Ladies and gentlemen, thank you for standing by. I'm Sarah, your current call operator. Welcome, and thank you for joining the Hapag-Lloyd Analysts and Investors Conference Call on the first quarter results 2019. Hapag-Lloyd is represented by Rolf Habben Jansen, CEO, Nicolás Burr, CFO, Heiko Hoffmann, Head of Investor Relations, as well as Anna Neumark from the Investor Relations team. Throughout today's recorded presentation, all participants will be in listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Rolf Habben Jansen, CEO. Please go ahead.
Thank you very much, and thanks, everybody, for taking the time to join us for this investor presentation. As usual, we'll guide you through the charts, and then at the end, we'll be happy to take your questions. Maybe as a start, I think if we look back on the first quarter, the highlights I think are, apart from a generally quite good result, that we've seen, a fairly healthy freight rate, about 5% above last year. We've seen a growth which is close to 2.5% for the first quarter, which is more or less in line with our expectations, as we expected growth to be a little bit sluggish, as people had been pulling orders forward before the end of the year, especially on the Transpacific trade.
If we look at the market, I mean, there's not that much change, to be fair. We see a fairly stable market. We see slowing supply growth, and we certainly see good acceptance of the new bunker formulas, as everybody understands that costs will go up by 2020. And as a consequence of that, rates will also have to go up. If we look at our numbers, significantly increased EBIT of $243 million, including only $5 million impact of IFRS. The group profit 109, impacted by IFRS with -13 because we have this front-loading effect.
We had a good strong free cash flow. But there also, we pointed out the IFRS impact, but Nicolás will talk more about that later. If we look ahead, we continue to focus on implementing our strategy towards 2023, and of course, we'll try to further improve our results and continue to deleverage as we prepare for IMO 2020. A bit more on the numbers. Transportation volume, as said, up 2.4%. Transport expenses, fairly, pretty stable, yeah, if we compare it to previous year. Freight rate up. EBIT and group profit, we already mentioned. Equity remains healthy. Percentage a little bit down, but this is purely an IFRS effect, otherwise, it would have gone up.
Good liquidity reserve and the net debt $7.2 billion, including all the IFRS effects. If we look at net debt on a comparable basis, we repaid about $300 million in the first quarter. If we look at the market, not many updates available on that just yet. Here we took the Clarksons numbers for 2019, who predict about 4% growth. You know, not that much more to be said, I think, at this point in time. We originally looked at IHS, who haven't updated their forecast just yet. They're still at 4.7%.
We think that's a little bit on the upper end of what in the end it will be, but we'll have to see how that develops throughout the year. We certainly don't see anything falling off a cliff. If we look at the first 3 months, looking at CTS data, then we see very limited growth, only 0.5% globally, yeah, with fairly significant differences between the various trades, with actually fairly healthy development on Far East to Europe and also on the Atlantic, and significantly weaker numbers on the Transpacific, but also on Intra-Asia. If we look on the rate front, then we see we started the year quite well, and now we start to hit the curve, which we saw last year when freight rates started to pick up.
Now we need to see what's gonna happen throughout the second quarter and the beginning of the third quarter, because at this point in time of the year, we always have this uncertainty about when will rates start picking up as we move towards the peak season. I think we're gonna start seeing something on that within the next 4-6 weeks, but there is certainly always an element of uncertainty around that. When we look at the order book, not much change there. It remains at a very low 11%. Yeah, and yes, we've seen a few orders this year, but again, in total, about 300,000 TEUs of capacity. We think that's very manageable.
If we keep in mind that a market is growing 3% or 4%, an order book that covers, say, 2.5 years, and a couple of percentage points of scrapping, then this is actually on the low end of where the order book should be, and certainly will also prevent us from getting into a big crisis again, even if growth would be a little bit slower. We see scrapping starting to pick up. Also, if we look at the outlook for the upcoming couple of years, still fairly low. We think that it's not unlikely that in the end that will be a bit higher, yeah.
As you can see anyway, on the right-hand side of chart number 7, we do expect that both in 2019-2020, but likely also in 2021, you know, the balance between supply and demand will narrow further or at least remain more or less where it is today. I think that there's an introduction from my side on the key numbers and the market, and I'll be handing it over to Nicolás, who will take you through the numbers.
