Welcome to the Second Quarter Presentation of Klaveness Combination Carriers. I'm Engebret Dahm. I'm th`e CEO of the company. Together with me, I have Liv Dyrnes, the CFO. Please use the webcast solution to give us questions and we'll go through it after the presentation. KCC, we are owners and operators of combination carriers that have assets that can transport both dry and wet cargos, competing against the standard tankers and dry bulk ships. We have two type of ships. We have the CABUs, which in dry mode can transport all type of dry bulk commodities, and in tanker mode, are specialized for transportation of caustic soda to the alumina industry. Our new fleet of CLEANBUs can do the same transportation work as the CABUs, but in tanker mode can transport a much bigger variety of tanker cargos, hence having a bigger market.
Our ships do the transportation work of both a tanker and dry bulk ship more efficiently with less ballast, meaning that all other things equal, our ships earn more than the standard tankers and dry bulk ships. With a 50/50 utilization in the tanker and dry markets, our ships should, in all other things equal, earn at least 1.5 times the standard markets. This quarter is a big milestone. We took delivery of the last new build in May, putting it in service in July, meaning that we can now say we have completed the big newbuilding program, where over the last five years have taken delivery of 11 newbuilds. This is important because it increases the KCC's earning base and dividend potential for the coming years, and we are very focused on showing our investors the full potential of our business the coming quarters.
Looking at the second quarter, it's been a spectacular quarter when it comes to market development. The tanker market has as an average weakened as the biggest sized product tankers have weakened earnings in the second quarter. The dry market, the strongest market since the China boom, has been spectacular over the quarter. It's been acceptable, a good quarter for KCC, with earnings, time charter earnings, up 20% compared to the first quarter, being in line in the top range of the guiding we gave when we presented the first quarter results. The earnings for the CABUs has been very strong at $21,900 per day, driven by the strong dry market. The CLEANBUs are at an earnings of $18,500, is lagging behind. Still, I'm pleased to see that we have progressed big time in this business over the quarter and the summer.
Looking at the EBITDA, we can show you an increase of 66% compared to the first quarter, ending at $15.3 million adjusted EBITDA. Based on the posted results and a positive outlook for the second half, we are pleased to announce a 50% increase in dividends for the second quarter. Depending on the market, we expect to increase the dividends for the coming quarters. We believe this company has a good value proposition to customers. We have a future-proof business model that delivers positive results through the shipping cycle, and that's easy to forget when you are in a boom phase of one of the commodity markets. We have the by far lowest carbon emissions shipping solution in the dry bulk and tanker market, which will be increasingly important in this industry over the coming years.
We have earnings that are far less volatile than the standard tankers and dry bulk ships by being diversified, and we also deliver consistently over time higher earnings than the standard markets at fairly marginally increased operating costs. This company has never lost money in any year through the cycle. The release of the UN's climate panel's report in August is a big wake-up call for all of us, and also for the shipping industry as such. This, I'm sure, will lead to increased demand for effective decarbonization regulations in shipping. The truth is that up to date, introduction of effective decarbonization regulations in shipping has been moving very slowly. This summer has been, however, an exception, by IMO approving the short-term measures in June, which sets minimum requirements to ship owners when it comes to energy efficiency and operational efficiency or the so-called carbon intensity.
In our mind, this regulation will have limited effect. It's ineffective and partly inappropriate for the next six years. A bright spot is the proposal given by the EU Commission in July for introducing shipping into the Emissions Trading System. It is a requirement that ship owners will need to buy emission allowances for 50% of the emission from transportation in and out of Europe. There is a phase-in from 2023 to 2026. This is a milestone by the fact it's the first time the shipping industry starts paying for its carbon emission. Driven partly by EU regulation and other things we are seeing moving, our customers will increasingly focus on cutting emission from their ocean freight. This means we will see increased demand for shipping solutions that can deliver these cuts in emission.
We believe strongly that the market for low carbon shipping solutions will be the strongest demand increase over the coming years. For KCC, delivering the lowest carbon shipping solution, this is improving our competitiveness. I've given you one example we showed you in the last quarter. Our new trade in Atlantic for our CLEANBU, where we bring iron ore and grains from Brazil to Europe, and in return, we bring naphtha and other clean petroleum products. Compared to the two standard ships doing the same transportation work as the CLEANBU, we cut emissions by 35%. Since April there are two big changes. One is that the cost for emitting carbon in Europe has increased further, by 20% since April. It's now at €58 per ton and all expect this to increase further as EU progresses further with the Fit for 55 regulations.
