Odfjell: Climate targets and sustainability a hot topic
Odfjell’s results will be announced next Thursday and we expect a somewhat weaker quarter following the company’s guidance on increased competition from swing tonnage. Still, the growth in rates is to follow with more significant improvement projected in 2H21 and onwards. Currently, sustainability should be the key word used in Odfjell’s headquarters with ambitious climate targets, sustainability-linked bond and Chief Sustainability Officer in place. Although little of this can be monetized, it still brings some reassuring mood to the table. We reiterate Buy for the stock under unchanged NOK 40/sh TP with hopes of improving chemical market rates already in 2H21.
Somewhat weaker 1Q predicted
Odfjell repeated its forecast of a challenging start of 2021 for the tankers in its annual report as more lockdowns halted the economic recovery and the competition from swing tonnage grew. Nevertheless, an accelerated recovery throughout 2H21 and a stronger market in 2022 was guided. Our estimates follow the prognosis and reflect just that. Situation in Terminals was communicated to be somewhat mixed with an increased demand for products related to healthcare industry, packaging and consumer goods, while the products related to the automotive and aerospace industries are just starting to show the signs of recovery. Still, the LT demand prognosis is promising.
All about sustainability
Odfjell has set ambitious targets to reduce the carbon intensity by 50% by 2030 compared to 2008 levels and have a climate-neutral fleet from 2050. Both targets go beyond the targets set by IMO and contribute to achieving the UN Sustainable Development Goals. However, it will be interesting to see what adoptions to the IMO regulations will be announced in June worldwide. Although it is hard to put into figures all that is connected to sustainability, those measures have already let the company to successfully place shipping’s first sustainability-linked bond (note, that this marks a first not only for Odfjell but also for the international shipping industry and for the Nordic region across all industries), let alone being awarded as the company demonstrating “outstanding performance” within green and sustainable shipping.
We reiterate Buy @ NOK 40/sh TP in a belief of a better tomorrow.
Source: Norne Research