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Earnings name: Euronav posts record Q4 profit with strategic sales

2024.02.02 22:20


© Reuters.

Euronav NV (NYSE:) has reported a record profit for the fourth quarter, with earnings considerably bolstered by the sale of vessels to Frontline (NYSE:). The firm’s underlying profit for the quarter was sturdy at $88 million, supported by a wholesome freight market.

Despite these features, Euronav has opted to withhold Q4 dividend funds till after a compulsory supply interval concludes, with a future dividend coverage set to be discretionary. The firm has additionally expanded its fleet with the addition of two new very giant crude carriers (VLCCs), and has secured new long-term charters, promising a sturdy outlook.

Key Takeaways

  • Euronav’s Q4 profit reached $411 million, with underlying profit at $88 million.
  • The firm is not going to challenge a Q4 dividend till after the necessary supply interval.
  • Euronav added two VLCCs to its fleet, with a complete order e-book of 4 VLCCs and 4 Suezmaxes.
  • The firm’s liquidity has been strengthened to $2.5 billion.
  • New long-term charters have been secured with Valero.
  • A transaction with CMB.TECH is anticipated to be ratified, including to Euronav’s divisions.
  • Supply aspect of the tanker market appears to be like optimistic with potential for elevated scrapping.
  • The sale of VLCCs to Frontline will affect money movement statements in Q4 and Q1.

Company Outlook

  • Euronav’s liquidity place is powerful at $2.5 billion.
  • The firm has a remaining capital expenditure of $700 million for its order e-book.
  • Euronav continues to navigate away from the Red Sea resulting from security issues.

Bearish Highlights

  • Dividend funds are suspended for Q4 pending the result of a compulsory supply.
  • The firm is going through a good demand-supply steadiness within the tanker market.
  • Safety issues are inflicting Euronav to keep away from sure transport routes.

Bullish Highlights

  • Record Q4 income pushed by strategic sales to Frontline.
  • Healthy second-hand costs for Suezmaxes and VLCCs.
  • Positive outlook on the provision aspect of the tanker market.

Misses

  • Specific particulars on internet proceeds from the Q4 and Q1 vessel sales weren’t disclosed.

Q&A Highlights

  • Operations in Tankers International proceed as common regardless of the lowered fleet.
  • Approval for acquisition on the upcoming SGM requires a easy majority vote.
  • Break-even offered for tankers refers back to the remaining fleet, with no added prices for avoiding Houthi-threatened areas.
  • Bunker technique will stay market-related with out vital hedging.

In abstract, Euronav’s strategic strikes, together with the sale of a part of its fleet and the enlargement of its fleet with new VLCCs, have positioned the corporate for a powerful monetary efficiency. The firm’s choice to droop dividend funds displays a cautious method amid ongoing transactions. As the tanker market exhibits indicators of a optimistic provide aspect, Euronav maintains a wholesome liquidity place and a transparent technique for navigating market challenges. The upcoming vote on the transaction with CMB.TECH and the consolidation anticipated in Q1 might be pivotal for Euronav’s future efficiency.

InvestingPro Insights

Euronav NV’s (EURN) monetary efficiency has been noteworthy, with the corporate reporting a record profit for the fourth quarter and a sturdy underlying profit of $88 million. To present a extra in-depth have a look at Euronav’s monetary well being and investor advantages, let’s delve into some key metrics and InvestingPro Tips.

InvestingPro Data exhibits Euronav with a market capitalization of $3.59 billion and a low Price/Earnings (P/E) ratio of 4.14, indicating that the corporate’s shares could also be undervalued relative to its earnings. The adjusted P/E ratio for the final twelve months as of Q4 2023 is barely larger at 6.08, nonetheless suggesting a pretty valuation. Additionally, the corporate has skilled a major income progress of 91.08% during the last twelve months as of Q4 2023, highlighting its monetary momentum.