Thank you, Rolf. Good morning, everybody. In the P&L here, you can see the result of the company. Volumes up 2.4%. Freight rate 4.8% up. That's the reason you see our revenue going up by $257 million, or 8%. The bunker went 14% up. In summary, when you look at the EBIT of the company, which is the most comparable number when you take the IFRS 16 effect, only $5 million effect positive. There is a difference when you take out that $5 million of $176 million compared to last year.
Basically explained by a better expansion rate, higher volumes and an improvement also in other revenues, especially the margin retention. Leading us to a very satisfactory EAT of $109 million and improved return on investment capital of 6.4% when you analyze that result. When we dig a little bit into the IFRS 16 effects, and just for your clarification, this is a good result even without that effect. We have an EBITDA effect. Here you have the delta between Q1 2019 and Q1 2018.
On the orange column on the right-hand side, you see the corrections, how much would have been that difference in the case we wouldn't have applied IFRS 16. You see there the correction in EBITDA 113. The difference in EBITDA when you take out the IFRS 16 is $177 million. You have a depreciation effect of - $108. That gives you an EBIT difference tailwind or a positive effect of $5 million. A negative effect in the interest component of $18 million, leading to an EAT effect, total effect of - $13 million when you take out IFRS 16. Going into the KPIs.
Next slide. You see here the volumes of 2.4%, pretty much led or driven by the Atlantic, the Far East trade, and the MAO trade, especially the ones coming in and out of Africa. In terms of the rates, you see there a good increase of 4.9% in the nominal rate. When you see the bunker going up 14%, you see anyway that the ex-bunker rate, even though the bunker went up, improves when you see the difference between the two curves. That improvement is still around 3% when you take out the bunker.
In terms of the consumption, specific consumption of bunker, we see, in dollar per TEU, an under-proportionate increase in the bunker price per TEU of 9% compared to an increase in the bunker, which is higher, 14%, as I just mentioned. The reason of that is the impairment to the inventory or the correction to the inventory that we had to do in Q4 2018, that is basically recovered during this quarter. The specific consumption that you see there of 0.38 metric tons per TEU remains very tight at the same level of last year. So we are pretty satisfied with the efficiency of our fleet and how that is developing over time.
In terms of the unit cost in the next slide, I think deserves a little bit more time because this is the first time we present the unit cost, including depreciation, simply because it's much more comparable from this moment onwards to doing that way. Because any variation on IFRS 16 is basically removed by taking the depreciation in, and here you will realize the differences. When you look at the total unit cost that Rolf commented that went up 1%, 1.1% to be exact. A difference of $12 per TEU is mainly explained by bunker, as you see an increase in bunker of $13 per TEU.
Handling and haulage is basically less, or we have an improvement of $15 per TEU, mainly explained by effects, but also the decrease of some unprofitable inlands that we were basically performing. Therefore, that's the reason why we have an improvement in that cost item. Equipment and repositioning, we have to say here that we have a depreciation impact, an important one, of $17 per TEU. That is basically reclassified into depreciation in the back end of the $3 6. When you look at the total effect, it's an increase of $2 per TEU when you basically include the $17 that are within the $36.
The $2 per TEUs are explained because of more imbalances, especially in Europe and in the U.S. Vessel and voyage also has some depreciation that is also included in the $36. The depreciation is around $17 per TEU as well. That gives us an increase in that cost item of $16 per TEU. But here we have a particularity because we have a compensating effect on revenue because we have more revenues per TEU of around $13 per TEU. That leads to a total delta compared to last year of around $3 per TEU, and that is explained because of higher time charter rates this period compared to last year. That's basically what...
The depreciation effect that you have there on the $36 per TEU is basically $34 per TEU out of the $36 are explained by the implementation of IFRS 16. That's basically the whole explanation. Out of the difference, the $12 per TEU difference that you see there between the 1,003 and the 1,015 is you have to consider this delta that we had on the revenue side, that is coming from slot revenue. Which is anyway part of the network, because you have to net up that cost or increase or decrease in cost always, because it's usually something that you could have considered as a decrease in cost.
In terms of the cash flow, in the next slide you see very strong operating cash flow, a little bit over the EBITDA. You see also in blue as the considerations of IFRS 16. We have an inflated cash flow that was reclassified into negative cash flow on the financing cash flow that you recognize in blue also on the right-hand side. Anyway, it's a very strong operating cash flow when you take out that effect of $490 million. The investment cash flow is - $154 million driven by investment in containers, mainly $143 as you see in the investment report. Then we have some dry dock and some maintenance CapEx of around $18 million.
