Again, welcome to the first quarter result presentation. I'll go straight to the—to save time, I'll go straight to the performance of the overview performance. Amidst very hectic news flow on the geopolitics, it was a rather weak start for our two markets, especially the dry market had a very weak performance in the start of the year, while the product-tanker market kept up better. This translated into weaker results for our company and the term-shunted earnings for our two segments. At average, the CLEANBUs and the CABUs earned $22,400 per day, which is in the high end of the guiding range we gave back in February. We continued to overperform the standard markets, 1.2x the tankers and 2.7 x the dry bulk market. The results ended with an EBITDA of $15 million and an earnings before tax of $4.3 million.
Based on the results of the quarter, the board decided to distribute dividends of $0.035 per share, amounting to $2.5 million paid out for the quarter. Looking at the markets, even the scale may not really illustrate the volatility and the earnings effect in the quarter. The dry market in dark blue fell down quite a bit from December and January after what a large and a normal fall in weakening in the seasonal weakening in the dry market ahead of the Chinese New Year and ahead of the grain season that starts normally in March. The tanker market kept up better, as we see from the blue line, but again, you note the high volatility, especially in the tanker market. How was the KCC performance? In totality, the $22,400 time charter equivalent for the quarter was, under the circumstances, reasonably good.
As mentioned, 1.2 x the product-anchor market and 2.7 x the dry market. The graph again shows the lower volatility of our earnings, which are in the columns compared to the underlying product-anchor market in blue and the dry market in gray, and also shows that in markets where the difference between earnings of the two underlying markets are less, we have normally a higher overperformance. Looking at the CABU s, it's been, under the circumstances, a successful quarter. On the trading, we are back to more normal split between caustic soda trading and dry trading with 48% of the CABU capacity in caustic soda trades. This is down from the fourth quarter, which was quite extraordinarily high.
In the quarter, we have increased the ballast slightly, and the time in combination trading is somewhat down, which is a reflection that we, as an effect from the hectic caustic soda program at the end of the fourth quarter, had some ships ballasting from Australia to service our customers loading caustic soda . This does not really reflect the activity of the business. On the earnings side, the CABUs ended at $22,346, which is well below the fourth quarter. It is again a reflection mainly of weaker dry markets and also the lower share of capacity in caustic soda /tanker trading compared to the fourth quarter, where the earnings in the fourth quarter were slightly boosted by the high percentage in caustic soda trading. The earnings for the quarter also are reflecting a slightly lower fixed rate contract earnings compared to 2024.
Looking at the CLEANBUs, you note that the tanker trading on the CPP was down, but it also illustrates that we have increased the trading in vegetable oils in the quarter. This illustrates that we have been able to use the trading flexibility of the CLEANBUs to optimize the trading in very difficult dry market circumstances. We fixed some tanker cargoes with ballast, and we also fixed vegetable oils in order to minimize the time in the dry market. This is partly reflected in the time in combination trading, which is stable compared to the fourth quarter, but the ballast is slightly down. The earnings for the CLEANBUs ended at $22,449 per day, which is a reflection of very low earnings in the dry market.
The vegetable oil earnings kept up well compared to the fourth quarter, while the CPP earnings went down compared to the fourth quarter. Liv, over to you.
Thank you. I think I need your.
Yep.
Switch invoice. Thank you. Good morning, everyone. I will give you a brief update on the financials and sustainability efforts before I hand it over to Engebret again for market outlook and a more in-depth market presentation and the outlook. Yes, let's start with the financials. EBITDA for the quarter ended at $15 million, down 26% from last quarter. It should be no surprise by now that it was the TCE earnings for both the CABU and the CLEANBU fleet that is the main driver behind this change, in total approximately $8 million QoQ. This was, however, partly offset by more on-hire days as we dry docked or we had less off-hire related to dry docking in Q1 compared to Q4 last year, $1.3 million positive effect QoQ. OpEx was lower as well QoQ, $1.3 million, and administrative expenses as well lower, approximately 6% or $0.2 million.
When it comes to the operating expenses and the decrease of $1.3 million, this mainly relates to one-offs for the CLEANBU fleet in Q4, as you can see in the graphs to the left. Now it is back to more normal levels again. We had no unscheduled off-hire in Q1, and we had 59 off-hire days related to dry docking. One vessel finished dry docking this quarter, and two started their dry dockings in March this year. These two have now been finalized as well, and compared to the guiding that we do, we see that one of these dry dockings came in below both cost and expected off-hire, and the other one above the expectations. All in all, for these two dry dockings, total cost increased or were 2% higher than what we expected, quite in line with what we guided on.
