Hoegh Autoliners ASA Aktie

Good morning, and a warm welcome to Höegh Autoliners second quarter presentation. My name is My Linh Vu, Head of Investor Relations. And we have with me our CEO, Andreas Enger; and our CFO, Espen Stubberud who will walk you through the last quarter update. As usual, you can send a question to our Investor Relations mailbox at [email protected], and we'll address these questions during our Q&A session at the end. So with that, I will hand it over to you, Andreas.

Thank you, My Linh. And welcome to this presentation. This has been an exceptional quarter in many ways, exceptional in the sense that we've had the strongest customer demand growth, I think I've ever seen where we could have filled the multiple vessels that -- more vessels if we had them. It's been exceptional also then in the tightness of the capacity market with increased charter rates. And it has been exceptional in disruptions, both in terms of fuel costs and in terms of cargo displacement bound for the Middle East due to the conflict in Iran and the Strait of Hormuz. That in some way, warrants a slightly deeper dive than usually into the underlying factors, but we will run you through the presentation. And then as My Linh said, respond to a Q&A session afterwards.

Starting with the quarter highlights. The market for RoRo services is exceptionally strong. Car exports out of Asia growing 31% year-on-year in the first half. China increased by 68% year-on-year, again, creating an exceptional demand for capacity that is also fairly substantially underserved. That has tightened the capacity market. Charter rates climbing further, new build order books fully absorbed by the Chinese growth. We're coming into that in some more detail. It's also been very much colored by the conflict in the Middle East. It's been, for us, a huge disruption with 16,000 cars bound for the Middle East displaced but also successfully managed during the quarter.

And while as we said, the quarter is upset by this shock together with the fuel price. We do expect normal cash conversion and full run rate BAF compensation within the third quarter. So it is for -- as a summary, a market situation that is strong and is remaining strong. There has been some exceptional disruptions that we will dive into that has largely been dealt with and will soon be behind us.

Starting with the Middle East conflict. We have a strong position serving the Middle East market. We have regular voyages into the Middle East. And obviously, the disruption with the outset of the war or the military escalation is substantial. Right now, as we speak, we have no vessels inside and no cargo displaced as a result of that. But we're going back to what happened and how we got to where we are now.

On the financial side, the elevated fuel prices, and I think the fairly well-known lag in our BAF revenues impacts the quarter and the cost related to rerouting and disrupted cargo is fully compensated by customers, but it does create additional cost and receivables that takes slightly longer to collect due to the extraordinary nature of the costs. And that in some creates a working capital buildup that also unfortunately covers this quarter.

Let's start with the effects of the Strait of Hormuz. As I said, we have more than 16,000 cars under the Middle East when the Strait were closed. They ended up in being unloaded in the Caribbean, in Mozambique, in India and in Sri Lanka. And if you -- back in Europe that created a huge disruption and substantial costs in terms of both storage and then finding solutions to bring these cars somewhere. And we worked closely with customers. We found good solutions. All of these units have found a home. All the costs are covered. But again, there is a slightly longer invoicing cycle, although going back most of these costs are now actually also paid and collected, but it created a longer cycle than building working capital.

That was obviously compounded with the fuel price. And I think there are 2 effects that are important in that. We have an average fuel inventory on board of 2 months. And when the fuel price increases that extends it does now, it basically substantially increases our fuel inventory, and it's also a structural delay in the compensation. The cost of that -- the additional fuel cost is fully passed on to customers, but it is with a delay that then also is creating delays in revenues and building working capital.

We do expect the full run rate BAF compensation within Q3, and our 5-year average fuel cost recovery is 95%. So we are considering this to be temporary effects. And in a declining fuel prices, there is also a recovery or a sort of a positive effect on that, although I don't think we're going to guide on oil prices in the current geopolitical situation. Those effects combined created then a working capital growth of NOK 54 million in the quarter, as we said, net increase in receivables of '25 now mostly collected and the fuel inventory obviously staying high with the oil prices, but as a one-off effect. But in some substantial effect on the quarter, that obviously, given our dividend policy being strictly linked to end of quarter cash has an impact on the quarterly dividend.

So that brings us to the highlights, NOK 122 million of EBITDA, NOK 86 million of profit after tax, growth rate of $94 and one new vessel, a feeder vessel delivered continued high equity ratio. It resulted, if you factor in the delayed fuel costs and the costs of some vessel disruptions and not being able to serve the Middle East market fully is, in our view, a strong quarter. Unfortunately, with the working capital effects taking down dividends for this quarter.

To go a little bit deeper into the market side, I think it's important to recognize, I think, an unexpected, but an extremely strong growth in far east exports, primarily Chinese exports with a 73% growth in light vehicle exports year-on-year, a 41% in construction equipment, a little bit under communicated, but there's a strong development in that one as well. It's tightening capacity. It's also creating a larger system imbalance that also contributes to consuming RoRo capacity with the eastbound trades being largely flat with the West bound trades growing strongly.

Chinese car exports is continuing to grow with successes, high-quality, well-priced products, building market share across the world. And the 2026 growth alone consumes something like 100 car carriers in order to transport. So it is a -- it is very, very strong, and we believe well justified based on the products and price points and also sort of, given the growth across the world, also a sustainable or a structural market change that we expect to be here to stay. With the lack of RoRo capacity that has led to a strong increase in cars shipped in containers or other means of transportation we estimate that to be about 1 million, 1.5 million cars in the first half of 2026.

Our experience from this also, to some extent, happened after the pandemic. And our experience is that these volumes will largely return to RoRo when capacity becomes available. So it also creates a -- contributes to further tightening the capacity market, but also represents a buffer if and when markets normalize. The remain a -- to have a strong backlog, we are totally sold out for 2026. I think given what I've said, we probably would have some opportunity if we revert. But that's where we are.

We also have a strong backlog into 2027. But I think the situation in the market is now also changing the kind of somewhat limited, but still the contract renewals as an upside opportunity rather than a risk given that we see the market remaining tight into and through 2027. So our contract situation is strong. The sort of renewable -- renewing contract renewals represents an upside. And so that the market outlook in our view, remains quite strong and strongly colored by the lack of available RoRo capacity out of Asia.

Going a little bit into the capacity side as well. We are through the peak in newbuild deliveries. We are also heading towards a scrapping period where between now and 2030, a fairly substantial part of the older fleet will pass 30 years of age, which is the normal scrapping age for car carriers. And that is also clearly reflected where you sold 23 -- 4 very, very high charter rates falling sharply on expected normalized capacity balances into 2023 through 2025, and is now again on a sharply increasing trajectory, which I think is fairly well explained, if we look back by this slide where we basically look at net fleet growth against Chinese export growth back all the way back till 2020, where we basically saw when market tightened in 2022, '23, the growth grossly exceeded the newbuild deliveries or the fleet growth.

In 2024, '25, it's somewhat reversed where with the peak of the newbuild delivery, new capacity into the market slightly exceeded the Chinese export growth, and it's now been turned around again in 2026 with the increase in Chinese exports creating a gap that we currently estimate roughly 70-plus -- 74 ships. So it is -- it is kind of a fairly -- it's a close link between the evolution of Asian, Chinese export growth and vessel deliveries that has during 2026 -- towards the end of 2025 into 2026, changed the dynamic of a loosening capacity balance into actually a sharply tightening, which is where we are right now.

And in that picture, we are obviously very, very pleased to have our first 8 RoRo vessels in full operation. They are performing very well. They are also allowing us to deliver record carbon intensity. And since we are still -- I mean we are running LNG, which is helpful, but it is mostly efficiency. So it also actually impacts obviously our operating costs and the operating economics. And we are also, obviously, looking forward to getting the first 4 dual fuel VLSF ammonia vessels delivered from next year, mid next year onwards.

And we also, in that sense, I think we'll -- we are strongly committed. We did I think, innovate the PCTC capacity market by basically introducing a new class of vessels being larger and with more fuel flexibility and efficiency. We now see how that works out, where our -- first, our -- the cash cost of our newbuild vessels are almost a tiny fraction of the current charter market in cost, it's also substantially lower than it would have been to build the cheaper, smaller 7,000 or 7,500 vessels. So we are rapidly building the most competitive class of vessels in the industry. And we have now also required substantial operating experience, and we are quite comfortable with with how this plays out in terms of also long-term cost position.

That concludes my part of this presentation, I will then leave the word to Espen to go through the financials in some more detail.

Thank you, Andreas, and good morning. Our net rate is moving flat quarter-on-quarter and has been very stable over the last period. Top line is up 4% in the second quarter, quarter-on-quarter, driven by higher volumes, up 2.6% to NOK 4 million CBM. And we think that is a strong result considering the meaningful disruption to our network in the quarter. Our EBITDA in the second quarter came in at NOK 122 million. That's slightly ahead of what we guided in the first quarter presentation. We had -- it's down NOK 23 million quarter-on-quarter, and we had a net fuel impact of NOK 22 million, which is explaining the drop in performance. Our fuel cost was up NOK 21 million quarter-on-quarter, and we had a negative impact from BAF revenues of NOK 1 million quarter-on-quarter, following changes to our cargo mix. We had the net profit before tax reduction of 16% or NOK 16 million, mitigated by a gain from debt modification following a refinancing in June.