The second is we now have a much bigger certainty what are the cost effects of these regulations. Looking at how it looks in 2026, it will give customers the incentive to choose low carbon shipping solutions. With our CLEANBUs, they can save close to half a million dollars per year using one of our ships, which equates to $1,500 earnings for KCC with the current EUA pricing. Similarly, if these costs of emitting carbon increases to $100, it's $0.8 million or $2,500 per day. This gives customers the incentive to choose rightly. We also see that discussion regarding decarbonization is becoming an important part of our discussions with our charters. We are pleased to see that we're getting increased appreciation and acceptance that the capabilities of our Combination Carriers to cut substantially emission by substituting the standard ships.
This was an important trigger when we concluded this major contract for our CLEANBUs this summer with one of the main players in the oil market. We are, going forward, targeting to work closely with our customers and including features in the contracts that drives both us and the customers to cut emission. Firstly, we are including in all our contracts, reporting on month by shipment basis and totality of the emissions. It's right to say, if you can't measure it, you can't manage it. We are going to introduce more features into these contracts, establishing baseline emission targets, and also targeting to agree with customers a carbon pricing mechanism, giving us incentives to improve further. When it comes to our emissions this quarter, we have all hands on deck, full attention through our company to cut emission throughout what we do.
We are pleased to see that we are moving in the right directions when it comes to the absolute CO2 emission average per ship per year, showing that both for the CABU fleet and the CLEANBU fleet, reaching closer to the target we have in 2022, of average 17,700 tons CO2 per ship. On the carbon intensity, we cannot show the same post results for the first half. The CABUs, a slight increase, and the CLEANBU, which I will come back to, a fairly large increase in EEOI due to the trading of the CLEANBU. We expect both to be temporary. We expect for the CABUs to deliver improved total carbon intensity figures for the year, and the CLEANBU coming into 2022 will show big improvements. Target for the average for the fleet is 5.8 in 2022.
This quarter has also showed that having a diversified business model has a big value, partly also by having ability to shift capacity from one market to the other. Looking at the MR tanker market, this is the MR tanker earnings development showing after the spectacular boom last spring. It's been low and as an average for the product tanker market has fallen back in the second quarter. Quite opposite development in the dry market, as explained, continuous upward movement in the dry earnings in the quarter to the highest level seen since the China boom, falling back in July, but recovering again in August up to new heights. Also, the fuel prices have increased in the second quarter but has fallen back slightly in the third quarter.
We have two of our three markets that decide the earnings of KCC being strong, we're now waiting for the tanker market to recover. We believe the process of rebalancing the tanker market is continuing, the recovery is coming in much closer. We are seeing it on the oil consumption. We see it on the graph, where we see the global oil consumption demand is improving, getting closer and closer to the pre-pandemic level of the 2019. Important thing this summer in the U.S., we had the highest oil consumption ever. We are seeing oil stocks being drawn down to levels well below average over the last five years, well below pre-pandemic levels. Lastly, we see that the supply side looks under control with record low contracting of product tankers. Order book of 6%.
The spike in big tankers, VLCCs contracting in first quarter has come down in the second quarter, so the totality looks very good. The dry market is very strong, driven partly by solid growth in dry bulk demand. To date, we have a 6.6% increased total dry bulk demand compared to last year, and you see from the light blue curve that demand is well above historical average. An important thing to note is, however, that what's happening around the world has increased the dry bulk congestion substantially over this year. Seeing that congestion in July was around 14% higher than last year, impacting that dry bulk supply growth, in fact, was negative in July, which is one of the reasons why we have the strong markets we have.
We are seeing that the congestion is increasing in China as Chinese government is introducing new limitations in ports due to the spread of this Delta variant. I know it will take time before this congestion will be released. Order book also on the dry bulk side is positive. There has been some increased ordering, but still we are at a record low order book also in the dry bulk sector. We as a company, we are positioning for a strong 2022. In the dry market, as normal in this part of the third quarter, we are more or less fully booked on the dry side. We have a 50% fixed rate coverage for the fourth quarter, but a substantially lower coverage for 2022. We are about to discuss extension of a major index-linked contract.
We will look at other ways to secure high earnings, but focusing on keeping the upside in the dry market for 2022. The same picture we see in the tanker market where we are more or less fully booked for the third quarter. We have a 43% coverage for the fourth quarter. We are in discussions of extending the caustic soda contracts we have to Australia, which are partly index-linked and partly fixed rates. We expect with the limited coverage we have in 2022 to increase over the coming months. We look forward to reporting on this going forward. Looking at the earnings, the CABUs, a key explanation of the CABU is the strong combination trading of our caustic bulkers. With increasing caustic soda volumes to Australia, partly driven by increased demand and partly by more favorable caustic soda sourcing to Australia.
