end of July, still about 10% lower than pre-crisis levels. The main pressure point has been East of Suez, where clean loadings bottomed out 40% below normal averages. Since then, the region has improved, how quickly further eastern recovery continues will be one of the key variables for the clean tanker market. Meanwhile, dirty loadings followed the same trend, but with a much steeper decline. East of Suez dirty volumes fell from around 24 million barrels per day in February to 12.6 million barrels per day in May. And by July, volumes were still roughly 30% below precrisis levels. Further recovery depends on Arabian Gulf exports returning, including Iranian crude. An additional 2 million to 3 million barrels worth of exports would create significant demand for Suez and Aframax vessels.

Let's move on to Slide 14. Oil on water follows a similar trend. Clean products on water have recovered slightly from the May lows, but remains 12% below pre-conflict levels. [indiscernible] tonnage enabled increased cargo evacuation from inside the Arabian Gulf to ship-to-ship locations of the Omanian and Indian coastlines, servicing increases in total transport volumes. The decrease in clean products on water is equivalent to 180 MRs, highlighting the scale of demand and volumes displaced during the disruption. Dirty products have recovered strongly, underlining the fundamental strength within this segment.

And we move on to Slide 15. Refinery margins are also at record levels, with margins across all 3 major regions increasing multifold since the beginning of the conflict. U.S. Gulf has benefited the most. It has captured and replaced a significant share of the displaced refining demand with margins up ninefold. China's lower margins are likely related to reduced government-controlled export quotas, forcing product prices to rely largely on upstream markets only. We believe that Chinese margins are set to rise due to the immediate legalization of cheaper sanctioned barrels in Q2 and the gradual increase in export quotas to the international market in Q3. We expect global margins to moderate but remain healthy as forward curves supports continued refinery utilization and product trade flows.

And we move on to Slide 16. Turning into the key exporting regions. China's anticipated 2026 export quota of about 330 million barrels has a remaining balance of about 225 million barrels. Following the removal of export restrictions on transportation fuels, actual exports have reached around 0.9 million barrels per day in August, up from 0.6 million barrels per day at the start of 2026. In essence, the foundation for increased Chinese exports is supported. However, the question mark remains if the total 2026 export volumes will meet the 2025 averages. Funding constraints remain domestic demand and inventory requirements. Russian clean products exports remain constrained by ongoing refinery disruptions caused by Ukrainian drone strikes, removing exports of about 0.8 million barrels per day. Western freight markets increasingly rely on U.S. Gulf and Nigerian export volumes, supporting Atlantic ton miles in general.

Slide 17, please. Turning to tanker supply. Over the past year, the tanker market has faced 5 major shocks: COVID-19, the Russia-Ukraine war, the Panama drought, the Houthi Red Sea disruption and now the Hormuz blockade. Each shock has rerouted trade through flows and added ton miles where replacement capacity has consistently lagged. The fleet age 20 years and above has grown from 48 million deadweight tons in 2020 to 187 million deadweight today with 251 million deadweight projected by 2028. Ageing vessels are likely to provide structural freight support as scrapping sanctions and stricter vetting requirements imply the removal of older tonnage from the mainstream trade. Overall, this paint a resilient picture for the upcoming years.

And we move to Slide 18. The LR2 to Aframax migration continues to be one of the most important structural supply shifts in our market. Despite newbuild deliveries, global clean LR2 availability today sits about 27% below normal averages. And we move to Slide 19. Looking at the current global clean trading fleet from Handy to LR2 counted in MR equivalents, our estimate is that the effective fleet supply has decreased by 3% since the beginning of the year. This is mainly driven by clean to dirty trading migration. This is one of the key reasons for the clean tanker freight market remaining robust amid lower export volumes.

And we move to Slide 20. Looking at the order book and the scrap landscape and the no newbuild program 2026 to 2029, the Handysize to LR2 order book consists of approximately 60 million deadweight tons with LR2s accounting for a large proportion. Against that, potential scrapping of vessels older than 25 years and sanctioned tonnage roughly total 72 million deadweight tons from 2026 to 2029. We assume that the sanctioned fleet above 20 years is unlikely to reenter mainstream trading, which we estimate to 21 million deadweight tons, suggesting limited coated tanker fleet supply growth.

And we move into Slide 21 in the last slide. In summary, let me end with a simple balance sheet of what is holding the market up and what could take it down. On the anchor side, inventories, rebounding exports, demand recovery and the tightened clean fleet remain the key pillars. And on the risk side, the picture is mostly further out. The order book could have a stronger net impact from 2028 onwards, while the unwinding of LR2 migration could add to the clean fleet supply. If or when Hormuz and the Red Sea reopen for normal traffic, markets are likely to lose inefficiency effects such as ship-to-ship shuttle services, longer ballast legs and other factors currently absorbing tonnage supply.

And with those words, I'm now handing over to Perry, our CFO, who will bring you through the financial development.

Thanks, Soren, and good day, everyone. If you go to the next slide. In Q2, rates reached record high, and we delivered our strongest quarter since the third quarter of 2022. TCE income was $372.9 million, while adjusted EBITDA reached $287.3 million. Our fee-based businesses contributed $8.8 million for the quarter. And in addition, we received $9.9 million in dividend income from our investment in TORM.

Net profit was $277.8 million compared with $75.3 million a year ago. This includes the $39.3 million gain on disposal from the vessel sales completed during the quarter, bringing our half year net profit to $457.5 million. Return on equity for the second quarter reached 44.6% on an annualized basis and return on invested capital was 35.2%. Next slide, please. Turning to the balance sheet. The balance sheet also improved during the quarter on the back of strong cash flow generation from both operations and the proceeds from sale of vessels. The cash balance increased to $271 million, while gross debt reduced to $798 million. Net debt, therefore, declined to $527 million at the end of Q2. The net LTV moved substantially down to 13% from 20.2% at the end of the first quarter. This was mainly due to lower debt and supported by the increased vessel values. Total liquidity remains strong at approximately $631 million, which includes $360 million of undrawn facilities.

We also remain well protected on interest rates with around 67.6% of our exposure hedged at a weighted average rate of 2.85%. Announced last quarter, our newbuild program now consists of 10 MRs with CapEx payments beginning from the third quarter of 2026. With this, we believe our net LTV ratio would also understate our true committed position. From 2027 onwards, we will calculate net LTV on a fully committed basis. We will include remaining newbuild capital commitments such as unpaid yard installments in the numerator, while adding the broker assessed market value of the corresponding newbuilds to the denominator. We believe this provides a more comprehensive representation of our underlying leverage.

Next slide, please, where we can move to the operating summary. Q2 TCE rates for the year continued to show significant improvement across all segments. Our fleet-wide average TCE reached $44,093 per day, while our average spot rates were close to $50,000 per day. Dry dock and off-hire days totaled 392 in Q2. We expect this to fall to around 225 days in Q3 and approximately 110 days in the last quarter of the year, which should increase available earning days through the second half.

Let's move to the next slide. As of August 17, 80% of our Q3 earning days were covered at $30,716 per day, which, although below the exceptionally high levels in Q2, remains a very strong environment considering lower seaborne volumes. For the second half of 2026, coverage stood at 53% at $28,917 per day. These rates are well above our operational cash flow breakeven and set the stage for another strong year of earnings. For Q3, estimated earning days are around 9,376 after taking into account 50% for the joint venture fleet, scheduled dry docking, the impact of divestments, vessel deliveries and vessels chartered in during the quarter.

Mikael, I will hand it back to you now.

Thank you. And moving on to the next slide, please. Let me briefly touch on our sustainability priorities. As one of the leading owners and operators in the product tanker segment, we view sustainability as an integrated part of the business. Safety, environmental performance, governance and responsible partnerships have and will always remain core to the way Hafnia operates. Our commitments remain unchanged: Zero harm across operations, a 40% reduction in fleet carbon intensity by 2028 compared with 2008, net zero Scope 1 emissions by 2050 and continued progress towards 40% women in our offices by 2030. Next slide, please.

The strategic projects shown here are intended to strengthen Hafnia over the long term, whether through improving our overall shipping platform or advancing our technological capabilities. Seascale Energy continues to strengthen our bunker procurement capabilities together with Cargill, particularly in an environment where fuel availability, pricing and alternative fuel pathways are becoming more complex. Complexio is also moving from concept into practical deployment with early use cases already helping to improve response times in commercial and finance workflows. Next slide, please.

Before we close, I want to say a few words about the CEO transition announced on the 30th of June. This will be my final earnings call as CEO of Hafnia. As announced from the 1st of September 2026, Søren Steenberg Jensen will take over as CEO. Subject to shareholder approval at the Extraordinary General Meeting held later this quarter, I'm expected to join Hafnia's Board of Directors and look forward to continuing to contribute to Hafnia in this new capacity. This transition has been planned carefully and with continuity in mind. Søren has been part of Hafnia since the beginning in 2010. And as Head of Asset Management, he has been deeply involved in shaping our fleet, our asset strategy, capital allocation and many of the decisions that have brought Hafnia to where it is today. It has been a real privilege to lead Hafnia and to work with an exceptional team across sea and shore.

I would like to take this opportunity to thank our seafarers, shore-based teams, customers, partners and shareholders for their trust and support throughout this journey. What will not change is Hafnia's direction. The focus remains disciplined commercial execution, operational excellence and prudent balance sheet management. That brings us to the end of the prepared remarks. Thank you for joining us today, and we will now move to questions.

Thank you, Mikael and Perry and Soren for taking us through the results today. So, to those here, we will begin our Q&A session now. [Operator Instructions]

So I'm going to start with Frode. Please can you unmute yourself, please, to ask your questions.

Yes. Yes. First question is for Soren, I guess. I guess on the topic of Panama Canal. Last time, Panama was a big issue. We didn't really have Red Sea and Hormuz disruption at the same time. So when you look ahead and assuming Panama tightens further, how much more disruptive and supportive would this be for products, do you think?

Okay. Thank you for the question. I think you're right in the sense that when the Panama Canal again comes on top of many other things ongoing, it probably has an even larger effect. And now it's tying up with China also increasing exports, whereby you would expect with a further diminished Panama Canal transit where you are now paying up to about $1 million for an auction over there. You're likely to see export from the Far East coming into the U.S. West Coast, adding ton miles to the region, which in the first phase have displacement of tonnage.