The financing cash flow very active, -$163 million. In which we have to highlight some net repayment of debt of around $271 million. The interest of $129 million from which $18 million is basically the IFRS 16 effect, as I commented previously. Finally we go before I hand it over to Rolf again, a little bit of our balance sheet. You see there the fixed assets going up because of the same IFRS 16, $1.11 billion up. When you see and that's mainly the whole explanation of the deviation. The equity rate also going up a little bit because of the profit of the year, of the quarter, compensated by some negative OCI effects, especially coming from pensions.
The financial debt also describing the efforts that we have done on deleveraging. You see around $300 million less debt, which are the 270 that I just commented, that's some plus some valuation effects. Good quarter, very positive quarter on an operational side, but also on our balance sheet. With that, I will hand it over to Rolf, who will explain a little bit the outlook and some final remarks.
Okay, thank you very much. Yeah, not that much to be mentioned actually on the earnings outlook. We gave you the earnings outlook as we published our full year results. Basically nothing has changed there in terms of volume. We still expect that to increase slightly. We expect the freight rates to be up a bit. We still think bunker prices over the full year are gonna be up compared to what we saw earlier. Our guidance in terms of where we expect EBITDA and EBIT to land will remain also unchanged. If we look ahead into the rest of the year, what are our main targets? Continue to work on profitability and also on de-deleveraging the business. Make sure we are fully prepared for IMO 2020 on the one hand.
Towards our customers, we need to make sure that we get the additional cost back. We also need to make sure that the whole transition goes smooth technically, as it is not entirely uncomplicated. We'll continue to implement our strategy towards 2023, with the ambition to create more value, not only for our customers, but also for our shareholders and other stakeholders. In our strive to become number one for quality, in that context also to develop more digitalized solutions for our customers will play a very important role. With that, we would wrap up the presentation from our end, and would be happy to take any questions you may have.
Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift your handset before making your selections. Anyone who has a question may press star followed by one at this time. The first question is from the line of David Kerstens from Jefferies. Please go ahead.
Thank you very much. Good morning, gentlemen. Three questions, please. First of all, maybe on the volumes in the market. I think March showed a strong improvement, offsetting the lower volume in January and February, particularly on Asia-Europe. Just wondering if you saw this trend continue in April and May, and does it support your market volume expectation of 4%? The second question is on the impact of scrubber retrofits on idling and scrapping. I saw you lowered your scrapping forecast from 2% to 1.4%. Does this have to do with the scrubber retrofits that you're currently seeing in the market? How does it impact the supply growth that you show in the slide of 3.2%?
My final question is, can you provide any color on the contract rates on the Transpacific? I think some people were talking about 30% higher rates year-over-year on the Transpacific. Can you confirm that, please? Thank you very much.
Thank you. Well, maybe start with the first one. I mean, if we look at volume, it's still a little bit early to say how Q2 will develop. We've seen a reasonable recovery post the Chinese New Year, and I would still expect to see growth also in the second quarter. How high or how low that will be, that remains to be seen. It's still a little bit early to say that in the beginning of May. In terms of scrapping, I mean, we take usually the official numbers. I don't think scrapping will be much lower than we anticipated in the beginning of the year. The point on scrubbers is that of course, that will take out some capacity, especially in the second half of the year, as more and more ships go into dock.
That will probably have somewhat of an effect on available capacity. As far as the contracts are concerned on the Transpacific, I mean, that contract season is pretty much done, and we have indeed seen significantly higher rates for the contracts going forward than we had for the last 12 months. That was also needed because it was completely impossible to continue running at the rates that we had before.
Okay. Can you give some indication? I think you provided some guidance on Asia-Europe in the last call. I think $50-$100 per TEU higher. Is that similar for the Transpacific rates?
No, the Transpacific rates are up a bit more, yeah. I mean, we are talking about a three-digit number there per TEU.
Great. Thank you very much.
The next question is from the line of Johan Eliason from Kepler Cheuvreux. Please go ahead.
Yes. First a question of the volumes. You were growing quite a lot in this African-related businesses. Is that an area where you have taken market share, and where you expect to continue to take some market share going forward this year? Or are there any other trade where you see a particularly good performance for you? Secondly, just I saw that you plan to install scrubbers on maybe 10 ships, but I thought it's indicated early next year. Is that implying that you are not taking out any capacity to do the scrubber installation in the second half, or is it just timing when you get the ships from the yards again? Thank you.
