Good morning, and welcome to Höegh Autoliners' Fourth quarter presentation. My name is My Linh Vu, Finance Manager and responsible for investor relation at Höegh Autoliners. It's a pleasure to welcome all of you today, and our CEO, Andreas Enger, will begin the presentation with a business update covering the main highlights of the quarter, followed by a financial update from our CFO, Per Øivind Rosmo. You can ask questions by sending email to our investor relation mailbox, ir@hoegh.com. Without further ado, I will hand over the stage to you, Andreas.
Thank you, My Linh, and welcome again to this first quarterly presentation of, for Höegh Autoliners after our listing, late last year. We are happy to be able to report a strong quarter operating performance and also a strong quarter in terms of preparing the company for future growth. We did complete a successful listing at Euronext Growth and raised $ 131 million net in new equity. We have launched a new build program for the largest and most environmentally friendly car carrier ever built, which is, in our view, the most tangible and significant, decarbonization step in our industry. The general market continues to be strong, leads to improved trade balances, utilization, and margins reflected in our results.
Fleet optimization through sale of Höegh Masan and exercise of a purchase option on Höegh Beijing is improving our operating structure. Adjusted EBITDA for the quarter ends at $79 million, up 65% year-over-year and 55% quarter-over-quarter. And the strong Q4 results, together with reversal of impairments due to, you know, improved operating earnings and improved asset valuation, gave a net profit of $140 million in Q4. I will go through the first points on the market and commercial and capacity, and a little on ESG before Per Øivind will take over with the financial update.
We have had a quarter where the results and improvements have been produced by relatively flat volumes and a stable share of high and heavy and breakbulk, but a strong repricing on the margin side that have helped driving our results. We've had, you know, more than $6 improvement in the net rate in the quarter, which is driven by repricing of cargo and is the most important driver for our results. Looking at the ability to reprice, I think it's important to just reflect on what our structure is right, like. Two-thirds of our volume is on contracts, about 1/3 is rate agreements and spots.
The latter can be repriced relatively frequently, and when it comes to the contracts, we have a situation where we have typically 2 to 3 year contracts, meaning that, you know, we have significant, you know, repricing renewal perspective also into the near future. Our market is, I think characterized by, you know, a recovery of particularly new car volumes, somewhat flattened out by supply chain issues and semiconductors, but also with the outlook of a, you know, robust growth going into the next few years. And together with the capacity constraints, we believe that calls for a continued tight market. On the high and heavy side, we also see strong growth, particularly out of China, which is an important market for us.
We see also strong growth expectations in, in the mining sector, all contributing to an ability to maintain a strong cargo mix also going forward. On the capacity side, you know, the market has changed quite dramatically over the last few years from a situation of overcapacity to a very, very tight capacity situation. And we have done, you know, some adjustments in our fleet. We sold one of our oldest vessels at a very attractive price and have chosen to take a call, use a call option on, on one of the newer vessels, you know, also at a very attractive price, relative to current valuation. We plan to maintain a network of around 40 to 42 vessels, and out of those, 27 vessels are owned, 13 are chartered.
I think out of those 13 that are chartered, seven are, you know, chartered on, you know, long-term bare boats where we have purchase options, in that sense, you know, have full exposure to the vessel values and will not have a repricing of capacity cost, you know, driven by the tonnage market, which is also obviously important for the cost structure going forward. The tonnage market remains tight. New builds coming into the market over the next few years is very, very limited. And as I said, the capacity is tight.
There is growth in most of our core markets, and that has also reflected in clearly higher rates on our side, and also strong increases in the time charter rates in the market as we see on the slide here. Just a short update on ESG before I leave the word to go to the financials. You know, for Höegh Autoliners, fuel efficiency, carbon efficiency has been a very important priority for a number of years. Already going back to 2014, we started, you know, building vessels with reduced sort of design speed, which has substantially better fuel performance and carbon performance than the standard capacity. And we're obviously taking a new step with the Aurora Class, you know, creating a totally new benchmark for the industry.
In the meantime, we obviously also work to improve our carbon intensity, you know, year by year, up to also the new capacity comes online. And we have reduced our Annual Efficiency Ratio, also through this year. We have worked on, you know, the small things like propeller polishing, you know, hull cleaning, speed management, all of those kinds of things that are important, and we will continue to focus on. But we are obviously now at the stage to continue our improvement, the track we have to, you know, add in new and more environmentally friendly capacity, which we've taken steps to do. Then I will leave it to Per Øivind to go through the numbers in some more details. Per Øivind?
