Good morning, and welcome to the Klaveness Combination Carriers Q1 2026 financial results presentation. Today's agenda will be walked through by Engebret Dahm, CEO, and Liv Dyrnes, Deputy CEO and CFO. In a few moments, Engebret will start, and he will walk us through the highlights, a business update, following which we'll hear from Liv, who will give us the financial performance as well as the sustainability performance for the quarter. Finally, Engebret will then return, and he will take us through a summary and a look into the outlook going forward. As usual, we are happy to hear from you with your questions, so if you see in your viewing window, there on the right-hand side, there is a Q&A bubble. Please use that to send your questions at any time during the presentation.
I will pick them up at the end to ask Engebret and Liv . Your questions are coming through directly to us, so they're not publicly visible, and you have the option to send them anonymously or to attach your name. Once again, the questions are private to us and not publicly visible. With that, I will welcome to present Engebret Dahm.
Good morning, everyone, and excuse me for my voice. A little bit of a cold. Hopefully you can hear me. To say that the first quarter has been an eventful quarter, I think it's an understatement. A lot of things have happened in our business, in the shipping markets, in the business of our customers, and not to mention in geopolitics. I think we have been shocked to experience that civilian ships shipping with normal trading ships with innocent, hardworking crew on board has been attacked by Iranian drones and rockets. We have been shocked to see that even after nine weeks after the outbreak of the hostilities in Middle East, there are 2,000 ships stuck in the Middle East, including our cargo vessel, Banastar.
We're shocked to see that there are still close to 20,000 seafarers, innocent seafarers, including our 19 crew on board of Banastar, still stuck in the Middle East. Again, the first quarter, disregarding the situation of Banastar, has been a good quarter for KCC and a good start of what looks to be a promising 2026. We have earnings per day increased to $33,432 per day, which is above the guiding range that we gave back in February for earnings for the first quarter. It's an increase of around $5,000 compared to the $4,000 compared to the fourth quarter. It is a very positive development on earnings side. EBITDA is $29.3 million.
We have, which is up around $6.7 million compared to the fourth quarter. Profit after tax ended at $15.6 million, which is up around $5.1 million since the last quarter. The board has decided to pay $0.25 as dividends, which equates to close to $15 million in dividends for the quarter. Back again to the situation in the Middle East. As mentioned, we have the Banastar, which is stuck in the Middle East. The vessel is currently positioned at the shipyard in Dubai.
We have kept the vessel either at the terminal or at the shipyard throughout these weeks, which we believe is the safest place where we can keep the ship in order to have easy access to first aid, fire brigades, and supplies. We have repatriated close to the full crew on board the ship, 23 or 25 people. We have brought on board 70 new crew members over the recent weeks. We have used the time effectively in order to make repairs on the ship to prepare for the targeted life extension of this older lady. The financial loss of the situation in the Middle East is limited, given good coverage of our war risk insurance, covering most of the off-hire of the ship waiting in the Middle East.
The situation in the Middle East is not only impacting the ships stuck in shipping, it also impacts a number of other industries, including the aluminum industry, that our cargos are servicing by transporting caustic soda into Australia and also, to a lesser extent, alumina out of Australia into the Middle East. I would like to touch upon two risk elements that could potentially impact the cargo business into the second half of the year. One is the possible impact on Australian alumina refineries' sales from the quite dramatic impact of Middle East aluminum smelters from the war in Iran.
The three main importers of alumina in the Gulf, which is EGA in the Emirates, Alba in Bahrain, and Qatalum in Qatar, has all been severely hit by the events in the Middle East. EGA's plant in Abu Dhabi has been hit by Iranian drones and rockets. Bahrain has closed down part of the capacity due to lack of alumina, due to the closure of the Strait of Hormuz. Qatalum has closed down around 60% of their capacity following lack of gas supplies due to the Iranian attacks on Ras Laffan. The total production cuts in the Middle East has reduced by 40%-60%, which implies a 20%-40% lower import demand of alumina.