Looking at our EBITDA bridge. As mentioned, we had NOK 21 million extra in fuel costs. We also had, as Andreas already mentioned, additional operational expenses related to the Middle East routing, extra storage costs, extra discharge costs and canal costs as well as some costs related to us putting our cargo on third-party vessels, which is increasing charter hire expenses. These costs have been inverse to clients and is offset by additional revenues. We are continuing to using the short-term capacity market and some of the increase in charter expenses is also reflecting the tightness of that market.

Our balance sheet remains strong. Our net debt to EBITDA up to 1.3x following a lower cash balance at the end of the quarter, and an increase in right-of-use assets as we have taken delivery of one feeder vessel on a long lease, and we also extended one feeder vessel for 1 year. Extra ratio remained stable. We ended the quarter with NOK 216 million in cash, and we have liquidity reserves through our revolver of NOK 197 million.

As Andreas already talked to, our cash generation in the second quarter has been meaningfully impacted by increase in working capital with increased fuel inventory and also higher receivables. We expect working capital to be reversed in coming months, and we had the operating cash flow of NOK 67 million in the second quarter. We had a normal CapEx related to dry docks vessel upgrades and also one newbuilding installment for Aurora vessel #9 of NOK 16 million and we have normal debt and lease payments of NOK 35 million and as well as a NOK 94 million dividend paid to shareholders.

We have refinanced both our bank facilities over the last 6 months. We already announced that we extended our liquidity reserve. The 200 revolver we have in the first quarter, we extended it by 2 years up to 2030. And in the second quarter, we also extended our main 640 bank facility. And we're quite pleased to have achieved an 8-year tenure increasing the maturity by 4 years up to 2034, and also meaningful reduction in margin and more favorable covenants. As Andreas said, we have a cash-based quarterly dividend, and that gives some volatility in a very special quarter like the second quarter, we will be paying out NOK 16 million, which is the excess cash above our targeted cash balance in August.

And with that, Andreas, I hand it back to you for the outlook.

Thank you, Espen. Yes. And with the outlook, starting with the market, demand for ocean transportation is accelerating, supported primarily by strong growth in exports from China, both for vehicles and high and heavy equipment. And the capacity market is further tightening with 60% increase in July charter index prices, obviously, also then creating a limit to our flexibility on the capacity side, but also reflecting a very strong market. Q3 remains impacted by high fuel prices and delayed BAF revenue, but cash conversion is expected back to normal in Q3. Normalized performance with full run rate BAF compensation is expected within the third quarter. And Q3 EBITDA is expected then to be roughly in line with Q2.

So that's our guidance, a very, very strong market, still some of the kind of effects from the fuel and BAF accounting-wise coming into the quarter less cash-wise. But the underlying market suggests continued strong demand and continuing full utilization and also a strong environment for contract renewals. Thank you.

We can start our Q&A session. We have received a few questions from our online audience during the presentation. And the first set of questions is coming from analyst, Sondre Snersrud from Nordea. First, on net working capital. We talked a little bit about that in a previous slide, and then we guide for a normalization of cash conversion in Q3 -- within Q3. But how -- can we say again about how is the outlook for the underlying net working capital level? And can we say a little bit more about expectation reversal and when we can expect that?

So I think, as we said, it's a very special quarter for us and the working capital buildup is significant. It's driven by 2 things: it's the fuel inventory following higher fuel prices, which will come down when fuel price come down. The other part is the increase in receivables, and that is related to this rerouting of Middle East cargo. 16,000 units, big volumes spread out on different locations. This volume is from our largest clients, some of our absolutely biggest customers. So we're not concerned.

We will get paid, but it takes longer to process for our biggest clients because this is noncontractual cargo moves with additional surcharges and so forth. So the increase in receivables at the end of the quarter is related to those Middle East Cargo moves and wasn't paid at the end of the quarter, but it's largely paid today.

The second question, [indiscernible]. For this quarter, we highlight a [indiscernible] lack of 5 to 6 months. even somewhat longer than the previously commentary about 1 quarter.

I think for these questions, I can just take it. We are consistent with our previously guidance of a [indiscernible] 6 months. And it's a combination of the 2 main factors. Is there [indiscernible] nature of the back where the price, stress customer is by on the previous quarterly price and the privatizations effect. You want to add something more?

I mean, a, basically, what that means is that we load cargo and invoice and it takes a while and before actually the cargo is -- the work is fully done and the actual BAF revenues is prioritized over that period while it's invoiced separately.

And the next question is about capacity. I heard at the 2 chapters for the quarter, how is the view on capacity needs going forward with regards to the contract backlog?

I think there are 2 answers to that. In terms of the contract backlog, we are largely covered in terms of the market opportunities we will clearly at all times, be looking for additional capacity because we have good opportunities to put more capacity to work, but we will, given our very, very attractive cost of new builds. We will be very careful going into long commitments at pricing that is substantially above newbuild parity, which it is today.

Thank you, Andreas. Contract renewals, can we say a little bit about the sentiment and dynamics in contract renewals this year compared to last year? Can we say a little bit more about the [indiscernible] directions and the duration we are seeing?

Yes. I mean I think it's a very fairly simple, maybe a bit complicated well. But I think when you also looked at -- if you go back to 2024 and '25, you've had an environment where we expected the newbuild deliveries to catch up with the demand growth. And I think the kind of contracting market was probably more in a less for longer mindset. We're now in a situation where the capacity market has tightened. The availability of lease to charter tonnage is both limited and very, very expensive. And a lot of our Asian customers simply have uncovered transportation needs going into containers and chasing solutions.

So the dynamic is fundamentally changed and it's more back to sort of the earlier days so it is changed, and it's mainly driven by the fact that there is large uncovered transportation needs, there is more cargo going into containers. There is not sufficient RoRo capacity on offer, and there is no easy way to get it through the charter market. That changes dynamics quite substantially.

Thank you, Andreas. And the next question is about the spot exposure. Höegh Autoliners has previously been successful. We're a higher -- somewhat higher sported exposure during time markets. So could this be a strategic play going forward given the tight market? Or will we continue to pivot towards a longer contract?

I mean, first, I think I mean, right now, would we have wanted to have more spot capacity? Yes. But I still think over the cycle that our -- we have spent the last couple of years building strong relations with our existing large customers and also a number of growing customers. And we believe in our business that, that is valuable. So we will continue that strategy. So I don't think we will seek to go back to higher spot exposure.

We would -- we are very pleased with our new build effort, creating capacity. We are, I mean, which I think is also indicating some of the tightness in the market. We have chosen to do a 30-year class renewal on a couple of vessels, which is something that we generally do not like to do because of both the fuel efficiency and the cost of those vessels. So we are obviously actively chasing capacity.

Good part is that with our are the exceptional performance of the Euro class, we are still managing to provide market-leading performance in terms of reducing our carbon footprint and efficiency. But the capacity game is become -- is basically rather closer to where it was 2 or 3 years ago. And while the last 1.5 years, I think there has been it's been colored by the expectation of the market balance on capacity softening, which has sharply reversed during the first half of 2026 obviously changing the market dynamics substantially.

thank you for the elaborated Answer, Andreas. And the next question from analyst, Oliver Dorval, ABG SC. It's about operations. So with extreme export growth out Asia, are we're seeing an increased port congestions in the West, other terminals are able to handle all the volumes.

I mean, I would say generally, yes, but I mean I think it's more -- and the port congestion issue, I should say, is more a question in the disruption in the Middle East is creating a huge appetite for alternative routes where you don't have the structure and you don't have -- that one is challenging and remain a challenge, the challenge of actually serving the Middle East market is remaining. And obviously, port congestion is increasing with the larger volumes. But I think it's mostly related to Middle East being a fairly substantial market not being able to be served through the traditional develop port infrastructure is creating ongoing challenges.

Thank you, Andreas. Yes. And the next as question from analyst Jorgen Lien DNB Conergy. We already answered in details about the stickiness of the higher networking capital and the TC high-end capacity market. So that's why we're not going to ask this question again.

The next question is about the outlook of Q3 EBITDA in line with the current quarter. Is it saying -- is it implying there's an underlying number or the Q2 cost you guy for the Q1 report. mainly the NOK 20 million Q-on-Q fuel costs and NOK 10 million Q-on-Q Middle East disruption cost is still extending into Q3. Can we elaborate about the in-line guiding of the Q3 EBITDA?

I think we -- in the first quarter, we guided that we would have a NOK 20 million impact from fuel, and we had the NOK 22 million net fuel impact, so that was according to our guidance. Underlying performance improved somewhat. So we came in ahead of our guidance. And we have been able to invoice all the additional costs related to this derouting to our clients. And I think we also are very prompt to handle this disruption, actually being able to grow volumes from the first to the second quarter.

And I think -- but I think we have been very clear that when you have a spike in oil prices, that takes 5 to 6 months. So it takes 2 quarters for us to come through the P&L fully. We have a 95% recovery over time, but it takes 5 to 6 months for us due to the length of our wages and prediction of results. That's why we're saying that we will have full BAF recovery within Q3.

And I think if you add to that, I mean I think the guiding, which is mean first, we're always careful guiding exactly on working capital because that's obviously difficult on a specific date. But we are -- what we are clearly saying is that by the end of third quarter, we're back to normal run rates, both in terms of EBITDA and cash, and we're saying that cash conversion is coming -- improving faster but the sort of the drag in Q3 is pretty much driven by the fact that we start the quarter in a still somewhat disrupted expense environment, and we end the quarter in what we basically call normal performance. And that obviously colors the average, the full number for the quarter.

