Good morning, welcome to Höegh Autoliners' fourth quarter presentation. My name is My Linh Vu, Finance Manager, and IR Responsible at Höegh Autoliners. With me today, we have our CEO, Andreas Enger, and our CFO, Per Øivind Rosmo, who will walk you through the last quarter business updates and financial results. If you have any questions, please send an email to our investor relation mailbox, ir@hoeg.com. With that, I will leave the stage to you, Andreas.
Thank you, My Linh. It's a great pleasure to be here to present the best quarterly result on record for Höegh Autoliners. Start with some high-highlights. We are delivering an EBITDA of $156 million for the quarter. That is a 36% increase from a strong third quarter. Net profit, $118 million. The performance is driven by a continuous success in repricing contracts and exploiting a strong spot market. As a result of the quarter, we are stepping up our dividend payout ratio from 30% to 40%, delivering based on, you know, the adjusted net profit, a dividend for the quarter of $44 million to be paid in February.
In addition, we have continued our effort to optimize our capacity cost, using purchase options to buy long-term charter vessels, 2 options declared this quarter. We also raised financing of $130 million at very attractive terms to finance those purchase options in a way that reduces our capacity cost. I will take you through some of the details on market capacity and sustainability before I leave Per Øivind to take the financial update for the quarter. On the market side, as I said, you know, volumes are flat, reflecting that we are running really flat out on capacity. Our performance improvement is, as I said initially, driven by a continuously successful ability to reprice contracts and capture strong spot opportunities.
I think that is also particularly strong in the context that, you know, in the quarter, we've also reduced our high and heavy share. That's partially because we are selecting attractive new car cargo, but it's also that we are still moving substantial volumes on legacy contracts that are below the current market level. As I said, Q4 has been another successful quarter of contract renewals, and we will expect that to continue into this year. We are at the situation where, you know, car shipments is at an historically low level, first because of the pandemic and then because of various supply chain issues.
Based on our records, we are coming into a period where we see improvements, increases in car shipments, particularly driven by a very strong trend. I would say really that, you know, exports of cars from China to Europe in particular has really had an inflection point, you know, this year and is showing, you know, remarkable strength. That's-- The underlying trend on the market in our view is still positive, primarily driven by the fact that we're starting from a very low base. high and heavy market is also strong. I think when we reflect on our high and heavy share going down, I think it's also important to reflect that, you know, high and heavy is a very broad segment.
While we are maintaining and serving the strategic end on that segment, working, you know, as before and prioritizing our strong, you know, long-term clients in the area and the strong players in the industry, high and heavy and break bulk also includes, you know, a broad mix of much more opportunistic cargo that we have, as I said, at times, chosen to deselect. We've had a strong year on mining equipment and we have a good sort of outlook on high and heavy cargo availability. That market perspective then has to be matched up against the capacity situation. We have an historically tight market. We have very limited new capacity coming in to the market before late 2024.
We have extraordinarily high charter rates at the level where, you know, we have decided, you know, not to increase capacity through the charter market, even if the market volumes are available. I think also, it's important when we look at the capacity situation, there's very much focus on the new build backlog. There is also during 2022, you've seen a significant tightening of the IMO regulations in terms of carbon efficiency of vessels. You've seen a step up in particularly the EU's focus on carbon taxes.
You know, as important as, you know, the new build backlog, which we are following very closely, is also, you know, the quality of the bottom third of the global fleet and how they're getting increasingly challenged both by, you know, IMO regulations, carbon taxes, and customer preferences. We would say for our part, we are quite pleased that we have a significant green new build program and that we're going into 2025, 2026 with vessels that will have a substantially better environmental and carbon performance than the fleet average.
We have during the last years optimized our network to around, you know, the fleet we have, driven by the fact that we have decided not to cover the capacity gap until new builds coming in in 2024 with long-term expensive charters. We do have a few charters, but we have a total of 3 charter vessels that are all now contracted into the new build delivery window. We have a stable and very controlled capacity situation that is not exposed to the spot charter market.
Sustainability has rapidly become a very important factor in our industry, driven by the fact that we serve some of the most ambitious companies on decarbonization and some of the companies of the world that has a clear brand profile of sustainability and decarbonization. As a company, we are committed to deliver on supporting our customers on that journey. Unfortunately, which I think is for the industry with port congestions and capacity, you know, shortages and then still lack of new builds, the carbon or the AER ratio is sort of slightly increasing for the fourth quarter. It's driven primarily by bad seasonal weather and higher speed.
I think it's important to say that we have a very clear plan in place with green new builds and with, you know, modifications and initiatives on the existing fleet to take down carbon emissions substantially. We have already taken down our unit carbon emission by 38% from 2008 to 2022. As I said, we have substantial quantified ambitions to take that significantly further by 2030. I'll leave it to Per Øivind for the financials of the quarter.