InvestingPro Tips reveal that Euronav not solely pays a major dividend to shareholders however has additionally maintained these funds for 9 consecutive years, demonstrating a dedication to returning worth to traders. Moreover, the inventory typically trades with low worth volatility, which can enchantment to traders looking for stability. It’s additionally price noting that Euronav’s liquid property exceed short-term obligations, offering the corporate with monetary flexibility.

For traders seeking to dive deeper into Euronav’s financials and strategic insights, InvestingPro affords further ideas, together with the corporate’s sturdy return during the last 5 years and analysts’ predictions of profitability for the present 12 months. The platform lists a complete of 9 InvestingPro Tips for Euronav, which might be accessed by means of a subscription.

Currently, InvestingPro is operating a particular New Year sale with reductions of as much as 50%. To benefit from this supply, use coupon code SFY24 for an extra 10% off a 2-year InvestingPro+ subscription, or SFY241 for an extra 10% off a 1-year InvestingPro+ subscription.

In conclusion, Euronav’s strategic sales and fleet enlargement, coupled with its spectacular monetary metrics and shareholder advantages, underscore an organization well-positioned for future progress. Investors looking for detailed evaluation and extra InvestingPro Tips can discover them by means of an InvestingPro subscription, which now comes at a major low cost.

Full transcript – Euronav NV (EURN) Q4 2023:

Operator: Dear all, welcome to the Euronav Q4 Earnings Call. Everyone is muted and the questions might be taken after presentation. I’ll now give the ground to Alexander.

Alexander Saverys: Thanks very a lot, Enya. Good afternoon, everybody. And welcome to our Q4 2023 earnings name. My title is Alexander Saverys, I’m the CEO of Euronav; and I’m joined by my brother, Ludovic Saverys, our CFO, and I’ll instantly hand the phrase to him.

Ludovic Saverys: Good afternoon, all people, and thanks for dialing in on our Q4 earnings name. We’ll undergo the presentation of the Q4 outcomes, specializing in the monetary highlights first after which Alexander will take over on the company developments and the tanker markets. And we’re extraordinarily happy to say that we’ve had our record Q4 within the historical past of the corporate. Since 1997, we’ve been in a position to ship a profit for this quarter of $411 million. Obviously, that outcome has been skewed by capital features out of the sales of a part of the Frontline fleet of $323 million. Nevertheless, the underlying profit of $88 million places ahead a powerful Q4 based mostly on the sturdy freight markets. We’re blissful additionally to incorporate that in Q4 we’ve continued our fleet enlargement inside Euronav with one other two VLCCs, which at this time nonetheless places us with an order e-book of 4 VLCCs on order and 4 Suezmaxes. The — on the right-hand aspect of the slide, you’ll be able to see that the Q4 outcomes have been far above our P&L breakeven, but additionally that the Q1 steering goes in the precise path. Alexander will proceed on that. We fastened for Q1 46% at $50,430 per day for the VLCCs and on the Suezmaxes, we’ve 54% fastened at $55,000. If you look on the following slide, we’re highlighting clearly the important thing metrics of our firm. We nonetheless have a leverage on e-book fairness of about 30%. Obviously, with the sale of a lot of the VLCCs to Frontline, we’ve strengthened our liquidity dramatically. End of 12 months, we ended the 12 months with $1.243 billion in liquidity. As of at this time, as a lot of the vessels of the CO2 Frontline have been delivered, we’re near $2.5 billion in liquidity. The internet income of $411 million, I’ve talked about, blissful additionally to incorporate that for the complete 12 months, we’re on the $862 million profit, from which $490 million is coming from the enterprise and $372 million from capital features. Q4 has additionally been highlighted by a brand new chapter for Euronav, which Alexander will proceed to elucidate. We have determined to not do a dividend for Q4 till the necessary supply is over. Many of the stakeholders inside Euronav, traders, analysts and others, have requested us within the final couple of weeks what the dividend coverage can be for the corporate. Previous administration and Euronav as a standalone pure-play tanker firm has aimed to dividend out 80% of its internet income. Going ahead, and if the transaction with CMB.TECH might be consumed subsequent week, the Board of Directors has determined that the dividend coverage might be a full discretionary one. I feel CMB.TECH shareholder has a monitor record of rewarding its shareholders, however in phrases to offer readability to our traders, the Board of Directors will preserve a full discretion on what number of dividends might be paid based mostly on the income. The additional progress, we’re blissful to incorporate within the Q4 two new long-term charters to our first-year consumer Valero and increase our order e-book. As of at this time, inside Euronav, we’ve a remaining CapEx of $700 million all through the 4 VLCCs and greater than 4 Suezmaxes. Again, highlighting the very fact, which we talked about within the Capital Markets Day, if the transaction with CMB.TECH can be authorised subsequent week, CMB.TECH has an excellent capital dedication to newbuildings of $2 billion, which might deliver the entire CapEx dedication of $2.7 billion. One metric we haven’t highlighted and we hope to have the ability to develop additional sooner or later is the contract backlog on our Marine division. Today stands at a $1.75 billion income, and as CMB and Euronav have acknowledged, it’s our intention to proceed to search out enticing alternatives to have the ability to lock in long-term money movement. Without additional ado, I’ll move on the phrase to Alexander on company growth.