For the next question, I guess, we already briefly touch up on it, Andreas, during the answer for the capacity market question. But given the stronger market outlook, [indiscernible] ambition for fixed presize in the future.

I mean, I think we will -- given the strength of the market and actually also given the kind of aging of the current fleet, the global fleet and our fleet, we are seeking capacity addition and capacity renewal opportunities. But we are very, very strongly committed to retaining an industry-leading cash capacity cost because we believe in the company and our shareholders best in the long term. So we will have a very disciplined approach but we're clearly -- we will hunt for capacity, but we will not commit ourselves to long-term high charter costs.

Thank you, Andreas. Yes. And the next question is coming from [indiscernible] from Value Investor's Edge. First, could we compare the cost basis of shipping cars by container versus using RoRos, and how much less efficiency using containers compared to reducing a traditional RoRo vessels?

We have had that in a couple of, I think, some quarters ago. But what we have seen, without sort of giving the exact numbers is that when when rates for RoRo is excessive, being substantially for incremental cargo, being substantially ahead of the kind of RoRo rate level that we report today in our system. And actually also when RoRo capacity is simply not available, you see volume drifting into containers. It happened after the pandemic in a fairly strong way.

What we're seeing is that when at rate levels or definitely lower than what we report today, these volumes and with the availability of RoRo capacity, those are coming back. And it's partially a pure cost calculation. It's also a question that we had sort of discussions with. I did actually visit the port of Barcelona towards the end of last year that told the story of the additional land-based costs where during the pandemic, massive car imports came in containers and there is simply no infrastructure to handle unpacking and things around it. So it's partially the pure transportation cost, but also a sort of supply chain costs that makes at least on any large flows of cars.

Most -- all of our customers strongly preferring RoRo of container as long as the sort of pricing is not totally out of line. Then obviously, if you have 10 cars going somewhere, then containers might be fine. So it's -- but if you have 3,000 a month it's simply quite cumbersome. And most of our large flows and most of our large customers are more in that territory.

Thank you, Andreas. Yes. And the next question, with car manufacturing margins in China severely under pressure, to what extent, we expect continued export growth versus capacity rationalizations? Our export margins higher -- much higher than the domestic ones that could lead to the continued growth?

I mean I don't think we have full transparency on that, but we have strong indications clearly that the export margins are substantially higher. So that -- and we had that discussion when tariffs were introduced were the messages we got from from our customers was that it doesn't really impact their volume aspirations. And I think you also see the car exports growing in more markets. So it sort of get that sort of diversification out of it. You see -- also see high & heavy and equipment growing, creating sort of a broader cargo mix.

But I mean, I think it would be exceptional if the Chinese growth should continue at the current pace. I think we do expect that some production will be shifted closer to market and some of those kinds of things. But for us, it seems like -- I mean, looking at the volume aspirations, both of our automotive customers and the high & heavy customers we believe the likelihood of continued growth is still high. So the situation is positive and product price point margins, as you said, is supportive to that.

And that also comes in the sense that we are a bit surprised because the Middle East has been a high-growth market also for Chinese cars, and that has been shocked by lack of transportation options. And you've seen this kind of exceptional growth regardless of that. So I think there is also still opportunities on adding additional markets, whether that's Africa, other parts of Asia, South America, Middle East and then broadening the product mix probably offset by some localization of production to, for example, in Europe, where volumes are high.

And still, the market share is still -- I mean, it's growing rapidly, but it's still not so high that it necessarily some [indiscernible]. But but we don't expect the first half growth rate to continue. That's -- and I don't think that would be almost impossible to serve from our point of view.

Andres Yes. And the last question is about the fleet ambition. Is it already addressed for by Andreas earlier, so I want to just skip these questions.

I think that brings us to the end of the Q&A session today. And of course, you have further questions, feel free to reach out to us via Investor Relations mailbox and we will address that question to you later. Thank you very much for your attention today, and we look forward to seeing you next time.

Good morning from sunny Oslo, and welcome to Hoegh Autoliners First Quarter Presentation. My name is My Linh Vu, Head of Investor Relations. And with me today, we have our CEO, Andreas Enger; and our CFO, Espen Stubberud, will walk you through the first quarter business and financial performance. As usual, we have the Q&A session at the end of the presentation. So for the audience, if you have any questions, please send the question to our Investor Relations mailbox at [email protected].

So with that, I leave it to you, Andreas.

Thank you, My Linh. And we are starting this presentation with a beautiful picture of Hoegh Rainbow, which we took delivery of in the beginning of January. So it had its first quarter in operation. It's the eighth in the series of our 12-ship newbuild program of vessels that are doing a great job in a tight market.

Let's start with some of the very recent highlights. We've had an exciting week's at Hoegh Autoliners with a successful exit out of the Persian Gulf of Alliance Fairfax, which I think we commented earlier has been trapped inside the Persing Gulf. That happened with fantastic help and support from the U.S. Navy that mobilize substantial resources to ensure a safe transit for that vessel. We now have no vessels operating in the Persian Gulf and no remaining vessels that are bound for that area. There is sort of a continuous disruption, but contained operationally with repositioning and adaptation, which is, I think, one of the things we are quite good at in terms of fast response.

The Persian Gulf service is suspended due to the conflict. We don't, at this point, see any near-term transit of vessels into the area. But we maintain regional coverage via a Suez-Red Sea service that then returns back to us as we're not going through either the Southern Red Sea due to the [indiscernible].

Capacity market is tightened following these delays and rerouting and there is also substantial onshore logistics constraints. So there is clearly a turbulent market in many ways. So also in terms of fuel and bunkering, I think one of the biggest effects of the Hormuz crisis is imbalances in the global energy market, sharp increase in fuel prices and also tighter availability. It has led to reduced network speed to save fuels, but also a very sort of proactive bunkering operation to make sure that we have sufficient fuel on our vessels at all time, which we're also successful in doing.

The fuel price increases comes with a delay coming into. We are expecting recovery through fuel surcharges, but those comes with a significant time lag that is impacting our short-term guidance as we will see. Given the impact on fuel, actually, there has not been much impact of fuel pricing -- fuel price increases on this quarter because most of our fuel is used in the quarter is basically bunkered and expensed at an earlier price. But given the kind of large fluctuations we see right now, we've chosen to show these pictures -- number with the upper part here showing the bunker cost and BAF balance over the last 5 years. And that shows that there are periods, and we saw the last period during -- following the Russian invasion in Ukraine with substantial hike in energy cost and substantial effects also on our cost and on BAF.

But we see that through this period and through all other periods, the BAF mechanism has worked and we have, over that period, had a fuel cost recovery of approximately 95%. But the bottom part of the chart here basically shows how the Hormuz conflict have created a new very, very substantial spike that will have big effects on our fuel costs into the second quarter and will also have then big corrective effects later in the year on the battery revisions that will come for the third and the fourth quarter.

But then again, the highlight for the quarter. EBITDA of $145 million, flat quarter-on-quarter, reflecting obviously some added operational costs due to the turbulence in the Strait of Hormuz, but underlying and driven by continued strong cargo availability and continued attractive pricing and market conditions.

USD 103 million profit after tax. Gross rates of $92.6 million, which is up 1% back to normal dividend payments, paying out $94 million of dividends for the quarter. We have taken delivery, as I just said initially, of 1 vessel, adding or making the account of newbuilds now in commercial operations to eight. And we have an equity ratio of 53%, slightly down due to the debt increase on the new delivery.

Moving on to market and commercial. We are facing quite exceptional growth in Chinese light vehicle exports. And Far East exports in total rose 28% year-on-year, China at 57%. And if you look at EV and hybrid exports into Q1, you're talking -- you're seeing numbers of sort of 80% or close to 90% year-on-year. And what we see is that the energy uncertainty and the higher oil and gas prices is -- seems to be driving also the sales and the conversion to EVs and hybrids, clearly benefiting Chinese producers having, I think, in many ways, very strong products and price points in that market.

The global light vehicle sales fell 5% year-on-year. Full year outlook is somewhat downgraded. But again, the Chinese success in the market is substantially elevating demand for shipping services. Reflect a little bit also in all the turbulence and with the growth of China, what our trade structure looks like. And I think we are pleased to see, and it's important to notice also in these times of disruption that we have a well-diversified operation. We've had fantastic growth in China, almost double the share, but it's still from 10% to 19%. So it's still sort of a balanced card on this.

You can see on the other one is that we have a very strong presence in the Middle East as a discharge region, 17% of our cargo discharge, which obviously causes some disruption that we are addressing by first reallocation of capacity, but also from a dedicated service now from the U.S. into the Red Sea, where we can still -- we do not go through the Southern Red Sea because of the Houthi threat, but we can go into Suez and serve the Red Sea coast of Saudi Arabia, which we are doing to compensate for not being able to enter through the Strait of Hormuz.

High & heavy, it's in many ways, the same story, not exactly with the same magnitude, but the shipments of construction equipment from Asia did grow 31% year-on-year in Q1, and it's driven by continued growth out of China with -- but still with other markets being fairly stable. There is an expectation of continued high and heavy sales growth in 2026 into 2027. But there are some uncertainties of the U.S. equipment demand in 2026 due to various tariffs and sort of some noise in that area. But the same story that you have a market growth primarily out of Asia and primarily driven by the success of Chinese exporters.

