Hello everybody, and welcome to ADNOC L& S earnings call for half one 2025. All participant lines are currently muted. After the prepared remarks, there'll be a question and answer session. If you would like to ask a question and have joined the call via Teams, please use the raise hand icon found on your toolbar. Alternatively, you may submit a question in writing using the Q&A feature also found on your toolbar. If you have joined us on the phone now and would like to register a question, please dial star followed by one on your telephone keypad. I'll now like to hand you over to your host for today's call, Ali Afifi from Arcam Capital. Ali, please go ahead.
Thank you. Good afternoon everyone. This is Ali Afifi from Arcam Capital. I'd like to welcome to ADNOC L&S h1 2025 results call. With us on the call today, we have Captain Abdulkareem Almessabi, CEO, Mr. Nicholas Murray Gleeson, CFO, and Mr. Thomas Backmann, Vice President of Investor Relations. Without further delay, I'd like to hand over the call to management. Please go ahead.
Thank you, Ali. Hello and good afternoon to everyone, and the ADNOC L&S earnings call for the first half of 2025. My name is Thomas Backmann, and I'm the Vice President of Investor at ADNOC L&S. on behalf of the entire team, I would like to warmly welcome everyone and sincerely thank you for your in ADNOC L&S. we are pleased to have you with us for today's call. By now, you should have received the first half 2025 earnings presentation. If you haven't, you can the ADNOC L&S website in the Investor Relations section. I would like to direct your attention to our disclaimer on slide number two before we begin. It contains important information, and we advise caution on the interpretation and limitations of historical data and forward-looking statements.
Presenting today are Captain Abdulkareem Al Messabi, ADNOC L&S CEO, and Mr. Gleeson, ADNOC L&S CFO. i will now hand over to our CEO for his opening remarks.
Thank you, Thomas, and very good afternoon everyone, and thank you for joining us today. It's an absolute pleasure to share these truly outstanding results. We have delivered a record-breaking SICOnd quarter and first half for 2025. We have not only surpassed market expectations, but we have also demonstrated the full strength and resilience of our business. We are advancing our digital transformations by implementing the AI, enhanced logistics optimization systems, optimizing fleet operations through the Integrated Logistics Management System, and digitalizing port services with SmartPort. Our results are influenced by efficiency and adherence to high health, safety, and environmental standards, with ongoing improvements in safety and operational integrity. Before we dive into the financial results, I would like to briefly highlight a major strategic win from Q2, our 15-year, $531 million agreement with Borouge.
This long-term partnership strengthens our revenue visibility and supports the UAE's industrialization strategy through enhanced logistics services. Looking at our first half performance, revenue hit $2.4 billion, representing a remarkable 40% year-on-year growth. EBITDA also saw a robust expansion, rising 26% to $744 million, supported by healthy margins at 30%. Net profit for the period reached $420 million, an increase of 5% year-on-year and 18% higher than the SICOnd half of 2024. These results underscore the momentum behind our business and reaffirm our position as a leader in the industry. I couldn't be more proud, actually, of our team's dedication and the value we are creating for our stakeholders. Our first quarter acquisition of Navig8 is delivering meaningful contributions with $649 million of revenue for the first half of 2025.
Despite the softer shipping rates, performance from the business continues to live up to our very high standards of execution and safety and will continue to provide as a growth platform for our shipping activities. During the first half of the year, we invested $1.5 billion into expanding our business. This includes the Navig8 acquisition as well as investments in our integrated logistics division, such as new Offshore Support Vessels and the Jack-Up Barges and capital expenditures for our new build vessels program within our shipping segment. This ambitious new building program comprises 14 LNG vessels with two already delivered, along with nine very large ethane carriers and four very large ammonia carriers, with the VLECs, very large ethane carriers, and the VLACs, very large ammonia carriers, being held in a 50% partnership with our Wanhua Chemical Group partnership.
We are thrilled by the expansion of our fleet, especially as we have secured long-term contracts for 15- 20 years for 13 of the LNG vessels with ADNOC Gas, starting from the SICOnd quarter of 2026, as well as agreements with Wanhua Chemical Group for up to 20 years, covering all nine very large ethane carriers. These contracts provide us with reliable annuity-style earnings that we believe remain underappreciated by the market. Even with the level of growth our business is experiencing, our financial position remains strong, with a net debt/EBITDA ratio of 0.85x . This strength gives us the flexibility to pursue further value-accretive investments, which we have a range of promising opportunities in sight.
We are prepared to deploy up to an additional $3 billion in growth investments, which is not yet reflected in our current financial guidance or in the 16 analysis by recommendations, which currently average over 30% upside in our share price. We continue to remain the primary beneficiary of ADNOC's growth ambition, both within the GCC and internationally, providing us with an extensive list of opportunities to provide logistics and shipping services as ADNOC's requirements continue to grow. This is not just about numbers; it is about strategic alignment with ADNOC's global ambitions. Our resilience is showcased in our results today, and we believe the market will now begin to appreciate the resilience of our growing long-term contracted earnings within our integrated logistics, shipping, and services segments. This level of resilience is rare in our sector, and it gives us the confidence to invest and grow.
We again have raised our financial guidance, which highlights the strong earnings visibility we offer. Our balance sheet remains strong at 0.85x net debt/EBITDA, as highlighted earlier, with financial capacity fully secured to grow while maintaining the financial discipline. For investors, this is a compelling entry point into a company with strong fundamentals and clear growth visibility. Our contracted revenue, strong outlook, and disciplined capital structure ADNOC Logistics & Services a resilient, growth-driven investment story. We are not just delivering shareholders' value, we are building a platform for sustained growth and global leadership. We turn to slide six. ADNOC Logistics & Services, HSE (health, safety, and environmental) isn't just a priority, it's our leading principle. It's the way we plan, we perform, and measure success across every vessel port call and project.
