Hello, thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the TORM plc first quarter 2023 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number 1 on your telephone keypad. You can also ask your question on the webcast. I would now like to turn the conference over to Andreas Abildgaard-Hein, Head of Investor Relations. Please go ahead.
Thank you, welcome to TORM's conference call. We are pleased to have you with us, we have been looking forward to presenting to you the results for the first quarter of 2023. We will refer to the page numbers that we present during our presentation, at the end, you can ask questions if you are on the phone conference. If you are joining via webcast, you have access to ask questions during the presentation as well. After this conference, you'll be able to listen to a recording, as usual, you can find our presentation and other relevant data on our website. Please turn to slide 2. Before we start presenting the results, I would like to draw your attention to the safe harbor statement. Please turn to slide 3. Today's presenters are, as usual, Executive Director and CEO Jacob Meldgaard and CFO Kim Balle.
Please turn to slide four. I will now hand over to Jacob.
Thank you, Andreas, and good afternoon, good morning to all. Thanks for connecting with us today for our first quarter 2023 results presentation. During the first quarter of 2023, the product tanker market has remained strong with continued high volatility. We have achieved an EBITDA of $199 million and a profit before tax of $155 million, both of which are reduced by $15 million due to unrealized losses on FFA contracts that we have incurred to secure strong earnings on part of our earning days here in 2023 and into early 2024. Return on Invested Capital ended at 29.2% for the quarter, and our balance sheet remains strong at a net LTV of 26% and available liquidity of $575 million.
This morning, TORM's board of directors approved a dividend of $1.46 per share based on the first quarter, and we expect that we'll distribute around $121 million here in early June. As of today, we have taken delivery of all of the seven LR1 vessels that we acquired a little earlier this year back in January. We expect that the three MR vessels that we announced to be acquired here in March will be delivered to us by the end of this month. As of the 5th of May, we have covered 64% of the target second quarter tonnage days at $40,086 per day. Here, please turn to slide 5.
Since the start of the Russian invasion of Ukraine now, back in February 2022, we've seen strong improvements in product tanker rates, increased trade flows, longer trade distances, mainly due to the EU sanctions on Russia, but partly also due to more fundamental factors such as the oil demand recovery, recent refinery closures, and consequently increased import needs. This has moved the product tanker fleet closer to the point of full utilization, which again has led to higher freight rates. This is where even small changes in the underlying demand and supply are creating high volatility in freight rates. This is what we have experienced in the past year. Please turn to slide 6. This rate volatility can be demonstrated by movements in the average freight rates.
In the past months, we've also seen increased rate volatility across the different regions, which has in turn led to even more MR vessels ballasting over longer distances to optimize vessel earnings. These more inefficient sailing patterns have tightened the availability of vessels on the market and further supported freight rates. In this environment where we see increased volatility, being able to then position our fleet towards the premium trades and the regions is even more important. This means that having access to the right customers, the right cargo combinations, is really essential. We can see that we, with the One TORM integrated platform, continue to have really strong support from our customers, and we remain confident that we will have access to the cargos and the trades that will enable us to position our fleet towards the premium regions. Please turn to slide 7.
When we look more closely at the main market drivers, the geopolitical conflict in Europe and the resulting EU ban on Russian oil products has been the most important demand driver for more than a year now. As a result, the composition of EU imports has undergone a significant change from being mainly short-haul to being now predominantly long-haul. This has translated into a 48% increase in EU imports ton-mile during the post-sanction period compared to the same period a year ago. This is in spite of the fact that EU imports are almost 20% lower year-on-year, which itself has been a result of higher imports and product stockpiling ahead of the sanctions, as well as the fact that EU oil demand has seen some weakness so far this year.
Similarly, Russia has so far been successful in redirecting its clean products to markets in North and West Africa, to Turkey, some to Brazil, the Middle East and also Asia. Again, increasing ton-miles, although recently we have seen some slowdown in Russian volumes, presumably due to refinery maintenance. Here, I kindly ask you to go to slide 8, please. Looking at some of the more fundamental drivers, so not related to geopolitics, changes in the refinery landscape are also an important driver on the market. Since 2020, around 3 million barrels per day of refining capacity has been closed down permanently. Most of the affected capacity is located in regions which are already large importers of refined oil products such as Australia, New Zealand, South Africa, just to mention some of the examples.