To date, we have seen that shipments have continued into the Middle East. There are discharging ongoing in Oman into the Emirates. Ships are idling outside the Gulf. Cargoes have been sold on to other customers due to the situation in the Middle East. We are seeing that this situation has not impacted the alumina pricing, as you see on the blue line. Meaning that, as we understand it and as the market understands it, the situation is under control. Again, we appreciate that should the resolution to the problem in the Middle East drag out in time, there are further risks to the Middle East aluminum industry and possible repercussion effects on exports and production at the plants in Australia.
Second risks goes into the supply of caustic soda into Australia. The sourcing of caustic soda into Australia can be illustrated by this graph showing that the very big majority of imports of caustic soda comes from the Far East. A very small part comes from the Middle East, limited to 3-4 cargoes scheduled for this year that have easily been replaced by supply from other sources. The fact that the Strait of Hormuz have been closed have limited impact on the supply of caustic soda to Australia and limited impact on our shipment program.
The risks going into the second half of the year is mainly linked to the supply of ethylene and naphtha, which is needed for the chlor-alkali industry to produce EDC, DCM, and PVC, which is the offtake of chlorine, which is necessary in order to produce caustic soda. So far, we understand that the program for the spring and early summer is firm. We don't expect any negative consequences on the lack of naphtha supply in the Far East. There are also positives when we talk to customers and traders, that this will also be the case for the second half. Still, there's a risk, which we need to follow closely. We have a high booking of caustic soda for this year.
In fact, overbooked the capacity of our fleet, meaning that we are quite well positioned to handle the situation should there be impacts of lower production in Australia and lower caustic soda imports. Turning over to the CLEANBUs and the clean petroleum markets, the closure of Strait of Hormuz has had a big impact on trade flows of clean petroleum products. As the graph shows to the left here, the Middle East has stopped exports, and also there has been an export ban in China and some other countries, exports out of the U.S. Gulf have increased substantially over the recent months. This has actually also impacted the CLEANBU trading.
Here we just show the percentage of the CLEANBUs, the spread over the loading ports, the regions of loading. As we see here, a substantial increase in loadings in the Americas from around 25% in 2025, as an average. We are more than 50% in the first half of the year, the estimate for the first half of the year. I'm pleased to see that we have used the flexibility of the CLEANBUs to position the ships into the regions that are where the trade flows are going.
Again, showing the flexibility of our vessels to adapt to changing trade flows and geopolitical events. Looking into the market, we have had a good market backdrop for our business in the first quarter. The dry market, as we see in the green line, had a very short and shorter than normal seasonal dip in January due to the Chinese New Year, and the market recovered quickly and are at rather strong levels at around $18,000 per day for a Capesize. The market also started strongly in the tanker markets, product tanker markets, in the early part of the year. After the start of the hostilities in the Middle East, freight rates for product tankers skyrocketed.
Otherwise, I would like to mention for the business, we have taken delivery of the first CABU III newbuild in February. The second vessel was delivered in April. The third vessel that was launched in April will be delivered in August. I'm pleased to say that the first ship has now close to completed three voyages. That performance in every respect is in line with or above expectations. It looks very promising for the newbuilds that are coming into our fleet this year. I would also like to mention the positioning of one ship in the first quarter into Americas. It's to start service the 32 months contract with Hydro Alunorte.
We have, according to the business plan for this life extension of this 25-year-old vessel, taken investment in the form of a long ballasting from South Africa into U.S. Gulf, and which has impacted the earnings for the CABUs for the first quarter. The ships loaded the first cargo from U.S. Gulf into Brazil in the second half of March, meaning that coming into the second quarter, the earnings of this trade will contribute positively to the earnings and the profitability of KCC. Turning to the CABUs, it's been a quarter where we have had a higher share of the capacity in tank trades servicing caustic soda. This includes the ballasting of Barcarena.
Also, it takes into account that we have had to ballast a couple of ships from Australia due to tight fleet situation, given the Barcarena leaving the trade in Australia, some dockings, and the later delivery of the newbuilds. This has resulted in increased ballasting for the CABUs in the first quarter, and also reduced share of the capacity in combitrade as we don't count the shipments where we ballast as to be inside our KPI for combination trading. The earnings are in line with expectations, around $29,550 per day. Reduction from the fourth quarter, around $2,400 per day, can mainly be explained by the negative effects of the ballasting of the Barcarena.
