Thank you for standing by. My name is Janine, and I will be your conference operator for today. At this time, I would like to welcome everyone to TORM's third quarter 2026 earnings 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. To ask a question, please press star one, and to withdraw your question, please press star one again. I would now like to turn the call over to Jacob Meldgaard, the Chief Executive Officer. Please go ahead.
Yeah, thank you, and welcome to everyone joining us here today. As we addressed last time, we believe the One TORM platform is fundamental to understanding how we create value. By integrating our commercial, technical, and operational capabilities, we can make decisions quickly and optimize the value of each vessel throughout its life cycle. For us, this is not simply about replacing vessels at a certain age. Through disciplined maintenance, we preserve the quality and commercial flexibility of our fleet, giving us the option to retain well-performing vessels for longer when that creates more value. At the same time, we actively buy and sell vessels and invest in the fleet when we see attractive opportunities. The objective is to maximize the earnings and value of each vessel throughout the cycle. This approach is supported by our commercial performance.
From 2023 through 2025, our MR fleet generated more than $200 million of additional TCE earnings compared with the peer average, and we have continued to outperform during 2026. Finally, strong operating performance generates cash, which allows us to balance attractive shareholder distributions with disciplined investments in the fleet. That combination of operational performance, active fleet management, and disciplined capital allocation is at the core of the One TORM model. Turning to slide four, you can see how that approach has translated into both fleet investment and shareholder returns. Since the end of 2022, we have expanded the fleet from 78- 95 vessels while also building a significant pipeline of future deliveries. Importantly, while some of our peers have taken a different approach, we have deliberately maintained more vessels on the water over the past year.
In a strong freight market, this has allowed us to capture more of the economic value from our existing fleet rather than accelerating disposals simply because of age. And we have done this while returning substantial cash to shareholders. Since 2023, TORM has distributed $17.45 per share in dividends. We've also used the equity market selectively when it made sense, including issuing shares as part of the consideration for vessel acquisitions. In total, approximately 20 million shares have been issued over the period, helping us capture attractive fleet investment opportunities. Our approach is not to choose between distributions and investment. It is about allocating capital dynamically, maximizing the value of the existing fleet, returning cash to shareholders, and investing when we see opportunities to strengthen future earnings capacity.
That brings us naturally to the third quarter, where we continued to actively manage both the existing fleet and our future delivery pipeline. Kindly turn to slide five. During the third quarter, we generated TCE earnings of $353 million compared with $236 million in the third quarter of last year. EBITDA was $274 million compared with $152 million, while net profit reached $199 million compared with $78 million a year ago. These results came after an exceptional second quarter and demonstrated that earnings remained at very strong levels throughout the third quarter. We also continued to actively manage the existing fleet. During the quarter, we sold the 2007-built LR1, TORM Venture, and the 2008-built MR, TORM Laura. Following these divestments, our fleet comprises 95 vessels on the water.
At the same time, we continue to advance our fleet renewal and growth program. Following the acquisition of six MR resale vessels during the second quarter and our previously announced order for six MR newbuildings, we exercised options for an additional two MR newbuildings during the third quarter. After end quarter, we agreed to invest in eight LR2 newbuildings through a 50/50 joint venture and secured options for an additional two MR newbuildings. Taken together, these investments give us a significant pipeline of future fleet deliveries through 2030, supporting both the ongoing renewal of the fleet and our future earnings capacity. So when we look at the quarter, there are really two messages. First, the existing TORM platform continues to generate very strong earnings and cash flow.
Second, we continue to actively manage and invest in the fleet with a focus on future earnings and long-term shareholder value. Let me now turn to the market environment supporting those earnings. Here, please turn to slide number seven. The product tanker market remains exceptionally strong, with recent geopolitical developments adding an additional tailwind to an already robust market. The important point is that the market was already strong before the latest disruption. Limited effective fleet growth and sanctions have created a favorable supply-demand balance, while geopolitical developments have introduced further logistical inefficiencies and reduced effective vessel availability. This dynamic has been particularly evident in the crude tanker market, where rates have reached exceptionally high levels, lifting sentiment and earnings across the broader tanker sector.
