Ocean Yield ASA (OYIEF) Q4 2022 Earnings Call Transcript

Ocean Yield ASA (OTCQX:OYIEF) Q4 2022 Earnings Conference Call February 16, 2023 3:00 AM ET

Company Participants

Andreas Roede - Chief Executive Officer

Eirik Eide - Chief Financial Officer

Karl Fredrik Schjott-Pedersen - Senior Vice President

Conference Call Participants

Andreas Roede

Good morning, everyone, and invited to Ocean Yield's Fourth Quarter 2022 Earnings Presentation. I will commencement today's position pinch nan highlights of nan quarter, specifications of nan caller investments and spell done nan changes to nan portfolio earlier our CFO, Eirik Eide, will return america done nan financials arsenic usual. Then nan position will beryllium concluded pinch opening up for questions.

Starting disconnected connected page two. We are pleased to study different beardown and unchangeable 4th for Ocean Yield. We study an EBITDA adjusted for finance lease effects of $82.8 cardinal and a nett profit of $21.1 million. For 2022, we study an EBITDA adjusted for finance lease effects of $301.9 cardinal and a nett profit of $91.2 million. On nan backmost of continued beardown capacity successful astir of nan shipping markets, nan counter-party consequence successful nan portfolio remains debased and continued beardown plus values consequence successful charismatic lease to worth connected a portfolio basis.

At year-end, this fig was astir 60%, providing important buffer and comfort. We are ending nan 4th pinch a beardown and robust equilibrium expanse pinch $122 cardinal successful rate and an equity ratio of 30.3%. Several refinancing initiatives person been concluded, and we person $55 cardinal of disposable further liquidity presently undrawn.

We person called nan enslaved indebtedness OCYO5, which will beryllium settled pinch rate connected February 17. This is different measurement to trim our backing costs and optimize nan equilibrium sheet. Going forward, our ambition is to selectively usage nan Nordic enslaved markets. And arsenic communicated previously, we stay committed to continued financial reporting.

Q4 was different progressive 4th connected nan acquisition broadside arsenic we proceed to build and renew our portfolio. We person agreed to bargain a 3rd 5,500 TEU newbuild instrumentality vessel. Upon delivery, nan alloy will commence seven-year clip charter to ZIM Integrated Shipping Services. Also during nan quarter, we committed to nan acquisition of up to 10 Newcastlemax barren bulk newbuildings pinch 15-year charters to CMB. I will screen this successful greater item later successful nan presentation.

At nan extremity of nan 4th quarter, nan EBITDA backlog was $3.8 billion, pinch an mean remaining statement long of 9.3 years. 97% of nan portfolio is employed connected semipermanent charters, providing unchangeable and predictable rate flows from our diversified and well-renowned customer group.

Moving to page three. On December 6, we signed an statement for nan acquisition of up to 10 Newcastlemax newbuilds pinch transportation from Qingdao Beihai Shipbuilding betwixt Q1 ‘25 and Q2 ‘26. Upon delivery, nan vessels will commence connected 15-year bareboat charters to CMB pinch acquisition obligations astatine nan extremity of nan charter period. The full transaction size is $576 million, and nan afloat 10 vessels will adhd $950 cardinal to nan EBITDA backlog.

On January 31, WinGD and CMB.TECH signed an statement to co-develop ample ammonia substance engines and nan purpose is to instal these engines astatine nan 10 vessels. An disposable ammonia two-strike motor will beryllium an important measurement arsenic nan world shipping fleet prepares to adopt greenish fuels arsenic a measurement towards gathering semipermanent decarbonization targets. This transaction is simply a grounds to Ocean Yield’s strategy of partnering pinch starring shipowners and facilitating their power modulation journey.

Moving to page four. On November 4, we signed an statement to acquisition a 3rd alloy successful nan bid of 5,500 TEU instrumentality vessels nether building astatine HJ Shipbuilding successful Korea. Delivery is expected to return spot during 2023. And upon delivery, nan alloy will commence connected a seven-year clip charter to ZIM. This vessel, together pinch nan 2 sister vessels purchased successful June and July will adhd $240 cardinal to Ocean Yield’s EBITDA backlog pinch a highly charismatic front-end loaded rate travel profile. All 3 vessels are designed to beryllium capable to run pinch methanol arsenic substance and fresh our strategy of investing successful modern future-proof vessels.

Moving to page 5 for nan developments of nan fleet. At nan extremity of October, nan instrumentality alloy MSC Fatma, was delivered to nan associated task Box Holdings, and she commenced connected an 18-year bareboat charter to MSC. The alloy is dual substance LNG and is nan seventh alloy operating successful nan associated venture. During nan quarter, nan barren bulk alloy Interlink Activity was delivered to her caller proprietor pursuing Interlink’s workout of an action to waste nan alloy to a 3rd party. Ardmore Dauntless and Ardmore Defender was delivered to Ardmore pursuing nan workout of an mean acquisition option.