So it is a strong driver. Whether or not this time around, it will be a halving of transits to the tune of 2024 is still a question mark, but you've probably seen the news that 2 ships left by the end of this week and then another 2 a little bit further out. So the trend is there and the combination of the factors that we have ongoing is not insignificant.

Yes, right. So you discussed a lot of good points here. So if you were to, let's say, summarize it and look ahead just for the next 6 to 9 months, how would you think this market will develop?

Well, on a general note, disruption is the driver here, right? I think we are now in a scenario that is probably a little bit worse than the beginning of the Middle East crisis, especially with the news of the flag-lifting of ships evacuate in the Middle East, at least a more closed Red Sea passage than it was when we spoke last with a partial opening there as well. And China exports ramping up U.S. and China that is really gravitating the world towards it, which can only mean longer ton mile on a general note to supply the world.

So I'm constructive for the balance of Q3 and through Q4, obviously, with the caveat that we are sitting in a very political-driven environment and changes could still be coming at us like they have been more or less on a weekly basis over the past months really. So positive and constructive, always with the -- being mindful that it's all good and fine that we have a lot of ton mile and we have disruption all over the place, but oil also have to be available to increase transport demand. So it also depends how much the release on SPR volume will be on a further basis and how much stock draws we can actually do as a world. But yes, did that answer the question?

Yes, very well. So it looks like a good and interesting winter period ahead of us, right?

I think that's probably also one of the points that we didn't touch upon, but an El Niño year and whether or not that's going to give the usual cold winter that, that brings with it, but depleted inventories coming into a winter season could, in our mind, also kickstart an earlier Q4 transportation spike and probably also market spike that you would be used to as you would likely see Europe trying to restock at least where possible before the winter really comes up.

Yes. Fantastic. My final question is for Mikael. Since this is your last call, I guess, as a CEO. I just wanted to ask you, if you had to leave the investor with one thing, you think the market is still underappreciated with Hafnia. What would that be?

Yes, that's a really good question. I don't know if there's anything that's, kind of, specifically underappreciated. But I think at least what comes to my first mind, I don't -- as I said, I don't know if it's underappreciated is that I think our strong focus on capital allocation and particularly discipline through the cycles. I think that has been and will continue to be one of the strength part of Hafnia that we have a major shareholder that has a long-term perspective, which means that we can time our investments and the capital allocation for the right timing rather than being forced by other conditions to make decisions through the cycle. So I think at least to me, that's one of the strong parameters for us is that we have the ability to think long term and not be forced to make any panic decisions short term.

Yes. Yes, it's been a fantastic journey, I guess. So thanks, Mikael. And this is your last call. As an analyst, I would just thank you for all the good insights over the past few years. So all the best what comes next. Thank you.

Thank you so much for that.

Thank you, Frode, for your kind words. I don't actually see any more raise hand functions, but I do see a question in the chat, which is from [ Foster ]. So I'm just going to read it out here. First of all, congratulations on your retirement, Mikael, and thank you for your leadership and contribution to Hafnia over the years. Hafnia performed particularly well in the LR1 and MR segments during the quarter compared with most of its peers. Can you explain the main drivers behind this outperformance? Was it partly related to a higher number of product tankers trading dirty? Or were there other factors at play? Do you believe these are structural or repeatable factors that allow Hafnia to continue outperforming in Q3 and beyond? Soren, I will ask you to unmute yourself and maybe you want to also look at the question in the chats to answer kind of the 3 different parts of it.

Yes. Thank you, Sheena. I think we divide it in segments and start with the MRs from the bottom up. So we are not super exposed to dirty spreading on the MRs, and it's literally not very big in the MR segment. But we had a strategy from already the end of 2025 to be exposed in the U.S. Gulf market. That was driven by a belief that the turnaround season for the U.S. Gulf would not be as big this year, driven on the back of high refinery margins on a general note.

That so transpired that the AG or Middle East prices came on top of it. So we already had a big position in terms of tonnage spread from a Hafnia perspective in the Gulf, and it was just amplified in terms of return for taking that strategic decision by the Middle East crisis. So it's really a positioning thing where we have been leaning very much towards the Gulf PADD 3 and the Far Eastern area, which has been the second best performing area. On the LR1s, it's to the tune of the same story. We migrated tonnage from the East to the West early in the year. And they have -- we have capitalized on that because the -- even the Europe market and the Mediterranean and the Red Sea market spiked on the back of the AG crisis. We also have an exposure in the Panamax market, which have quite clearly through that quarter, in particular, been overachieving, if you like, our percentage exposure in the Panamax segment is not that significant, but it has elevated the earnings to a certain extent.

Whether or not we are benefiting from the exact same factors in Q3. It still remains to be seen for the rest of the quarter. But for the beginning of the quarter, it has not been too bad to be exposed to the U.S. Gulf. We did actually migrate some tonnage towards the Far East at an early stage. So from a strategic perspective, we are sound and well and sitting with a tonnage but east-west that we are satisfied with. So I would certainly hope that we are up there with the best.

Okay. Thank you, Soren. For that, [ Foster ], I'm assuming I trust that, that covers everything you needed to know. In case not, feel free to send a follow-up in the chat. I'm at the moment going back to the raise hand function, I do not see anything there. Great. And [ Foster ] confirms Soren, you covered everything. So I think given that there are no more raised hands, then I'm just going to thank the speakers for the presentation and then thank those for their questions.

So yes, we have come to the end of today's presentation. So thank you to everyone who joined for attending our second quarter 2026 financial results conference call. You can find more information on our website after this call where this recording will be uploaded. Thank you, everyone, and have a great day and a great weekend when you get there.

Welcome to Hafnia's First Quarter 2026 Financial Results Presentation. We will begin shortly. You will be brought through today's presentation by Hafnia's CEO, Michael Skov; CFO, Perry Van Echtelt; Soren Winter, VP, Commercial; and Thomas Anderson, EVP, Head of Investor Relations. They will be pleased to address any questions after the presentation. [Operator Instructions]

During this conference call, some statements may be considered forward-looking, reflecting management's current expectations. These statements involve risks, uncertainties and other factors, many of which are beyond Hafnia's control that could cause actual results, performance or plans to differ significantly from those expressed or implied. Additionally, this conference call does not constitute an offer or solicitation to buy or sell any securities.

With that, I'm pleased to turn the call over to Hat and CEO, Michael Scott.

Thank you, and hello, everyone and thanks for joining Hafner's First Quarter 2026 Earnings Call. I'm Michael Skol, CEO of Haffner. With me today are our CFO, Perianaktelt, our VP of Commercial, SonWinter, and our Head of Investor Relations, Thomas Anderson.

We released our first quarter 2026 results earlier today, and you can find them on our website. On today's call, we will cover our Q1 highlights the latest market developments, including the significant geopolitical disruptions that have shaped the quarter and then give an update on our financial position. We will also talk on our sustainability initiatives before concluding the presentation.

Let's move to the next slide. Before we proceed, I would like to go through our safe harbor statement. The information discussed on this call is based on information we have today, which may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Nothing presented in this call should be construed as an offer to buy or sell securities.

Next slide. We now move to Slide #4, and let's begin with a review of our results for the quarter. The first quarter was a transformative quarter for the tanker industry largely defined by geopolitical disruption without modern precedent. The closure of the Strait of Hormuz has fundamentally reshaped global oil trade flows during the quarter. Against this backdrop, we delivered a net profit of $179.7 million, nearly 3x our first quarter 2025 result supported by higher freight rates, which tightened tanker supply and disruptions of trading routes around the world.

On our forward coverage, 73% of Q2 earnings days has been covered at $46,600 per day, supporting our expectation of a stronger second quarter. On the fleet activity side, we continue to divest older vessels during the quarter as per our fleet renewal strategy in maintaining a low average age modern fleet. Importantly, we have also announced the signing of a contract for 8 new MR newbuilds with Hundai Heavy Industries, with delivery is expected between Q3 2028 and second quarter 2029. Further to that, we recently exercised 2 additional options with the same yard for delivery in 2029.

This is a meaningful step in our fleet renewal strategy, locking in modern, efficient tonnage at an attractive point in the cycle, continuing our focus on modernizing the fleet and reducing average fleet age as well as strengthening our long-term earnings capacity.

Let's move to the next slide. Hafnia remains the global leader in product and chemical tankers. At the end of the quarter, we owned and chartered in 118 vessels with an average fleet age of 9.6 years. Our net asset value at the end of this quarter has increased to approximately $4 billion, equivalent to $8.09 per share or about NOK 78.81. That's up from the $3.5 billion at the end of fourth quarter, driven by higher valuations across all segments and strong earnings.

We continue to operate around 60 third-party vessels across 8 pools. While our c-scale energy bunkering joint venture with Cargill continues to progress steadily and even more so with recent geopolitical events. Looking ahead in 2026, we intend to wind down our Handy and LR2 pool operations. As our handy vessels are sold, we expect to exit the Handy segment entirely, while the majority of our fleet will transition to employment under time charter arrangements.

Let's move to the next slide. Turning to shareholder returns. We have now paid dividends for 17 consecutive quarters. Our net loan-to-value improved to 20.2% at the end of the first quarter, down from 24.9% at the end of 2025 and primarily driven by strong cash flow generation from both operations and vessel sales. In line with our transparent dividend policy, we are declaring an 80% payout ratio. That translates to a total cash dividend of $143.8 million or $ 0.2877 per share. This represents an annualized yield of 14%.

For shareholders receiving dividends in Norwegian kroner, the exchange rate will be based on the value date which is 2 business days before payment. Over the last 4 quarters, our cumulative dividends totaled $365.3 million or $0.79 per share. Our total shareholder return over the last 12 months now exceeds 100%, which is a result of strong earnings, consistent dividends and meaningful share price appreciation.

San Vinda, our VP of Commercial, will now take you through the industry review and market outlook.

Thanks, Michael. The next slide, please. Let me set the scene for the market environment we are navigating. This quarter has been unlike anything we have seen in modern shipping history. So I want to walk through the key dynamics shaping the market. The headline numbers tell the story. Global observed inventories has drawn down roughly 200 million barrels between February and April 2026. The with OECD on land stocks punching 146 million barrels in April alone. The IEA A cumulative deficit is projected to reach approximately 900 million barrels by September, requiring roughly 1 million barrels per day of incremental supply over a 3-year period to fully be built.

