Good morning, and welcome to Höegh Autoliners' third quarter presentation. My name is My Linh Vu, head of Investor Relations, and we have with me today our CEO, Andreas Enger, and our CFO, Per Øivind Rosmo, who will walk you through the last quarter business and financial updates. As usual, if you have any questions, well, we have a Q&A session at the end of the presentation, and questions can be sent to our investor relations mailbox at ir@hoegh.com. So with that, I will leave the stage to you, Andreas.
Thank you, My Linh. Welcome to this quarterly presentation. We're starting with the front page of a beautiful picture of Höegh Autoliners, the largest and most environmentally friendly car carrier in the world that we took delivery of in early August. On this picture, just finishing its maiden voyage, successful maiden voyage to Europe, and is in the process of loading cargo for Australia. A very important milestone for the company, since our fleet renewal program has been, you know, one of the driving pieces of our strategy, actually, also one of the triggers of the IPO back in 2020 .
We're very pleased now to see the vessels coming with this one in Europe and also Höegh Borealis, the second one, has after the end of the quarter left the yard in China and is loading in Asia as we speak. The quarter, pleased to report another strong quarter, EBITDA of $178 million. We have previously announced some vessel sales, meaning that we have a net profit of $193 million. We have continuing the growth in gross rates and with our dividend policy of paying out free cash because we are fully financed and have a strong [position] our new build program and have a strong, very, very strong balance sheet. The dividend for the quarter will be $245 million.
As I said, we have taken delivery and put in operation the first of our Aurora class vessels successfully in the third quarter. As I said, we have another one, you know, that is now in operation, and we have another two coming towards the end of the year. Equity ratio 64%, reflecting what I said about the very, very strong balance sheet. We're going through a traditional, you know, presentation, commenting a bit on the market, on capacity and sustainability, before we go into the financials. Just before we start, and that's, I mean, at this stage, just for the sake of good order, we've just released a notice of planned future organizational changes.
And that is, you know, we are continuously working, developing the organization, building a strong succession plan, and creating opportunities for our people. And one important element in that is that we have an operating model in Höegh Autoliners, where we do all the critical tasks related to our business, internally with our own staff, and the largest office in the system is in Manila. During the last several years, we have added substantial new activities to the Manila office, includes activity we have traditionally had crewing, we had technical management of and of our vessels, we have the new builds. We, we've also and we had our entire financial or most of our financial office operating out of Manila. Recently, over the last few years, we've added IT.
Our entire global IT is run from there. We've also built customer service, so it's becoming, you know, the largest and most important office in our system and our operating model. And we've also decided that the further development and optimization and getting the full, you know, effect out of that office is very important to us and requires some more executive attention also from corporate management. And we have therefore, I'm happy to share that we agreed with Per Øivind that he has been one of the key architects in creating the office and will, from the beginning of next year, as part spend more time on, you know, providing overall leadership in a executive chairman role for that office.
Which means that he will step out of the CFO role and will be replaced with Espen Stubrud in that role. It's. This is not happening now. It's happening in a planned process at the end of the year, but it's a reportable issue, so we want to make sure that we have shared that information. Going into the market, we have fairly stable, but, as you know, somewhat lower volumes driven by the Red Sea and also a fairly-...
You know, high activity on, on, you know, five-year dry dockings of vessels and also obviously for the fact that we have sold some vessels, although they are being, you know, more than fully compensated by the additions of new builds that are happening this year. High and heavy break bulk volume is stable. The net rate is, you know, continuing upwards, reflecting that we have a continued strong market, and we have a very positive activity on, on renewing and actually also adding new contracts. To the contracts, we have as we said, we've successfully signed a number of contracts, you know, adding up to 5 million cubic meters.
Still with an average rate, new contracts above the $100 million mark, and a duration of 4.2 years, which is, I think, longer than we had usually. We still have some volume to renew before the end of 2024. There are good processes around that, and we basically continue to have contracts that are strengthening our backlog and, you know, creating a more robust rate level. In Q3, the contract coverage was up to 75%, which is historically high, but we are continuing to build and are aiming for the 80% mark during 2024.
