TORM plc Posts Improved First Quarter Results With Product Tanker Market Recovering Strongly
In Q1 2022, TORM achieved TCE rates of USD/day 16,743 (2021, same period: USD/day 13,493) and an EBITDA of USD 60.4m (2021, same period: USD 18.9m). The profit before tax amounted to USD 10.7m (2021, same period a loss of USD 21.1m), and profit per share (EPS) was USD 0.13 or DKK 0.86 (2021, same period loss per share: USD 0.29 or DKK 1.80). Cash flow from operating activities was positive at USD 17.9m in Q1 2022 (2021, same period: USD 9.8m), and Return on Invested Capital (RoIC) was 4.4% (2021, same period: -2.7%).
At the start of Q1 2022, the product tanker market was negatively influenced by declining volumes of long-haul trade, resulting in LR rates falling below MR rates. In late February 2022, Russia’s invasion of Ukraine led to a partial re-routing of trade flows towards longer haul trade, resulting in freight rate hikes to levels last seen in the Spring of 2020. Self-sanctioning by Western oil majors and ship owners resulted in lower product flows, primarily diesel, from Russia to Europe, while high arbitrage spreads incentivized Middle Eastern and US diesel flows to Europe, increasing ton-mile demand for vessels.
None of TORM’s vessels have been in any of the critical areas since Russia’s invasion of Ukraine, and, thus, we have been able to maintain operational safety. In Q1 2022, many countries lifted COVID-19-related restrictions despite significantly increasing numbers of infections from time to time. Despite a few non-severe cases on our vessels, TORM has been able to safeguard the health of both our shore-based employees and our seafarers due to high vaccination rates. We expect that restrictions worldwide will be lifted further in the coming quarters.
During Q1 2022, TORM entered into agreements to sell TORM Horizon (MR) and TORM Tevere (Handy) with delivery and expected delivery to the new buyers during Q2 2022. After the end of Q1 2022, TORM has purchased a second-hand LR2 vessel. The vessel will be financed by a sale and leaseback agreement with a Chinese leasing company. TORM expects to take delivery of the vessel during Q3 2022. TORM sold its oldest LR2 vessel, TORM Gudrun, which we expect to deliver to the new owner during Q2 2022. In addition, as a part of TORM’s strategic decision to gradually exit from the handy vessel class, TORM sold the last remaining Handysize vessel in April 2022. The vessel is expected to be delivered to the buyer during Q3 2022. Since 2017, TORM has sold a total of 11 Handysize vessels. The LR1 vessel TORM Emilie which was sold in Q4 2021 was delivered to its new owner in early April 2022.
As of 31 March 2022, TORM’s available liquidity was USD 139.6m consisting of USD 94.6m in cash and cash equivalents and USD 45.0m undrawn credit facility. TORM repaid USD 45m on RCF facilities during Q1 2022. Cash and cash equivalents include USD 19.7 m in restricted cash, primarily related to collateral for financial instruments. As of 31 March 2022, net interest-bearing debt amounted to USD 999.8m (2021: USD 743.4), and TORM’s net loan-to-value (LTV) ratio was 51.5% (2021: 55.5%).
Based on broker valuations, TORM’s fleet had a market value of USD 1,957.4m including asset-held-for-sale as of end March 2022. Compared to broker valuations as of 31 December 2021, the market value of the fleet increased by USD 31.4m when adjusted for acquired and sold vessels in Q1 2021. The book value of TORM’s fleet was USD 1,973.4m as of 31 March 2022. The fleet was not impaired 31 March 2022, as TORM has assessed that were no indications of impairment and the book value were in line with the market value.
As of 31 March 2022, TORM had installed 52 scrubbers out of 60 planned including scrubbers installed on purchased second-hand vessels. The remaining scrubbers are expected to be installed before the end of Q3 2023.
As of 31 March 2022, 16% of the earning days in 2022 were covered at an average rate of USD/day 19,694. As of 08 May 2022, the coverage for Q2 2022 was 65% at USD/day 28,348. For the individual vessel classes, the coverage was 65% at USD/day 32,123 for LR2, 58% at USD/day 29,915 for LR1, 66% at USD/day 27,424 for MR and 48% at USD/day 12,490 for Handysize. Recent trading has been made at significantly higher levels.