TORM's Q3 2025 Earnings Call: Contradictions Emerge in Dividend Policy, Interest Expenses, and Fleet Strategy

Date of Call: November 6, 2025

Financials Results

• Revenue: USD 236.0M TCE, above levels achieved in previous quarters
• EPS: USD 0.79 per share

Guidance:

• As of Oct 31, 55% of Q4 earnings days secured at avg TCE $30,156/day.
• For full-year 2025, 89% of earning days fixed at avg TCE $28,281/day.
• Increased full-year TCE guidance midpoint by $25M to a range of $875M–$925M (prior $800M–$950M).
• EBITDA guidance narrowed to $540M–$590M (prior $475M–$625M).

Business Commentary:

* Strong Financial Performance: - TORM plc reported a TCE of USD 236 million in Q3 2025, above levels achieved in previous quarters, resulting in a net profit of USD 78 million. - The growth was driven by firm freight rates and increased market demand for product tankers.

• Fleet Optimization and Asset Transactions:
• TORM acquired 5 vessels: 4 2014-built MRs and 1 2010-built LR2, while divesting a 2007-built MR.

• The acquisitions were aimed at maintaining a modern, high-quality fleet to enhance commercial attractiveness and meet return hurdles.

• Increased Dividend and Shareholder Returns:

• The company declared a dividend of USD 0.62 per share, reflecting a 78% payout ratio, which is higher than the previous range of 70%.

• The increase indicates strong earnings and a commitment to responsible capital allocation, supported by stable cash flow breakeven levels.

• Market Conditions and Geopolitical Factors:

• Product tanker rates remained stable, supported by consistent demand and limited growth in the CPP trading fleet.

• Geopolitical developments such as sanctions on Russia, OPEC+ production cuts, and U.S.-China reciprocal port fees are impacting market stability and demand.

• Debt and Financial Stability:

• TORM's net interest-bearing debt stood at USD 690 million, approximately 24% of its capital structure.
• This reflects the company's conservative financial approach, providing ample financial runway and stability in the face of market volatility.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management repeatedly described results as "another strong set of numbers," highlighted firm freight rates and TCE of USD 236M, and raised/narrowed FY guidance (TCE to $875M–$925M; EBITDA to $540M–$590M), signaling confidence in market momentum and earnings visibility.

Q&A:

• Question from Frode Morkedal (Clarksons Platou Securities AS): How were you able to charter a 2009-built MR for 3 years at $22,234/day and how repeatable is securing such long-duration deals for older vessels?
  Response: Their integrated platform (consistent standards, in‑house crew/technical/chartering) allows them to command premium long-term charters for older vessels; they are negotiating more long-term deals but will only do so when it meets their financial criteria.

• Question from Frode Morkedal (Clarksons Platou Securities AS): On acquiring 4 MRs and 1 LR2 while selling an older MR, what decision metrics (return hurdle, cash breakeven, time-charter prospects) drove these moves?
  Response: Decisions are driven by internal IRR/ROIC hurdles and NPV comparisons, not age; each acquired vessel met return requirements and the sale produced superior NPV versus keeping/operating the asset.

• Question from Frode Morkedal (Clarksons Platou Securities AS): How does the One TORM platform work and why does it translate into higher TCE than peers?
  Response: In‑house integration—common KPIs, unified crewing, targeted technical upgrades and active commercial positioning—drives efficiency and better charter outcomes, delivering higher TCE versus peers.

• Question from Omar Nokta (Jefferies LLC): Do the recent acquisitions mark a shift in capital deployment toward older vessels; is this the right age profile or would you pursue younger tonnage?
  Response: They buy based on highest return on invested capital; current older tonnage fits that objective today but they remain open to younger vessels if pricing and returns justify it.

• Question from Omar Nokta (Jefferies LLC): You increased the payout ratio to ~78% this quarter—will dividends stay in the 70%–78% range or trend higher?
  Response: Dividends are based on free liquidity each quarter, not a fixed payout target; current ~78% reflects strong cash generation and lower breakeven but is not a guaranteed target.

• Question from Omar Nokta (Jefferies LLC): Reported interest expense was higher this quarter—was this an accounting/timing issue and will it normalize in 4Q?
  Response: The uptick is due to refinancing accounting and upfront fees; management expects the effect to smooth/normalize going forward.