Today, I want to share what that principle looks like in practice and the results our commitment has delivered. We lead with 100% HSE culture because our people, our partners, and the communities we serve deserve nothing less. We measure ourselves with rigor, focusing on two indicators that matter the most: the LTI (lost time incident) frequency and the total recordable incident rate, the TRIR. We have made consistent measurable improvements over time with our LTI improving from 0.35 in 2017 to just 0.03 in 2025. That is a powerful indicator of safer operations and stronger controls across the board. Our TRIR has fallen from 0.65 in 2017 to 0.12 in the first half of 2025, a sustained downward trend that reflects discipline, learning, and continuous improvement. These are not just numbers, they represent people going home safely every day.
In June 2025, we crossed a significant milestone: over 23 million LTI free man-hours ADNOC Logistics & Services . our LNG shipping fleet alone has achieved approximately 16 million LTI free man-hours, a testament to the safe navigation, maintenance, and crew culture. To our crews, our onshore teams, our HSE professionals, and our partners, thank you. These results reflect your professionalism and care for one another, and we are proud of what we have achieved, but we are not complacent. We will continue to improve, to innovate, and to lead with HSE in everything we do. With that, I will now hand over to Nick to update you in details on our results. Over to you, Nick.
Thank you very much, Captain Abdulkareem, and thank you to the analysts and investors joining this call. We really appreciate your interest, and I hope it will be well-rewarded. We're extremely pleased with the results we've delivered for Q2 in the first half of 2025, mostly because we believe it's excellent timing after a period of significant market turbulence to demonstrate the extreme resilience of our business model. In Q2 2025, we've delivered record EBITDA and net profit once again, with EBITDA up 31% year-on-year and net profit up 14% against Q2 2024. As you can see, integrated logistics remains the key value driver in the portfolio and has delivered exceptional value growth, with EBITDA up 27% versus the first half of 2024, and I look forward to giving you more detail on that.
Shipping revenues and EBITDA have grown substantially after the acquisition of Navig8, with EBITDA up 27% versus the first half of 2024, despite a weaker environment for shipping rates. Services EBITDA grew 22% to $33 million over the same period. If we move to slide eight, slide eight speaks to something we're particularly proud of, which is the delivery of value efficiency initiatives across the business to improve profitability in the face of a weaker shipping rate environment. If I look back to the beginning of this year, Captain Abdulkareem called us, the leadership team, into his office, and he told us it's going to be a tougher year on rates than we'd expected. It's time for people to tighten their belts and find ways to drive profitability in the business.
I'm extremely proud of the efforts that have been made across the community in our organization to deliver on that. We expect to unlock over $100 million of net income improvements in 2025 alone through these initiatives, originally targeted to ensure our ability to maintain guidance despite weaker shipping rates. We spread the target opportunity set wide with goals for all business areas, and we've seen an exceptional response, which continues to grow efficiencies well beyond our initially envisaged outcomes. Going forward, we see at least $65 million of these improvements being sustainable value contributors, supporting maintenance of our midterm guidance in dollar terms, even as we factor in potential for weaker rates again in the shipping segments. On slide nine, I know I've run the calls a little long in the past.
I won't go into too much detail on everything, but I am very open to questions at the end, just to ensure we have enough time to cover all the material. Here on this slide, we highlight the exceptional continuing growth announced this morning. Q2 up 40% on revenue, 31% on EBITDA, and 14% on net income, and for the first half, up 40% on revenue, 26% on EBITDA, and 5% on net income. A few important points to note about these financials. The first one is the resilience of financial performance against lower TCE rates, which is driven mostly by integrated logistics and the value efficiency initiatives we've delivered for the business. We have a positive impact on financing costs coming from the use of the hybrid capital instrument, and we'll be using that more fully by the end of the year, delivering further savings.
Margin dilution impact of finalization of G Island, which will be completed within this year, and the outperformance this year on operating free cash flows. As we maintain and beat targets, despite the accounting impact of the Navig8 transaction, you'll recall from Q1 we have depreciation on the fair value uplift, as well as the amortization of the remaining 20% acquisition. For those who are not aware, essentially what we're required to do in accounting terms between now and mid-2027 is that we capture all of the anticipated payment for the remaining 20% of Navig8 and amortize it over that period. We get to mid-2027 and 100% is then fully paid. Moving on to slide 10. At the beginning of January, we asked integrated logistics to prepare to shoulder the load of the year with the prospect of lower rates in shipping.
They've outperformed significantly with growth across all segments, delivering a 17% EBITDA jump, underpinning a 31% net income jump. The improvements comprise broad-based growth and stronger margins across offshore contracts, offshore services, and delivery on EPC and projects. The business is leveraging technology through its Integrated Logistics Management System and investing in artificial intelligence applications to deliver further optimizations. You can see what we've been able to do at the beginning of this year. There's more room to continue to do the same, and just imagine what this can do in other energy fields around the world. Integrated logistics is delivering profitable growth at scale with a diversified earnings base and improving margins. We're well-positioned to continue regional growth and to continue to expand internationally.
If we move to slide 11, offshore contracting delivered 29% EBITDA growth to $315 million and 37% profit growth to $222 million, with Jack-Up Barges on strong rates and stronger utilization even than the past, and ILSP efficiencies very much improved during the period. We've expanded the fleet by an additional three Jack-Up Barges, still bringing utilization up from 94%- 97% in the process, and with improving rates on renewals. Jack-Ups have been a really strong performer for us. The OSV fleet increased 11 units, 24%, to meet increasing client demand for volumes now and into the future. Material handling volumes are up 21% from 489,000 metric tons to 593,000. Really strong growth in the underlying factors of the business with the outlook for that to continue. We move to slide 12.