I mean, maybe on volume first. Yes, we've grown quite significantly in and out of Africa, but admittedly also from quite a small base. We're not really talking here about taking market share, but we started a few services actually last year, and you now see the full year effect of those services. That's why we grow a bit there. I don't think we're very aggressively there trying to take a lot of market share, but we are trying to build our position there from a very low base. As far as scrubbers are concerned, we ordered 10 for our own ships, and we have started retrofitting those.
We will take some ships out in the course of 2019, 'cause we would like to have at least most of them done before the end of the year.
Okay, good. Just on the bunker cost, it seems like the comparison number is a little bit different from what I put in a year ago. Is that what you related to this inventory charge you had to take at the end of last year? Or can you explain why the bunker cost would be a bit different per TEU than what you actually reported in Q1 2018?
Yeah. It is because of the IFRS norms. Basically it tells you that when the price of the commodity goes significantly down, you have to impair the value of your inventory. We have done that in Q4 2018. That basically was around $30 million. That is basically back in the cost of goods, in the costs of Q1 2019. That's basically the reason why you see a better market price in our cost factor.
Okay. Thank you very much.
The next question is from the line of [Michael Dome with Sono]. Please go ahead.
Hi. Obviously, Q1 benefited from high freight rates and lower bunker. Looking at Q2, spot freight rates have come down very significantly. Bunker has obviously gone up. Obviously, you have the benefit of the higher contracted rate on Asia-Europe. Should we think of Q2 from an earnings perspective, being weaker than Q1 for those reasons?
I mean, we don't give outlooks on a per quarter basis, but you are of course right that when you look at the second quarter, that the rates tend to be seasonally weak.
Yeah.
Which is also what we see, which is a perfectly normal pattern. Volume tends to be a bit higher than it is in the first quarter, simply because you don't have Chinese New Year, and then we have the bunker effect. It's a bit too early to say what will happen with the result.
Yeah.
let me say that it would be, you know, I would not be disappointed if the result would be a little bit lower in Q2 than it was in Q1. That would still be in line with our expectation.
Okay. Can I just follow up on the contracted rates question? What was the increase that you gave for Asia-Europe?
What have you seen on the Transpacific route, please?
Yeah. We said earlier that on Asia/Europe, we talk about $50-$100 per TEU, and for the Transpacific, we talk about a 3-digit number, so a bit above that.
Okay, listen, thank you very much.
The next question is from the line of Danielle Ward with J.P. Morgan. Please go ahead.
very much for taking the questions. I firstly wanted to follow up on the comments you made on the freight rates earlier in the call. It sounded like you're expecting some kind of pickup in the next 4-6 weeks. I just wanted to get your sense of how, I guess, normal you see the lull that we've had since Chinese New Year. It has been quite prolonged at this point, so do you think there's anything kind of more significant than the usual seasonal patterns? What gives you the confidence in that 4-6-week window? Then are you able to provide updated leverage targets now for adjusted IFRS 16?
Yeah, I'll take the first one. I mean, when we look at volumes, I mean the uptake was post Chinese New Year, I think it was actually not that bad. After that, we've seen a number of weeks where it was a little bit sluggish. I think we now start seeing some signals that demand is picking up again. As far as when the rates pick up, I mean, we start to see some first signals that, you know, rates might start to recover a bit here and there, but it's always a little bit of a crystal ball that you have to look into, whether that happens around mid-May, or whether it happens 1st of June or 15th of June. Last year it was fairly late. It was only around 1st of July.
I don't see anything abnormal in the market right now. That's why I basically say it will pick up anywhere between now and 4-6 weeks. With that, I would give it over to Heiko or Nicholas to talk a little bit about the de-leverage target.
Okay. In terms of the de-leveraging, we maintain our target, so we have announced a 3x over the time frame of the strategy 2021 to 2023, and we maintain that firmly. We had a kind of a shorter term target of going below 3.5x net debt-to-EBITDA by the end of this year. That also remains the same. We can do so, you have all the elements in the financial statements on the investor presentation in order to correct the EBITDA with IFRS 16 to the previous scenario. The 3.5x that we always talked was referred to the IAS 17, the previous accounting norm and without IFRS 16.
