Hafnia's Q2 2025: Contradictions Emerge on MR/LR Performance, Fleet Strategy, Sanctions Impact, and Cash Distribution

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

Date of Call: August 27, 2025

Financials Results

• EPS: $0.15 per share for Q2 2025; comparative context not provided

Guidance:

• Q3 2025: ~75% of days fixed at ~$25,395/day; ~510 off-hire days expected.
• FY2025: ~48% of remaining days covered at ~$23,623/day; scenarios imply net profit of ~$305–$310M.
• Cash flow breakeven expected to trend toward ~$13,000/day once the refinancing is fully effective later in 2025.
• Expect counterseasonal strength into Q3/Q4 driven by tight European supply, low refinery outages, and higher OPEC+ output; minimal cannibalization for the rest of 2025.
• Maintain 80% dividend payout ratio.

Business Commentary:

* Strong Financial Performance and Market Outlook: - Hafnia reported adjusted EBITDA of $134.2 million for Q2, generating a net profit of $75.3 million, reflecting solid operational execution and underlying market strength. - The outlook for the remainder of the year is robust, with earnings days for Q3 secured at $25,395 per day, supporting net profits in the range of $305 million to $310 million for the full year.

• Market Demand and Supply Dynamics:
• There has been an improvement in trade volumes and tonne-miles driven by strong demand fundamentals, leading to tight product tanker supply.

• This positive market sentiment is supported by low inventory levels, strong refinery margins, and limited refinery outages, which are expected to continue through the end of the year.

• Sustainability Initiatives and Strategic Partnerships:

• Hafnia launched Seascale Energy, its bunker joint venture with Cargill, in mid-May, aiming to provide more efficient and sustainable bunkering solutions.

• The company is actively investing in maritime innovation and strategic partnerships to support its commitment to a more sustainable maritime future.

• Fleet Development and Newbuild Program:

• Hafnia's dual-fuel methanol MR IMO II newbuild program in partnership with Socatra has proceeded as planned, with deliveries of vessels Ecomar Guyenne and Ecomar Garonne in May and July, respectively.

• The company continues to focus on fleet growth and modernization to enhance operational efficiency and sustainability.

• Refinancing and Financial Position:

• Hafnia secured a $715 million revolving credit facility, reducing overall funding costs and enhancing balance sheet resilience.
• The facility was used to refinance existing debt, further lowering cash flow breakeven levels and improving overall financial flexibility.

Sentiment Analysis:

• Management reported “another quarter of strong results” with adjusted EBITDA of $134.2M and net profit of $75.3M; liquidity exceeded $450M and a new $715M RCF was secured. As of Aug 15, 75% of Q3 days were fixed and scenarios indicate FY net profit of $305–$310M. They emphasized robust market fundamentals with limited fleet supply and improved spot rates, and maintained an 80% dividend payout.

Q&A:

• Question from Frode Morkedal (Clarksons Platou Securities): Can you quantify the impact of the new $715M refinancing on cash breakeven and funding costs?
  Response: Refinancing cuts margins by 50–60 bps and should reduce cash breakeven to roughly $13,000/day once fully in effect.

• Question from Frode Morkedal (Clarksons Platou Securities): Why do you expect longer-haul LRII movements to improve into Q4 despite July tonne-miles suggesting shorter average distances?
  Response: European inventory draws, refinery outages/closures, and the Dangote outage are boosting east-to-west flows (incl. China), lifting tonne-miles into Q3/Q4.

• Question from Omar Mostafa Nokta (Jefferies): Why are MRs and Handys outperforming LRs in Q3 bookings?
  Response: LRIs/LRIIs already printed strong rates through Q2; MRs are now catching up rather than LRs weakening.

• Question from Omar Mostafa Nokta (Jefferies): Does Hafnia switch ships between clean and dirty to capture value (reverse-cannibalization)?
  Response: They switch opportunistically (notably LRII↔Aframax) when accretive but avoid moves that would undermine their own market.

• Question from Unidentified Analyst (Affiliation not disclosed): Are OFAC sanctions more impactful than EU/UK sanctions, and how much tonnage is removed?
  Response: All major sanctions regimes effectively bar vessels from mainstream trade; impact is material across regimes, not just OFAC.

• Question from Unidentified Analyst (Affiliation not disclosed): How do sanctions and market strength affect near-term scrapping potential?
  Response: If sanctioned trades shrink, older (>20 years) ships lose utilization and scrapping would accelerate; scrap potential aligns with 23–25 year age norms.

• Question from Unidentified Analyst (Affiliation not disclosed): Outlook on the IMO net-zero framework decision and Hafnia’s planning?
  Response: They assume IMO will approve the framework and are planning accordingly despite geopolitical uncertainty.