Offshore services EBITDA is up 17% to $77 million and net income 6% to $42 million. We added four vessels to the fleet, growing from 66- 70 assets. Utilization is down from 94%- 86% due to planned maintenance and re-contracting. We've achieved that uplift in EBITDA and net profit despite an 8% reduction in utilization to achieve planned maintenance, which positions us for higher utilization in the coming year. Offshore projects grew EBITDA 31% to $28 million and net income 34% to $22 million. EPC project delivery for Hail and Ghasha is proceeding well. G Island is slightly behind schedule but anticipated to complete within this year. We're still guiding to $200 million- $250 million of EPC projects at mid to high single-digit margins per year going forward.
As we come out of G Island, the $1 billion project captured mostly over two years, the margin dilution impact will reduce, and you'll see the impact of these value efficiency initiatives in integrated logistics where we've really lifted the margins once again. We grew from pre-IPO in the low 20s to the low to mid 30s post-IPO, and when we take out the EPC works, you'll see we're even delivering beyond that now. On slide 13, shipping is a segment where we've seen the greatest challenge year to date, as we'd anticipated at the start of the year. I'd really like everyone to reflect on the resilience of our platform. We can experience a negative environment in our spot-exposed market and still deliver exceptional results.
A, because we have so much long-term contracted income, B, because we've been so effective at improving efficiencies and managing our margins, and C, because of the extent of profitable growth that we have ahead of us. Tankers revenues are up 163%, and EBITDA is up 30% on the Navig8 acquisition, but net income is down 36%. That's driven by the Navig8 accounting that we've shown in the first quarter of this year and is attached as a summary slide to the presentation. In cash terms, though, focus on the EBITDA was very significantly up, even in a weak market. As rates firm, we may consider some term charters; however, our mid-term view remains positive.
We guide against MSI rates, which tail off towards 2028 and 2029, but actually we remain optimistic, which is related to our views on the delivery of vessels versus the ton-mile demand for tanker transportation going forward. Gas carriers are 85% up on EBITDA and 138% up on net income, despite the rate environment, but this is driven by a 26% one-off income. We have $26 million of one-off income on the termination of the Al-Khazneh contract and on the sale of the MGC Yas. Those won't be repeated. Next year, we move the new fleet onto long-term contracts, which will be a major change for shipping. From Q2, we'll start to see the LNG carriers move onto these long-term seven 15-year contracts, eventually delivering 20-year contracts. Those contracts will perform well above the current market environment.
They were delivered at a time when rates were closer to $100,000 a day. Over time we start to move the margins up very significantly on gas carriers. Dry bulk continues to languish with lower rates and charter inactivity. Net profit is slightly above zero. On slide 14, operationally in shipping, we've seen two new LNG carriers delivered this year, or actually November last year and one this year, and two more coming this year, as well as one Very Large Ethane Carrier. We sold the MGC Yas in January, as I mentioned. We've been more selective on charters in and volumes in dry, given the rate environment, so that you see low activity in dry bulk at the moment.
Gas has seen some strengthening into the $20,000 a day range on the back of increased gas exports from USA and Middle East, but we don't anticipate a market recovery prior to our vessels going onto long-term charters. On slide 15, this explains the time charter rate environment where we've seen a slight recovery in tankers and a continuing uptrend, weakness in dry bulk, and relative lows in LNG carriers. Although we went much lower, we think where we are today is far below where we've been in the recent couple of years and far below where we expect the market to be in 2027 and beyond. Geopolitics and conflict are impacting tanker rates, but we do see near-term strengthening. Dry bulk, we anticipate continued softness. We see increased scrapping in older LNG carriers, and that should amplify the tightening of rates once new production comes online.
We're less exposed to that. We're very focused on the long-term contracted income, which is already built into our numbers. On slide 16, this provides an overview of our asset sales and purchases. It's a new slide that we think would be useful for understanding, just given the extent of change in the fleet and the growth that we're achieving. It also shows the delivery timelines, which we typically append for information in our presentations going forward. On slide 17, this is familiar content presented in a slightly different way, modernized by our IR team with capabilities beyond my own. I think this shows even better than we have in the past, just how well protected we are by long-term contracted income that you can see on the bottom of the page, and the degree to which we maintain and desire to have an exposure to the spot shipping environment.
You can see now that that exposure is reducing over time from 33% in 2025 down towards 23% on an EBITDA level in 2029 and 2030. Part of that is driven by a reduced outlook on rates, which is already factored into our guidance, and part of that is, of course, driven by the growth in other areas of the business. If we move to the next slide, slide 18, it's here to break down our long-term contracted revenues, with 89% of integrated logistics contracted year to date, 7% of services, and 11% of shipping. Most important is to understand the development of that $26 billion of forward contracted income over the coming few years and the degree of protection that affords against our earnings.
Now, bear in mind, you've seen the first two quarters of this year with a relatively weak shipping environment and the strength of performance that we've delivered. That's before we start on these 340 years of contracted gas activity. What you're seeing is our resilience before the bulk of the resilience even kicks into the platform. Integrated logistics is benefiting from strength in Jack-Up Barges and the Integrated Logistics Services Platform. Shipping is benefiting from gas contracts going forward, and services benefit from the long-term contracts on petroleum ports authorities and oil spill response activities. On slide 19, we show the development of the P&L in our services business, which now includes commercial pooling and share of profits from bunkering. As a result of this, EBITDA is growing strongly by 22%. You don't see the growth in revenue because for bunkering, we're only bringing in the share of profits there.
We still seek opportunities to extend this services business in the region and internationally to increase its relevance to our overall portfolio. On slide 20, cash flows have grown significantly with the delivery of value efficiency initiatives and consequent margin improvements. Remember, we have these accounting adjustments between the EBITDA and the net income line, which are impacting our shipping business post the acquisition of Navig8 because of the great value of that transaction, which needs to be depreciated. The recovery that we've made to more than outweigh that additional depreciation through value efficiency initiatives is all paying off in cash. Cash flows have strengthened significantly. We have more than $600 million of operating free cash flows for the half. We're at 0.85x net debt/EBITDA and still have exceptional financial capacity to fund highly value accretive growth. There are tremendous opportunities out there.