This is reflected in our commercial performance, where our fourth quarter bookings secured to date average $78,000 per day across vessel classes, demonstrating our ability to capture value in a rapidly strengthening market. At the same time, the historical ranges on this slide also remind us that shipping remains a highly cyclical and volatile industry. Market conditions can change quickly, which makes commercial flexibility increasingly important. Turning to slide eight, if we step back from product tankers and look at the broader oil market, the key element here is that Persian Gulf crude exports are recovering towards pre-conflict levels. That matters because crude flows are the starting point of the entire value chain. While it may take longer for the Middle East clean product flows to return to pre-war levels, improved feedstock availability globally enables refiners in other regions to increase utilization and ultimately export more clean products.
In that sense, product exports could represent the next leg of the recovery. Importantly, these additional volumes would enter a product tanker market that is already tight and generating attractive earnings. At the same time, operational inefficiencies in the Persian Gulf continue to constrain effective vessel availability. We potentially have additional cargo demand entering a market where effective vessel supply is already constrained. That brings us directly to the next slide, to slide nine, where here we see the other side of the equation, effective vessel supply. One point we have highlighted repeatedly is that headline fleet growth figures overstate the actual supply available to the clean product tanker market. This slide is a good illustration of that dynamic. While the nominal product tanker fleet has grown by around 7% year- to- date, the fleet actively trading clean products has actually contracted by roughly 4%.
The reason is straightforward. A growing number of LR2s have migrated into dirty trades, effectively removing capacity from the CPP market. In fact, despite significant newbuilding deliveries this year, there are fewer LR2s trading clean products today than at the start of the year. The important metric is not simply how many vessels are being delivered, it is how much effective capacity is actually available to the clean market. Turning to slide 10, the longer-term supply picture is also more nuanced than the headline order book suggests. Newbuilding deliveries need to be considered against the significant amount of existing capacity that will require replacement over time, as well as vessels that are currently unavailable to mainstream trades. This is particularly visible in the combined LR2 and Aframax segment, where more than a quarter of the fleet is currently sanctioned and effectively removed from conventional trading patterns.
We have also spent considerable time discussing the potential return of sanctioned tonnage. Our view remains that the actual market impact is likely to be smaller than the headline numbers suggest, given the limited pool of younger vessels that could realistically return to mainstream trades. The key takeaway here is that fleet replacement remains a powerful balancing mechanism. When combined with the reduced availability of sanctioned vessels, effective fleet growth appears considerably lower than the headline order book could indicate. Turning to slide 11, the final point is what the market could look like as the current disruption eventually normalizes. As inventories have been drawn down, replenishment of strategic and commercial stocks could become a meaningful source of incremental demand. We estimate that inventory rebuilding alone could increase global oil trade volumes by roughly 1%-2% over the next 12 months.
Importantly, product tanker fundamentals were already strong before the disruption. Effective fleet growth remains constrained, while demand continues to be supported by resilient trade activity. We therefore do not view the reopening of the strait as the end of the story. Rather, it marks the beginning of a new adjustment phase that can continue to support tanker demand. To conclude, while the current geopolitical environment continues to support freight markets, our constructive view does not rely on disruption. Whenever tensions in the Middle East begin to ease, we believe the underlying fundamentals will remain supportive, with resilient trade activity, inventory rebuilding, and constrained effective tonnage supply. This includes EU sanctions against Russia, which we believe will continue to support longer trading distances and ton-mile for the foreseeable future. At the same time, the current environment highlights the importance of adaptability, a strong balance sheet, and operational execution.
These are core strengths of TORM and position us well to capture opportunities, navigate volatility, and create value across market cycles. With that, I will hand it over to Kim, who will take us through financial results.
