Hafnia's 2025 Earnings Calls Reveal Contradictions in Fleet Strategy, Market Dynamics, and Newbuild Pricing

The above is the analysis of the conflicting points in this earnings call

Guidance:

• Q3 started very strong; July was the strongest month YTD.
• Expect stable markets with longer voyages and low inventories that need replenishment into winter.
• Western refinery outages drive East-to-West middle-distillate flows.
• LR2 newbuilds largely entering crude, limiting product-tanker supply pressure.
• Red Sea/Suez normalization would be net neutral; company won’t transit until the area is fully safe.
• Strategy: keep high spot exposure (~85–90%) with low forward coverage (~8%); hedge only at attractive levels.
• Capital allocation focused on dividends per policy; no newbuild orders at current $51–52M MR prices and 2028–29 deliveries; prioritize fleet optimization and consolidation.

Business Commentary:

* Strong Q2 Performance and Market Resilience: - Hafnia reported a net result of $75.3 million for Q2, which is better than Q1, reflecting a healthy market. - The resilience was driven by a strong and healthy market, unlike the massively strong hay years of the past, and a high demand for product tankers.

• Fleet Management and Age Optimization:
• The average age of Hafnia's fleet is around 9.4 years, which is below the industry average, and the company aims to keep it below ten years.

• The company is optimizing its fleet by selling off older vessels, which is a common strategy in the industry to maintain a modern and efficient fleet.

• Dividend Policy and Shareholder Returns:

• Hafnia paid out 80% of its net profit in dividends for Q2, adhering to its dividend policy.

• The policy is linked to the net loan to value and aims to provide consistent returns to shareholders.

• Impact of Geopolitical Events:

• The geopolitical events, such as the Ukraine war and the Red Sea situation, have had a limited impact on Hafnia's operations and the product tanker market.

• The company is optimistic about the market stability and expects a neutral impact if the Suez Canal and Red Sea become safe again for vessel traffic.

• Order Book and Fleet Supplies:

• The order book for product tankers is around 19% to 20% of the existing fleet, but only 13% to 14% is considered a true addition to the product tanker fleet.
• The market is heavily undersupplied due to the age and conditions of the fleet, and a strong market is expected as scrapping and replacement progress.

Sentiment Analysis:

• Management was “very pleased” with Q2, reporting a net result of $75.3M, better than Q1. They noted Q3 started very strong with July the strongest month of the year, and highlighted multiple supportive demand/supply factors. They described markets as stable and expressed confidence in the outlook.

Q&A:

• Question from Thurso (Moderator): You only had 8% coverage; can you comment on your strategy for fixings and forward coverage?
  Response: Maintain high spot exposure; Q3 is strong; add hedges only if pricing is attractive—otherwise keep limited forward coverage.

• Question from Thurso (Moderator): Are you optimizing fleet age by selling older vessels like peers?
  Response: Yes—continuing to sell older ships, including LR1s, as part of an ongoing fleet-optimization program.

• Question from Thurso (Moderator): What would drive you to order newbuild product tankers?
  Response: Current economics don’t work: delivery is 2028, and MR prices of ~$51–52M are unattractive; prefer consolidation/secondhand over newbuilds.

• Question from Thurso (Moderator): If the Red Sea/Suez route becomes safe again, what’s the impact?
  Response: Net neutral for product tankers—shorter routes but higher volumes; Hafnia won’t transit until the area is unequivocally safe.

• Question from Thurso (Moderator): Mid-Q3 status—how do you see the market now?
  Response: Surprisingly strong and stable, supported by longer voyages, low inventories, healthy demand, and LR2 newbuilds moving into crude.

• Question from Thurso (Moderator): How are you approaching shareholder returns—dividends and buybacks?
  Response: Paying 80% of net profit as dividends per policy; buybacks considered ad hoc and only in addition to the dividend.

• Question from Thurso (Moderator): Does the new ~$700M revolving credit facility change your capital plans?
  Response: No—it's standard financing that improves terms and flexibility, providing reserve capacity without altering capital allocation.

• Question from Thurso (Moderator): Do you have appetite and capacity for M&A/consolidation?
  Response: Yes—favor sector consolidation over buying single ships at current prices; strong position to act if attractive opportunities arise.