We've shown in the past with the growth of the ADNOC ecosystem and the growth of our international portfolio of businesses, we're really well-positioned to continue to deliver those low double-digit unlevered IRR projects to continue to grow our P&L. We project a $287 million dividend for the full year 2025. Slide 21 addresses our growth investment plan and funding with a table on sources of funds for financial modeling purposes. We anticipate remaining within 2.5x net debt/EBITDA on an on-balance sheet basis at a peak, returning to a stable 2x net debt/EBITDA over the midterm. That doesn't include the hybrid capital instrument, and it doesn't include the financing we have in place on six VLGCs in the AW Shipping joint venture, nor the financing that we'll raise on very large ethane carriers and very large ammonia carriers in that 50/50 business.
We have a strong pipeline of new investment opportunities and maintain our focus on delivering low double-digit unlevered IRRs, and we do see a great pipeline at that level. If we move to slide 22, segmentally, we've increased guidance in a number of areas, with any downward adjustment in midterm guidance only the consequence of the now higher base year due to those upgrades. Effectively, we're maintaining where we were in dollar levels at least going forward. We do have some positive impact, actually, of the value efficiency initiatives, but the strong growth we've seen in 2025 impacts the denominator, which means you might see in the midterm a slight retreat in some of that guidance. On integrated logistics, revenues are up to a mid to high single-digit year-on-year guidance, and EBITDA is maintained at a mid to high teens year-on-year guidance.
In the midterm for integrated logistics, low single-digit reduction in revenue, the same as before. That's because of the tail-off of the EPC projects, but delivering a low single-digit growth in EBITDA. In shipping, we've upgraded to a high 80% revenue growth and upgraded to a mid-30% EBITDA growth year-on-year in shipping. In the midterm, low to mid-single-digit growth and high single to low double-digit EBITDA growth. In services, we have low double-digit year-on-year growth in revenue, and we're projecting an upgrade to a low 20% year-on-year growth in EBITDA. In the midterm, we're upgrading to low double-digit growth in revenues and mid to high teens growth in EBITDA. Slide 23 wraps that all up in the ADNOC L&S group 2025 and midterm guidance. On revenues, we've upgraded to high 20% year-on-year growth, delivering low single-digit thereafter.
On EBITDA, we see mid-20% year-on-year growth with mid to high single-digit CAGR thereafter. In net income, we see low, and we've upgraded again to low to mid double-digit year-on-year growth, delivering mid to high single-digit growth thereafter. You can see exceptional growth in 2025 and maintaining our numbers in terms of delivery out over the next few years with an adjustment then to the medium-term CAGR. CapEx remains as planned with significant continuing financial capacity. Again, we target 2x- 2.5x net debt/EBITDA. We plan to fully utilize the $2 billion hybrid capital instrument, which pays dividends, not interest. We're projecting all-in financing costs averaging 60%. That's what's built into our model. Actually, you'll see we're ultimately paying quite a bit less than that.
We're paying 95 basis points on SOFR for our senior unsecured facility and 125 basis points on SOFR for our hybrid capital instrument, which of course shows a zero on the P&L. Our effective tax rate remains 9% on Integrated Logistics and less than 1% on Commercial Shipping. We maintain our dividend 5% progression year-on-year, with this year signaling $287 million planned for 2025. I would like to thank everyone very much for your attention. The key highlights for us, we've upgraded our outlook for 2025. We remain confident in the indications that we gave for growth in dollar delivery over the medium term. We see continued strong earnings growth. We're delivering around or just above a 9% CAGR in EBITDA over the midterm. We see growing EBITDA margins through the value efficiency initiatives we've driven in the business.
We continue to execute on strategy using Zakher Marine International and Navig8 as new platforms for growth in the region and further internationally. We're committed to continue to deliver attractive shareholder returns going forward. With that, I'll pass over for questions, please.
Thank you. If you would like to ask a question and join the call via Teams, please use the raised hand icon found on your toolbar. Alternatively, you may submit a question in writing using the Q&A feature also found on your toolbar. Please hold while we allow questions to queue. Our first question comes from the line of Lydia. Lydia, if you may state your full name and company, unmute locally, and proceed with your question.
Hi there, and thank you very much for the presentation and for taking the questions. It's Lydia Rainford from Barclays, and congratulations on a fantastic quarter and particularly on the safety results. That was really very impressive. I've got two main questions that I'll stick to. The first one just on the cost savings and the recurring efficiencies that you talked about. $65 million is obviously quite significant. Where is that actually coming from? Is that part of the AI rollout? Is it a different way of doing things? Just to help us understand how sustainable that is. SICOndly, if I could come to your international ambitions and that you talked earlier, very comparatively about the strategic alignment with the ADNOC ambitions, both domestically and internationally.
Is that how you see it as part of the, obviously, we've got the XRG as of expansions coming through, just the scale of those ambitions internationally?
Very good. Thanks very much, Lydia, and I really appreciate your comment on the safety record of the company. It's honestly something to be incredibly proud of. The organization's worked so hard to maintain that, and in our industry, it's absolutely critical to maintain those really strong outcomes on safety. We've been working very, very hard to address the concept of complacency in the organization because we've had great results now for multiple years, and it's really important to keep people aware to make sure that we never slip on safety. On costs, it's a really great question. We're doing a lot in terms of focusing on what we call AI, digital, and technology savings. There's a combination of those that factor into everything we're doing. There is a slide in the deck which shows the areas we've made most of the savings, but in summary, they're really on OpEx.