We have a strong contract backlog. We are, in many ways, relative to our 80% contract coverage over booked for 2026. So we have a large part still of 2027 covered. We have added contracts, I think for about $160 million during the quarter. We have -- when it comes to the remaining renewals into -- towards 2027, 80% of that is to long-time relationship customers where we have 10-plus years of relationships.

Rate agreements are typically noncommitted contracts with a fixed pricing towards freight forwarders and used vehicle shippers. And the spot volume, just -- it's only now 6% of the volume, in that volume, there is an 80% high and heavy share. So the spot market is in reality in the current market, almost entirely for tight project cargo, high and heavy equipment. There is very little automotive components in that part of the cargo mix. That leaves us to first capacity, sustainability and later into finance.

And I'll leave it to Espen.

Yes. Thank you, Andreas. Turning to capacity and the capacity market continues to be tight and tighter than we had anticipated a year or two ago. During 2024 and 2025 and so far this year, 141 car carriers have been delivered. These have been absorbed and the market remains tight. In fact, pricing have been increasing so far this year. We continue to use the short-term capacity market. We had 4 ships on charter in the first quarter. That was down 1 vessel quarter-on-quarter.

And if you would want to charter a ship over the next few months, that's -- it's pricey, but it's also very few ships available, only 2, 3 ships available up to the summer.

Turning to sustainability. We are very pleased to have been able to drive down carbon intensity over the past few years, obviously, on the back of now having 8 Aurora Class vessels in operations since January, but also having invested heavily in existing fleet and also divested 5 vessels, which were weak fuel performers. Quarter-on-quarter, we're up marginally. That's related to heavy weather delays and idling early in the year and also some idling related to the Middle East conflict.

Turning to the financial update. The year started very, very strongly. Our commercial team complained about lack of capacity already early in January. That's not normal. I think it's the first time we heard about. Normally, the first few weeks in January is a slow period following downscaling and closure of plants around New Years. But this year has been very strong from the very beginning. We have about the same number of operating days in the first quarter as we had in the fourth quarter.

We still had anticipated somewhat higher volume in the first quarter on the back of very strong demand and extremely high utilization. However, volume came down a little following the Middle East conflict, where we canceled 3 voyages to the region in March. Net rate moving flat quarter-on-quarter.

So top line moving very flat. Costs also moving flat. So we come in with an EBITDA, as Andreas said, of $145 million, moving flat quarter-on-quarter. And also, as mentioned by Andreas, we didn't have any fuel impact from the increasing pricing in the first quarter. In fact, fuel costs came down $2 quarter-on-quarter, following a 5% lower fuel prices.

We had some extra costs related to discharge of unplanned cargo. That was cargo already in route to the Middle East that was discharged. And we had charter costs increased $2 million quarter-on-quarter on the back of the increased pricing that we just talked about.

Net profit before tax, seemingly, we are dropping 35% year-over-year. So just as a reminder, we sold one vessel in the first quarter of 2025. So adjusting for this net profit before tax year-over-year is down 11%. Our balance sheet remains strong, some modest changes to net debt to EBITDA and equity ratio following the delivery of the 8 Aurora vessels. And we are ending the first quarter with close to $500 million in cash and liquidity reserves, cash somewhat higher than we've seen in the previous quarters, but flat quarter-on-quarter following the change in dividend calculation method that we announced in the second half last year.

So it's another strong quarter with cash generation. We had $144 million from operating activities. We had net CapEx of $16 million. That's mostly dry docks and investments in the existing fleet. We had normal payments to bank and lease, and we paid out $99 million in dividends in the quarter. So again, we are paying out cash in excess of $200 million, paying out $94 million in May, which marks the 16th consecutive quarterly dividends, and we paid $1.7 billion now over the last 4 years.

Then we're coming to the outlook.

Yes. And I think it's fair to say that there is a level of turbulence uncertainty in the world on many dimensions, including tariff fees and conflicts that is creating uncertainty. But in that environment, we see demand for ocean transportation remaining firm, supported by steady demand from Asia and China. And I mean, in particular, we see quite substantial demand for additional capacity, and it's definitely not in the current market, any downward pressure on rates.

And when it comes to the next quarter, so I think the Q2 will be very much colored by the spike in fuel prices, which will impact fully and still with no BAF effects before into the third quarter. That effect is expected to be around $20 million and the disruption impact of Middle East service is expected to around $10 million.

My small comment on that one is that we are quite. While this is obviously an unfortunate effect, and we would love to get back to the Persian Gulf as quickly as possible, we are also quite satisfied that we have an area where we have 17% of our cargo discharge, very important and attractive market for us, and we're able to manage that disruption with clearly some but not enormous impact to the system, which I think is because we have a fantastic team and capability to deal with disruptions and reallocate capacity and work the system in a way that minimizes that effect. And as we said back to that, we have a well-diversified geographical structure that allows us to manage also quite substantial crisis.

The Q2 EBITDA adjusted for the above effects is expected to be slightly at the same level or slightly below the first quarter. So that is the outlook. That is substantial, but temporary fuel effects and some -- and we'll -- I don't think we're going to guide on how temporary or how long-lasting the disruptions in the Strait of Hormuz is, but it's quite clear that in the current environment, we are extremely pleased that we have got one vessel out with U.S. Navy support, which is now fully back in commercial service, adding to our available capacity. But we see no scenario where we'll send new vessels in there in the very near future, but we are obviously still hoping for a resolution that will allow us to resume traffic into the area.

That's the end of our presentation. Thank you very much for listening. And I think we're now going on to Q&A, My Linh?

Thank you, Andreas and Espen. And yes, we have received a few questions from our online audience. And the first question is regarding market and the rate. So first question is RoRo as part of shipping business is what we call. Can you say anything about where we are in the cycle? And can you comment anything about how the net rate is looking towards the second half of the year?

I think starting with that, we have a practice of guiding for the following quarter. We are not going to divert from that, and it's definitely not the time where that, I think, would be appropriate. And that's not so much because of the market, it is because of all the sort of conflicts and tariffs and things and other things that are impacting this industry in different ways.

But when it comes to the cycle, I think, we are in -- where there is a cycle where we are in a period in this industry that is very, very strongly influenced by a remarkable growth of Chinese exports across our cargo categories. It's obviously most prominent in automotive. It's very prominent in EVs, hybrids that seems to be gaining traction with -- also with the energy uncertainty, but also supported by equipment high and heavy. So we are seeing -- we are in the part of the cycle where there is an export growth that is clearly absorbing or to some extent, with disruptions more than absorbing the new build deliveries.

And so I think we're more -- I think the driver of the market now is more on the position on Chinese export growth. From where we see demand seems to be there. The products are there, the price points are there. We're quite impressed with how -- also the Chinese car exporters have lost or unable to deliver to one of their important growth markets in the Middle East. And we basically, from what we can see, they're still able to redirect production to other areas, maintaining or even accelerating the export growth. So that position is very robust. And that also creates a tight market. It puts upward pressure on trucking capacity. And it clearly supports the current rate levels very well. And how and when that will change in the longer term, I don't think we want to speculate.

Thank you very much for the detailed answer, Andreas. And yes, we received also a few questions, but this is the same topic that we will try to considerate questions. The next set of question is about the capacity market. We mentioned a bit earlier that we are looking at roughly one vessel delivery per week for this year and that the market is still high. Can you say anything about that we're still having newbuildings coming in the next years? So can you say anything about the rig overcapacity in the market? Is there anything we can comment on? What is the current supply/demand balance?

I think that -- I don't know if you have anything to add, Espen, but I think that answer will be quite repetitive of the one I just gave in the sense that as long as Chinese exports grow at the pace it does, the market will remain tight. And I don't think -- but it is very dependent on that growth rate.

You didn't say that the order book has been big, and I think it's been a concern for many. And at the peak, it was -- the order book to fleet ratio was 42%. Now it's down to 20% and that capacity has been absorbed. And so I think we also see now actually that a couple of new orders have been placed for '29 and '30. It's also reflecting this very, very strong market and capacity pricing actually going up.

And maybe add to that, if there is one thing that's happening that for every year, this capacity has been well absorbed by growth, the legacy fleet has become 1 year older, and it was old to start with. So I mean, I think we're also seeing that the longer this journey works and the longer the capacity is actually absorbed, the closer we are to capacity attrition through scrapping for vessels that reach their end of life.

So I think every year of maintained tight capacity is further improving the cycle by actually adding a year to the legacy and getting -- bringing more vessels closer to natural scrapping. So I think it's a very positive dynamic while I think it's also difficult to make clear guidance on exactly how it's going to play out because it's many moving parts, and it's a sum of all those variables.

Yes. And the next question is about fuel price and how we hedge the fuel cost exposure. We mentioned earlier about the cost pressure from higher fuel price starting from Q2. And we also talked explicitly about the BAF mechanism. So maybe -- but maybe we can just remind -- we get the question from the audience just now. So maybe you can just remind the audience a little bit how we handle costs, higher bunker costs in this segment with our BAF mechanism?