We will have several more dry dockings this year. You can find the details on slide 40. You will here see the full income statement. Depreciation increased by 7.3% from last quarter. We have mentioned that we do expect higher depreciation, and this relates to dry docking. We dry docked several vessels last year and will do seven this year, so this is a reflection of dry docking. Net financial cost was down 37%. It mainly relates to FX, and then 1.2% of this change is related to capitalization of interest cost on the new builds. We had steel cutting for two of the vessels in Q1, and based on that, we start to capitalize interest cost on the new builds. This will increase through the year as we pay more yard installments. Profit, $4.3 million for the quarter, down 50% from last quarter.
Earnings per share, $0.07 for the quarter, and dividends per share, as Engebret mentioned, $0.035 per share. This is a payout ratio of 50% from the quarter, and it is 135% of the adjusted cash flow to equity for the quarter. The dividend policy is based on the adjusted cash flow to equity, and this is well above the 80% minimum threshold that we have in the policy. Return on capital employed and return on equity, 5% for both of them this quarter on an annualized basis. Just some brief comments related to the balance sheet. The main changes from year-end until the end of Q1 relate to new builds. As mentioned, steel cutting was performed for two of three vessels this quarter, and we paid approximately $12 million to the yard in relation to the steel cutting.
To fund these payments, we draw on the RCF capacity that we have, and you will see this reflected in mortgage debt that increased by close to $9 million. This amount is net of the regular debt repayments that we have every quarter. Equity down by $9.9 million. This is mainly due to dividend payments as well as the share buyback program that was finalized in the quarter, and then we as well had a slightly negative other comprehensive income for the quarter. Due to these changes, equity ratio decreased by approximately one percentage point through the quarter, but it is still at a solid 57.8%. You will see the same elements reflected in the cash flow. In the net cash flow from operating activities here, you see that working capital was negative $2 million. That is much lower than what we have seen over the last quarters.
Net cash flow from investment activities, -$3.4 million and $1.4 million, related to CapEx for dry dockings and energy efficiency measures. You will see here as in the balance sheet, CapEx related to new builds approximately $12 million. Net cash flow from financing activities this quarter consists of normal debt service, as always around $10 million, and we draw, as mentioned, on the RCF $15 million, and then dividends and share buybacks amounted to $12.5 million for the quarter. Cash hence was down $11 million through the quarter and ended at $45.1 million, while available long-term liquidity was down $26 million and ended at $145 million. The larger changes than what we are used to seeing mainly relates to the new build program. A brief update on our sustainability efforts.
As you can see, the carbon intensity metric that we have for 2025 is quite ambitious for this year. We have a target of 5.8. However, we do see that we're on track so far this year. Both fleets had an EOI of 6.3 for the quarter. The decrease for the CABU fleet mainly relates to higher cargo intake and lower speed, while the CLEANBU reduction mainly relates to BES now being employed in combi trades again after having been employed as a tanker vessel on TC for the last couple of years. We continue to work on all aspects of the business to reduce our emissions. Of course, it's nice to see that IMO is now moving forward on their regulation. In April, they agreed on a framework that will hopefully be adopted in October.
The framework regulates the GHG intensity of the fuel used. To comply, you must use an increasing share of alternative fuels over time. As you can see, this is illustrated by the black and the sharp blue area in the graph to the left. If you do not use alternative fuels, then you have to pay a carbon tax in line with the same area as you can see in the graph. This will effectively increase fuel prices, either as you have to buy more expensive alternative fuels or as you have to purchase remedial units. The implied additional cost on heavy fuel oil, you can see it to the right. For KCC, this means improved earnings due to our fuel efficiency.
As an example, we have estimated the impact for the CLEANBUs in the trade from the Middle East to East Coast South America and back again to be $4,000 per day in 2035. This is assuming that the standard tanker and dry freight is uplifted to cover for the regulatory cost, which I think is a realistic or a likely assumption. We believe that fuel prices will increase, and we have believed that for quite a while now, and this underpins that statement that we have had for years now. If you consume less, that is, of course, better when fuel prices increase and will support our business model. Let's hope that this is being adopted in October this year. Engebret, over to you again.