On the fleet side, year-to-date, around 72 LR2 vessels have migrated into Aframax DD trading, reducing the clean LR2 fleet by about 28%. This has effectively absorbed the bulk of 2026 newbuild deliveries. Meanwhile, and since the closure of the homes trade, U.S. clean product exports have surged approximately 40% and from February to May, partly filling the supply gap left by the Middle East disruption. The market remains backed by fundamentals supporting continued market resilience. Most important drivers are elevated ton miles, structural fleet tightness and a multi-quarter inventory rebuild ahead.

Let me take you through the deeper detail. Next slide, please. Starting with global oil demand. In the face of global oil shortages, government and companies are working to constrain the crisis by implementing demand-saving measures. As a result, the IEA is now projecting the first annual decline in global oil demand since 2020, with the sharpest dip coming in Q2 2026. However, projections for demand are to recover towards the year-end to approximately 106 million barrels per day, averaging around 104 million barrels per day for the full year.

On the inventory levels, as mentioned, the IEA's cumulative drawdown could reach 900 million barrels by September 2026, which includes the 400 million barrels of coordinated SPR stock releases, of which only 164 million barrels have been released as of May 8.

Next slide, please. Importantly, the inventory drawdown is uneven across regions withdraws heavily focused in the East. The U.S. and China inventories remain balanced as the U.S. is supported by strong refinery runs for exports, while China adds to commercial stocks. The draws are concentrated in the Middle East, Asia and Europe. The Middle East is drawing heavily under direct Iranian impact, such as refinery damage and product diversion. The rest of Asia is growing as eastbound arbitrage flows pulled from regional stockpiles and Europe is growing as Atlantic supplies mobilized esports, tightening regional balance.

Next slide, please. This slide puts the current situation into historical context and further shows the unique situation we are facing. And you can observe historically, oil supply deficits have coincided with weaker freight rates due to lower cargo volumes. However, current conditions break that pattern. We have recorded supply deficits occurring alongside VLCC earnings near cycle highs.

We see 2 possible outcomes, either freight rates correct sharply or supply rebound strongly to validate current freight levels. We expect the latter to happen. Supply recovery and continued freight resilience into 2027, supported by the Middle East refinery normalization, demand recovery and structural tanker market tightness from LR2 migration and sanctioned fleet attrition.

The next slide, please. Apart from the closure of the home of trade, another key factor behind the market disruption is the extensive damage to regional refinery capacity. Around 2 million barrels per day of Middle East on refining capacity is currently offline due to war-related infrastructure damage. This includes major facilities like Cato and Jubail, BAPCO in Citra and ADNOC. While Eastern refiners have indicated that even without further hostilities, full capacity won't return before Q1 2027.

While consensus expect shipping to weaken post conflict, we see continued strength if demand rebounds as forecasted. With ongoing refinery disruptions supporting elevated product flows and ton mile demand into late 2026.

The next slide, please. Looking at daily loadings. Global clean petroleum product departures are down approximately 15% heavily concentrated in the East of Suez, driven by the homes disruption and export restrictions and Far Eastern hubs. This has partly been offset by a search investor exports, mainly from the U.S., but not enough to fully replace the lost Eastern volumes. On the dirt side, we see a similar pattern. Global dirty petroleum product departures are down about 17%, mainly due to the collapse in Arabian Gulf crude exports.

And the next slide, please. We typically observed to mile data as a proxy for product tanker demand. However, reliable data is delayed due to prolonged voyage links. Instead, products on water serve as the most reliable proxy for transportation demand. It's important to note that while clean vetoleum product loadings are down by roughly 15%, floating cargo volume are only down about 6%. This tells us that the actual impact on global transportation demand is milder than the headline figures suggest, meaning that vessels are spending more time on the water, effectively absorbing tonnage supply.

Next slide, please. On ton miles, the reported data shows a decline of about 10% from February to April. But as mentioned, this may not paint the most accurate picture as it's distorted by data lag and ongoing voyages not yet fully captured. Once in transit, latent voyages are reflected, and we expect the gap to narrow. What is much more telling is the ballast voyage links hitting record highs of approximately 1,900 nautical miles in April. This means vessels are sailing further to secure their next cargo a clear sign of repositioning inefficiency that support a tighter supply-demand balance.

And the next slide, please. Turning to key exporting regions. China's anticipated 2026 export quota of 332 million barrels has had a remaining balance of about 1 million barrels per day through an year representing sustained refinery export capacity. U.S. export volumes increased roughly 40% from February to May, stepping in to fill the left gap by disrupted Eastern supply. Although elevated prices have since narrowed arbitrage spreads, export flows remain resilient and continue to sustain ton mile demand. Russian clean product exports remain constrained by ongoing refinery disruptions from Ukrainian drone strikes.

And the next slide, please. In the Arabian Gulf, exports have been partially offset by increased loadings via the reds, particularly proband supported by a greater utilization of the Saudi Gulf to Red Sea pipeline. However, this remains only a partial offset overall regional export capacity is still materially below historical levels. Clean petroleum product exports from the Red Sea remain resilient.

And on to the next slide. Turning to Tanker Supply. Over the past years, the Taker Markets has faced 5 major shocks. COVID-19, the Russia-Ukraine war the Panama dot, the HuitiRedsea disruption and now the Hormuz blockade. Each chug has rerouted trade flows and added ton miles, while replacement capacity has consistently lagged. The fleet aids 20 years and above has grown from 48 million deadweight tons in 2020 to 187 million deadweight today with DKK 251 million projected by 2028. The scrap potential, sanctions and operational restrictions on this expanding age cohort for a durable supply anchor through the end of the decade.

And the next slide, please. The LR2 to Aframax migration continues to be 1 of the most important structural shifts in our markets. Global clean LR2 availability is now down approximately 28% year-to-date, with 72 vessels having migrated to dirty trading. This has effectively absorbed both 2026 newbuild deliveries and part of the existing clean trading tonnage. A reversal is unlikely while Aframax economics remain this strong. This migration is materially tightening clean tanker supply and reinforcing the overall tonnage constraint.

Next slide, please. On the order book and square landscape, the known newbuild program through 2029 for handy to LR2 consists of approximately 54 million deadweight tons with LR2s accounting for a large proportion. Against that, potential scrapping of older vessels and sanction tonnage totaled 79 million deadweight tonnes over 2026 to 2029. Here, we assume that the sanctioned fleet above 20 years is unlikely to reenter mainstream trading. Despite available yard slots for 2029 and 2030, any new order would arrive late in the cycle, structurally capping the net fleet growth.

And on to the next slide. When preparing this material, the home was trade remained closed and leaving 124 laden and 33 ballast tankers carrying approximately 96 million barrels worth of dirty petroleum products and 18 million barrels worth of clean petroleum products trapped within the region. Stranded tonnage is materially tighten global supply conditions and underscore the constrained state of the market.

Moving on to the last slide. In summary, while the timing and trajectory of geopolitical developments in the Middle East remain difficult to predict, we remain constructive on the strength of the underlying market fundamentals. As countries continue to draw down on inventories, the eventual reopening of the home was trade and recovery in Eastern refinery operations could trigger a meaningful multi-quarter inventory rebuilding cycle, providing strong underlying support for the tanker demand and resilient freight rates.

I'm now handing over to Perry, our CFO, who will bring you through our financial developments.

Thanks, Karen. Next slide, please. Q1 2026 was our strongest quarter since the end TCE income reached $282.5 million, up from $218.8 million in the first quarter of '25. Adjusted EBITDA came in at $198.6 million compared to $125.1 million again for Q1 2025. Fee-based business contributed $7.1 million and we've also earned $9.9 million in dividend income from our investment in Tor. Therefore, net profit was $179.7 million, nearly triple Q1 2025, and this quarter also included $32.5 million in gains on the vessels that we sold in the quarter. .

Return on equity for Q1 reached 29.5% on an annualized basis. And return on invested capital was 22.7%, both the highest levels we've recorded in the trailing 5 quarters. If we move to the balance sheet on the next page. Our net debt decreased from $932 million to $797 million driven by strong operational cash flow and the vessel sales, the proceeds from those vessel sales. Our net LTV ratio improved meaningfully from 24.9% at the end of last Q4 to 20.2% as vessel valuations continue to rise. Cash flow was steady, and we received proceeds from these vessel sales.

We continue to maintain a strong liquidity profile with total liquidity standing at approximately $660 million, comprising of $146 million in cash and $550 million in undrawn credit facilities. With our newbuild program consisting of 10 MRs, the chart on the bottom right reflects our expected CapEx commitments for these newbuilds. We expect to incur approximately $80 million in Q2 2026 on progress payments and most of the CapEx of the remaining CapEx is concentrated in 2028.

We then move to the operating summary on the next page. The first quarter TCE rates showed significant improvement across most segments. Our fleet-wide average TCE reached $30,327 per day, while our average spot rates were $31,543 per day. The dry docking side, Q1 had 214 off-hire days, significantly less than those that we had experienced in 2025 overall. And we still expect some dry docking in 2026, but the number of off-hire days will decrease meaningfully in the second half of this year.

The strength of the current market is clearly visible in our forward coverage -- as you can see from the graph, our covered rates for Q2 are significant improvements from the previous quarters, supporting our expectation that Q2 will be significantly stronger than Q1.

Then with that, let's move to the next slide. So as of May 13, we have secured 73% of Q2 earning days at an average rate of 46,600 per day. For Q2 through Q4 2026, we have 39% of earning days covered at $38,281 per day. These rates are well above our operational cash flow breakeven and reflect the extraordinary rate environment that we're in. Based on these coverage levels, looking at the current earnings scenarios, as you can see on this page, for full year 2026, the range from $700 million to $1 billion in net income, depending on the scenario.

Michael, over to you for the next slides.

Thank you for that. Move on to the next slide. Let me now turn to Hafner's sustainability strategy and targets. As a global leader in the product tanker segment, we take our role in shaping the maritime ecosystem seriously. We maintained the highest operational and environmental standards and are committed to making a positive impact. Our targets remain unchanged, a 40% reduction in fleet carbon intensity by 2028, and net sales growth on missions by 2050 and CeroHarm across our operations. We continue to invest in our people with a target of 40% women in our offices by 2030.