Yes. I think the BAF that we're referring to, it's a contractual fuel surcharge, and it's very established in our industry. We've had it for a very long period of time. So it's a contractual fuel surcharge, is updated quarterly based on actual fuel pricing. So -- but it comes with a lag, as we said, the quarterly lag, and it takes actually -- for us, it takes 5 to 6 months before it's fully reflected in the P&L because of the [indiscernible] of the voyages. But it's a very, very strong recovery, as Andreas already talked to. So this quarter is a one-off. We will get these increased fuel prices back in surcharges in the following quarters, and we have a 95% recovery over time. So this is very well established, and it's been basically a very strong recovery for a very long period of time.

Thank you Espen, Yes. The next question from [indiscernible], DNB Carnegie. We guide about the impact of fuel and service in the Middle East. And for the latter, the volume impacts were around $10 million expected in Q2. Is there a run rate quarterly impact or just more specific for the quarter?

I think we -- this -- I think we are talking about the next quarter. And I think as Andreas said, the Middle East is a very important discharge region for us. It's a backhaul. So the rates to the Middle East is lower than on the front haul. And we are very happy that we can continue to serve the region via the Red Sea with a dedicated service from the U.S. So we are serving our clients. We already have 2 ships into the Red Sea that has discharged in 3 ports in the Red Sea. And we're also serving clients from Europe to the Middle East with what we call space chargers. So we put that cargo on [indiscernible] capacity. So we are serving this region through the Red Sea, and we'll continue to do so. So -- but for the second quarter, the impact is around $10 million.

Yes, I'm just trying to wait a little bit a few seconds for the new questions to come in. Yes. The next question from [indiscernible], have we seen or do we expect to see any effect of the disruptions from the Middle East conflict on contract renewals?

I mean, no, I don't think so in the sense that what we're seeing is the contract renewals, I commented on that, that we are engaged in is going as planned and continued as planned. And demand for additional volume from customers in Asia is strong. So I think the environment, given the tightness and given the export growth out -- particularly out of Asia, that is -- there is a strong dynamic around contracts and contract renewals there.

And I don't think it has any particular impact on the Middle East either, I think. But obviously, we have customers there that are eager to get back. I mean both finding alternative routes like the Red Sea and -- but clearly, preferably coming back into an order service to the Persian Gulf, which, again, is an important market for us and it's an important market for many of our customers.

Thank you, Andreas. We talk a little bit about our contract backlog for the coming years. And can we say it's a question from audience for the webcast. Can you say anything about the risk level in the recent contract renewal for this year and next year?

I mean we are [indiscernible] new contract level, I think, but that's obviously individual and it's -- do you want to add?

No, I think -- no, not really. I think it's a very strong market and it's the back of China. And again, 57% growth quarter -- year-over-year in the first quarter is just unprecedented. So I think that's such a strong growth that we actually see capacity pricing going up, and that's just reflective of where the market is.

For the next question is about the topic that we talked a lot about in the Q3 last year. We have any current base case regarding U.S. fees? Do we have any updates about that?

No, I don't think we have any updates on that. It has been suspended. There are debates around it. We are actively engaged in the process. We have met with USTR. We have had key meetings, and it's an ongoing process. But I think I also said back in Q3 and elsewhere on the similar kind of questions is, I will -- we are not going to guide on future policy decisions from the U.S. Administration. And this is a future policy decision from the U.S. Administration.

Thank you so much, Andreas. I think that's the last question we received for now. Thank you so much for your attention and for your engagement. And of course, if you have more questions, feel free to send an e-mail to our Investor Relations. Thank you for your attention, and I look forward to seeing you next time.

[Presentation]

Good morning, and a warm welcome to Hoegh Autoliners Fourth Quarter presentation. My name is My Linh Vu, Head of Investor Relations. And with me today, we have our CEO, Andreas Enger; and our CFO, Espen Stubberud, who will walk you through the last quarter business and financial performance. As usual, we will conclude the webcast with a Q&A session at the end of the presentation. So if you have any questions, please send an e-mail to our Investor Relations mailbox at [email protected]. So with that, I will leave it to you, Andreas.

Thank you, My Linh. And once again, welcome to our quarterly presentation, starting today with a picture of Hoegh Sunrise, one of our newbuild vessels that was named -- had celebrated its naming ceremony last summer with valued customers in the land of the Rising Sun. We are pleased to report another quarter, and this is also an end of the year with solid performance in -- I think in somewhat we could justifiably call a somewhat turbulent year on the macro side, but has still translated into very solid performance from our part.

EBITDA for the quarter, $145 million, translating into net profit $105 million, gross rate of $91.4 million. And we are now back on our regular full payout dividend policy of which this quarter translates into $99 million. One more new build delivered in the quarter, a solid equity ratio of 55%. If you look at the year, $621 million of EBITDA and $513 million net profits delivered, gross rate of $93.4 million. We have declared for the year dividends of $424 million, maintaining our very solid dividend yield, taking delivery of 3 vessels, and we have a return on invested capital of 26%, all adding up, as I said, to very robust performance.

I'm just going to go through some pieces on the market and sustainability and then hand over to Espen for capacity financial before we end up with an outlook for -- in the current quarter. On the market side, I think it's relevant to emphasize the importance of China and Chinese car exports for our industry and for the capacity balance and clearly being the driver for vessels running full and delivering the performance. Europe remains China's clearly largest export market, but we also see strong growth in other markets such as the Middle East and South America. So the export boom is broadening.

The Chinese OEMs are almost doubling their market share in Europe in 2025, now surpassing American and Korean OEMs. So it's a very, very strong continued growth from China that is the main driver in development of our industry. And that goes across also the cargo segments. Clearly, the main driver from China is new vehicles, where China has established a clear position over the last few years as the dominant car exporter to the world, and that development is continuing at full force. Also importantly, we'll had some fairly soft development in the High & Heavy market over the last several years, but we are now seeing a change in that. But also that part is driven by a strong growth in the exports of construction equipment from China with other exporters being largely flat.

Then let's turn to our contract backlog. In the quarter, we have increased the contract share of volumes transported up to 84%. That is a result of our strategy over the last years to prioritize duration and robustness of contracts over short-term profit rate optimization and clearly increasing the contract rate from 80% to 84% in the quarter is diluting to profit because we are actually leaving behind potential higher paid cargo to serve our customers as a part of our strategy.

We believe that is a, what should I say, resilient, robust strategy in the current market, and we are pleased to continue to exercise that even if it then leaves out some opportunities to take higher paid cargo. The average duration of the contract backlog is 2.9 years, almost 3 years. We are basically sold out for 2026, also have a very strong contract backlog into 2027. We have added $250 million of contracts during Q4, though being contracts below the $100 million threshold individually for separate reporting, but there's still been a solid contract inflow during the quarter.

And when it comes to the 29% of contracts that are up for renewal during 2026, those are -- 80% of those are with customers that has been with us for 10 years. So it's with very solid customer relationships where we basically expect good opportunities to renew most of or all of those. And then obviously, we have the other ones which we talked about, the rate agreements, which are noncommitting agreements where we have clients in a structure where we unfortunately have had to do a little less of taking low paid cargo.

And just on the spot volumes, which is a small share of it, but I just also want to emphasize that our spot business is primarily High & Heavy or break bulk business where the volume of sort of individual lots and spot cargo is larger. So 70% of the spot volume is in the High & Heavy segment.

On the sustainability side, we are with the introduction of our new builds, delivering strong improvements on our carbon intensity. And this is to the story we have around our Aurora-class vessels that are delivering substantially better carbon performance also on fossil fuel and so on that side, it is the Aurora class primarily that is driving our improvements. But we also had a fairly intensive docking cycle during the last year, and we do have extensive energy efficiency improvements scheduled for all our dry dockings of legacy vessels.

So it's a combination of continuous improvement of energy efficiency on our legacy fleet and introduction of very carbon-efficient newbuilds. We also have certified 4 of the Aurora class vessels during the quarter for shore connection. So we are stepping up shore power as a source of reducing auxiliary engine use and carbon emissions in port.

Then I'll leave it to Espen for capacity and financials.

Yes. Turning to the capacity market. We've had a couple of years now with a relatively strong fleet growth. We had 75 vessels delivered during 2025 and 13% fleet growth. So despite quite a large number of ships being delivered, the charter market remains strong, although the pricing is down from the elevated levels seen in '23 and '24, the pricing is still relatively expensive and has been stabilizing and moving flat over the last few months. And in fact, into January this year, pricing is up. So there are no idling ships. The capacity market is firm. And if you want to add a few ships over the next few months, there are very, very few candidates.

Turning to the financial update. As Andreas already said, 2025 was another strong year for Hoegh Autoliners. Despite U.S. tariffs, despite U.S. port fees, despite increasing imbalance in our system and not the least the growth in the net fleet. EBITDA came in at $621 million, that's down from 2024. Two main drivers. One is reduced rate and one is -- the other one is increased charter costs. The rate is down about $5, as we can see here, from $85 net to about $80 year-over-year. That's following our strategy of adding to our contract backlog, taking on more contract business, long-term agreements, which has increased the share of contract business from 73% in '24 to 82% in 2025. The increased charter cost comes from overall growth in volume. We increased total volume by 10%, but increased volume out of Asia by 40% year-over-year, and that comes with added charter costs.