This has led to the fact we have increased the path of the capacity in combination trade and decreasing the ballast. Looking at earnings, with the earnings in the second quarter of $21,900 per day, it's quite fascinating to see the gearing this company has to the dry market. Comparing to the first quarter where we had dry earnings before FFA effects of $14,300 per day, has doubled in the second quarter up to close to $28,000 per day. If you compare this to the dry bulk spot market, which was about $21,900 for Panamax, you're seeing that our CABUs before FFA effect produce 30% higher dry earnings than the standard markets. You see also how that the tanker earnings is flat, partly secured by contracts.
Which is the same looking at for July, but it is positive to see the spectacular increase in earnings for our CABUs in July. Increasing dry earnings to USD 36,400, leading to CABU results all inclusive of USD 26,500 per day, which gives some indication of what's coming for the second quarter. Also compared to the standard markets, the performance of the CABUs has been stellar. The earnings of USD 21,900, it means around 2.9x the earnings of standard MR tankers, and matching the earnings of Panamax dry bulk ships, which we are very satisfied with the context we have in a weak tanker market. The same picture we see for the year to date figures of USD 19,400, with outperforming both the MR tankers and the dry market.
The CLEANBUs, we have seen that the very weak LR tanker market with LR tankers queuing up in loading areas has not been the ideal timing for introducing a new shipping concept in the tanker market. With the weak rates, we have optimized the situation by switching capacity into dry trades, taking benefit of the strong dry market and showing the large flexibility we have in our fleet to adjust capacity between the markets. As this graph shows, in the second quarter, 86% of the days were in dry market, partly in combitrade and mostly as a standard dry ship. This has had the effect that the percentage of time in combitrade reduced to 30% and the ballast increased to 28%, which is one of the reasons for the performance on the carbon intensity, the EEOI, which I mentioned before.
Looking at the July figure, we show this is about to change. This is not due to the stronger tanker market as such, it's due to the fact that we have succeeded to advance our discussions with tanker customers, partly driven by the environmental agenda. We concluded the new clean petroleum product Contract of Affreightment with one of the leading tanker players, charterers which will take one to 1.5 of the vessel capacity for the next one to three years. Advance with other customers as well, fixing the first combi voyage to West Africa, expanding the trade. Now in July, we have fixed five of the eight CLEANBUs into clean petroleum trades, bringing the ships into dry bulk export regions. We expect to make further shipments fixtures over the next weeks.
Meaning that within the end of the third quarter, we should have at least seven or eight ships trading in combination trade, which will be one of the main drivers for increasing the earnings of the CLEANBUs in the third and fourth quarter. Earnings ended at $18,500 per day. Compared to the first quarter, we see a positive effect of dry earnings increasing from $17,400 to $23,700 per day. You note the big decrease in tanker earnings, partly a reflection of the weak LR1 tanker market, and partly startup costs for new ships delivered and new trades being started up. July figure again gives an indication of what's to come in the second half, with earnings increasing to around $21,600 per day. We increased the earnings both in the dry bulk and in the tanker days.
Compared to the standard markets, the CLEANBUs have clearly outperformed the LR1 earnings. Given the not fully optimal trading of the CLEANBUs, we have not managed to match the earnings of the Kamsarmax bulkers. This is the same for the year-to-date figures of $18,200 per day. Liv, I leave the word to you.
Yes. Thank you. Over to or back to EBITDA, I should probably say. EBITDA for the quarter ended at $15.3 million, an increase of 66% Q-on-Q. The driver behind this increase is mainly driven by CABU revenue. CABU TCE earnings increased by more than $5,000 per day compared to Q1, which is the effect here shown as $4 million, mainly driven by a strong dry bulk market and efficient combination trading. In addition, we had less off-hire related to dry docking in Q2 compared to Q1, an effect of approximately $1 million. CLEANBU revenue increased by $2.3 million, approximately 65% due to a larger fleet and 35% related to higher TCE earnings, approximately or close to $600 per day. CLEANBU operating expenses is up $1.1 million from Q1 to Q2 as a consequence of the larger fleet. Finally, we have a full fleet on water.