They're on delivering value on the Integrated Logistics Services Platform, generating better profitability in that part of the business. They also go down to smaller areas like, for example, optimizing our financing and our use of cash, minimizing our use of debt. The areas that we're benefiting mostly from technology would be in the Integrated Logistics Services Platform. We're investing at the moment in AI solutions to take us to the next level, optimizing use of deck space, optimizing cargoes and routings. We also have systems which are helping us to optimize routings and commercial opportunities in the shipping side of the business. We benefit from technology that we've acquired together with the Navig8 platform, and I think we're really only just at the thin end of the wedge in terms of getting that benefit out of the Navig8 capabilities, which are very strong indeed. It is a combination.
I think AI will tend to be at the next stage. We are benefiting from AI already, but there's much, much more to be done as we gather data and start to understand how we can benefit from digital analysis of our business. In terms of international growth ambitions, I think you've hit the nail on the head. There's a lot of opportunity that will come through XRG in terms of international gas transportation, chemical transportation, but also integrated logistics connected to investments that the XRG platform is making as well. Also, ADNOC far beyond XRG has many other growth programs in train, and wherever there is a logistics, and in particular a maritime logistics aspect to that, we're very focused on making sure that we're making the best offer available in the market to win that work going forward. We do obviously grow beyond ADNOC as well.
Our client base continues to grow and has grown significantly with the acquisition of the Navig8 platform. It's a combination of benefiting from ADNOC's growth and extending those capabilities and asset base to continue to grow internationally beyond ADNOC as well.
Thank you all. Next question will come from the line of Ricardo Rezende from Morgan Stanley. Please unmute locally and proceed with your question.
Hello. Thanks for taking my question. Nick, if I may just follow up on what you mentioned about international expansion, I wanted to focus a bit more on integrated logistics. When you think about a new geography, how should you think about your entry into those contracts and how you're bidding for those contracts? Would you be willing to be a bit more aggressive sometimes on the pricing as you can start building your network effect, and then you can deliver a bit more of your assets within that region? The SICOnd question that I have is on the $3 billion that you mentioned under your firepower. What's the current status of some of the negotiations? Do you see some scope for transactions on a similar scale as Navig8, or should we be thinking more about some bolt-on acquisitions? Thank you.
Right. Thanks very much, Ricardo. On the international expansion, obviously the growth in integrated logistics is really important to us. If you go back to November 2022, we completed the acquisition of ZMI . That contributed significantly to the growth and internationalization of the integrated logistics business for us and got us into the Jack-Up Barges space, which has been really important to our growth. After that, we've completed the acquisition of Navig8, but also this large number of international gas transportation contracts and the growth of the AW Shipping joint venture. It feels like the next step is the next phase of extension for the integrated logistics business. Where will that make sense? It'll make sense in energy fields which are logistically suboptimal, where we can deliver the platform that we have that's capable of significantly improving efficiency and significantly reducing cost as a result of that.
Do we need to move differently on pricing to enter into new markets? I think time will tell, but I think a 30% EBITDA margin is not an unreasonable expectation in the business activities that we're performing, including in other markets around the world. Bear in mind the significant savings that we've been able to deliver to clients in the UAE , for example, through the Integrated Logistics Services Platform. There should be a lot of room to successfully make those offerings in the right market. How do we achieve market entry? I think it's very likely to be done in partnership or through acquisition of another business. It's very difficult to turn up cold into a new market and simply relocate assets. The configuration of assets is typically going to be specific to the location. The customer and the government relationships in that location will be important.
We're constantly working on finding the right partners and acquisition opportunities to extend the platform that we've already built. In terms of the use of the $3 billion, I always balk at this one a little bit, right? The way I think about that $3 billion, it's surplus financial capacity we have rather than a very specific opportunity set. At the moment, we build into our numbers the opportunities that we've either already realized or contracted or are extremely high probability. We don't build in all of the opportunities that we'd like to win, but we don't know where we stand yet. For example, if we see opportunities coming through XRG, but we haven't begun negotiations or discussions about supplying assets, we haven't started entering into transportation agreements, none of that would be built into our numbers.
That $3 billion is the financial capacity for us to be able to achieve our ambitions, selecting the best value accretive opportunities above 10% unlevered IRR going forward.
Thank you.
Thank you. Our next question comes from Jean-Pierre Dumargin from Kepler Cheuvreux . Please unmute locally and proceed with your question.
Yes. Good afternoon, everyone, and congratulations on these strong results. Focusing on the integrated logistics segments and more specifically on the offshore contracting business, the EBITDA margin rose sharply in the SICOnd quarter to 51% compared to an average of roughly 44% in the previous quarter. There may be a bit of an overlap compared to the previous question, could you elaborate on the main drivers of this significant improvement and clarify whether any potential one-offs contributed to boost that performance? Looking ahead, do you think that an EBITDA margin above 50% is sustainable in offshore contracting?
Yeah, it's a great question. Thanks very much. Two elements to that, really. The first one is we have seen quite a lot of strength in the Jack-Up Barge market. We saw utilization grow from 94%- 97%, which is obviously very high. I think somewhere in that range looks sustainable into the future just because the market is so tight, but 97% is clearly exceptional. We also saw re-contracting on Jack-Up Barges at even stronger rates than we've had in the past. We also saw in the Integrated Logistics Services Platform improvements in profitability. Some of that will be repeatable going forward, and a portion of that I think will be challenging to achieve.
Just to explain that, one of the efficiencies that's been obtained in the early part of this year in integrated logistics is redeploying assets that were made available as a result of optimization of use of deck space and better fleet planning. It won't always be the case that we have those same chartering opportunities for vessels which become available. We also had, to a certain extent, a retroactive addition to profit, which is the result of completion of a range of services over a period of time. We don't normally go into a lot of detail on that, but ultimately, most of that should be sustainable going forward. That's why we talked to $65 million as being a sustainable improvement going forward compared to around $100 million that we'll achieve this year in terms of overall value efficiencies.