Thank you, Andreas. I am very happy to be here today to present the best result ever for Höegh Autoliners. As Andreas said, we had a record quarter. We are also, when we summarize this, we have the best year ever in the history of this company. Before I go into the detailed numbers, just a short recap of the main drivers for our profitability. That is the volumes and the net rates. Looking at the volumes, we see that we have a small increase, 1.2% from 3rd quarter. When we round this off, it is 4.1 million CBM each of the quarters. That comes on the back of reduced capacity.
We actually had 4.3% lower capacity in Q4 because we sold 2 vessels during Q3, meaning that we are actually able to utilize the fleet better. We have more cargo on board on every sailing, and we are also able to do more efficient voyages giving the high volumes that we have. Same volume with lower capacity is the main takeaway from this one. As Andreas said, we are able to transfer the strong market that we have, the tight capacity situation, into a situation with considerably increase in the net rates. The net rate increased with 9.3% from 3rd quarter to $68.3 per CBM.
Looking at the year as a total, we see that we have been able to increase the rate from 55.6 - 68.3, representing 22.8%. This comes both from renewal of contracts as they expire, but we are also in a situation where we have capacity available to benefit from the very strong market. That is the backdrop for the financial numbers. Revenues increased with $27 million from third quarter into fourth quarter. $24 million is coming from the increase in the net rates, and approximately $3 million is coming from increase in surcharges, mainly BAF. The EBITDA, as we said, increased from $115 million - $156 million, representing an increase of $41 million from Q3.
We see that we have also a record-high margin. The EBITDA margin has increased to 44%. This is also then translated into a very high net profit. We see that we have a net profit here of $120 million in fourth quarter. That is up from $95 million in third quarter. The increase from or actually if you compare it with 2021 Q4, you see that we had $146 million, but that was because we had a reversal of impairments of $109 million. Comparing on apple-by-apple basis, you see that we have an increase from $38 million to $120 million comparing to fourth quarter last year.
If we look at how this is divided between income and expenses, we see that we had an EBITDA of $79 million in Q4 2021. That took us to $115 million in Q3. The drivers there was the increase in revenues, we had a hit from higher bunker prices at $34 million, we were able to reduce our operating expenses by $12 million in that period. From third quarter to fourth quarter, again, cargo revenues, as I said, $27 million, $24 million coming from the increase in the rates, $3 million coming from surcharges. We also had a positive effect in bunker. Bunker expenses was reduced with $16 million from third quarter to fourth quarter.
Other operating expenses, mainly voyage expenses, more or less the same as in third quarter, and that took us to $156 million for the quarter. The balance sheet has strengthened considerably during the year. We see that our net interest bearing debt is reduced from $491 million by the end of Q4 2021, down to $379 million. Looking at the net interest bearing debt EBITDA ratio, it is now down to 0.8. The book value of the equity is by the end of the quarter, close to $1.1 billion, representing 61% of the total assets.
Cash balance, we are generating a lot of cash, and we can see that if we go back to second quarter, the end of second quarter, we had $61 million in cash. That has now increased to $184 million. On top of that, we have an undrawn revolving credit facility of $94 million. Our liquidity reserve by the end of the year was $277 million. Looking at the cash development during the quarter, we started with $130 million, and then we generated $146 million from the operation. We used $7 million in investing CapEx during the quarter. $7 million, that is mainly dry docking of vessels. We repaid $10 million of the mortgage debt and had interest and commitment fees of $4 million.
We purchased the Höegh St. Petersburg late December for $30 million. We paid cash, and we didn't take any loan on that vessel at that point in time. We also paid $20 million in dividend, and we had other cash spendings from financing activities, $23 million. That is mainly payment of lease and time charter hires. We had some currency gain losses. We had a loss of $2 million, and that is because of the strengthening of the USD. That took us to $184 million plus the $94, $277 million by the end of the quarter. The balance sheet is as we see it, very strong. We have vessel and new building of $1.151 billion.
We have right-of-use assets of $274 million. That is the leases and the time charters that we have. Then we had cash of $184 million. Bunker and receivables was $143 million by the end of the quarter. Equity, close to $1.1 billion. Lease liabilities, $299 million. We had interest-bearing bank debt of only $265 million. Current liabilities and other non-current liabilities, $87 million and $39 million, respectively. The equity share was 61%. It represents $5.6 per share or NOK 57 if we compare it to NOK. We also calculate the value adjusted equity by replacing book value of vessels with market value of vessels.