If you apply the net debt-to-EBITDA to the current numbers, of course, we already more or less we approach very quick to the target, but that's not what we refer to.
Okay. We should be thinking of the target against the old metrics.
Exactly. We will update you on that update on that target quickly soon in order to really clarify how you can translate a 3.5 into a new number with the IFRS 16 norm. Once we
Yeah.
We stabilize the listings and we know a little bit better about the total, the final year portfolio of listings and contracts.
That would be great. Thank you.
The next question is from the line of Tobias Sittig from MainFirst. Please go ahead.
Can you give us an update on the uptake of Quick Quotes?
Tobias Sittig, your line is open.
Oh. Hello? Can you hear me now? Can you hear me?
Yes.
Thanks for taking my questions. 4 for me, please. Firstly, can you give us an update on the uptake of Quick Quotes, how that's developed during the quarter because you were pretty bullish with the last presentation there. Secondly, interest costs were a little higher than I thought, but you made some debt redemptions now in the quarter. Can you give us an indication about the run rate for the coming quarters on the interest cost side? Basically your unit costs were flat ex bunker, but you target $350 million-$400 million savings until 2021.
When should we see those savings flowing through your unit costs, or anything that basically have prevented from those savings showing in the unit costs because of utilization or whatever? The last one, just to reconcile the 4% market growth that you're still sort of expecting for the year with a 0.5% in the first quarter, that means more than 5% for the remainder of the year. That looks a bit over the top. Maybe you could comment on why you still think that's a realistic number. Thank you.
Okay. I'll take questions 1, 3, and 4, and then Nicolás will suggest you comment on the interest cost. On Quick Quotes, I think we've seen some continued growth. I mean, we are now around about 7% of our overall business being on that platform. We think it's gonna stabilize there for a while because so far we've been very much focused on the short-term market, and we'll come probably throughout the year with a couple of other initiatives to further boost that channel. In terms of unit cost, I actually think that keeping unit cost flat in this market is a success 'cause there are actually quite a lot of costs that have upward pressure. Yeah, I mean, you already mentioned bunker, that also has an effect on trucking and rail costs.
Those basically go up. In order to keep it flat, you actually need to already save quite a lot of money here and there. Okay. We certainly see that the cost savings program is on track. In terms of market growth, we've always said that we feel that, you know, that a trend of a growth of, say, 4% or so is not strange. I don't look at that only on the calendar year. I think if you look at something like that, you need to look at it more on a 12 months rolling basis. If you look at that, then you will sometimes have a good quarter, sometimes you'll have a great quarter, and sometimes you'll have one that's a little bit sluggish.
I don't see that trend as being broken based on, you know, one quarter that is actually not that strong.
That's for the interest rates. You compare an interest result of 101 in Q1 2018 compared to 120 in Q1 2019. Out of that number, $18 million are related to IFRS 16. When you deduct that, you compare 101 to 103. The reason why we have more related to capital is basically because we have decided to repay the bond, and we have paid a call premium of around $6 million. The second effect is that we have more LIBOR than last year. We have around 50% of our debt linked to LIBOR, and that effect is around $10 million.
Those are the main reasons why when you deduct or when you take out the effect of IFRS 16, you still have a similar amount of costs compared to last year.
That would be then, I mean, the $6 million is not recurring, but the higher LIBOR is probably recurring. So-
Exactly.
Yeah.
The call premium, of course, is not a recurring interest.
Okay. The redemptions should help some on the average interest rate?
Yeah. I mean, of course, that will generate more further interest savings, coupon savings throughout the year.
Yeah.
Because there you have only one or two, 1.5, one month of savings. The second quarter, you will see the full quarter of savings.
Okay. Yep. Thanks a lot.
Welcome.
Ladies and gentlemen if you would like to ask a question please press star followed by one on your telephone. The next question is from the line of Edward Stanford from HSBC. Please go ahead.
Good morning, everybody. Just one question from me, please. Harking back to your comments about freight rate increases on Transpacific contracts that came up for negotiation. Did you notice any appreciable change in how customers wanted to play the mix between going to spot rates versus contracted rates? We're certainly hearing from others that there's been a bit more of a move towards spot rates this year. What's been your experience?
I mean, we have not seen any material change, to be honest, in the behavior of the customers. Also, the amount of cargo we contract for the next season is more or less the same as it was for last year, and not a big change.
Thank you.
The next question is a follow-up from Mr. Eliason. Please go ahead. Mr. Eliason, your line is open.