Just a quick follow-up regarding the $65 million. How would you allocate these savings between the different segments, in particular within the Integrated Logistics Management System business?
Yeah. We've got a slide that shows how they've been achieved during this year, and what we've done is we've built that into our guidance going forward already. We don't need to make any kind of separate accounting for those $65 million going forward. To give you an idea where they've come from, a part of it was through the improved efficiencies in the I L S P, integrated logistics. A good part of it was through OpEx savings in shipping and bringing down our forward OpEx. A good part of it was through improvements in planned maintenance and dry docking. For example, the business has become much better at advanced planning and ordering of inventories and ensuring that all items are available on day one of dry dockings to minimize the dry docking period. There are a number of areas we've factored them into the guidance going forward.
That $65 million uplift is already captured between integrated logistics, shipping, and services in the right proportions for the coming years. It's also, by the way, already factored into the budgets and the targets of the individuals who are responsible to continue to deliver those improvements.
That's great. Thank you very much.
Our next question comes from the line of Faisal Al-Azmeh from Goldman Sachs. Please unmute locally and proceed with your question.
Yes, hi, and congratulations on the strong set of numbers. I have two questions on my end. Maybe just trying to understand the dry bulk performance year to date, and how do we think about it generally as a business going forward? My SICOnd question relates to the guidance. I mean, you've raised guidance for the year, but medium-term guidance remains kind of unchanged. Are you being conservative generally as you think about the forward, or are you expecting some softness in the medium term versus what you initially expected at the beginning of the year? Thank you.
Hi, Faisal. Thanks a lot for those questions. Yeah, I think for dry bulk, the way we look at that market is a high proportion of our fleet has always been operating on a charter in, charter out basis. That means they make a margin, and those margins compress when the rates are lower. With a lower rate environment, we've carried out less charter in, charter out activity, which is why you're seeing such muted results in that area. Around two-thirds of our business is typically charter in, charter out. When the profit's not there, we're not highly motivated to enter into the charters in for that business. We still see it as a very interesting business going forward. The UAE is the world's largest exporter of sulfur. There's a tremendous amount of business beyond that sulfur in the UAE, and we've been very successful in the past.
It's just a matter of being in the right business environment to conduct that activity. For your SICOnd question, in terms of conservatism, I think my answer to that would be the way that we've always presented the results has been based on what is already long-term contracted, the assets we already own. For the spot market, we tend to follow the market spot rates as they've been projected going forward. You see those projected rates coming off a little in 2028, 2029 compared to where they were before. We have topped up for the components of the value efficiency initiatives that we expect to be able to carry forward. I don't regard it as particularly conservative in that respect. I just hope it's very predictable for people.
Our view, by the way, on the tankers market compared to where the rates are showing on MSI at the moment would probably be somewhat more optimistic than that, but we haven't factored that into our guidance. The reason for our comparative optimism is when we look at what we project ton-mile demand to be for tankers compared to the build-out of the fleet, we think there is room for rates to strengthen. Of course, that will be impacted even more positively if we see continued geopolitical disruption and conflict. We're simply following the market projection on rates when we deliver our guidance. What we don't factor into our guidance is anything that's not yet delivered. We do have a tremendous growth program and a really strong pipeline of new opportunities. Where those aren't cemented yet, they're not yet factored into the guidance that we're giving to the market.
Some would regard that as relatively conservative. I think the best way to look at it is if you take the additional financial capacity we have to invest, our history of successful investment, and the unlevered IRR targets of at least 10%, and our history again of delivering well above those, I think you could factor in that there's opportunity upside that's not captured in our numbers as a result of the position we take on guiding without including opportunities that we haven't yet realized.
Thank you very much.
Sure.
Our next question comes from the line of Ahmed Ishaqi from SICO Please unmute locally and proceed with your question.
Am I audible?
Yes.
It's Ahmed Ishaqi from SICO. Congrats on the great set of results. I have a couple of questions. My first question is in terms of synergies. You've mentioned around $50 million synergies per year from Navig8, if I'm not mistaken. Have any of these synergies been realized in the first half of the year, and is it expected to be realized in the rest of the year? My SICOnd question is related to the offshore, I mean, integrated logistics segment. Do you have a target number of vessels in mind, and is this included in the guidance itself? Basically, the five new vessels, including the offshore support vessels, are these included in the guidance, or is it part of the $3 billion incremental CapEx?
Lastly, given the strong growth in revenues in the first half of the year for the integrated logistics segment, around 40% growth in revenue, you have the 2025 revenue growth as mid to high single digits. Are you expecting a softening in the revenue growth in the SICOnd half of the year, or are you just conservative with your guidance?
Okay, great. Thanks very much. Let me start on the synergies. When we announced the Navig8 transaction, we announced an expectation of $50 million of synergies over the life of the investment, which was obviously a very conservative view if you look at the size and scale of that platform. We didn't want to project synergies in detail before we'd done the homework. After we completed the acquisition, we projected synergies around $100 million over the same period, over the life of the acquisition. Since then, we've gone to the market to say that we see $20 million of synergies per year starting in 2026. Actually, we are already realizing synergies from the platform in 2025. They're not as strong as they would be in a strong market, but examples of those, we've moved 20 of our tankers into their fleet.
We see an uplift on achieved time charter earnings, which is not a surprise because of their global commercial presence. We're working on further synergies being achieved, for example, through technical and operations costs, through plant maintenance, repairs, and maintenance, but also through bunkering. We still anticipate delivering strong synergies from 2026 and going forward. There will be some component of those synergies in the $100 million of value efficiency initiatives that are being delivered in 2025. On integrated logistics, I think the target number of vessels, yeah, we don't really think in exactly those terms. What we do is we look at the capacity that we have to support for the energy fields that we're operating in, and then we look at a balance between owned and chartered in assets. We'd like to keep that balance anywhere between 40/60 and 60/40.