We see that we had net asset value of close to $2 billion by the end of the quarter, representing $10.4 or NOK 107 per share. Dividend, we have, as Andreas said, we have increased the dividend payout considerably. We increased it from $20 million - $44 million, representing an increase of 120%. We calculate the dividend as 40% of net profit adjusted for extraordinary items, and that is according to our dividend policy. Converting this into numbers per share, it represents $0.231 per share or NOK 2.369 per share for the fourth quarter. That dividend will be paid on February twenty-three. That concludes the financial presentation. All the details are in the quarterly report.
We will also publish on our website a fact sheet with more details after the presentation. With that, I leave it back to Andreas to say something about the outlook.
Thank you. I think we do that relatively short and sweet. We expect a continued strong market driven by limited capacity growth and positive demand development from a very low level. We see continued positive rate development. We have already published our first monthly report for the year and we see strong fundamentals supporting both contract repricing and spot rates. The year 2023 has started well, as I referred to with our first monthly update. We are obviously closely monitoring the global macro situation and continuously working on having scenarios for any impact that might come. We are seeing a good start of the year.
I want to add to that we are extremely satisfied with, you know, when going into 2022, we had a focus on finding the right balance between building financial resilience and, you know, investing in fleet renewal and serving our shareholders. If you look at where we are, we have a, you know, debt-to-EBITDA ratio at under one. We have a market-leading fleet renewal program where actually most of the equity is already paid in, and we have committed financing that gives us future capacity costs substantially below what you can achieve by picking up some of the charters of the tonnage provider-owned new builds that are coming on stream.
We have then decided for the quarter that this balance now comfortably allows us to step up the dividend payout ratio from 30% - 40%, you know, and still keeping the focus on financial resilience and financial capacity to execute a market-leading fleet renewal program. We'll leave it for questions, My Linh.
Yes. We have received a few questions from our audience. The first questions from analyst Erik Hovi from Nordea. The first question is about the potential leakage of cargo to the container markets. This is also the question coming from Petter Haugen as well, that he want to ask if you can say a little bit more about the leakage of break bulk cargo to the container market, and if you want to quantify it in a way.
First, I don't think we will link or can quantify it. I think what we see, we do not see, you know, any kind of mass sort of change to the container market. There is a little bit on the margin on what we would call, you know, both strategically and income-wise, marginal cargo. We see a few things. I was in Australia last week and see not in containers, but some of the break bulk, some of the complicated break bulk things that sometimes went on roro is going on both carriers. That's normal. You see some sort of creative solutions. When we talk to customers, that's almost entirely driven by lack of ro-ro capacity as supposed to a cost optimization kind of thing.
Most of the solutions that are, you know, in reality quite costly, but is providing additional capacity. But, you know, there is a balance there and obviously there are smaller items. There are some things that fits in container that will move. In terms of our core cargo segment and what's driving our business, we don't really see that. We rather see people that are transporting on inter-alternative means that would like to get ro-ro capacity to cover their needs.
Yeah. I would add to that this is on the margin. We saw cargo coming from containers to our vessels when the container rates peaked a couple of year ago, and now we see some of that cargo moving back to containers. This is on the margin and it doesn't really impact our cargo portfolio to a meaningful extent.
Also say that, you know, in a situation where we're not able to satisfy a transportation request from our customers, we obviously have to expect that they seek other means of transportation.
Yeah. Thank you. The second questions is about the difference or premium in rates for live vehicles versus high and heavy. Is it closings? We are actively shift to our light vehicles volumes.
That
Do you-
I think in general we can see that at least for our business, that gap is closing. Has been closing over the last year. It's still high heavy to some extent are still better paid, but it's a mixed picture because the rate structure in this industry is very fragmented. Today we are clearly in a situation where we see that the cars are, in some markets, better paid than what you can call the liner part of the high heavy. That is a very. It's not a straight answer to that question, because the rate structure is fragmented. Yes, in some cases we see that that gap is clearly closing.
Yeah. Thank you. The next question is about the dividend outlook, and the question is, the declared dividends for the fourth quarter is the highest so far, and what can you expect similar going forward, or?
Yeah, I think we can say to that, you know, when we have stepped up from 30% to 40%, we obviously done that on the basis of a belief that that is sustainable. We will continue to monitor that balance, but we are quite confident in the dividend outlook.
Yeah. Thank you. The next set of questions is from analyst Petter Haugen from ABG Sundal Collier. The first questions is about the outlook sections. The question is, "You write that for the first quarter of 2023 has started well, and we expect another strong quarter. Can you clarify a little bit more on that? Do you see an increase in EBITDA?
No, I don't think we want to clarify more on that. We have a focus on transparency, so we have our monthly reports coming out. We have published the first one of the rates into January and commented on that. We will publish for February and March as time comes. But we basically said that the quarter has started well, and we're also saying that we're seeing a positive sort of rate development on the other side, and then I think we stop there. We don't want to speculate in numbers.