Thank you, Liv. I think it works. I think it's safe to say that since we delivered the fourth quarter results 14th of February, there's not been a boring minute in the business with an avalanche of executive orders from the White House, a start of a trade war, which comes on the top of wars in Ukraine, hostilities in the Red Sea. Yesterday, we got the news regarding Pakistani-Indian unrest or attacks. We continue to believe that in this uncertainty, we believe that both the tanker and the public markets stand reasonably strong. There are many moving parts for sure, which will decide the outcome of these markets. It's important to remember that it can turn both positive and negative. Let's first consider the product tanker market.
Not surprised that both the global economic growth and the global oil demand growth has been revised down for this year. It is good to see that the oil market still in the start of the year looks very healthy. In the graph to the right, we see that the oil demand is well above the 2024 levels to date, which seems that the oil market is pretty much balanced and maybe even slightly tight. This may be the reason why OPEC decided to hike the oil production, and on the next months and quarter, looks likely to reverse the production cut that was decided back in 2022. This is one of the reasons why there is quite a bit of optimism in the crude tanker market.
Although the effect of this production hike is not yet into the fiscal market, we see on the graph in the middle that crude tankers, and here it is the Aframax tankers, have performed well in April and May. The graph illustrates the difference between the Aframax crude tankers and the equally- sized LR2 product tankers. This shows again the incentive for the LR2 tankers to move into dirty trading, into crude oil shipments, which is already happening as we speak. As you see from the graph to the right, the blue line shows that the share of the tanker fleet trading dirty, DPP, has increased substantially over the recent months. Ending up today where an equal part of the LR2 tanker fleet trades clean and dirty.
This again, the exit of [Alaturs] from the product tanker market improves the market balance and gives a good backdrop for the development on the product tankers. There also are some good positive news when it comes to oil product trading, which can support the shipping volume in the product tanker market. The fall in oil price in the graph to the left, there's the Brent, is likely positive for oil demand, and it's also positive for refinery margins that you see in the graph in the middle, where we are seeing that the lower oil prices has had a positive impact on refinery margins, and especially the U.S., but also in the Pacific in the lower line shows. We know that the strong correlation between refinery margins and shipment volumes, and that is likely to have a positive effect on the product tanker market going forward.
It's good to know that the stock levels for clean petroleum products are at normal levels, as the graph from ARA range shows, which gives the good foundation for possible increased shipments in the CPP market. If you look into the dry market, also what's happening in the U.S. and on the trade war impacts the market. To the left, the graph shows again how the political announcements, just like Trump's Liberation Day announcement, the 2nd of April, directly impacts our markets. This is the FFA market for the three last quarters of 2025. We see that as it was announced, the FFA market for the remaining part of the year dropped by 15%. Also, the spot market dropped down quite a bit over the days that passed. There has been some improvement in the FFA market, while we haven't seen similar improvements in the spot market.
The main risks of the U.S.-China trade war, except for the indirect global economic effects, is the export volumes of U.S. grains that normally happens in the second half of the year. When we talk about grains, it's good to see that to the left, that the Brazilian grain season or South American grain season has performed according to expectations, with volumes shipped well above last year. With a good crop this year, it's expected that the shipments will continue at high levels throughout the summer, which is good for the dry market. The risk is mainly into the North Atlantic grain season, which is shown in the graph to the right, where there are uncertainties on the U.S. export volumes given the ongoing trade war. At the same time, there are optimisms regarding the shipments out of the Black Sea despite the war, given expected crop.
When it comes to dry markets, it's important to think about the dry market in the totality. The analysts are definitely more positive on the Capesize market, the biggest houses, than the Panamax that KCC have ships in and the lower Supramaxes. The optimism on the Capesize market is the increased iron ore shipments from Brazil mainly and from Guinea. The graph to the left shows again the high shipment volume out iron ore from the Atlantic Basin to the Pacific, and where the blue line shows a good start of the year. This is expected to continue, especially into the second half of the year, where we get the opening up of the large Simandou iron ore mine in Guinea. That looks likely to further support the development in the Capesize market.