This is obviously a very important part of our priorities and economic model that we are now, you know, focusing on creating a robust platform with customers and happy to report that we're making great progress on that. Also on the volume side, you know, deep sea shipment of cars is increasing. It's still very much driven by Chinese exports, but you know, a robust development for also in many other markets. With high and heavy, you know, in many ways, the same development there's been. We've talked about before, a dip in 2024 .
We believe we're back on a growth track, and also in that segment, we see, you know, fairly stable volumes, or slight declines, but it's fairly stable level out of Japan and Korea, but and a strong growth out of China. Capacity. You know, we now entered into the kind of delivery phase for new builds through twenty twenty-four. You know, there has been a series of vessels delivered, including then one of ours, if we include only the third quarter; two, if we include, you know, yeah, it's to date in the fourth quarter; and four, if we count to the end of the year.
That is easing the charter market slightly, but still at a high level, and obviously the deviation route around Africa, with the closure of the Red Sea is also continuing to create a strain on capacity. On sustainability, I started off with the, you know, talking about delivery of Höegh Aurora. And you know, these vessels with LNG and due to its size and lots of improvements in fuel efficiency in the design, is actually from yard today delivering 58% lower carbon emissions per car per transported than a typical or an average car carrier in the market today.
And as we add those new builds, and also as we continue technical upgrades to ensure optimized fuel efficiency during dry docking of older vessels, we are on a trajectory to you know improve our carbon intensity substantially in the years to come. That is the start, and I'll leave the details on the financials to Per Øivind.
Okay, thank you, Andreas. As usual, starting with a short recap of volumes and rates being the main driver for both the top line, but also the EBITDA and the cash flow. We had a small reduction in volumes, 2.8% down from 3.5 million CBM to 3.4 million CBM. Mainly coming from, as Andreas mentioned, periodic maintenance of more vessels, but also some repositioning, mainly due to the issue in the Red Sea. It still creates a need for us to reposition vessels between continents and that absorbs, of course, capacity. The net rate continued to increase, 83.2%-86.7%, +4.2%.
The main driver now for the rate increase, as it has been the last quarter, is actually renewal of contracts. Leaving behind us old legacy contracts with low rates and replacing them with contracts with higher rates. That's the driver more than the spot rate, time being. Converting this to numbers, it has been very stable. The last quarters, we have had revenues of $349 million. The lower volumes was offset by the higher rates, taking us from $341 million to $349 million if you compare with the last quarter. As you see, over the last 5 quarters, this has been pretty stable. The same goes for EBITDA. The EBITDA margin is between 50% and 52%, 51% the two last quarters.
And we have a small increase in EBITDA from $174 million to $178 million. So out of the $8 million that we increased the top line with, $4 million was converted into EBITDA. Net profit before tax is a record high this quarter. It's $196 million. The main reason for that is that we, in addition to the result coming from the operation, have included the sales gain from the sale of Höegh Kobe and Höegh Chiba, and that is together $52 million on top of the normal operating profits. The bridge between first quarter and third quarter, it's basically driven by cargo revenues in...
From first quarter to second quarter, it was volume that increased, and now from second quarter to third quarter, as I said, it was the rate increase that was the main driver for the uptick in EBITDA. Other expenses like bunker and other operating expenses, voyage expenses, is pretty flat, actually, between the quarters. The balance sheet, Andreas said it. It is, we have a very strong balance sheet. We had net debt by the end of third quarter of $255 million only. Net interest bearing debt EBITDA ratio zero point four. The book value of the equity is $1.3 billion, 64% of the total balance sheet.
We built a substantial amount of cash during the quarter that is also reflected in the proposed dividend. In addition to a solid cash flow from operation, we also had the net proceeds from the sale of the vessels, of the two vessels that I mentioned, of $119 million. Both vessels were debt-free, so that cash is going directly into the cash balance here. There is no repayment of debt. In addition, we have unused drawing facilities of $208 million, so the liquidity reserve by the end of third quarter was $551 million together. Closer look at the cash development. We started with $195 million. We generated $190 million from the operation.
EBITDA was $177 million, so we had a positive development in working capital, reducing the working capital through the quarter. We spent $10 million on investing activity other than vessels, mainly dry docking and maintenance expenses. We sold the two vessels that I mentioned, Höegh Kobe and Höegh Chiba, $119 million net proceeds, and then we have taken delivery of Höegh Aurora. That was one, that was $70 million out of the hundred, and we also have purchased Höegh Jeddah during the quarter. We have used $19 million on debt service, amortization, repayment, and interest expenses. And we have taken $110 million in new debt, $70 million on Höegh Aurora and $40 million on Höegh Jeddah, and then we have other lease payments of $17 million.