Thank you, Andreas. Good morning, everyone. Fourth quarter of 2021 was a very strong quarter for Höegh Autoliners. We managed to convert a very strong market into good results. We saw considerable improvements in our net rates as well as the cargo mix. We had a good cargo mix, and we continued to have a lot of high and heavy and breakbulk in our cargo mix. If we look at the revenue, you will see here from the chart that they increased with $ 42 million from Q3 into Q4. Our volumes did not increase that much. We had 4.0 million CBM in Q3, increasing to 4.1 million in Q4. That was mainly driven by better utilization, as the fleet has been more or less constant.
Most of this increase is coming from the rate increases, and our net rate in Q4 was $ 55.5 per CBM, up from $ 49.1 per CBM in Q3, an increase of 13%. The share of high, heavy, and break bulk was stable, 31%, so most of the rate increase is actually coming from repricing of cargo. We also had increased compensation for a BAF in Q4 compared to Q3. If we look at the adjusted EBITDA, it increased with $ 28 million, from $ 51 million to $ 79 million from third to fourth quarter. This took the adjusted EBITDA for 2021 to $ 210 million, up from $ 165 million in 2020.
Net profit in Q4 was $140 million, and that was an increase from $14 million same quarter last year, and -$9 million in Q3. Out of the $140 million, $32 million is coming from underlying operation. $13 million is coming from an extraordinary repayment of capital from the Norske Krigsforsikring. That has been treated as a financial income in our P&L, so it's not included in the EBITDA. We also did an reversal of impairment of $96 million due to the increased vessel value and our increased earning prospects. On the bottom graph here to the left, you see the net interest bearing debt. It came considerably down from Q3 to Q4. It went from $ 646 million to $ 491 million.
The main reason was the capital injection of $ 128 million, but also the good cash contribution from our operation contributed positively to that deleverage. The book equity increased with $275 million from $526 million to $801 million. The two main contribution are, of course, the equity injection and the solid net profit. The cash balance, as you will see here, we increased our cash balance from $77 million by the end of third quarter to $228 million by the end of the year. A combination, again, of good underlying cash flow from operation and the funds from the IPO. If we compare EBITDA Q3 versus EBITDA Q4, you see here that it increased from $51 million to $79 million.
The main driver is the increase in net freight, and as I said, volumes was more or less the same. So the increase that we see here in net freight revenues is basically only coming from repricing of cargo and increased net rates. We also had increases in surcharges. You see here that surcharges increased with $8 million. We had a good exchange between BAF and bunker in Q4. You see bunker expenses increased with $5 million. Most of the increases in surcharges is actually related to BAF bunker compensation. Voyage expenses increased with $7 million. That is basically a function of trade and cargo mix, but also some underlying expense increases. Running expenses increased with $3 million.
Part of this is directly related to the COVID-19 situation, and some of it is actually expected to be reversed when the situation normalizes. We have also here compared EBITDA 2020 with EBITDA 2021, and as you can see, it increased from $165 million to $210 million. Pretty much the same drivers as we had in fourth quarter. Net freight rate increased from an average of $45.9 in 2020 to $50 in 2021. So out of the $180 million increase, $70 million is coming directly from rate increases, and $110 million is coming from volume increases. The volume from 2020 to 2021 increased from 14 million CBM to 16.5 million CBM.
Bunker expenses has continued to increase throughout the year, and you will see here that we had $67 million more in bunker expenses in 2021, and out of which, $29 million is coming from higher prices and $38 million is coming from higher activity. Voyage and other expenses increased with $79 million. Again, it is a combination of cost increases and increases related to volume. $51 million from volume increases and $28 million from cost increases. The increase that we see here in charter hire expenses is because we had to charter in some tonnage to cater for increased volumes, especially in first half. In second half, we have hardly done any charter in tonnage and basically managed with the tonnage that we have, that we own, or have on long-term bareboat charters.
The increase in running expenses is $9 million. It is a combination of some more activity and, as I said, some cost increases. And we also see here that our EBITDA margin was the same in 2021 and 2020. It was 22%. If you look at the graph to the left here at the bottom, you will see how our EBITDA developed through the quarters. First quarter started out with some challenges related to operational COVID issues, delays. We saw high bunker price increases that was not really covered by BAF, but that situation gradually improved through the year. And the main rate increase that we experienced in 2021 actually came in fourth quarter.
And then you also see that fourth quarter was by far the best quarter that we had in 2021. We have a robust balance sheet by the end of the year. Our asset side consists basically of vessels that we own, vessels that we have on bareboat charter, and cash and some other current assets related to the operation. The $1.057 billion that we see here is, for all practical purposes, vessels that we own. We have an owned fleet of 26 vessels. Then we have $229 million that is right-of-use assets related to the 10 vessels that we have on a longer-term bareboat charter and 3 vessels that we have on longer-term charter, and we had $228 million in cash.