When the Cape size markets are strong, it normally trickles down to the Panamax market. As an example, the graph to the right, we show the share of coal shipments made on Panamaxes versus Cape. The black line shows the development over 2024, and the blue line to date this year shows again an increasing share of coal shipments made on Panamaxes. In totality, we are optimistic both on the dry and the tanker market into the remaining part of this year. We have to mention again the U.S. Trade Representative proposal to port fees for Chinese-built and Chinese-operated vessels. The first proposal came the 21st of February, just a week after we delivered our fourth quarter results, which was pretty extreme, high risk of large implication for most shipping companies and large risks when it comes to the timing of implementation.
I think all of us were pleased to see that the revised proposal, that is far from ideal, but it is more moderate and a watered-down version of the first proposal. The exposure for KCC is as follows. The cargoes which are trading back and forth to Australia from Northeast Asia and Middle East will not be impacted by the USTR port fee. The CLEANBU, all built in China, and one of three main trades are into the U.S., may be impacted depending on two factors. One is the definition of which size of tankers will be exempted from the new rules. There is a very vague and unclear definition in the proposal from USTR. They have a definition of something called individual bulk capacity, which is unclear whether they mean that is only applicable for dry bulk or also applicable for the tankers.
If it's 55,000 deadweight, which may be one of the outcomes, the CLEANBUs will be liable for the USD extra port fees in the trade to the U.S. The second point illustrated to determine whether the CLEANBUs will be affected, how much, will be to which extent the market freight for LR1 tankers in and out of the U.S. will absorb all or part of the new port fees. We know that alternatives to LR1 tankers in this trade are the smaller MR tankers that deliver more expensive freight. We calculated, for instance, in the trade from U.S. Gulf to Brazil, our ships deliver a 20% lower freight than MR tankers. That gives at least some optimism that if this turns out to be the case, we will see that the freight markets will incorporate part of the fee.
We just put up this for illustration. The worst case for KCC is that the CLEANBU, every time the ships come into the U.S. with the cargo, we have to pay the fee, which the first year is $380,000 for a CLEANBU in the first port of arrival. The U.S. trade is a part of a triangular trade, and if we measure the effect per day on the full triangular trade, it accounts for around $2,500 per day. Assuming that that trade is one third of our business, it has a negative effect of $150 per day. The best case to the right is basically that if the exemption for sized tankers is 80,000 tons, the CLEANBU will have very high probability to be exempted from the USTR port fee legislation, and hence there will be no effect.
In the middle, in the white zone, is basically with a fee of $380,000, how much will actually the market incorporate and what will be the net negative effect for KCC, which is unknown. Just tune in, and this has to be followed, which we do for sure, followed very closely over the coming months. Let's turn into the outlook for the company as such, looking first on the bookings situation on the cargoes. On the dry side, we have still some dry cargoes to fix for the second quarter. These are all shipments in the trade back and forth to Australia. For the second half of the year, we are around 50% covered on the dry side, where about one third of the total capacity is on fixed rate.
On the tank exposure, on the tanker side, where we transport caustic soda, we are fully booked for the second quarter. We have still some index-linked floating rate contracts to settle the freight. Looking at the second half of the year, we have a 90% coverage, of which 30% of the tanker capacity is on fixed rate contracts. Looking into the outlook for the cargoes, the market has improved quite a bit in the Pacific. To the left, we see the development for the ammo tankers in the Pacific and the Panamax Pacific spot earnings. That are the best KPIs for the market backdrop for the cargoes, which shows in the middle, shows the good improvement in earnings for both.
As the graph shows, the market has come down quite a bit in April and May, which likely will mean that the average for the second quarter and the increase from the first quarter we see here will be less. Again, we have had good and strong operational performance of the cargoes to date in the second quarter, and we get the positive effect of the stronger market, both on the index floating rate contracts on caustic soda and the spot trading we do in both the dry and the tanker market. Looking on the CLEANBUs, we have booked more of the capacity for the second quarter. We are around a bit more than 70% of the capacity booked for the second quarter. For the second half of the year, we are fully market exposed on both the dry bulk and the tanker side.
We have floating rate contracts both on dry and on the tanker side, which gives us comfort that we can keep the ships, the CLEANBUs, running in the best trades. As we mentioned before, we work continuously to expand the contract coverage for the CLEANBUs as we go forward. Looking at the second quarter performance, due to a number of reasons, the performance of the CLEANBUs in the quarter will be below the target, both on the trading efficiency side and on the earnings side. The graph to the left and in the middle shows that also on the CLEANBUs, we get support from stronger underlying markets.