And then we paid $127 million in dividend, and then a minor currency gain. So that is taking us from 195 to 344. Balance sheet, as we have said already, very strong. Our balance sheet is easy to understand. Most of the balance sheet is vessel and new building, close to $1.5 billion. We still have some right of use assets, vessels, but it is been considerably reduced over the years as we have purchased most of the vessels that we previously had on leases. That is $72 million. And we have bunker and receivables of $141 million, and cash of $344 million. That takes us to somewhat in about $2 billion in total assets.
The equity is 1.3. The net interest-bearing bank debt is now $513 million. We have some lease liabilities of $119 million, and we have all the current liabilities of $86 million. The book equity per share is calculated to $6.8, equivalent to NOK 74. If we replace book value with market value for the vessels, we end up with total assets of $2.5 billion, and that represents a value per share of 13.3, or net asset value of 145 million NOK, NOK 145 per share. Yeah, we have disclosed it, and we, Andreas mentioned it initially here. We are proposing a dividend of $245 million.
We expect to pay that in middle of December, and it adds to the considerable dividend payments that we already have done so far this year. Okay, outlook for you, Andreas.
Yes, and I think this is becoming a slide that is not, you know, changing so much between the quarters. And there are really sort of three points in this, and one is that the market remains strong. We are in a good track. We have, you know, started to add capacity with top-notch modern vessels, and we are having good progress, as I said, on, you know, contracts and contract renewals. You know, the geopolitical situation I don't think is changing much either. It's complicated, and it's obviously some effects of Suez being effectively closed for our type of operation.
But it's not much change in those dynamics, and you know, we have adapted and responded to that, I think, operationally in a good way. And when it comes to expected Q4, there is a level of... I think there is a high level of stability in this, meaning that we expect, you know, a Q4 EBITDA to basically be in line with our, you know, recent run rate. And we are in the process of increasing our contract share, securing more cargo under longer contracts at strong rates. So that ends our presentation, and thank you for listening in, and we're opening for a Q&A, My Linh.
Yes, we have received quite a few questions from our audience this morning, and the first questions is about the general capacity planning. What is our plan with the older vessels, where we have more and more delivery of the new Aurora class vessels?
I mean, I think we have, first, we have obviously used the opportunity to sell some vessels, and we still have one vessel where, Höegh New York, we made an agreement and will deliver, which we will deliver early next year. So we have chosen to sell some older vessels at good prices, to match the delivery schedule, meaning that we are adding capacity, but we're not adding massive capacity. And but I think the future capacity strategy, we will sort of work on as it goes along. Right now, we are quite tight. I mean, we could easily have employed the vessels that we have divested. It's a bit of sort of balance sheet and fleet balancing.
There are some vessels that are going to be also retired in the years to come with age, but we're managing that carefully. But I think the main thing about our capacity strategy now is that we have world-class new builds. We have a large sort of legacy fleet that is well-performing and encumbered, no debt. So we have flexibility to basically continue, and we could add, you know, extra charter vessels as, you know, that market gradually opens up. So in a way, we are in a very comfortable situation where we have all the tools in our bag to, you know, number one, go green with our customers, but also to balance our total capacity to our total requirements.
I think we will report on that, as we make decisions going forward.
Yes. Thank you, Andreas, and the second question, this has been echoed by a few different analysts and audience, is about the sentiment of the recent contract renewal.
Mm-hmm.
What we are seeing... Can you say anything about the negotiation and the rate we are seeing for the recent contract renewal compared to earlier this year or last year?
No, we don't really comment on rates on individual contracts, and that's that differs, but I think I will comment on the processes in the sense that I mean, to some extent, we have, we're also getting some questions, "But when do we announce contracts?" And you know, the dialogues with our customers are you know, positive, going well. We are working hard to make sure that we get you know, balanced terms, and we have sort of taken some time to make sure that we we you know do improve the contract language and terms, and these are large organizations, so it naturally takes some time.