Alexander Saverys: Yeah. Thank you very a lot, Ludovic. On the company growth, rather a lot has already been mentioned during the last couple of weeks. I feel if we zoom in on the Frontline transaction, I feel, the very first thing we are able to spotlight at this time is that 23 out of the 24 VLCCs have already been delivered to Frontline. You have seen within the Q4 what the outcome affect is and we’ve additionally projected the affect of the sale of the 24 vessels or the remaining 24 vessels in Q1. One vessel nonetheless must be delivered, however we’re anticipating that to be inside Q1. We additionally bought the Oceania, our oldest ship within the fleet. This can be being introduced at this time. We’re going to comprehend a capital achieve of near $35 million, which might be recorded in Q1 2024. Ludovic already mentioned, crucial contract finished with Valero on a long-term time constitution on two new Suezmaxes for supply in Q2 2026. Then our whole order e-book, a part of our optimization technique, fleet renewal technique of VLCCs at Beihai shipyard in Qingdao is now 4 vessels, three of them which is able to ship in 2026 and one which is able to ship in 2027. So when you have a look at our whole fleet, other than the 2 FSOs that we’ve, we’ve 17 Vs on the water, plus 4 newbuildings and 22 Suezmaxes on the water. We have the Bristol delivering very quickly, plus one other 4 on order, that are going to come back in 2024 and 2026. We go to the following slide. We can not have this name with out mentioning the Red Sea. As you could have heard, we have been one of many very first corporations to keep away from the realm after the Houthi insurgent assaults on service provider transport. We haven’t modified our viewpoint thus far, so we’ll proceed till additional discover to go and select different routes than by means of the Red Sea till that state of affairs has grow to be safer for our crew and for our ships. The affect of the diversions might be seen day-after-day in transport, normally, and I might say, and product tanker transport in particular, this certainly creating extra demand for ships due to the longer ton miles and we’re anticipating the state of affairs sadly to final a minimum of for the following couple of weeks, hoping for this to be resolved within the following months. We can go to the following slide. Making a bit of recap what we already did on the Capital Markets Day presentation of what has occurred over the previous months and what’s going to occur within the subsequent couple of weeks. On the ninth of October we struck an settlement with the Fredriksen Group to get out of the impasse for Euronav. That deal, that settlement was ratified in November at a particular basic assembly of shareholders. Just earlier than Christmas we introduced the CMB.TECH transaction and subsequent week on Wednesday we could have a particular basic assembly to vote on that particular transaction. Shortly thereafter we hope to open the necessary bid for Euronav and we hope to shut it by the center of March. I wish to say a number of phrases concerning the tanker markets as properly. As we’re in transport there’s issues we all know and issues we don’t know. If we zoom in on the provision aspect and the fleet composition, that are issues that ought to be comparatively sure, I can solely say that the indicators are nonetheless very optimistic. If we have a look at the order e-book to fleet, though there was some current enhance in ordering exercise particularly for Suezmaxes and a few VLCC, we’re nonetheless at very low order e-book to fleet ratios from a historic viewpoint, and this positively for the following two years might be very supportive for our business. Zooming in on the age of the vessels, stating the plain, with a fleet that’s hardly getting scrapped, the age profile of the vessels is rising, goes up and we at the moment are taking a look at ages — common ages of the fleet that we haven’t seen for a really, very very long time. Again, it ought to be a really optimistic sign going ahead. We have yet another slide, the following slide, that zooms in on the VLCC fleet age profile and order e-book. Basically you’ll be able to see there {that a} large chunk of the vessels goes to achieve the age of 20 years within the following years, which implies numerous potential to scrap, which implies that utilization positively has some help, even when demand, and we’ll discuss demand in a second, would keep comparatively flat. So solely optimistic issues to say concerning the provide aspect. Going into the asset costs, the market reacts because it does when the supply-demand steadiness is tight. We are seeing very, very wholesome second-hand costs for each Suezmaxes and VLCCs. If we’ve to say one thing unfavourable, I might say that, the VLCC second-hand market has not gone up because the underlying sentiment would have it. It’s been underwhelming a bit of bit, however we’re anticipating this to catch up because the 12 months proceeds, if the basics keep as they’re. On the following slide, we’ve a number of graphs on demand. Again, though demand is rising slowly, it’s the supply-demand steadiness which continues to be trying very, very wholesome. It’s properly publicized that the one new VLCC of the 12 months has already been delivered, so there are not any extra Vs coming in 2024 and you’ll see on the slide that the order e-book for 2025 is certainly very low or non-existent, with a slight progress in demand in oil, this could tighten the steadiness of supply-demand additional. I’m already at my concluding remarks, earlier than we go and take some questions, clearly, for Ludovic and I, it is a Euronav Q4 earnings name, perhaps the final one as a pure-play. If the transaction of CMB.TECH on Wednesday is ratified, is agreed by the shareholders, then clearly the following earnings name will zoom in much more on all of the completely different divisions that we’ll have added. But for now, we’re open for questions.