Otherwise, the CABUs have been supported by strong MR tanker earnings in the Far East through the index or so-called floating rate contracts. Also positive effect of a strong dry market, and also high fuel prices have had a positive effect on the earnings on the CABUs. On the CLEANBUs, we are seeing that a very high share of the capacity of the CLEANBUs in the first quarter has traded in the tanker market. We did expect a high share of the fleet in tanker trade in the first quarter, before the events in the Middle East, partly due to the physical positions of the fleet, and partly due to we had a high proportion of dry trading in the fourth quarter.
What happened in markets with skyrocketing rates meant that we put more capacity into the tanker trading in the first quarter than we had expected. Looking at this has impacted the ballast percentage, which is up two percentage points, but also that the share in combination trading has fallen back to just as an effect of a deliberate choice of allocating vessels into the long-haul trades into the U.S. Gulf. Earnings are up substantially compared to the fourth quarter, up with around close to $10,500 per day. I'm very pleased that this again shows the way we have been able to optimize the trading and the earnings of the CLEANBU fleet in the quarter. Liv, over to you.
Thank you. Over to financial performance for the quarter, before I also give you an update on the sustainability performance. The net revenue, EBITDA and profit after tax for the quarter were $47 million, $29.3 million, and $15.6 million, respectively. This is an increase of approximately 20%, 30%, and 50% QoQ. While the CABUs had stable net revenue from fourth quarter last year to first quarter this year, we saw a considerable increase in the CLEANBU revenues. On a total revenue basis, approximately 2/3 of the increase is related to higher rates, while 1/3 is related to more on- hire days. We had 80 more on- hire days in Q1 compared to Q4, and it's two reasons for that.
It's the CABU new build that was delivered in February, and then we had less off-hire related to dry docking for the CLEANBU fleet. The profit after tax is as well impacted by somewhat higher depreciation. Depreciations increased by $1.3 million or 14%, and it's mainly related to dry docking. Based on this, we achieved an annualized return on capital employed of 11% and return on equity of 17% for the quarter. If we have a closer look at the EBITDA bridge from Q4 last year to Q1 this year, you will see that the CABU TCE rates increased by a total of $1.5 million QoQ. As Engebret mentioned, a large part of this is related to the Barcarena positioning voyage.
The CLEANBU TCE rates, the 10.5 increase in TCE rates for the CLEANBUs, that's a total QoQ effect of $7 million. The more on- hire days, approximately 50/50 related to the CABU new build, as well as less dry docking, and the negative effect related to other income, that relates to a positive one-off in Q4. Part of it related to loss of higher compensation for an old claim, and part of it a no- claim bonus related to insurances. When you look at the costs for the quarter, it's quite stable QoQ. Underlying, we saw a decrease in the CABU operating expenses per day of approximately 3% QoQ, and an increase in the CLEANBU operating expenses per day of approximately 3%.
This is mainly timing effects between quarters. A solid EBITDA for Q1 compared to last quarter. Over to the balance sheet. The balance sheet is still very solid. As you can see in the graph to the left, the equity ratio is 50% at the end of Q1. This is down from 55% at the end of last year. This decrease mainly is due to $80 million in debt drawdowns related to the new builds. These debt drawdowns, they also impact net interest-bearing debt, as you can see in the graph in the middle, which increased by approximately the $80 million. It also impacts the net interest-bearing debt to EBITDA ratio that ended at 3.1 for the quarter.
If we adjust for the new build debt, as we have limited earnings on the new build so far, as the first vessel was delivered in February and the second was delivered in April, so the last vessel had no earnings in Q1, but the full debt is acknowledged here. If you adjust for that, you have a 2.2 net interest-bearing debt to EBITDA ratio. The cash balance included long-term available RCF capacity, ended at $127 million at the end of Q1. That's an increase of approximately $9 million during the quarter. This is supported by a solid EBITDA and debt drawdowns net of new build CapEx, debt service, dividends, and some negative working capital changes as well for the quarter.