Turning to the quarter. The Q4 volume came in at 3.9 million cubic meter. That's down 2% on quarter-on-quarter. That's following us having 2 vessels fewer in operation. We redelivered 2 ships in the third quarter to long-term charters, and we also sold 1 vessel. So this -- we had 2 ships fewer in operation. That's just a quarterly impact as we had, as Andreas said, another newbuild delivered in December and also one very early in January.

We've seen very strong demand from contract clients, as Andreas alluded to, also towards the year-end, which has increased the share of contract cargo in the fourth quarter and is reducing the rate by close to 2%. EBITDA came in at $145 million. That's down $10 quarter-on-quarter, $5 million is related to USTR cost, while the remaining $5 million is sort of a net impact of lower activity and somewhat lower rates. It looks like net profit is down 21% quarter-on-quarter. Just as a reminder, we sold 1 vessel then in the third quarter. So the third quarter net profit before tax includes $20 million from selling that ship. Adjusting for that, the net profit before tax is down 7%.

Looking at the EBITDA bridge quarter-on-quarter, you can see the drop in volume following fewer operating days and marginally lower rates. Lower activity comes with lower fuel costs and also lower voyage costs. However, in this quarter, the lower voyage cost was fully offset by the USTR cost, which is booked under voyage expenses, leaving us with $145 million in the fourth quarter.

We have a strong balance sheet with healthy ratios and stable ratios. Net debt-to-EBITDA still at 1x, equity ratio of 55%, moving flat, and we ended the year with $299 million in cash, somewhat up from previous quarters following the change in dividend calculation that we announced in the last quarter. We also had close to $200 million in liquidity reserves at the end of the year from a revolver. That revolver was originally maturing in the first quarter of '28 and have been extended by 2 years. So we end the year with $299 million, and we have decided to pay out cash in excess of $200 million, meaning we'll pay out $99 million in dividends in March, and we now paid out NOK 90 per share. Then I think we're at the outlook, Andreas?

We're coming to the outlook section. And very briefly, what we have seen last year and what we still see is that demand for ocean transportation and car carriers remain strong, supported primarily by increasing demands from Asia. When it comes to the discussions going on around the Red Sea and the Middle East, there is no return to the Red Sea transit planned for the near future. The risk level is still considered high, and we are observing, but not planning to act on that in the near term.

And for the first quarter 2026, somewhat also driven by, as I said, two newbuild deliveries right in December and early January of this year, getting into operation, meaning that we now have the first 8 of our Aurora-class newbuilds in operation and performing very well, helping us to a slightly increased -- expectation of a slightly increased EBITDA in first quarter of 2026 over the fourth quarter of '25.

That ends our presentation. And then I think we'll leave it to My Linh to manage questions from the audience. Thank you.

Thank you, Andreas. And we have received a few questions from our online audience during the webcast. And the first question is relating to our capacity planning. So that the company has planned to sell further older ships during 2026. Do the companies have the plan to sell further older ships during 2026?

I don't think we -- I mean, I think we are continuously looking at what to do with our fleet composition, but we don't have any immediate plans for selling vessels. And I'm not -- I wouldn't -- I don't think we would guide anything on that because vessel sales are also, I think, in this market triggered by opportunistic situations. But we are clearly committed to fleet renewal and energy efficiency. So we -- I think it's fair to say that with our newbuild program, we have a strong preference from larger, modern, more efficient and more carbon-efficient vessels over what is the dominant sort of legacy fleet in our market.

Thank you, Andreas. And the next question. We have talked a lot in 2025 about the structural trade imbalance that has negatively affecting our operating costs. Can we comment a little bit, do you see any improvement in this point for 2026?

Yes. I think we've had a history in our company to try to fill ships in both directions, and we've been doing that successfully for a number of years. We saw -- starting 2024, we saw that we had a slight imbalance, meaning we ballasted about 1 ship per month from the Atlantic and back to Asia. And as we've talked many times, we've seen very, very strong growth in Asia over time with obviously China as the main driver.

And the growth we've taken and seen over the last year of 40% means that all the growth is coming in Asia and the volumes coming back is somewhat in decline, meaning that the imbalance has increased quite a bit. So the balancing activity is up 2.5x year-over-year. So -- and I think that's a theme for all operators. I don't think we see any change to that into '26. So we expect that imbalance that we've seen in '25 to be about the same in '26.

Thank you, Espen. Yes. And the next set of questions coming from analyst Petter Haugen, ABG. First, about our outlook. Can you say more about slightly above in the guidance for Q1?

No, I think we mean slightly above.

Yes. And the next question is about the full year guiding. So one about, the company and our segment guides for full year EBITDA. Why we do -- we choose not to guide for the full year?

We basically -- if you look at the world around us, we believe that guiding for a full year is mostly speculative, and we don't engage in speculation.

Yes. And for our new building plan, we have put today about 12 vessels on order. Are we contemplating further new builds?

We have -- I think I said repeatedly that we consider these 12 vessels to be the current program. Clearly, if you look into our 2040 and 2050 objectives, I'm sure there will be further newbuilds in there. But currently, there are none in our plans.

Thank you, Andreas. Yes. And also from this -- in this quarterly presentation, we also updated our contract backlog, including renewals for 2027. Can we comment anything about the expected duration or rates for the 29% contract renewal in 2027?

No, I don't think so. But I think we are experiencing strong demand for contracts, the typical sort of duration of contracts, I guess, in our industry has been sort of 3 to 5 years for the longer contracts. And I think we are likely to be in that territory. But that is -- it's a bit individual contract by contract, and it's something that we -- and these are things that we haven't even started negotiations. But I think we said in our presentation that the -- most of the contracts that we are going to have renewal negotiations in 2026 are long-term customers. They stayed with us for a long time. So it is -- we are negotiating with companies where we have a long-term relationship.

Thank you, Andreas. And one of the topic that we talk a lot about in the last quarterly presentation in the next question from our investor online. So with the current -- for now, the USTR port fees on pause until November 2026. What are our view about how much EBIT coming back in November? How much do you think we can pass this on to our customers?

I think I said a few minutes ago that we're not engaging in speculation. And I think that having any view on that now is highly speculative. What I would say is that closely following, working through relevant challenge to understand, respond to -- and if there is any possibility, particularly together with our customers, including U.S. customers that will be hurt by some of those fees. We are working actively with the matter, but I think we're pretty far from one thing to speculate on the outcome.

Thank you, Andreas. And we mentioned in light of the strong China export demand ongoing, we also have that comment in our outlook. What is the management latest view whether the car carrier order book is still too big?

I think -- I mean, I think what we observe is that the current -- I mean, the order book so far, counter to most expectations have been absorbed very well, and we see it continue to be absorbed well. And so in that sense, I think the view that the order book was far too big is becoming maybe challenged by realities. But -- and I think the answer to that question will -- is basically based on a forward view on Chinese exports. And what we see from our customers is that they have the capacity, they have quality products and they have attractive price points. If the Chinese are allowed to continue their export growth, you will continue to get good absorption of capacity.

Thank you, Andreas. Yes. And we also received a lot of questions. I think some of the questions already covered previously by other audience. So I will just read the question that is new on the topic that we haven't seen. So in 2025, Hoegh Auto actually charter-in a few vessels. How do we see that in 2026? Do we see more TCE opportunities to enter the fleet? Or are we comfortable with the current fleet? I think for you, Espen.

Yes. No, as we talked to, we took on some new business out of Asia at the end of 2024, and we've been supporting that new business volume with some charter-in activity. particularly after deliveries of the newbuilds, and we had 2 newbuilds delivered just before the summer, and we have very recently just had 2 more delivered. So we've been planning for that capacity to come in, and we've been supporting that volume growth this year with extra capacity.

And I think as we talked to the imbalance, I think that will be stable from '25 to '26. We have now 2 more newbuilds coming in fully in operation in the first quarter. So that should reduce the charter-in activity. Having said that, we think we'll also use the capacity market opportunistically with short-term charters, typically between 3 months and 12 months to some level also in 2026.

Thank you, Espen. And I guess that bring us to the end of the Q&A session today. Thank you very much for tuning in, and we look forward to see you next time. Thank you.

[Presentation]

Good morning, and welcome to Höegh Autoliners Third Quarter Presentation. My name is My Linh Vu, Head of Investor Relations. And with me today, we have CEO, Andreas Enger; and our CFO, Espen Stubberud, who will walk you through the last quarter performance.

We have a Q&A session at the end of the presentation, and you can ask questions by sending e-mail to our Investor Relations mailbox at [email protected]. So with that, I will leave the stage to you, Andreas.

Thank you. Opening this presentation with a photo of beautiful Höegh Moonlight at the quay in Gothenburg, where we had a naming ceremony while loading cargo together with valued customers in Gothenburg.

This quarter, we are once again presenting a strong result. We have a good -- have good underlying earnings and profitability driven by our strong contract backlog and an operation as previously noted, we have some more imbalances than others, but fundamentally, we're running full vessels out of Asia and are basically serving customers to the full and executing our backlog.

I will open this presentation to basically respond to an issue of a slight change in the payment schedule for dividends that may require some explanation.

And I want to do that by starting with reiterating how we operate as a company. We have focused a lot on creating value through the cycle by building backlog, focusing on a cargo strategy being overweight cargo.