Next slide, please. Here, we showcased some of our strategic initiatives. On complex So, we have recently commenced the deployment of an enterprise AI platform that integrates conversational AI, workflow analytics, and automation to transform operational data into faster and more informed decision-making. Initial applications are very encouraging, having already improved response time across commercial and finance workflows. We believe the platform has significant potential to scale across Hafnia as adoption accelerates to 2026 and 2027.

Next slide. Looking ahead, we remain encouraged by the fundamentals of the product tanker market. While periods of disruption and volatility often translate into stronger earnings for tanker companies, it is important that we do not lose sight of the human impact of these events. At the end of the quarter, nearly 200 tankers and thousands of sea fares remain unable to transit the straight. The safety and well-being of our own crews as well as those across the industry remain our foremost priority.

The outlook nevertheless remains highly uncertain and depends largely on the duration of the Hormuz disruption and the time required for oil production and global refinery operations to recover. Despite this backdrop, I remain highly confident in Hafner's commercial expertise and operational agility to respond to evolving market dynamics and capture opportunities as they arise.

With that, our presentation concludes. I'd now like to open the call for questions.

[Operator Instructions] I see Friday, you have your hand up. Can I ask you to unmet yourself, please?

My first question is to Michael, I guess, on the 10 MR newbuilds, I think this is the first time we've made a major newbuild investments. I can't recall at least 1 in a few years. So I guess in the prior discussions, we discussed newbuild investments. And in the past, of course, it was more about uncertainty about future fuels, long lead times at the yards. So the question is really about what's changed now? And what makes you feel this is the right time to take an order for new builds.

Thank you for that, Pat. And yes, it is true that we have previously said that we wanted to to wait for more opportune timing when it came to new builds. But I think our conclusion on this has been that we've sold quite a lot of secondhand ships, older vessels. We sold them at very strong prices, which basically reflect the depreciated value of a new build today. So in other words, we have been selling older tonnage, and now we are taking on these 10 MR newbuilds. So we see this as kind of to say normal normal modernization of the fleet.

And the other issue that we've kind of noticed is that the shipyards order book seems to be full very, very far ahead. 29 is almost full. So we're looking at 2030. So we also wanted to make sure we didn't get caught up in a situation where your fleet gets older and older and older every year, and you still have 3 or 4 years until you can get a new ship. So it's really a combination of those. I mean, we would have loved to see prices being lower. But I think what justifies it, as I said, is that we sold a lot more of older vessels before we order the new ones at similar price levels.

Yes. makes total sense, and this shouldn't affect the dividends, right, anyway. So yes, no course of actions. The second question I had is on the -- you mentioned that you're winding down the handy and moving some of the LR2s into time charter. Maybe you could elaborate about that. Is that about scale or risk reduction? Or what's the reason behind that.

Thank you for that. Well, the reason really when it comes to the hands is that -- we've seen a market that over the years actually have been shrinking rather than growing. That goes both from the demand side for handies but also on the supply side of vessels. We had a tremendous proposal for selling the handy ships that we had and the pricing was extremely interesting. I mean, we basically got the same price of the vessels as we bought them for is new builds back in 2015. And they were making a lot of money in between. So that was like a constant decision that made sense because of the price of the assets.

And then by selling that, we basically were coming down to a small amount that we decided to dissolve the pool because the whole idea of the pool is to have scale and to utilize scale to optimize on your earnings, that wasn't the case anymore. So it's a segment that's been shrinking, hence, again, why we also sold out of it. On the LR2 side, it's really a function of that Haftar doesn't have that many other 2 ships. And we decided to charter out a few of those. And because, again, we charted them out. It suddenly became a different scenario. It didn't make any sense to have a pool when you don't have any vessels yourself in the spot market.

So the fuel at we have become more of a hedging sector for us, and that's why we put them out on time charter. That, of course, contains in the future, but that's kind of the reason for the alerts and the fact that we were winding down the pool as well.

Thank you for here. May I ask you to meet yourself?

Maybe sticking with the charter coverage. As you say, Handys and LR2 is a bit smaller part of your fleet. But when I look at your charter coverage on Slide 23, has it been a very significant increase compared to your Q4 report. So I'm just wondering what you're hearing from charters. Obviously, spot rates are very compelling at the moment. But just curious for your thoughts there.

Well, you can say we have actually increased our coverage to some extent, you are sitting somewhere between 25% and 30% coverage for half year now. And well, yes, spot charter rates are compelling. But this is -- for us, is a hedge against geopolitical unrest really and a future that is very hard to predict or at least to set a timing on my [indiscernible

Got it. And then zooming out a bit -- you mentioned migration of LR2s into the dirty trade. Do you see this state of Hermos putting pressure on LR2s to clean up or perhaps trade dirty on the 1 hand I'm thinking you have increased competition from larger tankers for some Atlantic routes, right? And then on the other, there's less export-oriented refining capacity, which you called out in the presentation.

I think primarily the driver for the switch over has been the super strong Aframax market on a general note in the Western Hemisphere. You could say, combined -- that combined with the almost closure for now, meant that you have to balance very long on your alien to pick up next cargo where the natural home for Aframax is pretty much tested to us. So that has probably driven a large part of it. But I think, first and foremost, the aging part of the 2 Aframax combination segment is the Aframaxes getting owned.

And I don't know if you saw -- I can't remember the slide number. But looking at sanction tonnage and aging Aframax fleet, it looks like we will be able to build somewhere around 140 and 150 additional LR2s before you sort of catch up to the aging of the same segment. So in combination, to all seem natural that you will have Ms. Tan for that the LR1 segment go from 250 early '25 to 230 late '25 and now down to I think the last time we have is 179 clean trading LR2, which is a significant dent the deadweight available on the clean product segments that is probably market disruption and the scenarios that we are in now in a reopening of almost will that change things?

Well, to the extent that clean frame supersedes Aframax trade, then you are likely to see ships at least opportunistic trainers shutting back into team. The only caveat to that is that at the same time, right, it will take 1 or 2 quarters to do that meaningful.

I don't actually see any more raised hands. So I am going to move into a question in the chat that we have from Fausto regarding S&P. So the company has been doing a great job on the fleet renewal front. Should we expect divestitures to continue in the coming months? What is management's view of the current S&P markets. Recently, the company has expanded the fleet with new builds. Could management comment on the reasons for favoring new builds over secondhand tonnage. Does management currently see new builds as more attractive? Or are there a few opportunities in the secondhand market?

Yes. Thank you for that question. Well, I think the fleet renewal strategy that we have is kind of an ongoing thing. So we still have a couple of vessels in our fleet that at the right price, we'd consider to divest but we have done most of the cleanup, I would say, of the older tonne it has been done already. So we're kind of getting close to a point where what we have left is what we would like to have left. .

The newbuild versus secondhand, yes, I mean, I think there's 2 things in it. One is that we do believe that the secondhand vessels here and now are very highly priced for obvious reasons because you have a very strong spot market. We're not convinced maybe that, that is the right time to pay up for modern ships here and on the water with all the uncertainty. So the fleet renewal and the new build is first also about a new generation of vessels. So the vessels that we get in '29 is a new design, which will have a lot more fuel savings than the older designs.

So it's also kind of a way of making sure that we continue to be on the trajectory of having modern ships with less fuel consumption and less emissions. On top of that, they deliver in 2029. And if you look at the slide of the 2 slides that we have in the presentation, you can see how the aging fleet is coming under severe price already now. The current order book is nowhere near to cover the vessels that have to be scrapped within the next 4 to 5 years.

So we're kind of also feeling that the timing of getting something in '29 could actually be at a time where there is a massive shortfall again of tonnage. So that's another thing that we have kind of taken in or factored in when we made that decision.

Okay. Thank you, Michael, for that. And thank you, Faster for the question. I don't actually see any more questions in the chat, all the Q&A and I don't see any more raised hands. So which then means that we have come to the end of today's presentation. Thank you so much for attending apneas First Quarter 2020 financial results conference call. You can find more information available online at www.afnia.com. See you next time.

Welcome to Hafnia's Fourth Quarter 2025 Financial Results Presentation. We will begin shortly. You will be brought through today's presentation by Hafnia's CEO, Mikael Skov; CFO, Perry Van Echtelt; Soren Winther, VP, Commercial; and Thomas Andersen, EVP, Head of Investor Relations. They will be pleased to address any questions after the presentation. [Operator Instructions] During this conference call, some statements may be considered forward-looking, reflecting management's current expectations. These statements involve risks, uncertainties and other factors, many of which are beyond Hafnia's control that could cause actual results, performance or plans to differ significantly from those expressed or implied. Additionally, this conference call does not constitute an offer or solicitation to buy or sell any securities. With that, I'm pleased to turn the call over to Hafnia's CEO, Mikael Skov.

Thank you, and hello, everyone. Thanks for joining Hafnia's fourth quarter earnings call. I'm Mikael Skov, the CEO of Hafnia. With me today are our CFO, Perry Van Echtelt; our VP of Commercial, Soren Winther; and our Head of Investor Relations, Thomas Andersen. We released our fourth quarter and full year 2025 results earlier today, and you can find them on our website. On today's call, we'll walk you through our Q4 highlights, the latest market developments and our outlook and then give an update on our financial position. We'll also touch on our sustainability initiatives before opening for questions. Let's move to the next slide.

Before we proceed, I would like to go through our safe harbor statement. The information discussed on this call is based on the information we have today, which may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Nothing presented on this call should be construed as an offer to buy or sell securities. Thank you for your attention. With that, let's begin with a review of our results for the quarter. Next slide, please. So we are now on Slide #4. The product tanker market started 2025 on a softer note, but strengthened through the second half and remained seasonally firm in the fourth quarter. This helped us close the year on a strong footing. In Q4, we delivered our strongest quarter of 2025 with a net profit of $109.7 million. For the full year, that brings us to a net profit of $339.7 million, another year of solid performance.