Operator: [Operator Instructions] So the primary one that can ask a query is Kristof Samoy. You could unmute and ask your query, please.

Kristof Samoy: Hello. Good afternoon, Alexander and Ludovic. I’ve the few questions, if I could. The upcoming SGM, the approval of the acquisition, is that by a easy majority vote that it must be authorised or do we want a professional majority? And then, secondly, finest case situation, when would we see the primary consolidation of CMB.TECH if the transaction is authorised? And then, secondly, relating to the sale of VLCCs to Frontline, the supply is unfold in fourth quarter and first quarter. Can you give extra element on how this impacts the money movement assertion within the fourth quarter and the primary quarter? How many dump vessels within the fourth quarter in your money movement statements and the way a lot reimbursement of borrowings you foresee linked to those sales in first quarter and fourth quarter of final 12 months? And then third query, if I could, on Tankers International. The VLCC vessels which have been bought to Frontline are now not a part of the pool. How do you see this for Tankers International? What’s the affect there? And yeah, how do you see the place of Euronav in Tankers International going ahead? Thank you.

Alexander Saverys: Okay. Thank you, Kristof. I’ll take the final query after which I’ll hand over to Ludovic. So, on TI, as we’ve acknowledged earlier than, so far as we’re involved, it’s enterprise as common. As , we’re a 50-50 shareholder collectively with INSW. The fleet has clearly lowered, however operations are nonetheless going as they have been earlier than, and truly, in current weeks and months, we’ve even added new vessels to the pool from different third-party homeowners. For the opposite questions, I’ll hand over to Ludovic.