All in all, a very solid balance sheet and cash position. Over to dividend. As Engebret mentioned, dividend for the quarter is $0.25 per share and total $14.8 million. This is above 80% of the adjusted cash flow to equity, which is a bit less maintenance CapEx and debt service, so in line with our policy. On an EPS basis, it equals approximately 95% and dividend yield, based on close yesterday, close to 10%. With this quarter, we have an unbroken dividend history from when the company was listed in 2019. We have paid dividends every quarter since then. A short update on the sustainability performance. The carbon intensity, the EEOI, ended at 6.5 in Q1.
This is up from an average of 6.1 in 2025, and there are several reasons for this increase. We employed the CLEANBUs in the tanker trades for a large part of the capacity of the CLEANBUs in tanker trades. We as well had the long positioning voyage for Barcarena into the U.S. Gulf. As Engebret mentioned, we had a tight caustic soda program in Q1, and all these effects resulted in more ballasting, somewhat higher speeds, as well as lower cargo volumes. On a positive note, the Balder is performing very well. Well, that's the first new build delivered in February. She had an EEOI of 5.3 for the quarter, much lower than the average of the other CABUs.
This is somewhat impacted by good trading efficiency for the vessel, but she as well had a very strong technical performance. This looks promising for the new builds, both when it comes to earnings capacity as well as emissions performance. With that, Engebret, over to you again.
Thank you, Liv. Looking ahead, we start up diving a little bit into the to our two markets, the dry market and the product tanker market. As mentioned, the effects of the Middle East has mainly been on the tanker market to date. For both markets, the uncertainties, especially linked to the possible consequences on the world economy from the situation in the Middle East. Looking at the product tanker market, I would like to mention three factors. The impact of the closure of Strait of Hormuz and also export bans in the Far East has effectively reduced supply by around 10 million barrels per day, which is another once-in-a-lifetime supply disruption.
We also see the impact of high oil prices in the green line that has led to already some demand destruction in the oil markets. The big uncertainties going forward is clearly how will this gap between reduced supply and reduced demand develop over the coming months. The second point is linked to the increase in efficiencies of the fleet. Around 90 MRs and LR1s, and LR2s are stuck inside the Gulf. It equates to around 3% of the world fleet, which is not that significant. But the impact of what's happening in the Middle East, like, is shown through the efficiency of the world fleet. Disruptions of trades have led to far longer ballasts.
There have been more waiting times, and there has also been impact on some idling. We have seen that on the impact on the ballasting on the CLEANBU fleet. The graph that we show here probably underestimates partly the development, where we see the so-called inefficiency index has increased to close to record levels over the recent months. The last point I want to mention is the continued development, where the dirty market continued to absorb an increasing number of LR2s. Over the last six months, the number of LR2s trading in DPP has increased by around 70 vessels, and that compares well to the pace of newbuilding deliveries of LR2s, which is around 50 per year in both 2026 and 2027.
This is supportive for the product tanker market going forward. On the dry side, as mentioned, has had less effect on Middle East, but we see the impact on especially the efficiency, just as we saw in the tanker market. Fewer dry ships are stuck in the Middle East. It's around 150 vessels, which equates to around 1.5% of the total world fleet. But we have in the markets seen increasing waiting time, ballasts, and total effects of disruptions to many industries transporting dry bulk cargos. Also, the speed of the world fleet is reduced. In total, having a positive effect on effective supply growth in the dry market.
Another element to mention is, as oil prices have increased, so has demand for coal and also coal prices. A bit unexpectedly, shipments of coal in the Pacific has decreased.
In China, we have seen that domestic prices have increased less than international prices, meaning that the import arbitrage, as you see in the blue line here, had become negative, holding back imports and meaning China relies more on domestic coal. This has turned in the last weeks, like domestic Chinese coal prices have increased substantially, meaning that it is expected that the import arbitrage will become positive again over the coming weeks, likely leading to increased coal shipments into China, as we experienced last year, as you see in the graph, in the blue line. Lastly, which is not linked to the situation in the Middle East, the dry market is supported by a very strong South American grain season.