We have basically operated in the market now there is persisting market imbalances with strong growth in Asia, not so much opportunities elsewhere in the world.

Charter market is starting to provide opportunities for short-term capacity, which we are using at the cost to develop our -- and be able to maintain a strong backlog. And we are now faced with, I think, a totally new level of geopolitical uncertainty coming from things like U.S. port fees and taxes and whatever.

And while we are fully committed to remain -- keep our dividend policy of distributing excess cash flow, we have found that the unusual geopolitical situation is requiring a slight modification.

And it's really triggered by the fact that the implementation of the tripling of the USTR fees that came a couple of weeks ago has resulted in the biggest change in our short-term cash forecast as long as I've ever been to the company.

And that period includes the shutdown during the pandemic where we lost a large part of our cargo share. And adapting to a world where governments choose to introduce or increase cash payable taxes with it in reality, 2-day notice is really putting an extra requirement for securing the cash balance that has made us conclude it is prudent to do a small change.

And without going into too much details, but the U.S. port fees, and we don't know exactly what's happening with them and the tripling and the retaliation from China is creating a situation where we suddenly get an additional cost of $60 million to $70 million per year effective immediately.

And that is totally unprecedented, and we can have all kinds of ideas and theories of what will happen. But in our financial and liquidity management, I think we'll have to work on a worst-case scenario and basically say that we have to be prepared for these kinds of shocks in a situation where our business is drawn into a geopolitical space where we don't think we belong, but we are still pulled in.

But I think I also want to emphasize that this is not reflecting a fundamental change in our business operations. I mean coming to that sort of when we have the guiding for the next quarter, but it is to make our -- make sure that we are resilient to type of shocks that we haven't seen before, not because we have any expectations that there will be further shocks, but we think it's prudent to be capable or make sure that we can handle it comfortably.

And -- so what we're doing is that we are reiterating, reconfirming our dividend policy of paying out excess cash. We are adjusting the calculation method that basically results in a one-off and nonrecurbable impact to the Q3 distribution.

And the way we do it is simply that instead of paying the dividends based on the running sort of outlook of cash, we are changing it to actually do it on the cash balance we are reporting at the end of the quarter -- in this case, the end of Q3.

And that creates, in many ways, one quarter gap in the dividend payments. Just to remind, we have a track record of paying out dividends. We paid out NOK 1.5 billion in cash dividends since our IPO. That is more than 3x the equity value of the company at the IPO. So it's quite substantial.

And again, we are committed and we have reviewed our financial resilience requirements. We have concluded that the current strategy, the current cash balance is sufficient and that we intend to continue to pay all excess cash in dividends.

But we have changed the liquidity policy from a forward-looking one to ensuring that we actually have that cash balance at any time in order to be robust against those types of shocks.

And that then leaves us to the headline figures, $155 million of EBITDA, slightly down. Espen will come into more detail, mostly a result of combination of the imbalances in the system and charter costs to keep up the volume.

We have 2 further newbuilds at the end of the year, and we have -- so we are -- but we do -- due to our vessel sales, have a capacity gap to fill that is creating some charter costs in the near term. $132 million profit after tax, $92.3 million in gross rate.

And then what we talked about, the $30 million dividend, which is then not related to this quarter's free cash, but produced out of this onetime change in the timing of payouts.

We have taken delivery of one purchased previously bareboat chartered vessel, Höegh Copenhagen. It's the last one, I think now we have exercised all the purchase options, and we have a strong equity ratio of 54%. If you take into -- going into the market, I think one very important thing is that shipments from Asia continue to grow and expand despite U.S. tariffs and despite the kind of environment, I said, increased geopolitical risks.

So we have a very, very strong activity. It's mostly driven out of China. And as we see it, Chinese growth and Chinese exports of vehicles and equipment is basically continuing to grow. And that is a trend that has been driving this industry for a while, continues to drive it.

And Chinese share of exports from Asia or actually even the world is strengthening. High and heavy market is also after some flat years going into a good growth pattern.

But again, we have a stronger market out of Asia than we have out of the U.S. and Europe. But the market is generally strong and supportive. We have, as we said, a strong contract backlog being fully booked in 2026. And we have a number of -- and we are continuing to add contracts, although I think both capacity and the market cycle, the big contract renewals for the next couple of years is -- or next year is behind us.

But we have signed a long-term significant contract during September with substantial value and a 15-year duration actually.

We have a contract share that is now up at 81% and a duration of the backlog of approximately 3 years. We do have rate agreements mostly 1 year fixed pricing, but noncommitted, that is a product that is mostly towards freight forwarders and secondhand vehicles. But -- and we do have sort of long-standing relationships also in that area that basically creates stability.

And also reiterating that when it comes to what we call spot, it's not the kind of same cargo in the spot contract. New vehicles OEM business is almost entirely on contract and 60% of the spot volume is high heavy and break bulk, which is cargo that has a different -- has more variability in volumes and trades. Espen, should you take over on the capacity side?

Yes. On the capacity side, there is still a significant order book in the industry. Net fleet growth is up 12% in 2025 and another 8% is expected in 2026.

As we've talked to a few times, we have expected the charter market to normalize in terms of pricing, and we are using that market to a larger extent than we have in the past with 5 actually short-term charters in the third quarter. We see pricing is stabilizing around $40,000 to $45,000 for a large ship at the moment.

If I take in a short word on sustainability, we showed you Höegh Moonlight. We have 6 of our newbuilds now in operation. We have had an intense docking schedule, which is sort of somewhat variable, but we had a large amount of dockings of all the vessels in the 5-year cycle in 2025.

We do have a committed program to use every dry docking to upgrade existing vessels for better fuel economy and efficiency. We have then taken development of delivery now in total of 6 vessels in operation of, I think, the most -- both carbon and fuel and cargo-efficient vessels on the water.

And that is now also materializing in a clear downward trend on our carbon intensity. We're also continuing to use 100% biofuel and have 100% biofuel available as a product to our customers. And we have 3000 tonnes bunkered in the quarter. So we have a continued effort on decarbonization, both in improvement of our existing fleet in taking delivery on modern efficient fleets and obviously, also in our path to zero, looking at future fuel options.

And that drives us into a carbon intensity -- clear carbon intensity road map. Just reiterating from 2008 to 2024, we have improved our carbon intensity more than 40%. And we do have a clear path to 0 where half of that -- the remaining voyage is on improvements to sort of non-zero carbon fuel-related improvements.

The last half of this in our plans will basically have to be covered by clean ammonia and e-fuels, and we believe we are with that on track to be able to deliver zero-carbon transportation by 2040.

With kind of the uncertainties creating by the delay of the IMO framework and others, I think it's also prudent to reiterate that in all our decarbonization efforts, we are ensuring dual fuel, multi-fuel capabilities. And we are 100% committed to be able to offer our customers zero carbon transportation by 2040.

We are also committed to offering the option to billing customers on zero carbon transportation before 2030, but we are not underwriting the decarbonization cost of our customers. So it has to be aligned with regulations and the customer demand. And we have the ability to deliver, but we will obviously run our vessels in a matter that is economic and profitable in whatever regulatory market that exists. Then back to financials.

Yes. Turning to the financials. The [ fourth quarter ] volume came in at 4 million CBM. That's up 4% from the second quarter, but up 17% year-over-year. And we are particularly pleased with our volume development out of Asia. The first 3 quarters this year is up 48% last year, so very strong volumes.

The volume we loaded out of Asia in the third quarter is the highest volume we loaded since we IPO-ed back in 2021. We talked to it a couple of times that we took on some -- a couple of large contracts at the end of last year at somewhat lower rates to add to our contract backlog.

That lowered the rates that came into 2025. But we've seen very stable rates in '25 with a net rate drop of 2% from second quarter to the third quarter, mainly related to changes to cargo and trade mix. Revenues are moving flat on higher volume, quarter-on-quarter. EBITDA is down about 6% from $166 million to $155 million as our operating margin is being reduced.

And as Andreas already mentioned, we talked to the increased imbalance this year, basically reduced network efficiency. We also see somewhat lower utilization of our fleet in the third quarter. That's not so unusual, particularly in August when production is closing down, so which is reducing the efficiency somewhat in the third quarter and we're also using some more charter costs as we talked to.

Net profit before tax came in at $132 million in the third quarter. That includes the $20 million book gain of selling Höegh Beijing.

Turning to the EBITDA bridge. In the first -- from the first to the second quarter, we added revenues of $38 million. And with that revenue followed the increased voyage costs and charter costs, but we increased EBITDA to $166 million in the second quarter.

We also added volume from the second to the third quarter of $15 million in revenue. However, that was fully offset by increased voyage costs and charter costs. And with the rate net rate dropping about 2%, we come in at $155 million for the third quarter.

Our balance sheet is robust with healthy ratios. We have seen net interest-bearing debt being increased over the last few quarters as our newbuilds have been delivered. No newbuilds delivered in the third quarter, so moving flat quarter-on-quarter.

And as Andreas said, we're looking forward to ship -- sorry, #7, newbuild #7 being delivered now in a few weeks in December and newbuild #8 to be delivered in January, which will reduce our capacity cost going forward.

Cash balance and undrawn liquidity from our revolver is moving basically flat over the last few quarters. So it's another strong quarter with strong cash generation with somewhat improved working capital, we have $173 million in cash from operating activities.