As part of our fleet renewal strategy, we continued divesting older vessels at attractive prices. So far in Q1, we've sold 2 MR vessels and committed to sell 2 more MRs, 4 LR1s and 4 Handys. During the quarter, we also took delivery of the Ecomar Gironde, the fourth and final dual-fuel IMO II MR in our Ecomar joint venture. In December, we acquired 13.97% of Torm's shares from Oaktree. Since then, we've engaged with Torm's stakeholders, including its Board to explore the merits of a potential combination. We see a strong strategic rationale with commercial, operational and financial benefits for shareholders as well as enhanced market presence and trading liquidity. In our view, our combined platform would create a clear market leader in scale and performance within the shipping industry. Let's move to the next slide.

Next, I'd like to highlight Hafnia's key investment attributes. We are a global leader in the product and chemical tanker space, operating one of the largest and most diversified fleets in the industry. At the end of Q4, we owned or chartered in 123 vessels with an average age of 9.7 years, well below the industry average of 14.1 years. As we continue to sell older tonnage, our fleet will become even younger, more efficient and better positioned for stronger earnings as well as significant savings on global carbon taxes in the future, which are aimed at penalizing older vessels with large fuel oil consumption. At quarter end, our net asset value was about $3.5 billion, which translates to $7.04 per share or NOK 70.79. Beyond our own fleet, we also operate around 65 third-party vessels across 8 pools. These contributed roughly $30 million in earnings for the full year of 2025.

Let's move to the next slide. Another key investment attribute for Hafnia is our transparent dividend policy. We've now paid dividends for 16 consecutive quarters, and our goal is to keep them sustainable and predictable through the cycle. At the end of the fourth quarter, our net LTV stood at 24.9%. And in line with our policy, this means we are declaring an 80% payout ratio for Q4. That results in a total cash dividend of $87.7 million or $0.1762 per share. For shareholders receiving dividends in Norwegian kroner, the exchange rate will be based on the value date 2 business days before payment. For the full year 2025, that brings total dividends to $271.7 million or $0.5557 per share, representing a yield at about 10%.

When we include the share buybacks completed in 2025, we returned 88.1% of our net profit to shareholders. We're now on Slide #7. Our strong performance is further demonstrated across different time periods, our total shareholder return shows that we have consistently delivered superior returns. At the same time, when we benchmark our cost base against our closest peers, we are pleased with our positioning, which allows us to operate at highly competitive levels while supporting sustainable value creation and also one of the main reasons why we see substantial value in consolidation in our sector. Next slide, please. Soren Winther, our VP of Commercial, will now share the industry review and market outlook.

Thank you, Mikael. Let me start with a quick review of the product tanker market in Q4 2025. And then I will walk through our outlook for the months ahead. Overall, 2025 was supported by continued growth in refined oil exports and higher crude oil exports. This drove a significant shift of coated LR2 vessels into dirty trading, tightening supply within the clean segment. The product tanker market stayed seasonally firm through the fourth quarter into 2026. We have seen a surge in both dirty and clean product volumes on the water. Dirty volumes have largely been driven by sanctioned barrels awaiting buyers, while clean volumes reflect strong export flows out of the U.S. Gulf, the Middle East and China. These flows have benefited from reduced demand for Russian refined products, which has increased demand for non-sanctioned supply and supported tonne miles.

Here, we can see the relationship between product tanker tonne days and earnings. Historically, clean petroleum product volumes on the water have shown a strong correlation with tonne days and tonne days in turn correlate well with earnings. That said, the earnings recovery for the fourth quarter was more moderate. The main reason is the large number of newbuild deliveries in 2025, combined with very limited scrapping to offset the fleet growth. Together, these factors have capped the upside in freight rates. Even so, area-specific tightness has remained an important market driver. In particular, the U.S. Gulf continues to see sustained historically high earnings in the Clean Products segment. This slide shows the improvement in demand fundamentals. If we look at year-on-year tonne-mile development for clean products, we can see a clear growth trend going back to 2020. This trend is also reflected in cargo volumes, which are now at their highest levels in 9 years.

This reinforces the resilience in global oil demand and shows how ongoing geopolitical disruptions continue to reshape trade flows. On the dirty side, cargo volumes have been relatively stable, but dirty petroleum product tonne miles have rebounded sharply, up by around 2 billion tonne miles in 2026. This reflects the impact of trade route dislocations linked to sanctioned vessels and fuels, which have lengthened voice distances and pushed tonne miles higher. Moving on to the supply side. And even though we saw a large number of newbuild deliveries in 2025, the overall net fleet growth for product tankers has stayed limited. A major reason for this is the continued impact of crude tanker sanctions, which have pushed a significant share of LR2 vessels into Aframax dirty trading. In fact, in 2025, around 80% of coated LR2 newbuild capacity or the equivalent thereof moved into the dirty market.

And now more than half of the coated LR2 Aframax fleet is operating in dirty petroleum products trade. Specific to the clean LR2 segment, it is worth noting that the competing fleet count is at its lowest in 3 years. Beyond the LR2 migration we just discussed, sanctioned vessels also play a major role in tightening fleet supply. In 2025, the U.K., UN and OFAC collectively sanctioned more than 500 tankers, most of them crude vessels. The EU's 20th sanctions package is expected to add another 43 vessels to the count. The class and names of these vessels are yet to be identified. Further sanctioning of the shadow fleet throughout 2026 can be anticipated. This is supportive for both crude and product tankers as sanctioning effectively reduces available fleet supply and limited crude to clean cannibalization, keeping overall supply versus demand balanced.

Importantly, there's a broad consensus amongst insurers, major flag states and government advisory bodies that sanctioned tonnage is unlikely to return to the mainstream trade even if sanctions are eventually lifted. Despite the already large number of sanctioned vessels, data from Lloyd's list shows that around 1,000 additional non-sanctioned shadow fleet vessels will -- are still trading within sanctioned regions. Flag hopping remains a common practice within the shadow fleet as evidenced by the high share of fraudulent or rapidly changing flags. A significant proportion of both the sanctioned fleet and the broader shadow fleet is more than 20 years old. That points to a higher scrapping potential. Beyond the factors we have already discussed, the continued aging of the fleet and the potential for scrapping further support the supply outlook.

Between 2026 and 2028, we expect about 43 million deadweight tonnes of newbuild deliveries across the Handy to LR2 Aframax segments. Over the same period, potential scrapping could reach roughly 38 million deadweight tons based on typical scrapping ages of 25 years. Looking a bit further ahead, another 29 million deadweight tons could leave the fleet between 2029 and 2030. Another important point is that 65% of the newbuild program consists of coated LR2s. If we apply the historical crude migration factor of about 72.5% to these future LR2 deliveries, a large part of the apparent supply will be absorbed into the dirty market. The right-hand graph illustrates the current newbuild program is more than manageable, provided the scrapping of scrap age non-sanctioned vessels and sanctioned tonnage above 20 years of age.

Slide #15. Bringing together the impacts of LR2 migration and vessel sanctions, we can see that overall clean petroleum product capacity growth in 2025 was limited. For the full year, around 12 million coated deadweight tonnes have been delivered, yet only about 1.4 million deadweight have effectively entered clean trading. This translates to approximately 0.6% net growth in clean product tanker supply for the year. We noticed the trend of broker reports increasingly using a 20-year age cutoff when assessing the competitive fleet. Our models instead apply a 25-plus year threshold, reflecting the rising scrap ages. This shift is largely driven by recent political unrest. Since 2022, transportation demand across the Handy to VLCC segments has increased by 4 million barrels per day. Over the same period, tankers aged 20 to 24 years have seen a demand rise by 4 million barrels, while vessels over 25 years have seen a 1 million barrel increase.

These trends demonstrate that older tonnage remains commercially relevant and should be considered when evaluating the effective supply-demand balance. Inventory levels remain an important indicator for the product tanker market. In Europe, diesel inventories drew down sharply through most of 2025 before rising again in the fourth quarter to meet seasonal winter demand. Refinery margins have softened since Q4 2025, especially in Europe, while U.S. refiners have benefited from access to newly discounted Venezuelan sour crude. The forward curve is trending upward, largely driven by crude backwardation, which supports near-term fundamentals. Looking ahead, we remain optimistic for Q2 2026. Moving on to next slide, where Perry, our CFO, will now bring you through our financial developments.

Thanks for that, Soren. If we move to the next slide, please. We delivered our strongest quarterly results of 2025, supported by the seasonally firm market conditions in Q4, driven by growth in oil production and export volumes. For the fourth quarter, we reported an adjusted EBITDA of $149.7 million and a net profit of $109.7 million, which includes $9.5 million from gains on vessel sales. Our fee-based businesses contributed $6.9 million in fee income. So for the full year 2025, we recorded a net profit of $339.7 million with a return on equity of 14.8% and a return on invested capital of 11.2%. If we then move to the next page to the balance sheet. Our net LTV ratio increased from 20.5% at the end of the third quarter to 24.9% at the end of Q4. This increase was primarily due to our investment in Torm, which raised the debt level and was included at market value in the calculation.

This was partially offset by higher vessel valuations and a strong operational cash flow generation. We continue to maintain a strong liquidity profile with $104 million in cash on hand and an additional $324 million in undrawn capacity for a total of around $430 million of availability. We move to the next page on to the operating summary. We continue to generate strong operating cash flows and TCE rates have improved for the fourth consecutive quarter since Q4 2024 with a strong momentum continuing into the first quarter of 2026. For Q4, TCE income stood at $259 million with an average TCE of $27,346 per day. As in the previous quarters throughout 2025, our Q4 results were impacted by scheduled dry dockings, which accounted for approximately 550 off-hire days. This was around 120 days higher than expected due to unscheduled repairs for 3 vessels. We expect dry docking activity to continue into 2026, but the number of off-hire days will decline significantly compared to 2025.

Across '25, we dry docked around 40 vessels and expect to complete around another 20 vessels in 2026. So with most of the dry dockings behind us and freight markets recovering, we're well positioned for improved utilization and stronger earnings momentum throughout 2026. Then let's move on to the next slide. The recovery in freight market is further evident here. As of the 11th of February, we have secured 76% of our Q1 earning days at an average rate of $29,979 per day, well above our operational cash flow breakeven for '26 of below $13,000 per day, highlighting the strong earnings leverage in the current market. For the entire year of 2026, we already have 33% of earning days covered at an average rate of $27,972 per day as most of our LR2s have secured long-term time charter contracts. So based on Q1 and full year covered rates as well as looking at analyst consensus, 2026 points towards another year of strong earnings. Then Mikael, over to you for the next few slides.