The graph shows a record high Brazilian exports, and the season is likely to continue the next couple of months, supporting the dry market of the next months. With all the uncertainties in the markets, we are clearly happy that we have built up a good contract backlog. Looking out on the dry, the contract coverage for the dry capacity of the fleet, we have only one fixed rate contract in our portfolio, but we have added some FFAs to increase the fixed rate coverage up to around one-third of the capacity. We have, in addition, some floating rate contracts that adds to the contract backlog.
Again, as we have told you before, on the dry side, in KCC, we normally rely on long-established customer relations and repeat business with customers and with the support of the dry bulk activity, the sister company in Klaveness. On the tanker side, as mentioned last time, we built up record-high contract coverage for the CABU on the shipment of caustic soda into Australia. We actually booked more than we needed for the growing CABU fleet, and the split for the CABU contracts were around 40% fixed rate and 60% index floating rate. This leaves us in a very good situation, as mentioned, should we end up with some effects on the caustic soda program from the situation in the Middle East.
We also built the fixed rate coverage on the CLEANBU with the fixture of the two-year charter of one of the CLEANBUs. If you take everything into account, and which you see here on the graph, we have around 34% of the total tanker capacity of the KCC fleet on fixed rate coverage for second half, 22% is floating rate contracts, and 44% is spot-based. We believe we are in a good situation on the contract support.
Turning over lastly to the outlook for the second quarter, we are, as the figures show, with a high probability set for a record quarter for the company, and where the time charter earnings looks likely to surpass the peaks we experienced in 2023 and 2024. The CABUs will continue their solid performance with especially healthy earnings on the floating rate caustic soda contracts and supported by a strong MR tanker market. We'll have positive effects on a very positive dry market, and as mentioned, also a positive contribution from higher fuel prices for the CABU business.
As mentioned also, there are negative effects on the CABUs from less predictability on the shipment dates, cancellations of some caustic soda cargos, which are moved out in time, which impact the waiting time, the ballast percentage of the CABUs in the second quarter that all other things equal, had a negative impact. Still, with 76% of the days booked, we are happy guiding on earnings of between $32,500 and $34,500 for the quarter. Looking to the CLEANBUs, we have, as mentioned, repositioned the vessels due to the lower volumes in our traditional trades from Middle East, India, into Americas, and also from the Far East into Australia.
We are positioning the ships, showing the flexibility as mentioned of the CLEANBUs and booked solid earnings for the CLEANBUs fleet to date. With 64% of the days fixed, we are guiding between $49,000-$54,000 per day. Over the next weeks, we expect to fix a couple of more CLEANBUs that will increase the percentage of days fixed and solidify the earnings visibility for the quarter.
After a good start in the first quarter, we are set to have an even better quarter in the second quarter. We appreciate the uncertainties in the markets, but we believe that despite this, we are well-positioned in KCC for whatever comes with the strong contract backlog, with the flexibility of the ships and the efficiency of the ships.
We believe that we have a good chance to continue to deliver on the promised value creation of our business, which means higher time charter earnings over time with low volatility and contributing positively to the value creation of our business, delivering the best risk-adjusted returns in the dry bulk and tanker shipping. That summarizes the presentation, and we are ready for some questions.
Some questions. Yes, thank you, Engebret. We do have some questions, and I'll just remind the attendees that, maybe joined us later, your questions do come through directly to us. They're not visible to the whole audience. The first question, Engebret, bunker prices have moved significantly recently. Can you explain the impact on KCC and how you're managing that exposure?
We have, as all ship owners, in March especially, have been hit by escalating we call delivery premiums. One is the total level of fuel prices that have increased. In addition, there has been competition for the availability of fuel in various bunkering ports that has increased delivered price further. That has been a negative effect that is implemented into the results in the first quarter. It will also have some minor effects into the second quarter.