Ludovic Saverys: Yeah. Great. Kristof, thanks for the questions. On the SGM subsequent week, it’s easy majority, i.e., CMB can vote as properly. So, therefore, there’s a excessive chance that transaction will undergo. On the consolidation of CMB.TECH, we’ve — the easy reply is that you will notice that within the Q1 figures, which clearly might be introduced in May. We have put an illustrative steadiness sheet within the Capital Markets Day the place the principle level to be identified is that we don’t take any good will, i.e., the vessels and underwater in CMB.TECH might be handed on at e-book worth in a 12 months and a half. But so, you will notice a full consolidation within the Q1 set of outcomes. On the sale of the VLCCs, 11 VLCCs have been bought to Frontline in Q4, with a capital achieve of $323 million. 13 VLCCs might be bought to Frontline, i.e., 12 have been bought in Q1 and one is being — might be bought round mid-March with a complete capital achieve of $372 million for Q1. The whole sales quantity was $215 million. The precise element on the web, the complete proceeds in Q1, Q4, there, I’ve to come back again to you on that. If you simply take an arithmetic common on 11 of 24 vessels, will probably be round $1.1 billion in Q4 after which $1.25 in Q1. There was no debt on the ships whereas being delivered to Frontline. That is as a result of inside a 12 months and a half, we’ve refinanced all of the remaining fleets that also stays at this time in our possession. We’ve re-leveraged these vessels to 55% of truthful market worth and we’ve used extra money out of that to take out the debt on the vessels being bought to Frontline, which implies that the $2.35 billion got here in as internet money proceeds. Does that reply your query?

Kristof Samoy: Yes. Thank you.

Operator: Okay. Thank you. Then the following one that can ask his query is Thijs Berkelder. You can unmute and ask your query, please.

Thijs Berkelder: Yeah. Thijs Berkelder, ABN-Amro ODDO BHF. Three questions. First, you offered a break-even — P&L break-even on your four-year tankers. Is {that a} pre-sale of the fleet or post-sale of the fleet, or someplace in between? Then the second query is, given the state of affairs with the Houthis, et cetera., are you making further prices for safeguarding your vessels now, and if that’s the case, what quantities ought to we consider? The third query is on the bunker volumes. What is your bunker technique going ahead?

Ludovic Saverys: Okay. Thijs, thanks. I’ll take the primary one and I’ll take the following two ones. The break-even of the tankers as shield — as projected are of the remaining fleet. So, that is going ahead, these are the P&L break-evens on each Suezmaxes and VLCCs.

Alexander Saverys: Yeah. And then on the protecting measures for the Houthis, we don’t have to take any measures as a result of one of the best measure just isn’t going there. We are mainly crusing round and never crossing the realm. In phrases of the bunker technique, Thijs, we’re mainly holding a method of being full-floating, so market-related. There’s not any vital hedging and we aren’t doing something that perhaps was finished prior to now of shopping for bunkers beforehand and loading it on board of the Oceania, as a result of now the vessel is gone. So we mainly return to the traditional technique of staying on the spot market and never taking any cowl. Does that reply your query, Thijs?

Thijs Berkelder: Yes. Thank you.

Alexander Saverys: Thank you. Yeah. Maybe, Enya, earlier than we return to the query of Kristof, it’s what I believed. It’s $1.1 billion in money got here in in Q4 and $1.25 billion in Q1. You can go forward, Enya.

Operator: [Operator Instructions] Okay. I see no additional questions, Alexander and Ludovic.

Alexander Saverys: All proper. Great. But we’re all the time there to reply any questions you might need after this name. Thanks for becoming a member of us and see you subsequent week on Wednesday on the General Assembly. Bye-bye.

Ludovic Saverys: Thanks. Bye.

Alexander Saverys: Bye.

This article was generated with the help of AI and reviewed by an editor. For extra info see our T&C.

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