These regions' import needs have increased in conjunction with the refinery closures and are expected to increase further as oil demand is still picking up, with especially jet fuel demand still recovering. On the other hand, these refinery closures coincide with new capacity coming online, mainly in the Middle East and also in China, regions that already today are large exporters of oil products. Much of this capacity, especially the Jazan and Al Zour refineries in the Middle East, are currently ramping up to reach their full capacity. These refineries are, to a large extent, concentrated around middle distillates, which we believe will further facilitate the trade recalibration triggered by the EU ban on Russian oil. Refinery capacity increases in China this year are likely to cater more for the increasing oil demand domestically after the country lifted all of the COVID lockdowns.
In the short term, we do not model any significant increase in exports from China. Should China increase its export quotas in the coming months, this would be another leg up on the market. Please turn to slide 9. The positive outlook for the demand for product tankers in the next 2 to 3 years coincides with the supply side, which remains supportive despite we've seen recent increase in new building ordering. Indeed, the recent orders, especially in the LR2 segment, have resulted in the order book-to-fleet ratio increasing to 8% from 6% just 2 months ago. Our fleet growth assumptions for the coming 2 to 3 years have not changed as these new orders are mostly for the second half of 2025 or 2026, and we expect some of the late 2025 deliveries to be pushed into 2026.
Please turn to slide 10. When we look at the fleet supply over a longer time horizon, it is possible that there will be more availability for product tanker orders at shipyards, and subsequently we could see higher deliveries of newbuilds, not least due to the need to renew the aging fleet. This will coincide with a significant increase in the scrapping potential as the fleet built in the 2000s is reaching their natural scrapping age. The net fleet growth could even turn negative here in the second half of this decade. Please turn to slide 11. Another aspect that one needs to take into account in connection with the recent pickup in the LR2 ordering is that given the versatility of the LR2 fleet, they can both trade clean and dirty products.
The LR2 order book should be seen in connection with the Aframax order book, which of course relates to dirty products. The combined order book is currently at 9%, still relatively low in historical terms. This compares with 5% of the combined fleet reaching 25 years of age during the same period. We consider that this segment has normally a lower average scrapping age, which has historically been 21 years, theoretically, even all the way up to 24% of the fleet could be removed from a primary market in the next 3.5 years. Here, kindly turn to slide 12. On the concluding remarks here on the product tanker market, it's clear that we see the main demand and supply drivers on the product tanker market continue to be very supportive.
The trade recalibration changes in the refinery landscape, which already started last year, will continue to support the market also this year, with the new large refineries ramping up in the Middle East being an important driver in this development. Around a year ago, we estimated that the full recalibration of the EU-Russia trade would add 7% to the ton-mile demand for product tankers. According to our calculations, 6% of this has already happened, despite the fact that EU imports have been down so far this year. With an expected pickup in European imports later this year, the ton-miles could increase by a further 2%-3% and in fact exceed our original estimates.
Of course, we should not disregard the fact that the current environment with high inflationary pressure on the global economy could slow down the growth pace of the global oil demand. Nevertheless, we believe that even those effects will be outweighed by the effects of the redistribution of the energy supply chain, that a potential effect caused by slower demand growth will not trump the redistribution. Furthermore, the positive demand side is complemented, as I mentioned, by the supportive supply side situation, securing low fleet growth for at least the next two to three years. I'll pause. I'll now hand it over to my colleague, Kim.
Thank you, Jacob. Please turn to slide 13. Despite the strong TCE rates achieved on average in 2022, we have achieved even higher TCE rates in the first quarter of 2023. We increased our rates from $34,154 per day in 2022 to above $41,700 per day over a total of 6,732 earning days in the first quarter across the fleet. For MRs, the average rates for the first quarter ended at $36,461 per day, for LR1s at $42,047 per day, and for LR2s at $65,551 per day. Once again, the One TORM platform demonstrated a very strong performance also when comparing to our peers.
Based on our rates and coverage for as of 5th May 2023, we had fixed a total of 64% of our days at $40,086 per day in the second quarter across the fleet. For MRs, 68% were fixed at $35,804 per day. For MRs, 62% were fixed at $45,578 per day for LR1s, and 51% were fixed at $59,197 per day for LR2s. Part of the coverage has been made with FFA contracts, and as per 5th May 2023, the cover for the second quarter of 2023 was 744 days fixed at $42,026 per day.