I think the main message of our business is that, due to the fact that, or this goes for the CABUs now, for the second quarter, given the high ballast of the CLEANBUs, given the high efficiency of the trading with substantially lower time sailing empty, we actually take benefit from higher fuel prices. That basically is a result of that standard ships get basically compensated for higher fuel prices in the spot rates. Given that we do not ballast, we basically can capture that value in our business, which increases the earnings of our business, the higher the fuel prices.
Otherwise, when it comes to how we manage the bunker risks, we do hedge our bunker exposure on all fixed rate contracts, but we live with the bunker exposure which are implied in the floating rates contracts.
We'll stay a little bit on this topic with a couple of questions about Banastar. Can you quantify the impact of the MV Banastar on CABU TCE when including the insurance?
The way in the first quarter, the impact is relatively limited. The ship is basically off-hire for most of March. The impacts are more coming into the second quarter. In March, we have this, we call, self-covering period around 14 days. In addition, we will cover also partly part of the time we did repairs in March. Coming into April and the next months, we will be fully covered by the off-hire component of the war risk insurance. That will basically pay us a compensation that equals around the earnings levels of the remaining part of the fleet. Meaning that we would, in the big picture, have limited, if any, negative earnings impact in the second quarter of the situation on the Banastar.
Banastar is not included in the guidance TCE, right?
Yep.
As it's considered off-hire, so that will be another income in Q2.
Yeah. It will be as Liv says, there will be a separate line where the impact of the compensation of the insurance will be shown.
Yep.
We had another question which was very similar, and I think you just answered the points on that. There was another one for Banastar. Are there any updates on the life extension progress for vessels approaching 25 years? And how does Banastar's current situation in the Middle East affect this?
As we have said before, our target is to add the Banastar into the trading in the Americas together with the Barcarena from start in 2027. In order to do that, we need more contract backing, and we are working with customers to secure that. We have not yet finalized, meaning that we cannot confirm that we actually will make the life extension of the Banastar. It's a target. We continue to work on it, and we do hope then when we come after the summer, we can confirm the decision to do that life extension to relocate the ship into trading between U.S. Gulf and Brazil.
We can move on to the CLEANBU here. We have a question: Have you fixed any long-haul CLEANBU voyages giving you some visibility into Q3?
We have fixed at least two long, very long voyages where we have, before we have relocated ships from their position Asia, have booked the ships. These are shipments that are 80-90 days. These two shipments will go into the third quarter, but not extensively. It will be more the next shipments that are coming up over the next weeks that will have more days in the third quarter.
A question here on the dry dock schedule. The dry dock schedule seems to have moved earlier compared to the previous quarterly presentation, and you're simultaneously taking in the new builds. How should we think about the combined impact on earnings and dividend capacity in the coming quarters?
Given uncertainty around caustic soda shipment program, we decided to move forward one of dockings that were supposed to be in the third quarter into the second quarter. Apart from that, there are no big changes to the docking program. The docking and ammonia-ready retrofit of one vessel is taking slightly longer time. That is another change. I think it's clear that there will be more off-hire days in the second quarter compared to the first quarter, which, all other things equal, will have a negative effect on the dividend capacity. Again, as people, when people are calculating, will note the substantial increase in the guiding earnings, that will have the opposite effect.
I don't know, Liv, if you have anything to-
No. That's correct. We have more of our related to CLEANBU dry docking in Q2. That will in Q2, but then we have the CABU vessel that is delivered in April and the one in February. All in all, I think it's slightly up on- hire days QoQ.
We can stay on the new builds. We have one more question here: How do you see growth prospects for the fleet now?
The growth prospects for the fleet, as mentioned before, is linked to new building prices. When we, of course, follow these markets very closely. When we looked at the situation this autumn, we were seeing gradually pricing, and also shipyard willingness to build special ships like ours improving day by day. What happened at the end of the year and into this year, as all know, the tanker market skyrocketed and also contracting of tankers have increased. That has reduced the possibility for KCC to contract ships at attractive terms. Meaning that we don't foresee that anything when it comes to contracting and fleet expansion will happen over the next 6-9 months.
We are confident that we will find good timings if we look a couple of years ahead in time.
Okay. That's it. Thank you very much.
Thank you.