Also during nan quarter, Hoegh Autoliners exercised an action to repurchase Hoegh Trapper. Hafnia exercised an action to repurchase Hafnia Turquoise and Scorpio Tankers workout an action to repurchase STI Sanctity and STI Steadfast. These vessels will beryllium delivered successful June, April, May and August, respectively. No acquisition options person been declared since nan announcement of nan Q3 financials and including nan 10 Newcastlemax newbuilds, nan Ocean Yield fleet counted 70 vessels astatine nan extremity of nan twelvemonth and 64 vessels adjusting for acquisition options declared but not yet delivered.

Moving to page six. Including nan finance activity completed during 2022, we now person an EBITDA backlog of $3.8 billion. The mean statement long of nan portfolio is much than 9 years and 97% of nan portfolio remains employed connected semipermanent charters. The residual 3% is nan anchor handler vessels that run successful a excavation pinch akin vessels managed and operated by Solstad. The diversified modern fleet comprising 64 vessels pinch nan mean property of 5.5 years connected charter to 18 different customers successful 8 different segments supply nan instauration for unchangeable and predictable net successful nan years to travel and besides service arsenic a beardown level for further growth.

We stay segment-agnostic erstwhile evaluating caller finance opportunities, but we're ever cognizant of nan improvement of nan underlying marketplace cycles arsenic we activity to mitigate and negociate consequence appropriately. This will beryllium progressively important arsenic we mightiness beryllium entering into a shape pinch little world maturation higher liking rates and a greater grade of macroeconomic uncertainty.

So pinch that, I would for illustration to manus nan connection complete to Eirik, who will return america done nan financials for nan 4th quarter.

Eirik Eide

Thank you, Andreas. So we move connected to descent seven, which shows a financial snapshot of nan institution arsenic of nan 4th quarter.

We person recorded EBITDA of $51.8 cardinal successful nan 4th and EBITDA adjusted for finance lease effects was $82.8 million. Adjusted nett profit was $22.2 million, compared to $23.1 cardinal successful Q3. The company’s rate position remains coagulated pinch $122 cardinal astatine nan extremity of nan quarter. And successful summation to that, we had undrawn in installments accommodation of $55 million. The Board of Directors has decided not to state a dividend for Q4. The equity ratio was 30.3% astatine nan extremity of nan quarter.

Moving connected to nan income statement. Under operating revenues, we person recorded $17.5 million, compared to $17.1 cardinal successful nan 3rd quarter. Operating lease gross was positively impacted by higher liking complaint successful nan quarter, which affected nan floating liking complaint rate-based operating leases, while nan anchor handling vessels successful nan Solstad excavation had little revenues, compared to nan 3rd quarter. Overall, this gave a affirmative effect of $0.4 million, compared to Q3.

Finance lease revenues accrued to $32.4 cardinal successful Q4, compared to $28.3 cardinal successful Q3. The summation present is owed to substantially higher liking rates, which affected nan floating liking complaint rate-based leases. It's worthy noting that location is simply a lag effect earlier higher liking rates person afloat effect connected revenues, peculiarly fixed nan crisp summation successful liking rates we saw during nan 4th quarter. In addition, it's worthy noting that 3 vessels were sold and delivered to its caller owners during nan quarter, which had a antagonistic effect connected finance lease revenues.

On income from investments successful associates, which is related to nan 50% ownership successful 2 tankers and 49.9% ownership successful 7 instrumentality vessels that was $3.9 cardinal this quarter, compared to $4.4 cardinal successful Q3. The simplification present is chiefly related to expenses associated pinch nan transportation of nan instrumentality alloy MSC Fatma successful nan quarter.

Then we had different income of $1.6 million, which is related to alloy sales, and that gives america full revenues of $55.4 million, compared to $51.1 cardinal past quarter. Depreciation $6.6 million, compared to $6.5 cardinal successful Q3. So this was fundamentally successful statement pinch nan erstwhile 4th and operating profit past improved to $45.2 million, compared to $42.3 cardinal successful Q3.

Financial expenses $25.1 million, compared to $20 cardinal past quarter. The summation present is owed to higher liking rates during nan quarter, but besides owed to indebtedness drawn related to nan finance successful nan 10 Newcastlemax vessels and besides 1 of nan newbuilding instrumentality vessels and 4 existing instrumentality vessels connected semipermanent charter.

Please statement that nan summation successful liking expenses is offset by higher lease revenues, owed to nan floating LIBOR SOFR clauses successful nan charter agreements. But arsenic mentioned earlier, location whitethorn beryllium a lag effect earlier revenues are afloat offset by nan summation successful liking expenses owed to nan quality of nan contracts.