Thank you. The next question is about the net rate in contracts renewal. Can you share some light on the relative change in net rate in the contracts you renew in Q4 and this far in Q1? Can you say something about that?
I think what we can say in general is that when we renew contracts now, we do it at what I would call sustainable rates. We and the rates we get is higher than what we have seen historically, so. That is also when you look at our rate development through the year, you see that we have a big increase. A portion of that is contracts renewed at higher rates than what we had when we left the contract. Contracts are, in general, renewed at better rates than what we had.
Yeah. Thank you. I can see that we have quite a few questions about outlook today. The next questions is from analyst Fredrik Dybwad from Fearnley Securities. How will the second half of 2023 looking from your perspective? Do you see a reduced ordering pace from live vehicles and high and heavy customers?
I think we said that we expect a strong market driven from a low level. I don't think it makes sense to speculate about the second half of the year.
Our observation is that it will be a tight capacity situation through the year, and the year has started with good cargo inflow to us and we don't really see that changing.
Yeah. Thank you. The next question is from Frederik Ness, analyst from SEB, and it's about capacity. They can see that there's a few vessels with above 15 years, and how is the CII and EEXI impacting these vessels? Do we expect to lower extra sailing speed on these vessels?
I think we, I mean, our view is that we, you know, we have the most environmentally friendly vessels on water. Half of our current capacity has A and B EEXI ratings, so we're quite comfortable with that. Out of the remaining, I think we only have one at D, and we have a clear program on dealing with individual vessels. I think our view is that we're starting off with the, you know, market-leading AER performance, and a very strong existing vessel portfolio in terms of CII ratings. We obviously have one of the more active renewal programs among operators, which is driving that, further improving that substantially, as I would rather repeat what I'm saying.
I'm very pleased that we are planning to enter 2026 with probably the best and most carbon efficient fleet in the industry, and I think that is that is an important part of the outlook.
Thank you. The follow-up question is that what do we expect for the global fleet overall, or do we expect increased slow steaming going forward? As on a-
We don't want to speculate on that. What I think we already have said is that we see the CII regulations coming, the IMO regulations tightening. We see increased appetite for carbon taxes in the EU. We wish that we think that is a good and positive development and is needed to, for our industry to play a role in the, in the energy transition and in the fight against global warming. We appreciate that, and we expect that that will be increasingly challenging for the bottom tier of the global fleet. We are quite pleased that we have fewer vessels in that category than many other operators.
Thank you. Yes. The next question's from Frederick. It's also about vehicles transported on containers and leakage, I guess you can find the answer from our previous answers. The next one is about volume export out China. We have seen data showing falling port call at Shanghai in November, December, and particularly January. We also see lower turnaround times. Do you share this development, or is both loadings out China and turnaround, which we could use a proxy for volumes, still strong?
We have a strong business out of China, and so I think we have, As I said, you know, out of Asia, our problem is our available capacity, not the access to cargo. Obviously we balance that capacity between customers that we want to serve. That's a, that's an entirely customer-strategic, customer-driven selection from our side.
Thank you. The next question is from analyst Even Kolsgaard at Clarksons. How much of your fleet is tied up in extraordinary port congestions? Can you share a little bit about the driver behind it, and do you expect it to end? When will you expect it to end?
I mean, it is improving slightly. I don't want to go into numbers. It is, we have, I think our congestion or delay problem is now fairly concentrated to Australia. I was in Australia last week talking to, you know, CEOs of port, maritime authorities and terminals, and we're working intensively. We have a very close sort of focus on our business and are working with the relevant stakeholders to find solutions. The sort of biosecurity constraints creating capacity constraints in terminals and causing delays in Australia is quite a serious problem that has where we are incurring, you know, substantial costs. Although reflected in the number, they still reflect in the positive numbers.
That is, that is a challenge, and we're working very closely with it to find both better short-term and long-term solutions on it. It is, it has been sort of varying around the world with COVID. We've had issues in Europe that is becoming softer. There has been issues in Shanghai that has been becoming better. I think if you should point at something now, it's Australia, and we're very, very close to it and working with it because freeing up capacity is obviously a very important priority for us in this market.
Thank you for sharing this, Andreas. The next question is from our investor, Peter Hermanrud. I think it's about the contract renewal volumes. The question is, you're rolling 17% of capacity during 2023, what I understand is volume capacity, which is lower share than usual. What do you mean? Does that mean you renegotiate a large share of contracts during Q4 2022 already? I think it's something-
Yes. We entered into some contracts in second half of 2022 that are running now. Yeah, that is what we did.
Thank you. Yes, and that is the last questions we received from our online audience. If you have more questions, please send us an email to ir@hoeg.com. We will answer you as soon as we can. With that, I would like to thank you for watching our webcast. We look forward to see you again next time.