Thank you. We're on Slide 25. Let me now turn on Hafnia's sustainability strategy and goals. As a global leader in the product tanker segment, we take our role in shaping the maritime ecosystem seriously. We maintain the highest operational and environmental standards and are committed to making a positive impact. Across the supply chain, we work closely with strategic partners, regulators and international bodies to co-develop solutions to the industry's challenges. Moving on to the next slide. Here, we showcase some of the strategic initiatives we've been working on to strengthen our competitive edge. For example, we are advancing our technological capabilities through our strategic investment in Complexio. Complexio acts as an enterprise intelligence layer that automatically understands how an organization operates by mapping human behavior across its system, enabling proactive decision support and intelligent automation across the enterprise.

Next slide. Looking ahead, we remain encouraged by the fundamentals of the product tanker market. Although 2026 will see a significant number of newbuild deliveries, the impact of sanctioned vessels and the ongoing LR2 transition will help ease effective market supply. I'm confident in the strength of the underlying demand fundamentals and proud that we have continued to deliver solid results while maintaining our 80% dividend payout ratio, recording a total shareholder return of 33% over the past year. We will continue to exercise disciplined financial management and pursue strategic opportunities that enhance our competitive position. With that, our presentation concludes. I'd now like to open the call for questions.

[Operator Instructions] Okay. Great. So let's get started. Frode can I ask you to unmute yourself, please?

Yes. I wanted to first discuss the LR2/crude Aframax spread we're seeing today. Are you surprised that given the switching we have seen that there's still $25,000 per day premium to crude Aframaxes. And does that mean that we should expect even more LR2s to move into dirty trades?

Well, it is really happening as we speak in any case. So the spread between the LR2s and the Aframaxes and the larger segments in reality already now causes more ships to enter into Aframax trade for sure. From a spot market perspective, it's more or less to the tune of an open up from the Middle East at the moment with the middle distillate coming over. You hardly see any of the ships coming back from the Western Hemisphere where once they get to the other side, they actually enter into the Aframax trade. So the transition is still going on. And as some of the earlier slides showed, we're actually having the lowest count of clean trading LR2s for a number of years, which makes the market for the immediate month ahead super, super tight in the Middle East.

Yes, right. So I wanted to -- I'm curious about your view on the seasonality here because Q1 and Q4 is traditionally viewed as like the highest points. But given what's happening in the crude market, super strong crude rates, Aframax is very strong. And as you said, LR2 is still moving into dirty trades, do you -- could we see like shifts in the seasonality that maybe Q2 would be better than normal or et cetera?

I think there's a lot of political or geopolitical unrest that is linked to this and nonetheless, the crisis ongoing in Iran versus the U.S. So I think there is a risk premium that relates to some of the hype that you're seeing at the moment. Having said that, I mean, we are in the quarter where most delays are appearing, bad weather and really reflected on the earnings for sure. On a fundamental basis, I think the Aframaxes, if we just focus on those, Venezuela coming into play, which is a Suezmax, Aframax place, gives an elevation to the market and more ton mile really on the Aframaxes. You have the Trans Mountain pipeline from Vancouver over to the Eastern Hemisphere. That has been another addition that really happened last year, but it still has its effect. And then you have the export out of South America coming into PADD 3 also related to the Aframaxes. So on a general note, I think there's a lot of good things, including sanctioning speaking for the Aframaxes. And yes, on the basis of geopolitics, you could have a second quarter that just looks stronger than normal historical averages, I would say.

Yes. Interesting. On the MRs, are we seeing any effects from this EU regulations that came in January 1, I guess, of this -- that the refineries can't use Russian crude. So maybe the Turkish refined products are shifting away from Europe. Are you seeing that impacting the MRs?

I think it's more a global perspective on a general note where you're seeing more legit barrels having to travel on the mainstream fleet on a general note. Looking at the Europe and Mediterranean for the MRs, that's probably the weakest area, and it has been for a long time, one because of the lag in volume coming out of Russia that we used to have years back. And second of all, because of the export flows maybe out of Turkey as well. I don't think it means that much in the space. But lagging in Europe, then again, massive supply out of the U.S. Gulf that is really driving the entire Western Hemisphere.

Do we have any more questions via the raise hand function I'm not actually seeing anything there. So I will then move on to check the chat. So we have a question from Tony. So any sign currently of increased scrapping of sanctioned vessels? Perhaps, Soren, you could take that one.

Yes, I can do that. I think we have seen a couple of ships that has been actually allowed to be scrapped in India. But to my knowledge, it's only a couple so far. I think the important bit here is that the Indian seems to have made it clear that they will be able to accept scrapping of sanctioned tonnage. And that's the first step rather than having taking bombs sitting idle in base around the world. So I don't think we can say that there is a lot of ongoing scrapping yet, but at least the potential to have them has been opened.

Okay. Thank you, Soren. Do we have any more questions coming through in either the chat or the Q&A function? Thank you, [ Tony ], for your comment. We have another question coming through on any reason why Hafnia isn't moving more LR2 into the Aframax trade. Perhaps Soren, maybe back to you.

Yes. There's one fundamental reason for that. We have decided to charter out on a long-term charter or LR2s rather than moving into the spot trade, which is really a part of our housekeeping hedge strategy for Hafnia as a general, and the value really lies on the bigger ships. So that's why we have done that rather than going into dirty trade.

Okay. Great. Thank you, Soren. I actually, I'll give it a few more seconds to see if there's anything coming through in either the chat or the Q&A. Actually, we have another question coming through from [ Paul ] on the raise hand function. Can you please unmute yourself?

Yes. I just -- I guess you have the same dynamics on the LR1s, right? So there's a large portion of the LR1s that trade dirty as well. Isn't that correct?

Yes. The Panamax market has been moving from literally $20,000 to $60,000, maybe even $70,000 levels with very, very strong earnings. So we are benefiting from that with our pool together with Mercuria in the U.S. Gulf. And it's only an 85 ship market. It's not really a big market. So when you have stuff like Venezuela coming into play with Diluent and Naphtha going into getting the crude out and you take 10% of the fleet and dedicated for that, you see a market that moves quite rapidly. So yes, it has been a very good move.

Yes. So that's important. I mean, the Q1 guidance or bookings, I guess, is quite strong on LR1s, and there's no reason why the same let's say, crude switching, if that's the right word, is not benefiting you, right? The LR1s will also benefit. And by sequence, when LR1s go up, then that impacts MRs, right? Isn't that the dynamic?

Yes. And that's what we are seeing at the moment. The lack of LR2s in the Middle East is going to spill down to the LR1s and actually, the effect is already happening on the MRs as well. So for sure, when you draw everything short, market is bound to pop, right?

We have another question coming through -- I'm moving on to the Q&A section. So we have one. Can you please comment on your commercial performance versus peers like Torm and MRs during Q4 '25 and Q1 2026? Soren, is that one for you, yes?

I don't know if it's for me or Mikael. I think it's for me. I had a quick review of the Torm numbers coming out today. And comparably, if you try and make apples-to-apples fleet and so on, I see that as a close run-up. We outperform on 1 or 2 segments and very close on all the others. So I think it's a tie, to be honest.

Okay. Thank you, Soren. We have another question, which I think is for Mikael. Can you elaborate on the status of Torm shareholding? What can we expect?

Yes. So I mean, I think we try to say as much as we can basically in the material we sent out already. Well, first of all, you can say that the shareholding on an isolated basis, of course, now has turned out to be a good investment. So at least when we look at the share price today versus what we paid and invested, it's obviously -- it looks great on paper. I think when it comes to any other issues, all I can say is that when we look at consolidation in general, what we are looking at is really trying to make 1 plus 1 becoming 3. So in other words, the reason why we've been advocating consolidation actually for years is that when we look at valuations and multiple expansions on companies, it's pretty clear that when you're a $5 billion or $6 billion shipping company versus $2 billion to $3 billion isolated, there's a significant difference through the cycles on the value -- net asset value versus pricing and also on a multiple basis.

So we think there's immediate uplift that way, but there's also a lot of synergies around to be harvested. And our view hasn't really changed that when you look into the future and you look into an energy complex that will change and for companies that are purely tankers alone, there's also a new element in terms of how do you position yourself, both in terms of investments in dual fuel engines, but also in terms of potentially running different types of ships that are burning different types of potentially oil or carrying different types of cargoes. And for that, you need scale. And I think you need both scale and you also need a capital market track record that is good. So I think for all these purposes, we see a lot of synergies on cost side. We see a lot of synergies on revenue side for sure. But we also, as I said, see a lot on immediately value uptick on valuations in general, which again would increase dividend capacity for shareholders.

Okay. Thank you, Mikael. And I believe you've also covered a similar question in the chat on our TOM investment and future M&A strategy. So I'll give it a few more seconds to see if anything else comes through in either the Q&A or the chat. And there's nothing in the raise hand function either. Okay. So then we have come to the end of today's presentation. Thank you for attending Hafnia's Fourth Quarter 2025 Financial Results Conference Call. You can find more information available on our website, www.hafnia.com. Thank you, everyone, for coming.

Welcome to Hafnia's Third Quarter 2025 Financial Results Presentation. We will begin shortly. We will be brought through today's presentation by Hafnia's CEO, Mikael Skov; CFO, Perry Van Echtelt; Soren Winther, VP, Commercial; and Thomas Andersen, EVP, Head of Investor Relations. They will be pleased to address any questions after the presentation. [Operator Instructions]

During this conference call, some statements may be considered forward-looking, reflecting management's current expectations. These statements involve risks, uncertainties and other factors, many of which are beyond Hafnia's control that could cause actual results, performance or plans to differ significantly from those expressed or implied. Additionally, this conference call does not constitute an offer or solicitation to buy or sell any securities.

With that, I'm pleased to turn the call over to Hafnia's CEO, Mikael Skov.

Thank you, and hello, everyone. We appreciate you joining in Hafnia's third quarter 2025 earnings call. My name is Mikael Skov, CEO of Hafnia. And with me today is our CFO, Perry Van Echtelt; our VP of Commercial, Soren Winther; and our EVP and Head of Investor Relations, Thomas Andersen.

Earlier today, we released our Q3 2025 results, which are now available on our website. During this call, we will walk you through our quarterly performance, discuss key market developments and share updates on our financial position. We will also present our sustainability initiatives before opening the call for questions.