Contradiction Point 1

Dividend Payout Ratio and Cash Flow Breakeven

It involves changes in dividend expectations, which are critical indicators for investors and company financial strategy.

Could you explain the dividend payout ratio increase to 78% and future dividend plans? - Omar Nokta(Jefferies LLC)

2025Q3: TORM's dividend policy is based on distributing free liquidity, not a specific payout ratio. The policy is flexible and aligned with cash flow breakeven levels. It aims to continue distributing free liquidity as it becomes available. - Kim Balle(CFO)

Will the dividend payout ratio increase beyond 2025? - Jonathan B. Chappell(Evercore ISI Institutional Equities, Research Division)

2025Q2: Cash flow breakeven is expected to decrease notably in 2026. Consequently, the payout ratio should also increase. While it's too early to provide specifics, a payout ratio of 75 to 80 is likely. - Kim Balle(CFO)

Contradiction Point 2

Interest Expense and Refinancing Activities

It involves changes in financial forecasts, specifically regarding interest expense, which are critical indicators for investors.

Why did interest expense increase in the recent quarter? - Omar Nokta(Jefferies LLC)

2025Q3: The increase in interest expense is due to refinancing activities and upfront fees. The accounting treatment causes the temporary increase, which will smooth out in future quarters. - Kim Balle(CFO)

Can you explain the cash breakeven and its relation to new financing facilities? - Climent Molins(Value Investor’s Edge)

2025Q2: The new financing has notably lower rates than current facilities. This should lead to a lower cash breakeven, which in turn should allow for a higher payout ratio in the future. - Kim Balle(CFO)

Contradiction Point 3

Dividend Policy and Payout Ratio

It involves changes in the company's approach to dividend policy and payout ratio, which are crucial for investor expectations.

Could you clarify the dividend payout ratio increase to 78% and future plans? - Omar Nokta (Jefferies LLC)

2025Q3: TORM's dividend policy is based on distributing free liquidity, not a specific payout ratio. The policy is flexible and aligned with cash flow breakeven levels. It aims to continue distributing free liquidity as it becomes available. - Kim Balle(CFO)

Can you discuss your dividend payout ratio? - Steve Dyer (Berenberg)

2024Q4: We continue to adhere to the company's dividend policy, which is based on distributing free liquidity, not a specific payout ratio. We are pleased with the strong financial position of the company, and based on that, we will pursue a strong dividend policy in the future. - Kim Balle(CFO)

Contradiction Point 4

Fleet Strategy and Renewal

It pertains to the company's strategic approach to fleet renewal and growth, which impacts long-term operational and financial decisions.

Does purchasing older MRs and LR2s indicate a shift in capital deployment strategy? - Omar Nokta (Jefferies LLC)

2025Q3: TORM focuses on return on invested capital and is not concerned about asset age. It considers younger tonnage if the market conditions are right, but current acquisitions meet the return requirements. - Jacob Meldgaard(CEO)

What is the outlook for fleet growth or renewal amid reduced secondary market activity? - Unidentified Analyst (Clarkson Securities)

2024Q4: Fleet strategy remains unchanged, focusing on maintaining a modern average fleet age. Market liquidity in S&P is expected to improve as rates stabilize. Transactions should pick up as prices recalibrate. - Jacob Meldgaard(CEO)

Contradiction Point 5

Capital Allocation Strategy

It involves changes in the company's approach to capital allocation, which is crucial for financial planning and strategic direction.

Can you comment on the 78% dividend payout ratio increase and future dividend plans? - Omar Nokta (Jefferies LLC)

2025Q3: TORM focuses on return on invested capital and is not concerned about asset age. It considers younger tonnage if the market conditions are right, but current acquisitions meet the return requirements. The company remains open to further fleet additions. - Jacob Meldgaard(CEO)

Have there been any changes in capital allocation, vessel sales, purchases, or chartering strategies compared to 12 months ago? - Jonathan Chappell (Evercore ISI)

2025Q1: On the financial side, TORM remains disciplined in its approach to capital allocation. On the business side, the company is adapting to normalized freight rates and might reassess fleet composition. - Jacob Meldgaard(CEO)