The reason having chartered in assets is important to us, even though it reduces profitability in the short-term, is it gives us an exit mechanism when the market softens. That's a really important discipline. At the moment, it's very tempting to have a much higher proportion of owned vessels because the market is high, but over the cycle, we'll do better if we maintain that discipline around having a combination of owned and chartered in fleet. The number of vessels that we maintain is really delivered by the projections of requirements from our customer base and our own projections based on growth. That's how we look at the size of the fleet, but no particular target number. Also, there's a lot of differentiation across asset classes as well.
There are certain assets that our key clients will reach out and want us to own or charter in, and we'll make decisions point in time whether we decide to buy or to lease those vessels based on the outlook for demand from our clients. On the final point, on the delivery of 40% revenue growth and the outlook going forward, I think you see in 2025, essentially what we're saying is that we've already delivered and will deliver very strong growth this year. The impact of that, because we've increased the growth in the base year 2025, reduces the outlook into the midterm. When we uplift 2025, the cumulative average growth rate over the remaining period reduces as a result of having a lower denominator. That's the only impact there. It's not really around being particularly conservative.
I think when you run the numbers based on what we've given, you'll find that the numbers for the future years are the same or higher as the numbers we've guided to before. It's just that the base year 2025 is increasing.
I think my question was about the SICOnd half of the year. The growth in the first half of 2025 was 40% for the integrated logistics, and the guidance for the rest of 2025 is mid to high single digits year-on-year growth. My question was mainly about are you expecting softening in integrated logistics revenues in the SICOnd half of 2025, given the strong revenue growth in the first half?
Oh, okay. I see what you're saying. Yeah. Some of what we're seeing in the first half is, I mentioned, a portion of the improvements that we've been able to make we see as being not necessarily repeatable. We're being cautious, I would say, as opposed to conservative about projecting that we'll be able to deliver the same type of positive outcomes that we have in the first half. If we look at the remainder of the year, we also see in the EPC works, the EPC works is largely complete. There'll be less coming from the EPC works in the fourth quarter of this year. For offshore contracting, we haven't assumed that we maintain those same high utilizations on Jack-Up Barges and the high volume growth that we had in the Integrated Logistics Services Platform through to the end of the year.
There is, to a degree, we're not factoring in Q3 and Q4 being as positive as they have been in Q1 and Q2.
Okay, thank you very much. All the best.
Thank you.
Our next question comes from the line of Claudia Carpenter from S&P Global. Claudia, please unmute locally and proceed with your question. Claudia, please unmute and proceed with your question.
Is that good now?
Loud and clear. Thank you.
I just have three quick ones. Do you plan to release your bunker sales since Navig8 has that every year?
Yeah. The first one on bunker sales, we don't have any plans. Integrate is a separate business. It's 50/50 owned with a third party. We don't release details on the bunkers, and they're not material to our results overall.
Okay. The next one is the UAE started a recycling law in June. Do you know about that? Just wondering.
Yeah, we know about that.
Do you consider it a growth market?
Not for us. It's not a market that we're targeting. You know we're a player in the younger asset space. We're not typically owning assets even through to recycling. It's not a part of the market that's a focus area for us.
Okay. The last one is about the EU having concerns about the Covestro acquisition because they're concerned about ADNOC backing the company. Is that something that you are concerned about if you're looking at assets in Europe?
I think, yeah. I'll answer that question in two parts, Claudia. I think that the first one is one of the reasons that we never build anything into our numbers that's not already cemented is to avoid a kind of a negative impact of anything like this. We don't have any information that would suggest to us that the Covestro deal is not going ahead or XRG not going ahead as planned. It's not something that's within our decision authority, nor that we're able to discuss. There's nothing that's been factored into our guidance that contemplates that. We've already been through a very extensive antitrust process in a large number of countries internationally in relation to the Navig8 acquisition.
We didn't feel anything or any pushback in the process of that acquisition, which would suggest to us that for our business area, there are any concerns with any of the jurisdictions that we dealt with. I can tell you that was pretty much every major maritime jurisdiction you could contemplate on the planet.
All right. Good, thanks.
We have a further verbal question from the line of Harsh Kadam. If you may state your company name, unmute locally, and proceed with your question.
Thank you for my question. My name is Harsh from ABI Analytics. My question is the effective tax rate showed at 6% in 2025. Do we expect it to remain at similar levels in 2026, or are we expecting it at 9%? Thank you.
Thanks a lot, Harsh. The effective tax rate will be proportionate to our business activity. We pay 9% effective tax rate on the integrated logistics business and most of the services business. We pay 1% effective tax rate on commercial shipping, which is in line with the international tax rates applicable to the shipping industry. Just take 1% times shipping, 9% times the rest of the business, and that will give you the effective tax rate in any given year.
Thank you.
There are no further verbal questions. I'd like to hand back to the team to address any written questions and for final remarks.
Thank you very much. We're not seeing any written questions on the platform unless someone can advise me otherwise. With that, unless we have any other verbal questions to be raised, we'll thank everyone very much for your time and for your interest. I see one hand going up.
Yes, we have one verbal question from Mohammed Elmessiry. If you please may state your company name and unmute locally, proceed with your question. If you may unmute locally.
Thank you for the presentation. I'm sorry about that. I had just one question in the Q&A box. I just wanted to ask concerning the rates for tankers. I mean, why are they decreasing, but the fundamentals are still strong for tankers and all the books are record those? Also, if management is still bullish concerning the right environment for tankers specifically after the acquisition of Navig8? That's the question I have. Thank you.
Thanks, Mohammed. I'm really glad you asked that question. It's a very interesting one when you look at what's happened this year. At the beginning of this year, so much has happened it can be hard to remember. If we go back to the beginning of this year, we basically saw a reduction in volumes being transported and tanker rates started to fall. Following that, we went into the global trade wars environment where there were fears of de-globalization, what was going to happen in terms of international energy transportation. In particular, there was the threat of U.S. port call charges being imposed. I think a lot of what happened in the market was based on perception. The reality is that the supply locations and the demand locations for energy tend not to change very significantly.