Let's move to the next slide. Slide #2. Before we proceed, I would like to go through our safe harbor statement. The information discussed on this call is based on information we have today, which may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Nothing presented on this call should be construed as an offer to buy or sell securities. Thank you for your attention.

With that, let's begin with a review of our results for the quarter. Next slide, Slide #4. The product tanker market started out this year on a softer note, but it strengthened significantly through the third quarter. Higher trading volumes and strong refinery margins drove this. Much of the growth came from increased export flows out of the Middle East and Asia with clean petroleum products on water continuing to rise throughout the quarter. This strong backdrop supported the spot market, and I'm pleased to share that Hafnia delivered another excellent quarter.

For Q3, we achieved $150.5 million in adjusted EBITDA and a net profit of $91.5 million, our best quarter so far this year. As part of our fleet renewal strategy, we also sold four older vessels, all built between 2010 and 2012.

Finally, in September, we announced a preliminary agreement to acquire 14.45% of TORM shares from Oaktree. This was followed by a binding share purchase agreement, and we are now waiting for the appointment of a new independent board chair at TORM before we can complete the acquisition.

Moving on to Slide #5. Next, I'd like to give you a brief overview of Hafnia and highlight our key investment attributes. Hafnia is a global leader in the product and chemical tanker space. We operate one of the largest and most diversified fleets in the industry. As of the third quarter, we own and chartered in 126 vessels with an average fleet age of 9.6 years, significantly younger than the industry average. At the end of the quarter, our net asset value was approximately $3.4 billion, translating to $6.76 per share or NOK 67.55.

Beyond our core fleet operations, we continue to give strength through our complementary business platforms. We commercially manage about 80 third-party vessels across 8 pools, and our bunkering procurement platform supports both Hafnia's vessels and external partners, creating additional scale and efficiency benefits.

Let's move to the next slide, which is Slide #6. Another key investment attribute of Hafnia is our transparent and consistent dividend policy. We have delivered dividend consistently over the past several years, and our goal has always been to make them sustainable and predictable across the market cycle. Our net loan-to-value ratio improved from 24.1% in the second quarter to 20.5%, supported by strong operational cash flows. Approximately $100 million was used to repurchase vessels on the sale and leaseback financings. In addition, vessel market values have also recorded a slight uptick compared to the previous quarter. In line with our dividend policy, we are declaring a payout ratio of 80% for the quarter. This corresponds to a total cash dividend of $73.2 million or $0.1470 per share. For shareholders receiving dividends in Norwegian kroner, the exchange rate will be based on the value date, which is two business days before the payment date.

With this quarter, we now mark 15 consecutive quarters of dividend payments, underscoring our commitment to consistent shareholder returns and long-term value creation. Soren Winther, our VP of Commercial, will now share the industry review and market outlook.

Thank you, Mikael. Let me begin with a review of third quarter market conditions within the product tanker market segment, where Hafnia primarily operates and then share our outlook for the months ahead.

The product tanker market started 2025 on a softer note, but showed countercyclical strength throughout the third quarter, supported by higher trading activity and tonne-miles. Clean petroleum product volumes on water for 2025, continue to track above the 4-year average, with Q3 showing an unseasonal increase compared to previous years. Importantly, the corresponding rise in daily loaded volumes suggest that total oil and water is being driven by higher export demand rather than longer voice distances.

Moving on to Slide 9. While high clean petroleum product volumes usually correlate with stronger earnings, the earnings recovery this quarter was more modest, yet 18% stronger for [indiscernible].

We also saw a strong rebound and ton-days during the third quarter, supported by tight gasoline and distillate supply in Europe, stemming from ongoing refinery closures. This dynamic has driven tonne-miles and supported strong trading margins out of the U.S. and the Eastern basin.

Moving on to Slide 10. On the supply side, despite continued newbuild deliveries in 2025, overall fleet growth has remained limited. This primarily is driven by continued vessel sanctions, and the migration of LR2s into Aframax dirty trading. Year-to-date, roughly 88% of the coated LR2 newbuilds have migrated into the dirty market, supported by a stronger crude earnings environment. In effect, the Crude segment has absorbed about 45% of the 2025 coated newbuild program, significantly minimizing increases in clean trading deadweight.

Moving on to Slide 11. Beyond the LR2 migration, sanctioned vessels also play a significant role in tightening fleet supply in 2025. The U.K., UN and OFAC have collectively sanctioned more than 400 tankers this year, with roughly 25% of them operate in product segments. This is supportive for product tankers. As it effectively reduces available supply and also limits crude cannibalization, contributing to a tighter overall supply-demand balance.

EUs 19th sanctions package, adds another 19 vessels to this list with the new addition split evenly between dirty and clean trading. We estimate that approximately 280 additional vessels have engaged in trade with sanctioned regions, signaling the potential for further sanctions. The dark fleet refers to targets with questionable ownership and an older age profile, while the grey fleet is associated with more reputable ownership.

Moving on to Slide 12. Bringing together the topics of LR2 migration and vessel sanctions detailed in the previous two slides, overall, clean petroleum product capacity growth in 2025 has been unlimited. Year-to-date, around 12 million coated deadweight has been delivered. We had only about 1.1 million deadweight has effectively entered clean trading. This translates to approximately 0.5% net growth in clean product tanker supply.

Moving on to Slide 13. Looking ahead, the supply outlook is less concerning than initially feared or reported. If we apply a 72.5% crude migration factor to future coated LR2 deliveries over the next 3 years, this implies roughly 11% fleet growth based on the current order book. However, nearly half of that growth is concentrated in 2026 driven by a heavier delivery schedule in the first quarter.

Slide 14. Clean product cannibalization remained a real threat in Q3 with cannibalization volumes exceeding the 3-year average. Despite this, clean product earnings proved resilient throughout the quarter. On a positive note and looking ahead, the current strong earnings environment in the VLCC and Suezmax segments has reduced cannibalization volumes for November to nearly zero. This sets the stage for a robust outlook for the remainder of 2025 into Q1 2026.

Moving on to Slide 15. Apart from the factors we have discussed, the continued aging of vessels and potential scrapping also supports a positive supply outlook. Between 2025 and 2028, we expect around 114 million deadweight of newbuilds across Handy to VLCC segments. Over the same period, potential scrapping could approximately be around 167 million deadweight based on typical scrapping ages. Looking further ahead, an additional 87 million deadweight could exit the fleet between 2029 and '30-'31. It is important to note that these estimates do not account for differences in utilization between newbuilds and older vessels.

Slide 16. Inventory levels are an important indicator within the product tanker market. European diesel inventories have seen significant draws in 2025. With the winter season approaching, Europe will look to replenish inventory. The end of refinery turnarounds in the U.S. Gulf, Far East and Middle East during November will free up additional export capacity to support the supply. As I'll explain in later slides, it's also worth noting that South America will rely on increased North American supply over the next two quarters, leaving the Eastern Hemisphere to cover the European import shortfall. This dynamic is expected to drive higher volumes and longer tonne-miles.

Slide 17. With continued drawdowns and refinery turnarounds, refinery margins have been on the rise in 2025. This typically correlates with higher earnings, further supporting the underlying market strength over the first quarter of 2026.

Slide 18. The longevity of strong refining margins and resulting transportation demand is set to continue in Q1 2026. Fundamentally, European supply and rising transportation volumes depends on sufficient oil availability and the pricing structure that supports underlying arbitrages. Forward arbitrage from the U.S. Gulf and the East to Europe, is trending high for the remainder of 2025 into 2026. This supports forward trading volumes and underscores the real and sustained demand from Europe to cover for the winter season and replenish low inventories.

Slide 19. Geopolitical tensions continue to influence the product tanker market. Following Ukraine's drone strikes on Russian refineries, clean petroleum product exports from Russia have declined significantly, while crude exports have correspondingly increased. This leads Russia's ability to supply clean petroleum products to South America and West Africa, prompting substitute barrels from the U.S. Gulf and Europe. These shifts drive higher tonne-miles on the non-sanctioned fleet, pushing the overall utilization. We're already seeing a decline in South American imports from Russia, accompanied by corresponding increases in imports from the U.S. Gulf.

Moving on to Slide 20. Further on geopolitical tensions. In early Q4, the Trump administration facilitated a piece plan between Israel and Hamas, aimed at ending hostilities. While this could eventually lead to a gradual reopening of the Red Sea, we expect the process to take time. Our analysis suggests that the potential impact of a Red Sea reopening may be less than initially anticipated. If Red Sea transits return to normal, Suez canal traffic could regain the equivalent of roughly 180 MRs in transportation demand. While tonnage demand loss via the Cape of Good Hope are projected at around 230 MRs. The net effect on total arbitrage transportation volumes, while the Suez canal is about 43 MR equivalents. This implies a minimal negative market impact of approximately 6 MR units.

Moving on to the next slide, where Perry, our CFO, now will bring you through the financial developments.

Thanks, Soren. If we move to next page, 22. We indeed had another strong quarter as market conditions strengthened, fueled by higher trading activity and firm refinery margins. For Q3, we reported adjusted EBITDA of $150.5 million and a net profit of $91.5 million, which is our best quarterly results of 2025 so far. Our Fee-based business in the pools remained steady, contributing $7.1 million in fee income. And we maintained strong profitability metrics with an annualized return on equity of 15.9% and a return on invested capital of 12.8%.

Moving on to the operating summary. We continue to generate strong operating cash flows, supported by a boost balance sheet and further declining breakeven levels. For the quarter, TCE income stood at $247 million with an average TCE of $26,040 per day. A meaningful portion of our fleet was built in 2015 and 2016, leading to a relatively high number of drydockings. And this quarter's performance also reflected the impact of several vessels undergoing drydocking. We recorded approximately 740 off-hire days in Q3, which is about 230 days above our initial expectations, primarily due to drydock glass and two vessels undergoing special cargo tank recoating. Across the first three quarters of '25, we have drydocked 32 vessels and expect to complete another 14 in the fourth quarter. While we still have several vessels scheduled for drydocking in the coming quarters, we do expect off-hire days to decline and taper down to around 440 in the fourth quarter. This positions us well for stronger utilization and earnings momentum heading into 2016.