Thank you, Jacob. Turning to slide 13, the third quarter delivered another very strong financial performance, with earnings significantly ahead of the same period last year. TCE earnings reached $353 million, up from $236 million in the third quarter of 2025. This was translated into EBITDA of $274 million and net profit of $199 million, compared with $152 million and $78 million respectively a year ago. On a fleet-wide basis, we achieved an average TCE rate of approximately $40,100 per day, compared with approximately $31,000 per day in the same quarter last year. Performance was strong across the fleet, with LR2s earning around $52,600 per day, LR1s around $38,700, and MRs around $36,100 per day.
While earnings came down from the exceptionally strong second quarter, Q3 continued to demonstrate the significant earnings power of our platform, supported by a strong product tanker market and solid commercial performance. Operating expenses were $7,894 per day, mainly driven by higher crew change expenses and consumable costs. Overall, Q3 represents another quarter of strong earnings and cash generation, leaving TORM in a strong financial position. With that, let us turn to the development in our TCE earnings and EBITDA. Turning to slide 14, this chart puts the third quarter performance into perspective over the past five quarters. While earnings moderated from the exceptionally strong second quarter, EBITDA of $274 million remained materially above the same quarter last year, demonstrating continued earnings strength of the One TORM platform. That strong earnings generation continues to translate into significant shareholder returns, which brings us to slide 15.
Net profit for the third quarter was $199 million, compared with $78 million in the same quarter last year. Basic earnings per share increased to $1.94 from $0.79 a year ago. Based on these results, the board has approved an interim dividend of $1.35 per share, more than double the $0.62 per share distributed for the same quarter last year. This represents a total cash distribution to shareholders of $138 million. In determining the distribution, the board has taken a prudent approach to capital allocation while maintaining a payout ratio of [inaudible]. This reflects the significant newbuilding pipeline ahead of us and our objectives of preserving financial capacity to fund these investments while maintaining a strong balance sheet and healthy liquidity.
This allows us to invest from a position of financial strength, which brings me to our balance sheet on slide 16. Net interest-bearing debt was approximately $697 million, while our net loan-to-value ratio stood at 25.9% at the end of the quarter. Importantly, our loan-to-value calculation already reflects the newbuilding investments we have committed to, both directly and in a joint venture setup. Once an investment is agreed, we include both committed CapEx and the corresponding value on the vessel in the calculation. At the end of the quarter, this includes approximately $650 million of committed newbuilding CapEx, bringing total loans and commitments to approximately $1.3 billion. This is measured against total vessel values of approximately $5 billion, which similarly include the value of the vessels under construction.
The 25.9% loan-to-value already incorporates our committed newbuilding program and demonstrates that we continue to have significant asset backing and financial flexibility. Finally, as shown on the right-hand side, our debt maturity profile remains well spread over the coming years, including the $200 million bond maturing in 2029. Please turn to slide 17 for our financial outlook, where strong freight environment and our high level of coverage provides good visibility for the remainder of the year. Our freight coverage for the fourth quarter provides further evidence of the exceptional market strength. For LR2s, we have covered 656 spot days at approximately $185,000 per day, contributing to average LR2 coverage of approximately $112,000 per day. Overall, coverage is very strong for [inaudible] at approximately $106,000 per day and MRs at approximately $60,000 per day.
Importantly, this shows that the strength extends across our fleet and is not solely an LR2 story. Based on this strong coverage and our expectations for the continued market strength throughout the remainder of the fourth quarter, we are raising the low end of our full-year TCE guidance by $50 million. We now expect full-year TCE of $1.75 billion-$1.9 billion, compared with $1.7 billion-$1.9 billion following our guidance upgrade in October. We are also raising the low end of our EBITDA guidance by $50 million, with full-year EBITDA now expected at $1.35 billion-$1.5 billion, compared with $1.3 billion-$1.5 billion previously.