While we would like to sort of announce sooner, we have to have, you know, the entire process completed before we sign. We're quite pleased with the processes, and I don't think we've experienced any setbacks or things regarding neither rates nor terms, nor contracts. It's a quite positive environment. It's, I think we've seen our industry moving in a more industrial direction. I mean, we are not sort of chartering out vessels on spot trades and stuff. We are creating trade systems that has, you know, multiple customers, and that creates some stability.
And we've reported, you know, the fact that we now have a contract coverage up to 75% is a substantial improvement to previous. And, with what we're doing, you know, that contract coverage is also moving upwards.
Thank you. And the next questions also from a few different analysts is about the outlook. So you wrote in our outlook that we expect Q4 to be in line with the last nine-month run rate. Can you say anything more about that?
I mean, I think we are expressing a level of stability in the outlook, and that we have a robust platform for, you know, performing at the current level.
Mm.
I don't know, Per Øivind, if you would add any details to that.
That, that's what we tried to say. It's, it's quite stable. We don't expect a lot of changes in fourth quarter, and so I think that's what we can say about it. It's, it's-
And if we should add something, I mean, it's. You know, it's a. We're operating a complicated system. There's lots of moving parts, and we have the impression that many analysts thinks, you know, a couple of % up or down is a big deal. And in that background, I think it's fair that we hedge our language a bit on the outlook.
Yeah.
Thank you. Yes, this next question is about our new vessels, Höegh Aurora. How does ship perform versus expectations? When could we expect some cost impact when the vessel is fully integrated in our system?
I mean, the vessel has performed fantastically. It's been what the people that have been in this much longer than me says that it was probably the best build number one of a series we've had, so we had a very, very good cooperation with the yard, and you know, all our partners on that, so the performance is very good. It has completed the first maiden voyage. Cargo operations are fine. Its operation is good.
Mm.
It has the LNG capability that is important. So, we are very, very pleased with having it, and I also want to emphasize the fact that this, I guess, according to our original plan, is almost half a year early. So, it's also ahead of schedule. And you know, that will gradually, you know, go into both our performance and our carbon emissions, but you know, it's now one voyage on one vessel in the fleet. So that's coming gradually, I think, into the fleet over the next twelve to eighteen months.
Yes, thank you. Yes, and seems to build up on the newbuilding program, or a newbuilding. It's not a secret that we see a large order book, in the segment, and we also write in our outlook at that with the deliveries of a new build to the other operator as well. It will take away gradually some of the pressure seen in our industry. How could we comment about, what could we comment about the outlook with increasing delivery of the new vessels?
I think that, I mean, that is a big question, but I think we should start with the fact that we have, you know, had an aging fleet over, you know, more than a decade. So, we believe that there is a quite substantial, you know, renewal overhang. And I think also it's like, we also, you know, see the quality of the new vessels and, you know, we have all these discussions of decarbonization and new fuels and willingness to pay, but we are quite confident that when we're taking on vessels that are really able to reduce carbon emissions per unit transported by more than 50%, actually with no additional cost, even with more efficiency, that is a good platform.
The fact that, you know, with the 12 Aurora class vessels being substantially larger than the average, we are making a very substantial renewal. We have captured the opportunity to divest some older vessels at very attractive prices, you know, paying actually a large, covering a large part of the equity installments in the new builds. We are confident that we're building a more robust, both a more robust fleet, a better performing fleet. We're building a stronger contract portfolio, and it's our clear ambition or impression that, you know, our customers want that stability in their supply chain. We are optimistic, but I don't think we're going to speculate on what's happening.
But still, currently, what the new build deliveries are, they're. Yes, they're easing some of the extreme pressure, but it's also, you know, filling in the gaps from, you know, a decade of underinvestment.
Thank you. Yes, the next questions is about the fluctuation in rate from month to month, and this question I can answer. So I think where we all previously guide before, I mean, or informed the market before, the fluctuation in the market is simply because as a result of different vessel positions in different months. And I would want- we would not try to treat it as any indication about the general macro market in general. And yesterday we received a few questions about the macroeconomics and the impact of tariff and the impact of the potentials of the upcoming US elections. And what we can say is that any kind of tariff in general, not good for the business, but it is something we are closely monitoring and we'll..
Yeah, and we will take actions accordingly. Yes. So, with that, I would like to conclude today's Q&A questions. Thank you very much for your attention, and we look forward to see you next time. Thank you.