We have $27 million in dry docks and CapEx, which includes $10 million newbuild installment on vessel #7 -- we have $42 million in proceeds from selling Höegh Beijing in the quarter, and we've drawn $46 million in debt, that's the $10 million for the newbuild installment, and it's $36 million for the purchase of Höegh Copenhagen. That was -- the purchase option was exercised in the first quarter, but the delivery took place in August.

Then we had normal mortgage repayment and interest of $31 million, and we paid leases of $43 million, which includes the purchase of Höegh Copenhagen.

And we paid dividend of $137 million, ending then the third quarter with cash of $230 million. That only leaves us with the outlook. And I think we need to have -- we need to put in the cautionary note that tariffs may, over time, lower volumes transported.

I think it's fair to say that, that has so far not really happened in the sense that the Asian market has continued to grow and remains strong.

But clearly, it is a friction and we'll have to look carefully at that over time. The changes to the U.S. port fees that was announced on the 10th of October with implementation from the 14th of October was, as I mentioned in the beginning, quite a substantial shock adding cost of $60 million to $70 million. And we are working diligently to mitigate the impact. We have close dialogues with all affected customers.

We are basically have strong beliefs that we will both be able to get unlikely full, but substantial compensation of the U.S. port fees from customers. We will also change our trade pattern in the U.S. to optimize versus the port fees. So we are continuously working on mitigating.

But given the kind of erratic, kind of decision-making in this field, it's basically hard for us to provide much guiding beyond the fact that we are clearly working to optimize around it.

We are working with customers to recover the cost. And we have, as we said, chosen to have a slightly more conservative cash retention policy by changing not the amounts over time, but the timing of paying dividends to make sure that we are resilient against these types of shocks.

When it comes to the Q4 performance, we expect the operational performance to be slightly below the Q3 EBITDA level and that the USTR fees are expected to be around $20 million for the quarter. And on the last one, I would also say that we don't -- we are intending through our mitigating actions to do everything we can to avoid that number being multiplied by 4 for next year.

But given that it was introduced at a surprise on a 4-day notice, we obviously had cargo on the water and vessels on the way into the U.S. that strongly significantly reduces our mitigation options during the fourth quarter, but we are working on adjusting and seeking recovery to reduce the impact going into 2026. So that concludes our presentation. We have open for questions. And My Linh, is there anything to answer.

Yes, there are a few questions for the Q&A session. And the first set of question coming from analyst Jorgen Lian, DNB Carnegie. The first one on the dividend policy. With the quarter end cash balance, would simulate around $200 million based on the declared dividend in this quarter be a constant or a function of certain assumptions?

Basically, we have said again that we will distribute excess cash. And with that, that is -- and I think you can -- and we have said we're going to be on the reporting quarter. So I think using that number as an anchor point is useful.

And we have reconfirmed in the Board, both that we consider that cash level to be -- give us sufficient resilient, and we have reconfirmed our commitment to pay out excess cash in dividends.

But I think we should also remind that we do have, obviously, and the Board has the responsibility to make a complete assessment of the total situation at any quarter, and that will obviously be the basis.

But in the current environment, and we have reconfirmed our dividend policy, and we are -- but we are using the last reported quarter as a reference for [indiscernible] surplus.

Thank you, Andreas, for the clarifications. And the next set of question is about port fees. I think we already briefly touched upon that during the outlook sessions. But we mentioned the guided impact for U.S. port fees of around $60 million to $70 million for yearly -- annual impact for HAUTO. And how does this relate to the last quarter guide of around USD 30 million for full year impact, given that now the modified port fee is now 3.3x higher. Espen, you want to.

Yes. Now we guided on $30 million earlier, and then the increase in fees now is 3.3x. So when we're saying $60 million to $70 million, this is based on us optimizing our voyages into the U.S., and that's basically about minimizing number of voyages into the U.S. and looking at how we can do that from various angles.

We have deep sea vessels going into the U.S., and we try to consolidate as much cargo to the U.S. as possible on those vessels. We also have activity in the Caribbean with smaller feeder vessels that are calling on the U.S. that we will look differently upon and reroute. And of course, we also need to avoid any marginal calls to the U.S. that we have done in the past. So the $60 million to $70 million is more of a -- is an estimate on the cost for the company after we have optimized the voyages into the U.S.

And it seems we also guide $20 million impact for Q4 out of the $60 million, $70 million for gross impact for the full year. So I guess for Q4, I guess, also takes into consideration the shorter lead time between the modification...

Yes, yes. Basically, we have no time to optimize. So the impact will be lower going into next year is what you're saying, yes.

Yes. And the next question is asked by a few analysts as well. Another clarification on the Q4 guidance. Is it correct to assume that the underlying operational result is slightly below Q3 and that the additional $20 million port fee will be added on top of that?

Yes. What we're saying is that the performance is continuing strong, third quarter is strong, and we're seeing also good volumes into the fourth quarter. I can repeat what we said earlier, we basically have more cargo than we can carry very strong growth in Asia.

So the underlying performance is strong also into the fourth quarter, but slightly below the third. And then on top of that, all of a sudden, we've had this extra $20 million that is reducing the performance in the fourth quarter.

Thank you Espen. The next question is about capacity management. Höegh Autoliners is chartering in more capacity. So what is the future consideration requirement we have for additional vessels -- additional vessels at this point?

I think first, we just said we have 2 vessels coming in, in the next couple of months, which are welcome additions to the fleet. And these are large vessels, 9,100 CEU. They're much more effective.

And with our attractive both cost and financing on those vessels, they will come in on -- at a capacity cost for us that is substantially lower than the charter market. So we welcome that.

But beyond that, I think it's fair to say that our -- looking at the charter rates that Espen showed without speculating too much, we were selling vessels to leverage and utilize a tight charter market. And high asset valuation, that asset valuation is coming down, and I think that is probably reducing our -- the likelihood of future vessel sales.

But we are in a fleet renewal -- we have a fleet renewal strategy, and we have a decarbonization strategy. So this is something we will always look at, but they will be done based on specific opportunities rather than any kind of predecided thing.

But when it comes to investments in new capacity, our program is fixed. We are getting those 2 vessels now. And then there is a gap until mid-2027, where we will then from mid-2027 into 2028, get the last 4 of the Aurora class vessels then coming at as dual fuel ammonia vessels that will have the option of running zero carbon fuels.

It will also have the possibility to run entirely on traditional fuels if the sort of worst thing should happen with the IMO process. I think I also want to reiterate, it's our belief that even without -- with delays in the IMO process, we believe a system will come in place.

And in the absence of an IMO system, I think it's also likely that the EU's scheme will continue. It's likely that other regions will copy that and have similar, so carbon taxes in our scenario will come in the years to come.

We would have preferred to get them in a level playing field in a uniformed IMO structure. We still hope that, that will get in place. But even if it is further delayed, it doesn't mean that there will not be taxes and fees and costs of emitting carbon in our trade system. So we believe that, that trajectory is still in place. But for CapEx, we don't have any additional vessel CapEx plans that are not already announced and financed and handled.

Thank you so much, Andreas. And I guess part of your answer already answered the question from one of our audience regarding the plan -- if we have any plan to sell further vessels next year.

So the next question is back into the topic of U.S. port fees, and this is asked by several analysts and other investors that follow webcast as well. So how do we plan to handle the U.S. port fee or possible future -- similar future tax with our customer? And how much do you expect to recover or pass on these costs to customers?

I don't think we can answer that specifically. But clearly, we are introducing those fees in full for our sort of liner business, and we are in dialogues, and we will get substantial compensation for our existing customers.

But I think it's also quite clear that this is now a cost that we expect to be embedded in all future contracting in and out of the U.S.

And our expectation is that these fees will gravitate to basically become an additional cost for American consumers and American exporters. So -- but there will be a transition period where we will get some compensation, but not full compensation for those fees.

Thank you, Andreas. I see this question coming in just now. The next question is about the Suez Canal and the opening of Red Sea. When do we expect -- when do we expect the reopening of Red Sea? And how will that affect our operations and earnings?

I mean I think it is -- I don't think it makes sense for us, I mean, to speculate about opening. It's, again, a geopolitical issue. It's a disturbance that we believe will have to come to an end. But -- and clearly, a reopening will allow us a more efficient trade system.

It will also add capacity into our system. But I think we are -- with our sales of vessels with the newbuilds with the current short-term charters, we are fairly well placed in terms of also optimizing that situation, and it gives us more carrying capacity.

So in that sense, I think that is an optimization that we are fully prepared for. We have, I think, created some things in our -- a solid structure in order to deal with it, and we will deal with it when it comes.

But I don't think we will try to speculate or provide any guiding on the timing. It doesn't seem to be imminent. But when you look half year out, a lot of things can happen. And if you look a couple of years out, we are assuming that the Red Sea will eventually open.

But more than that, I think we will refrain from providing -- I mean, there will be not any valid insight into our speculations and that timing because that's driven by totally external factors.

Thank you for detailed answers, Andreas. I think that's the last question we have for now, and we can give around 15 to 30 seconds more to see if we have more questions coming in.

I guess that's the last question we have for now. And of course, if you have further questions, feel free to reach out to us at Investor Relations mailbox at [email protected]. Thank you for watching, and we look forward to seeing you next quarter.