Yes. Thank you. It's Johan Eliason, Kepler Cheuvreux here. Just a follow-up on the IMO 2020. You mentioned that you have received already a good customer appreciation of your new sort of bunker fuel surcharge methods.
Isn't it so that the scrubbers will remove some of that? Will not that be mainly seen on the Far East trade, implying that maybe in the second half of this year, when ships are taken out of use, that could have a positive effect on the rates on Far East? Coming into 2020 and all these scrubber-fitted ships will actually imply that the expensive fuel will not be used here. We should be seeing an abnormal drop in the relative rates or how do you see this playing out?
I mean, if you look at, in the end, there's gonna be a very small percentage of the global fleet that's going to have scrubbers, and they will not all be deployed between Asia and Europe, but also on other trades. I don't think that you will see any big discrepancy between what happens on one trade or on another. Bottom line, the fact remains that costs will go up. It will be dependent a little bit on what the spread will be between the current HSFO and new low sulfur fuel. We still think that the extra cost is going to be between $80-$100 per TEU on average.
Do you see any potential for slow steaming on the back of this, or do you think the cost recovery will handle this?
I mean, I don't see a lot of that, but of course, we also read the press and yeah. Yeah. We
We can see that. We can see that there is some pressure, some political pressure to go and do something. I mean, I don't see a lot of that coming anytime soon, also because there aren't enough ships to really steam a lot slower.
Mm-hmm. Good. Okay. Thank you.
The next question is from the line of Jayanth Kandalam from Lucror . Please go ahead.
Yes. Just had a couple of follow-up questions. Firstly, on your point about scrubbers and the timing of when the ships will be taken out for that out of the fleet. Just a quick question. I mean, what is the proportion of the fleet of your own fleet at this point in time are you intending to take out for retrofitting the scrubbers? I mean, out of the total fleet, what proportion?
Okay. I mean, we intend to take 10 ships, yeah, out of the ten of our own ships, and I believe the number of own ships we have is slightly above 100.
For a 10th. Okay. Okay. That's useful. Basically then, the rest of the ships would be running on the low sulfur MGO. Is that what you're going to do?
I mean, they will all run on-
over the course of 2019 as well?
The rest of them will run on low sulfur fuels from the end of this year, and we will
End of this year.
We will test one ship on LNG. We will retrofit that in the first quarter of 2020.
I see. That's useful information. Thank you. Just on spot rates again. Thanks for giving a bit more detail on how the Transpacific and the Asia-Europe contracts work. If you can just give us a little bit of idea in terms of the main routes, what is the percentage of spot versus contract in terms of the take-up from customers? I mean, is there a number which you can just discuss?
If we look at it on a global basis, we have between 35% and 40% on contract. It varies a little bit by trade. On the Transpacific, it's a bit over 50%. If you look at Asia-Europe, it's probably only 25%, and most of the other trades are somewhere in between.
All right. Perfect. Thank you very much.
The next question is from the line of Brian Studioso from CreditSights. Please go ahead.
Hi. Thanks for taking my question. Regarding the encumbered fleet, last quarter, you mentioned that of the 95 owned ships, the majority was financed and encumbered. Could you just give an update on that given your current fleet? The real question on the back of that is, as you go forward and look to pay down debt, is there any emphasis you're putting on towards secured debt and freeing up some of those encumbered vessels or containers? Thanks.
The situation has not changed too much. We have, of course, less debt because we repay around a significant amount of contractual debt linked to assets every quarter. The loan-to-value that we have in those assets is relatively reasonable. It's a percentage that is, of course, 55%-65% of the market value of the assets, on average. We still always have some space to leverage up in case it is needed. Usually we take advantage of that financing vehicle that is the cheapest to finance ourselves.
In terms of the repayment of debt, as we repay that debt, as we depreciate the assets, that's something that we do every quarter. The voluntary repayments are pretty much on the most expensive debt that today is a bond 2020 that is due in 2022, and some other corporate debt that we have in UASC, inherited from UASC. That's basically a target for voluntary repayments.
Great. Thank you. Very helpful.
This was the last question today. Please direct any further questions to the investor relations team. I hand the conference call back to Rolf Habben Jansen for closing remarks.
Okay. Well, then we'll wrap it up here. Thank you very much for your questions and for taking the time to listen to us, and look forward to speak to you again soon.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.