For the third quarter, 1,116 days were fixed at $42,199 per day. For the fourth quarter, 1,116 days were fixed at $42,405 per day. As per first quarter of 2024, 443 days were fixed at $41,849 per day. These contracts are accounted for in TCE and affects our net result. In the first quarter of 2023, they gave an unrealized loss of $15.2 million, we expect unrealized gains and losses on these contracts impacting our P&L while they are outstanding.
As of 11th May 2023, the market value of our FFAs and related bunker hedges was a plus of $25 million. Similarly, the results are fixed at strong levels for the second quarter, where we are expecting 7,546 earning days, and in Q3, when all additional secondhand vessels will have been delivered, we expect 7,761 earning days. TORM had 299 dry docking days in Q1 2023, which is 29% of the expected dry docking days for the full year. Please turn to slide 14. The continuous strong markets have provided us with an EBITDA of $199 million from our operations in the first quarter of 2023. Over the past four quarters, we have achieved an EBITDA of $881 million.
During the same period, TORM has paid dividends of totally $100 million to our shareholders, together with the dividend announced earlier today. At the same time, while acquiring 10 secondhand vessels to the fleet, we have reduced our net loan-to-value to 26% before dividends by the end of Q1 2023. Our CapEx commitments increased during the first quarter of 2023. The increase is driven mainly by purchase, but not yet delivered vessels and scrubber investments. Please turn to slide 15. TORM continues to evaluate our opportunities for fleet expansion and renewal. As mentioned, we acquired a total of 10 secondhand vessels in the first quarter this year.
This means that as of 31st March 2023, the value of the 83 vessels that we had on a fully delivered basis in our fleet at that time reached $2.9 billion, an increase of $936 million since the same time in 2022. Existing vessels increased by 3% since the end of 2022. We added 5 vessels to the fleet amounting to $172 million. Since the end of the quarter, further two vessels have been delivered, and further 3 vessels will be delivered before the end of May, corresponding to $166.9 million in value. Our net asset value reached $2.6 billion as of the 1st March 2023, also impacted by significant cash generation.
By the end of the second quarter 2023, we expect to have 88 vessels in our fleet. We have seen that the secondhand vessels price, especially LR1s and 10-15-year-old MRs, have increased further since the end of Q1 2023. Please turn to slide 16. As mentioned, we will distribute around $121 million or $1.46 per share based on our end of first quarter cash balance. Consistent with our distribution policy, our distribution is derived from our cash position of $411 million and our available funding sources of $115 million. We deduct restricted cash primarily related to FFAs of $30 million and cash in Marine Exhaust Technology of around $5 million. Finally, MR proceeds, which were partly used for the five LR1 vessels of $23 million.
Our minimum cash reserve for 83 vessels was $149 million at the end of the first quarter. Our payout ratio remained high at a level of 78% of the profit before tax of $155 million. Please turn to slide 17. During the past months, TORM has utilized the strong markets to strengthen our financial position. Comparing to our first quarter performance last year, our net loan-to-value has reduced significantly from 51% to 26%. In addition, we have obtained refinancing and acquisition commitment of $556 million while extending debt maturity from 2026 to 2028, with a further possibility to extend to 2029. The commitment further secures an interest rate margin reduction of $433 million of TORM's existing debt. Margin reduction is an all-in 65 basis points.
This includes the loan margin reduction and the new loan applies SOFR as an interest rate, which is lower than the U.S. LIBOR. The refinancing underlines the strong position we have with European shipping banks, in addition to the strong relationship that we have with Asian lending houses. All in all, a conservative funding structure coming from well-diversified funding sources. We have hedged 90% and 84.4% of our interest rate exposure for the next three and five years, respectively. Our five-year interest rate exposure was hedged at 1.47 plus margin, either by interest rate swaps or by fixed rate agreements. On the cash side, we have also seen significant improvements during the past year.
Available liquidity increased from $139.6 million in the first quarter of 2022 to $574.6 million in the first quarter of 2023, including funding commitments related to acquisition of the remaining two LR1 secondhand vessels. Our distribution policy, where we hold back $1.8 million per vessel, provide a strong liquidity buffer. Further, with the coverage already obtained, we have fixed 31% of our earning days at $40,721 a day for the rest of the year. With that, I will let the operator open up for questions.
At this time, if you'd like to ask a question, simply press star followed by the number one on your telephone keypad. You may also ask a question on the webcast. Our first question will come from the line of Jonathan Chappell with Evercore. Please go ahead.