And turning to the balance sheet. We made significant progress this quarter. Our net LTV ratio based on our 100% owned fleet improved from 24.1% at the end of Q2 to 20.5%, supported by strong operational cash flows. Across 2025, we have also reduced our weighted average debt margins by more than 50 basis points, further strengthening our financial position by securing very attractive pricing on new financings. During the quarter, we have used $100 million of our excess liquidity alongside debt refinancing to repurchase 14 vessels that are under -- that were under sale and leasebacks. Vessel market values remained stable, showing a slight uptick from the previous quarter.

On the right, you can see our liquidity position. Following the signing of our $750 million revolving credit facility, we ended the quarter with over $630 million in total available liquidity, consisting of around $130 million in cash and $500 million in undrawn financing capacity. As mentioned earlier, we recently announced the agreement to acquire 14.45% of TORM shares. And let me clarify how this will be reflected in our net LTV calculation upon effectiveness of that transaction. In addition to broker valuations for our wholly owned vessels, we will incorporate the lower of the investments market value or its purchase price. This ensures that the investment is reflected in our leverage metric, while also maintaining the integrity of our dividend policy, which is designed to balance our capital structure and our asset strength.

Looking ahead, our solid financial position and effective cost structure supports an operational cash flow breakeven of below $13,000 per day for 2026. Given the current market environment, this positions us very well for another year of strong earnings.

If we look for that on the next page. So we look towards conclusion of Q4, as of the 14th of November, we have secured 71% of our Q4 earnings days at an average rate of $25,610 per day. For 2026, we already have 15% of our earning days covered at an average rate of $24,506 per day, giving us a strong head start to the year ahead. If you look at that based on the Q4 covered rates and also the analyst consensus, 2025 points toward net profits for the full year in the range of $300 million to $350 million. This positions us exceptionally well as we also move into 2026.

And Mikael, over to you for the next few slides.

Thank you for this. And let me now turn to Hafnia sustainability strategy and goals, and we are on Slide 27. As a global leader in the product tanker segment, we do recognize the critical role we play in shaping the maritime ecosystem. We hold ourselves to the highest operational and environmental standards with a clear commitment to creating a positive difference. Across the value chain, we are deepening collaboration with strategic partners, regulators and key international bodies to codevelop solutions to the challenges our industry faces. These efforts ensure that Hafnia remains firmly positioned at the forefront of the energy transition, not just adapting, but leading the way forward.

Moving to Slide 28. Here, we showcased some of the strategic initiatives we've been working on to strengthen our competitive edge. Take Seascale Energy, for example, this joint venture creates powerful synergies with our existing operations and enables us to deliver reliable, scalable solutions across the maritime sector. In parallel, we're advancing our technological capabilities through our strategic investment in Complexio. Complexio leverages both structured and unstructured data to create a detailed operational landscape, enabling automation of recurring processes such as chartering, ship clearance, finance management and contract negotiation. These initiatives reinforce Hafnia's position at the forefront of innovation in the maritime sector, ensuring we remain agile, efficient and future-ready.

Slide 29. Looking ahead, Hafnia remains well positioned for the remainder of the year. With winter approaching, seasonal demand is expected to support the oil market, driving higher earnings through increased tonnes-miles activity and strong operational dynamics. I'm encouraged by the underlying market strength and proud that we've delivered solid results while maintaining our 80% dividend payout ratio. We will continue to exercise disciplined financial management and pursue strategic opportunities that enhance our competitive position.

Before concluding, I want to stress an important concern. As Ukrainian ceasefire discussions progress, policymakers and the shipping industry must ensure the vessels from the dark fleet often operating with poor safety standards are not allowed back into mainstream trade. Doing so would undermine regulatory trust and create serious risks to people and the environment.

With that, this concludes our presentation. I'd now like to open the call for questions.

[Operator Instructions] Frode, I see you're having hand up? Can you please unmute yourself?

So the first question is on this coverage slide you had, I noticed you had booked 67% of the LR2 fleet in 2026. So maybe you can shed some color on that? Have you booked -- what type of contracts are you booked and the duration, I see the rate there, like $30,000 a day basically.

Hi, Frode, Soren here. Yes, that's correct that we, during Q3 and into Q4, have covered more of our LR2 fleet for three years. You're talking four ships, where three with 3-year deals and one is a 2-year deal, about the numbers you're talking about.

Okay. That's good. I guess coming back to Mikael's point in his final remarks. I want to ask about this Russian, see the key export decline we've seen, right? So you showed it in the slides, exports are down, probably been good for U.S. more liftings, right? Have you also seen like an offsetting effect from, let's say, shadow fleet coming back, let's say, drifting back into the conventional fleet. What's your data showing?

Maybe more on the DPP side than on the actual CPP side. So probably on this DPP, I'd say that the supply into South America has gone back to the conventional tonnage, adding a little bit more tonne-mile there, whereby on the DPP trading side, especially on Aframax', you have seen some more influx of not sanction tonnage, of course, but the grey fleet entering into an already busy Aframax market on the dirty trade.

For CPP, it's a positive result.

Yes, you can say it certainly feels like a positive for now, and we don't seem to find a lot of competition from the dark fleet yet, at least.

Omar, I can see you have your hand up? Can you unmute yourself, please?

Thanks for the update. I did have just maybe a couple of questions and perhaps maybe first, just on the -- do you mind revisiting that Red Sea slide? I thought that was quite interesting. You mentioned the opening would perhaps not be as significant to fleet supply as initially thought. And just want to get a sense of if you wouldn't mind just explaining a bit more how you got to those figures, especially that part about the 43 cross hemisphere regains.

Yes. Soren again, here. So the analysis we have done is based on historic data on a general note. So if you take pre-battle [indiscernible] closing volumes and anticipate that those volumes would come back the market if Suez reopened in the sense that Middle East will then be the more competitive supplier into Northwest Europe and Mediterranean again in the event of a reopening. So what you're looking at is that it's taking the volumes that you would regain out of Suez or trading by Suez again, and we have offset the full gains that we have had for trading via the Cape of Good Hope and added the volume to come back to normal averages of East to West volumes, which then boils down to a limited impact on the market. What you can see on that slide is what is that going to do to trade flows on a general note. Is that going to be a positive for the U.S. Gulf, which has been a big driver over Q3 for sure. And if you have more supply out of the Middle East, that's probably positive for the LR1s and LR2s, whereby there will be other trade flows out of the U.S. gold for the MRs and probably more tuned towards the South American region.

Okay. That's quite helpful. And maybe just touching on that point in terms of just transiting and what compels that you or maybe the industry do want to return. Obviously, I think a big part of it is perhaps insurance premiums. Have you seen any kind of shift or change in insurance costs, what's being quoted to transit in the region?

Not really yet, the big -- well, the big, I mean, at least the well-known owners on the clean side is not yet transiting. So there's not a lot of movement there. You have seen other parts of the lead, for instance, some Middle Eastern traders, that is sending their tonnage through the Red Sea. So I think you would see a mild increase in the volume that actually goes through the Red Sea today. But on an insurance and on a general willingness to try it out, not so much, to be honest.

So Clement, can you unmute yourself, please?

I wanted to start by asking about the exercise of purchase options you pursued on vessels under sale and lease back. Could you talk a bit about the effect you expect this to have on your all-in cash breakeven for the vessels involved?

Hi, Clement. Good question. It's Perry here. I don't have the effect on the specific vessels. We purchased -- we had quite good and regular frequent purchase options on those leases. So as part of our refinancing, we took them out across the board with all the refinancings that we've done since the summer, that has improved our cash flow breakeven quite significantly. I think for next year, that will bring us somewhere below the $13,000 a day. But we don't have anything for on a per vessel basis. It's also less relevant.

Makes sense. The color is still helpful. And you've continued divesting the older end of the fleet in recent months. How are you thinking about potential fleet renewal growth at current pricing? And secondly, should we consider the acquisition of TORM shares, likes that kind of fleet expansion, or how do you view it?

Hi, it's Soren, again. You can say that our strategy over the past couple of years on the newbuild purchase side has always been linked to bigger projects, will cover somewhat forward. Perry -- and looking at newbuild prices now, that will probably be our strategy still. But -- well, yes, it's I guess, it all boils down to a better market than this, I think we are probably not in a situation now where we would look at a big newbuild program at current levels.

And I'm actually not seeing any more raise hands, actually, so Omar -- so Clement, if you can take your hands down if you finished, and then Omar, can you unmute yourself?

Yes, can you hear me?

Yes.

Yes.

Just wanted a follow-up on just a net LTV for half year at 3Q, obviously, a very nice drop from 24% to 20%. Obviously, precise like quarter over quarter. It seems that you're pace to perhaps get below 20% at the end of the fourth quarter, which, I guess, presumably triggers you back into that 90% payout threshold. Do you forecast that happening, or do you take into account the pro forma acquisition of the TORM stake at that point?

Yes. Hi, Omar, it's Perry. Good question. Net LTV at the end of Q3 is 20.5%. As we always do, we are consistent with our dividend policy and our dividend payout ratio. So of course, that would depend on where values are in the quarter. As we've also announced earlier in September that when we include -- once that deal closes, we include TORM stake at market value and purchase price, low of the both and then also including the debt. So that obviously will bring the net LTV all in all some -- probably somewhere in the middle of that range.

I don't see any more raised hands. So I'm actually going to move on to the chats and the Q&A. So we have a question in our chat, which I will direct to Perry, regarding whether we plan on purchasing further shares in TORM?

Yes, that's not so much to come down. We've mentioned also in the earnings release that there's one more condition outstanding for the close of the stake that we've announced for 40.45%, and can't really comment or add on questions or suggestion of further purchases.

Moving on to the next question. So we have someone asking that we mentioned in our detailed release the pool earnings for the week beginning 17th of November 2025. Is it only the week's earnings, or is it from the first of October to the 17th of November 2025?

Thank you for the question. That's for the week of -- starting November 17, so that week's earnings only.

Thank you, Thomas. I'm just giving it a few more seconds to see if we receive anymore raise hands or any more questions in the Q&A or the chat.

All right. Well, thank you, everyone. So today, we've come to the end of today's presentation. So thank you for attending Hafnia's third quarter to 2025 financial results conference call. You can find more information available on our website at www.hafnia.com. Thank you, everyone.