As the graph shows, the market has, especially on tankers, come down in April and to date in May, which means that the averages on earnings for the quarter likely looks to be less than what the graph shows in the middle. On the CLEANBUs, we have not been able to fully get the benefit of the stronger markets, which is partly linked to lower trading efficiency with more waiting days and also changes in the trading pattern. The changes in the trading pattern is a clear reflection of what's happened in Washington, D.C.
After the announcement of the USTR first version in February, we decided, given the high risk related to the date of implementation, to reduce substantially the trading into the U.S., meaning we allocated more capacity into other trades, mainly in east of Suez, that at the moment has a lower earning capacity than the trades we do from Middle East, India, into the Americas. In the trades, both to Australia and in other trades in east of Suez, we still have some facing costs to get the trade moving and to expand the trades, which we expect to improve over the coming quarters. After the announcement of the revised USTR proposal in mid-April, we have reallocated capacity into the U.S., and the trading is normalized coming into May, which again gives a good backdrop for the performance into the third quarter.
Looking at the guiding for the second quarter, the cargoes' earnings will improve to an average between $24,000 and $25,000 per day. The estimates are made based on two quarters, 2/3 of the capacity booked for the quarter. The midpoint is around $2,100 above the performance in the first quarter. On the CLEANBUs, we are guiding on earnings between $21,500 and $23,500, and the estimate is based on three quarters of the capacity booked. In the midpoint, we are approximately at the same level as in the first quarter. On the totality earnings, guiding range is between $22,700 and $24,200, which is around $1,100 up in the mid-range compared to the first quarter. I think it is important when you comment on the guiding that we look beyond one quarter.
Ninety-one days are short, and as mentioned, a lot of things happened over the recent months that have not been positive for the way we traded our ships. Looking ahead, the cargoes are expected to continue to deliver solid earnings based on high contract coverage and very efficient trading. We believe there is a good upside on the CLEANBUs whereas the fleet is back in normal trading, and we are confident to deliver improved efficiency in new trades that we are working on. The second quarter performance was below target, but we continue to believe that our business model shall both deliver higher earnings and more stable term shuttle earnings than the general pro tankers and dry vessels. We have shown this before.
We have shown that in strong markets, where one of the two underlying markets is substantially overperforming, we are able to match or slightly overperform these markets. In markets like we saw before the tanker boom, which we likely are into the same phase at the moment, where with smaller differences between the dry and the pro tanker market, we deliver higher earnings over performance. This is what we are determined to continue to reprove through perfecting our combination trade, deliver higher earnings through our higher efficiency, secondly, through the trading flexibility of especially our CLEANBUs to utilize high volatility in the markets in the best possible way, further adding to the earnings, and show the more stable earnings and lower volatility partly through diversification of being in both the dry bulk and the pro tanker market.
In totality, continuing to give the best risk-adjusted return in shipping. That finalizes our presentation, and we are ready for questions.
Hi, yes, we have a few questions here. The first one is centered around the five oldest vessels in the fleet. How long do you see these vessels being productive and profitable?
The five oldest ships are built between 2001 and 2007. We have acceptance from our customers in Australia to operate the ships until they are 25 years old. That means that our intention is to keep all the ships in the Australia trade until they are 25 years old. That implies that the first ship, the Barcarena, which will turn 25 in February, in March, early March next year, will be phased out of the Australia trade at the end of this year. We have three options for these ships.
One is that we find new trading areas for the ships, and we are actively working to do that. We believe the technical quality of the ship warrants that the ships could, without large extra costs, continue to trade for another three to five years. The second alternative is that we sell them as a dry ship. The third alternative, which is what we least would like to do, is to do a green recycling of the ships. That means that still early days to conclude, but we believe that definitely there is an upside potential above the recycling value of the vessels going forward.
Okay, you have covered this before, I think in previous updates, but there are some questions around the delivery of the three new builds. Are they still on track, and when will they be ready for trading?
At the moment, it seems that the shipyard, it is early out. We expect at least the latest estimate I got, and still it's pretty early days, but it looks as the ships will be between two to three months early. The quality of the ships are good. The site team we have in place are doing a good job and have a good cooperation with the yard. I think the first ship looks likely to be in service within February next year, and the last one within August, I would say maybe September.
There aren't any more questions here.
I thank you for joining in this morning on our call, and please do not hesitate to contact us should we have further questions. Thank you.