When you have anything which impacts the availability of international transportation routes, that will normally push rates up because it results in suboptimal logistics. I think the third factor was these U.S. port call charges, but those are incident on the charter, not on the vessel owner. I think what happened, however, was you had a lower level of term contracting activity linked to the uncertainty around the impact of the U.S. port charges. That meant that the market was more liquid in terms of availability of vessels, and we saw rates come off. Since then, we've seen rates start to recover, and I think part of that is being driven by, let's call it, natural supply and demand. Part of that is being driven by geopolitical events like the Red Sea.
Also in the background, you have what's happening, the conflict between Russia and Ukraine, the outlook for the potential for oil to be transported onshore into Europe from Eastern Europe, and also the potential for the release of vessels from the so-called dark fleet, which has been servicing sanctioned oil cargoes. We've seen a number of actions taken, removing vessels from the market, from the dark fleet. However, the dark fleet continues to be quite large, and there's the potential for a much larger number of vessels to exit the fleet globally if that trade reduces. Finally, we've seen more recently enforcement of sanctions resulting in a change in the location or the sourcing of cargoes going into China and then into India, which again creates a positive push on tanker rates. There's a very large number of factors.
In our view, on balance, they create much more upside for the tanker rate environment than downside. I think there's a lot being driven by perception at the moment and by liquidity because of the lack of term contracting activity, which has resulted in rates being depressed compared to what you might expect if you were a macro economist.
That's perfect. Thank you very much. I really appreciate it.
No problems, Mohammed. I can see now on screen there's a question from John. Hello, do you expect growth opportunities from expansion efforts at Upper Zakum and other Abu Dhabi oil fields? The answer to that in short is yes. We do see projected growth in demand. We do go through an internal discussion cycle about what requirements will be going forward. We definitely do expect continuing growth, but we don't factor that into our guidance until that's realized in the specific demand for our activities. I have another question from Luca. Hi, could you please provide more color on the Jack-Up Barges market in the Gulf? Is this a sector in which you would like to increase your presence? If yes, would that be via ordering
New builds or would you consider acquiring existing assets and companies? The answer, I think, is yes to all of the above. We've been able to create a really strong market in the operation of Jack-Up Barges. We have a strong presence supporting ADNOC with Jack-Up Barges, but also third-party clients in Saudi Arabia and Qatar. We also have an asset in Iraq at the moment. We have assets which have been operating in Africa. Yes, we see a lot of potential to increase our presence in this market. It's a good, profitable segment if you're a good operator. We made a good decision in the acquisition of Zakher Marine . They've demonstrated that they have exceptional operating capabilities in the Jack-Up Barge space. The answer is yes, it could be interesting to order new buildings.
Yes, it could be interesting to acquire existing assets or even companies in the space because we believe we have superior access to clientele and we believe that we're operating on strong margins as a result of the strong operating capabilities of Zakher Marine. The next question I see there is from Balal. Can you please give us more clarity on when you expect the shipping segment to start reporting growth on the bottom line? Out of the $100 million targeted savings, how many have already been realized in the first half? Let me answer the SICOnd question first. In the first half of this year, we've delivered around $51 million of specific savings out of that targeted $100 million. We've also delivered improvements through a $28 million termination of the Al-Khazneh contract and $8 million gain on sale of the MGC Yas.
We anticipate, let's say, substantially more than $50 million being able to be delivered into the SICOnd half of this year as well. In terms of the clarity on expecting the shipping segment to start reporting growth on the bottom line, I think that growth is really going to be driven by what happens in the rates environment. There are two factors. The first one, when we put our LNG carriers onto these long-term contracts, seven and 15-year, 4x t 15-year and 1x seven-year contracts, starting from the SICOnd quarter of next year, you'll see significant bottom line growth in the LNG carrier space as a result of that. In tankers, it's going to be very much driven by the tankers rate environment that we've already talked about. In dry bulk, it's about the return of the dry bulk market.
We think that the dry bulk market might take some time to return. In terms of tankers, we do see that market strengthening and we do expect to see growth in the bottom line in the tankers market in the coming year. Just seeing if there are any other questions left on screen. I think that covers all of the questions on screen. Oh, sorry, I have one more from Waruna. Which routes is your tanker fleet mostly deployed on, both the ones you own and Navig8? The answer is global non-sanctioned routes. We're really everywhere in terms of the modern international tankers market. We're not selective navigators and international business, which has been successful globally. It's not the case, for example, that we're focused in the UAE or in any particular destination market in terms of the tankers.
We operate as any other international tanker player with such a large fleet. I have a question from Ahmed. Do you see an opportunity from the North Field expansion in Qatar for the integrated logistics segment? I think the answer again is yes. All of the expansion that you see happening in the GCC, not just in Qatar but in Oman, for example, creates opportunities for us to operate in the integrated logistics space. We're focused on seeing what we can realize from all of that growth in the region. I think that reflects one of the other questions we've seen. With that, I see no additional questions unless there are any hands ready to go up. Thanks very much for your attention, everyone. Despite my best efforts, we've gone a little bit over time, but I really appreciate the great questions and your attention to the presentation today.
I encourage you to reach out to our investor relations team and make contact with further questions that you have around the results. We're extremely proud of the results that we've delivered today. I hope that you'll see that the growth in 2025 and the maintenance of those long-term dollar projections that we've already given to the market puts us in really good stead to deliver high value to shareholders going forward on top of the many opportunities that we have to grow value accretively in the future. Thanks for your attention, and I hope it's well worth the effort that you've put into listening to the call. Thank you.
This concludes today's conference call. Thank you all for joining. You may now disconnect.