Moving connected to overseas speech movements and mark-to-market of derivatives. That was nett antagonistic pinch $0.5 million. And arsenic we person mentioned earlier, this is chiefly related to nan cross-currency swaps for our enslaved loans that are denominated successful NOK, which has past been swapped into U.S. dollars. So nan 4th past ended pinch a nett profit of $21.1 million, compared to $23.4 cardinal successful Q3.

Moving connected to adjusted EBITDA and adjusted nett profit successful much detail. So EBITDA adjusted for finance lease effects was $82.8 cardinal and which includes past nan repayment of finance lease element, which was $31.1 million. The adjusted nett profit, $22.2 cardinal and this includes past adjustments for FX movements and besides alteration successful adjacent worth of financial instruments positive an accommodation for deferred tax.

And past we move connected to nan equilibrium sheet. On nan equilibrium sheet, we person connected nan left-hand side, a flimsy summation successful vessels and instrumentality this quarter, compared to nan 3rd quarter. And nan summation present is chiefly owed to further installments paid to nan yards successful relationship pinch nan building of nan instrumentality vessels that are commencing semipermanent charters to ZIM.

Further down connected different non-current assets, you spot that this has accrued to $65 million, and this is related to nan newbuilding installments for nan 10 Newcastlemax vessels pinch semipermanent charter to CMB. Since this is system arsenic a predelivery loan, it is past booked nether different non-current assets while those vessels are nether construction.

On nan right-hand side, rate and rate equivalents $122 million, compared to $122 cardinal besides past quarter. In addition, we had restricted rate deposits of $13 cardinal that are paid successful relationship pinch nan cross-currency swaps. Also, arsenic mentioned earlier, location are besides $55 cardinal of undrawn disposable in installments lines that we person disposable for drawdown. Finally, nan book equity, $706 cardinal and full assets was $2.328 billion, and that gives america an equity ratio of 30.3% astatine nan extremity of nan quarter.

Moving connected to nan adjacent slide, financing initiatives. As Andreas touched upon, nan 4th fourth has besides been a very progressive 4th successful position of financing wherever we person refinanced and upsized 5 existing indebtedness agreements, wherever of $55 cardinal of this remains undrawn.

During nan 4th and besides aft nan extremity of nan quarter, we person signed indebtedness agreements for each 3 newbuilding instrumentality vessels and successful addition, we are successful precocious discussions pinch banks for nan semipermanent financing of nan 2 LEG vessels pinch semipermanent charter to Braskem.

And finally, aft nan extremity of nan quarter, we issued a telephone announcement for nan enslaved indebtedness OCY05, which past will beryllium settled successful rate connected nan February 17. Following this, Ocean Yield has 1 unsecured enslaved indebtedness successful nan marketplace pinch a nominal magnitude of NOK750 cardinal and maturity successful December 2024. And past besides we person 1 hybrid perpetual enslaved of $125 million.

And that concludes my portion of nan presentation, and I will springiness nan connection backmost to Andreas, who will summarize.

Andreas Roede

Thank you, Eirik. So to summarize connected page 11. Ocean Yield has a robust equilibrium expanse position and our entree to financing remains strong. This enables america to move quickly and unafraid charismatic financing for some caller transactions, arsenic good arsenic existing. And erstwhile again, we convey our banks for their continued support successful financing some caller deals, arsenic good arsenic existing transactions during nan quarter. The portfolio of semipermanent charters are performing good and nan counter-party value remains beardown connected nan backmost of nan beardown capacity of nan underlying shipping markets.

Following an progressive twelvemonth connected nan finance side, maturation still remains connected nan agenda. The changes to nan portfolio during 2022 person seen 12 vessels pinch accepted substance being sold, and nan caller finance activity person added 3 methanol-ready instrumentality vessels, 2 ethane-fueled state carriers and 10 ammonia-fueled Newcastle barren bulk vessels to nan fleet. This is successful statement pinch our strategy of investing successful modern tonnage pinch future-proof and energy-efficient engines and exertion arsenic we proceed to renew and modernize nan fleet.

We person a beardown and robust equilibrium expanse and our entree to attractively priced superior remains intact. The caller transaction pinch CMB is simply a grounds to our semipermanent ambition of partnering pinch industry-leading players and facilitate their displacement towards much future-oriented motor technology. Ocean Yield has a clear strategy and ambition of playing a starring domiciled pinch our partners arsenic we collectively embark connected nan power modulation journey.

So pinch that, I would for illustration to convey you each for listening to nan Ocean Yield 4th fourth net release. And I would now for illustration to unfastened up for questions from nan web.

Question-and-Answer Session

Operator

A - Karl Fredrik Schjott-Pedersen

Yes. So if you person immoderate questions, please usage nan chat usability beneath nan webcast. There are nary existent questions. So conscionable arsenic a reminder, if you would for illustration to scope retired directly, you tin ever consciousness free to do truthful arsenic well.

So pinch that, we manus it backmost to Andreas Roede.

Andreas Roede

Well, convey you each for dialing successful and listening. I deliberation that concludes nan call.