With that, I will hand it back to the operator for questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your touchtone phone, and you will hear a prompt that your hand has been raised. If you wish to withdraw, please press star one again. If you are using a speakerphone, we kindly ask you to lift the handset before pressing any keys. One moment, please, while we gather questions. Our first question comes from the line of Jon Chappell from Evercore. Sir, please go ahead.
Thank you. Good afternoon.
Morning, Jon.
Jacob, you have been pretty consistent with the One TORM strategy for several years now. The newbuilding plans that you have announced subsequent to the quarter end seem to be a bit more aggressive, let us just say. Not disparaging it, just saying it seems to be a little bit more aggressive than in the recent past. So, is this a function of the incredible times we are in right now, and the view from the management team and the board that investing in new tonnage is the way to recycle the tremendous amount of cash that you are bringing in today? Are there any other potential accelerations, so to speak, of the TORM strategy that we could look forward to as the cash flow remains robust?
Yeah, good question. No, actually, the fleet strategy and the strategy about the continued return of capital to shareholders remains the same. What we have seen is that in our fleet, we have a position that is across the LR2, LR1, and MR segments, and that when we look at the fleet profile of our LR2s over the next couple of years, we have approximately 50% of the fleet that will turn 20 years of age. We are simply just of the opinion that the planning process of that sort of keeping, maintaining at least the same position in the market will require us to make substantial investments into the fleet renewal, and we are starting that now rather than waiting for that to a later stage. This is just really fleet maintenance. On the same token, we have not changed anything about our distribution to shareholders.
Okay. Just as a quick follow-up, as you invest in these new builds, is there an ARB opportunity for you to continue to dispose of some of the older tonnage? I understand right now they are earning tremendous returns, and there is something to be said for making incredibly high rates on older tonnage that has been fully written down and depreciated, but also could be a source of funds for this new build program, especially as your ships approach 15 or 20 years. How do you kind of consider those puts and takes?
Yeah, absolutely. I think you have seen that we have divested a couple of vessels that is older in our fleet. If the rationale for doing it would be the same as we saw in those, i.e., that the value that we would be getting upfront exceeds, on a conservative basis, what we expect to be earning, we could do more of that. But it is not a necessary tool in order to establish any type of funding. As Kim also alluded to, our net loan-to-value standing, including all CapEx committed at mid-20, that can obviously change depending on the values of the assets. But I do not see that vessel sales is a necessary action to support the fleet renewal program that we have ongoing. But we will do it opportunistically when it is the right thing.
Okay. Thank you, Jacob.
Thanks, Jon.
Thank you. Our next question comes from the line of Frode Mørkedal from Clarksons Securities. Please go ahead.
Yeah, thank you. Hi, guys.
Hi, Frode Mørkedal.
I think, yeah, let's start on the market. It was this TradeWinds article today where you discussed the shuttle and STS operation around Hormuz, which was interesting. I think maybe you can talk about that. I mean, I feel like the crude shuttle runs are fairly well understood. How is it for clean product right now? How big is it? What type of inefficiency do you see? Yeah.
Yeah, thanks. Yeah, so when we go specific on the CPP exiting the Persian Gulf, then pre-war, it was standing at sort of also around 2.5 million barrels of clean product on a daily basis that were transiting. Then we saw pretty much the same pattern as on crude, that it went to very close to negligible volumes right at the beginning, and that it has come up from summer and up until now to around one million barrels , compared to the 2.5 million barrels pre. So, the latest surge that we have experienced on the crude side, i.e., that more or less, maybe there's a little piece missing, but more or less you are on crude at the same supply of crude out of the region, including the Yanbu facility and the STS that is taking place as pre-war. It's not the case for clean.
It stands around 40%, and has done so for a period of time. If the current political and military conflict stays the same, I am not confident that we will see a significant uptick or uplift from this one million barrels to, let's say, back to where it was, with the same pattern that we saw on crude. Simply because, A, the risk involved with transportation of refined fuels and the risk of having, whether it's a drone or a missile attack, simply has much higher consequences for the asset in question, number one.