$138 million in other current assets is, for all practical purposes, bunker inventory and freight receivables. So the asset side of our balance sheet is fully reflecting our activity. It's no goodwill. It is no investment in joint ventures or other things in our balance sheet. It's very, very related to our operation. Equity, $801 million, that is 48% of the total balance sheet. We have $445 million in mortgage debt. The mortgage debt has been considerably reduced over the last years, so the leverage here now is very good. We have $275 million in lease liabilities related to the right of use assets, and we have all the current liabilities of $102 million.
That is, for all practical purposes, related to our trades. It's supplier debt and balances with agents and other. So we have a very strong balance sheet, equity ratio of 48%, and a solid cash balance. Every quarter, we collect the market values of the fleet from three brokers, and we calculate the value-adjusted equity and compare it to the book value of the equity. And when we did that by year-end, we see here that the value-adjusted equity is $879 million, and that corresponds to $4.6 or NOK 41 per share. That is what we intended to say about the financial result. As I said, very strong result in fourth quarter and a very solid balance sheet by the end of fourth quarter.
I then send the ball back to Andreas, and he will give some final comments here.
Thank you. And, I think as we sum up, fourth quarter of 2021 has obviously been a transformative quarter for us with, you know, strong repricing on cargo in the market, you know, with a successful IPO giving us growth capital, and with firming up our green new-build program that will, you know, help us on our path to zero. And I guess with that strong quarter, there is obviously interest in how we see the future, and I want just to make, you know, a few comments on that. The way we see it, strong markets with tight capacity and supply-demand balance is expected to continue into 2022.
As we looked at our contract structure, we believe there to be further repricing potential so that the market is strong. I think we still want to highlight that, you know, as you also see in the Norwegian press, the Omicron wave is creating increased sick leave, is creating some issues around that, and we see that also in ports and the port congestions. Semiconductor shortages is still there. The tight tonnage situation, you know, makes things more complicated. There is fuel price volatility. So all of these things, you know, obviously also create some pressure, and I think we will see in the first quarter some more noise from those factors than what we had in Q4, but the underlying market fundamentals remains very strong.
I may add to that as well that I think I commented on that you know given the tight capacity situation and the increased time charter rates it is hard in this industry right now to grow profitably with volume growth because incremental volume comes at a high capacity cost as well. So our focus is on you know taking out the price potential and optimizing our existing fleet in order to you know capture that. The good thing is that that tight capacity balance obviously also supports pricing.
So we continue to see a good market, but I think it's important to be aware that, you know, there are noise factors coming from COVID, coming from supply chain issues and semiconductors, and coming from bunker prices and other things that can create, you know, some seasonal volatility in the results. But with that, I say thank you, and we open for questions. My Linh, any?
Thank you, Andreas and Per Øivind. We have received a few questions during our webcast. The first question is from analyst Jørgen Lian from DNB. Do you have any guidance on rate levels for 2022?
No, I think I don't think we will guide on rate levels, but you, you're obviously seeing the strong improvement we've had in the fourth quarter, and we consider those rate levels to be sustainable, and we basically also consider that there is some gradual repricing potential subject to market. But I think we stop there.
Yeah. And, and the second question's about the chartering market. So does the chartering in the additional capacity look attractive to you at the current levels?
Chartering in additional capacity?
Yeah.
I think I commented on that, you know. The good news in the market is that we're now seeing rates, you know, supporting, you know, the cost in the tonnage market. That being said, I think it's still challenging to get substantial margins on incremental volume, deliver that incremental capacity cost.
Mm.
So, we're going to be opportunistic on chartering, and we're going to, you know, focus on balancing the system. Our expectation is that we will charter vessels, but we will not have a charter-based volume growth strategy.
Thank you. The third question is from analyst David Bhatti from SEB. Can you comment a little bit about the percentage change in broker values for fleet, fleet values from Q3 to Q4?
We have seen a continued increase in fleet values and, on average, the value of our fleet increased with approximately 6% from Q3 to end of Q4.
Yeah. The next question is from analyst Anders Karlsen from equity research, equity research analyst. Can you comment about how much you can grow your volume without adding further capacity?
No, I don't think that's, that we are-
No, we cannot substantially grow our volume. We have some room for improvement by improving the utilization, but we can not grow substantially based on the current fleet. As Andreas mentioned earlier, growth require more capacity. More capacity is very expensive, and we will be careful to enter into the that.
Thank you. Yes, and that's all we have for now, and we hope the presentation has been informative to you. And if you have further questions, please reach out to us at ir@hoegh.com. Yes, so all the materials will be uploaded on our website after the presentations. And thank you again for listening to us, and we look forward to welcoming you again for the next quarter presentation. Thank you.
Thank you.