Thank you. Good morning or good afternoon. Jacob, I want to start with a market one, just a little bit of clarification, but also a little bit of recency. I thought it was interesting that you said the 7% of ton-mile benefit that you foresaw, let's call it 12 to 15 months ago from what's going on in Europe. You have 6% of that already, but then you'd also laid out another 3% from kind of refinery dislocation, et cetera. When put it all together, you know, the 10% aggregate ton-mile benefit, you think you're already 60% of the way there. Is that an accurate assessment if we add it all together?
You know, the second part of that is, given some of the recent volatility maybe to the downside, can you explain some of maybe the seasonality or some of the other issues that you think have caused a little bit of downward volatility of late?
Yes, absolutely. The way we think about it is that clearly the sanctions are working the way that they intended to. Oil is flowing as crude out of Russia, and you're seeing that Europe is replenishing on the refined product side with products from further away. What we have not seen so far is that the volumes that we are experiencing are lower than what they were on average here last year at this stage, because there's been some stockpiling taking place towards the end of last year. The differentiator here is that actually the sort of the trade recalibration, we say it's 6% so far, but there's more to come. That more to come stems from a normalization in the import levels. That is what it hinges on.
It's a volume, game that is a little, different. Actually, the fact that we calculated 7%, that was based on those volumes. We're not seeing exactly 7% yet, only 6%, because of volumes being down, but transportation distances being slightly higher.
We think it's accurate, but it's of course hinting on that you would see that imports into EU would grow from where they are now. That's number one. Number two, to some of the recent weakness, which is primarily seen from our perspective, actually a European MR or Atlantic MR game. Much of that has to do with what we don't have so much insight into, which is the Russian refinery sector being closed down for maintenance.
I think that is the one key component into, I would say, understanding the seasonality of the rate environment for MRs in the Atlantic that currently some of the vessels that would be engaged in export out of Russian refiners, they are now re-entering, so to say, the market that we've been operating in and many of our peers all along, which is non-Russian trades. Our opinion is that Russia will not necessarily come back to exactly where they were on their exports, but close to. At that point, that will take tonnage out, and the efficiency in our market will in that sense go down, leading to a higher freight rate environment.
Mm-hmm. Okay.
I'm not seeing big signs of change currently in the Atlantic. It is of course, on a day-to-day it's quite sensitive, but I don't think that's a good indicator of what is taking place. We saw that MR rates, for instance in the ATA were, let's say in the low to mid-20s yesterday, and today they're in the low to mid-30s. Is that a sign of that there's any dramatic change in the underlying freight? Not really. It's just that there's a little more cargos coming in the market and then immediately freight rates react. I think we will see a lot of that intra day, almost intra day or at least intra week, rates will be quite volatile.
That's very good perspective. My second question, I think the strategy, you know, has been very clear, over the last couple of years or so. You know, you've been selling quite well. You've been adding to the fleet, getting good returns on new tonnage, the refinancing of the balance sheet, the dividend policy. There's a little confusion this morning, I think, around your numbers because of that FFA exposure. I'm just wondering why. You know, there's 88 ships. You have a lot of exposure to the market already. Why are you getting involved in FFAs, and when does that kind of unwind fully?
Yeah, I can answer that. We already laid out in the last reporting that we are using FFA as a tool to hedge the forward clip when we see that there is value in it. What we did was that we took the rolling 12 months, I think on LR1s it was around 45, on MRs around 40. We used the FFA as an instrument to hedge part of it. On an intraday basis, again, the mark to market of that could be lower, it could be higher. On the day of issuance, it's $15 million unrealized loss. If we did it again today, it's positive, around $20 million positive. That's a swing of that we have on paper created $35 million, but we don't look at it that way.
This is just, it's actually a hedge instrument, but it is being marked to market in our accounting.
Mm-hmm. Yeah.
We will continue to utilize this way when we see there's value. I cannot, how do you say, avoid that there will be on the day that we are reporting, we will have these mark to markets. We are very cool around that, to be honest. We think we're doing the right thing.
Okay. That's very helpful. Thanks for all the perspective, Jacob.
As a reminder, if you'd like to ask a question on the phone line, simply press star followed by the 1 on your telephone keypad. You can also register for a question online. We'll pause for just a moment to compile the Q&A roster. We have no further audio questions at this time. Andreas, I'll hand the call back to you.
Thank you. We have no further questions now, so, this concludes the earnings conference call regarding the results for the first quarter of 2023. Thank you for participating.
Ladies and gentlemen, that does conclude today's meeting. Thank you all for joining. You may now disconnect.