And number two, the refinery side in the Middle East Gulf, I'm sure the producers there are a little wary about coming back to, let's say, 100% of production, because you are a sitting duck should the situation deteriorate on the conflict side, then you would be much more critically vulnerable having your facility up and running. So, let's see, but to me it feels like if the political and also military situation would stay where it is now, you would not necessarily see an increase of the clean product exports, but we would continue to see the crude.
But of course, the important piece in this is that crude is now being made available with some certainty to the various refiners, for instance, in Asia, and they can, on their side, start to behave more commercial in their export volumes, which is actually what we have been benefiting from over the last one to two months, that there is a recovery in that activity.
Right. So it sounds like if Strait of Hormuz reopens to more normal levels, it is actually a positive thing. You will get more CPP volumes out, and it is not like the logistical bottlenecks or inefficiency around the STS operation is more important than the volume part, right? So, if that is correctly-
I agree with that.
Yeah.
If we only zoomed in-
That is good.
On this particular, I would say, area of focus, then clearly if you saw that the exports of CPP out of the refineries were both available and safe, you would see a significant higher uplift in ton-mile from the additional volume than from the inefficiency that is currently in play for clean vessels.
That is good. Yeah, next question was on, I guess one of your peers last week talked about fairly good three-year and five-year time chartered deals being offered or for newbuilds in, let us say, next year, 2027 deliveries, et cetera. Are you seeing the same? Just, I guess more broadly, would you consider more time charter business? I assume you still favor spot-oriented model, but how do you see this?
Currently, we of course explore all avenues with our clients, but we have not seen something where our fundamental beliefs about normalization and the utilization rates that that would dictate, time charter would need to be more supportive, obviously, than our model. At this stage, we are not seeing much of the forward curve being significantly above where our own models around supply-demand comes out. That can change, obviously. We will be very dynamic around that if the right opportunity arrives, but it is not like we are seeing that the forward curve currently has a lot more value to offer than our own sort of model apparatus around the freight dynamic that we expect in a normalized market, where you click off the inefficiencies we have just discussed. We are still seeing a robust earning that is at par of what the TC rates are.
Yeah. Makes sense. Final question is on the LR2 newbuild joint venture. Is that something you were invited into, and that's why it's a 50/50 structure rather than, let's say, full ownership?
Well, it's something where we have been in dialogue with a partner for considerable periods about various ways to work together. The thing here is that what is important for us on our assets is that we have full control of the value chain when we operate them on the One TORM platform towards our clients, so that we got technical, commercial, sort of the full in-house model. And this particular JV, we've come to an agreement where we, once the vessels have been delivered, have that, and that we will share the economic of that venture with our partner. So it's actually something that has been in the making for a longer period, and where we share the view about the fact that the One TORM platform is the place to have these assets.
Okay. Just a follow-up. Can you maybe quantify the equity portion of your specific CapEx for this JV?
No, we have confidentiality agreements on this, as many of our commercial contracts. So unfortunately, I'm not allowed to give that. Sorry.
Fair enough. No worries. Thank you very much.
Thanks a lot.
Thank you. Our last question comes from the line of Climent Molins from Value Investor's Edge. Please go ahead.
Hi, good afternoon, and thank you for taking my questions. Most has already been covered, but I wanted to ask regarding the latest MR options you secured. Those are unexercised for now, right? If that's the case, until when can those options be exercised?
We have time still within this quarter to evaluate whether we will exercise the two options that you refer to.
Okay, that is helpful. That is everything for me. Thank you for taking my questions.
Thank you.
Thank you. There are no further questions at this time. I will now hand the call over back to Jacob Meldgaard for closing remarks.
Yes, thank you very much to everybody who has shown an interest and listened in. Have a fantastic day.
Thank you for your participation for today. You may now disconnect.