The last new build delivered in May started trading in early July. Q3 will be the first quarter with full earnings for the entire CLEANBU fleet. As you can see here, Q2 hence was impacted by the delivery of both the vessel delivered in late March and late May. As you can see to the right, the number of days from delivery until start of trading has been between 40 and 45 days for all the three vessels delivered in 2021. When comparing to 2019, here shown as 12 days on average, the main difference here is a consequence of COVID-19, as we take delivery of the vessels with a Chinese crew and then change crew later on. COVID-19 effects is estimated to be approximately $2.2 million for Q2, up from $1.9 million in Q1.
70% of this relates to the new builds. Hence, we expect these effects of COVID-19 to be smaller going forward. Both scheduled and unscheduled off-hire is quite stable compared to Q1. We had a limited two days COVID-related off-hire in Q2 compared to four in Q1, which is a huge improvement from second half last year. However, it is still challenging to do the changes of crews. We have approximately 30% fully vaccinated crew. There are no lighter restrictions related to the crew changes in the relevant ports and countries. So far in Q3, looks good as well to COVID-related off-hire days. This is not over. Hence, there are uncertainties related to this over the next quarters. One CABU vessel completed dry-docking in April. We had one CLEANBU in for guarantee repairs in Q2, in total 49 days.
Over the next two quarters, we will dry-dock additional three CABU vessels. The guarantee repairs for the last two CLEANBUs have been postponed due to the close down of certain regions in China. This is, for now, postponed until Q4 or going into 2022. CABU and CLEANBU OPEX, as you can see in the graph to the right, is quite stable compared to Q1, $8,000 per day for the CLEANBU vessels and $7,500 per day for the CABUs. The CABUs are quite in line with historic numbers. For the CLEANBUs, we expect this to be a bit volatile also going forward, might increase slightly over the next two quarters. I have commented on the net revenue, operating expenses, and the EBITDA. As you can see here, both SG&A, depreciation, and net interest cost is quite stable, however, impacted by a larger fleet.
Profit for the quarter ended at $3.5 million compared to a loss of $2 million last quarter, and earnings per share, $0.073 for the quarter. As mentioned earlier, dividend per share is up 50% Q-on-Q to $0.045 per share, which is a payout ratio above 60% for the quarter. Return on capital employed increased by 4 percentage points to 5.5% for the quarter. Cash by the end of June, close to $35 million, down approximately $5.3 million. In addition to the positive effect of adjusted EBITDA, we saw a negative cash flow related to clearing of freight derivatives in Q2 of $12 million. There's a mismatch or a timing mismatch in the cash flows from the derivatives and the physical contracts. Hence, the positive cash flow from the contract will materialize in 2021 and 2022. Dry-docking and upgrades, $2.3 million.
The last new building CapEx, $35.4 million. Sorry. Net mortgage debt, $28 million positive as we draw on debt related to new builds. Interest cost, $3.66, and dividends, $1.4. In addition, we had a drawdown of $7.5 million on the overdraft facility at the end of the quarter, and we had undrawn capacity of approximately $12.5 million. We expect cash to improve over the next periods, both as we have taken delivery of the last new build, we have a full fleet on water, and a strong market outlook. Book value of vessels increased by $30 million, and interest-bearing debt by $35 million as a consequence of the new build delivery in May. Equity is down approximately $10 million in the quarter to $201 million, as we have had a negative mark-to-market effects of freight derivatives over the other comprehensive income.
Equity ratio ended at 32.5%, down from 34.5% at the end of Q1. We expect this as for cash to improve going forward, and by the end of July, it was close to 33%. To the right, you can see the maturity profile, and we have a facility falling due in March next year. We have initiated discussion with banks related to the refinancing. We have no firm commitment yet, the indicative terms are very good, and we hope to finalize this in Q4. Over to you, Engebret, for the bright outlook.
Thank you, Liv. Second quarter has been a good quarter. Substantially increasing earnings, substantially increasing dividends, and progressing well with the business, both on the CLEANBUs and the CABUs. Looking ahead, we have booked 80%-85% of the capacity for the third quarter, meaning we have a good visibility for the earnings for the quarter. We are pleased to guide up considerably for the CABUs by $1,500-$2,500 per day, up to $23,500-$24,500 per day. We see a smaller uplift for the CLEANBUs, between $1,000-$2,000 per day, which is partly due to the effect of fixing CLEANBUs in the tanker market in the third quarter. It should be seen together with the effects in the fourth quarter, where we get the benefit of high dry earnings in combination trade.
It's important to have a look also on the Q4 and with the current FFA pricing in the market for Q4, the CABUs look approximately the same range as we have guided for the Q3, so same between $23,000 and $25,000 per day. The CLEANBUs will get the benefit of posted the combi earnings and dry trades. We estimate that with the current forward market to be between $23,000 and $26,000 per day. Looking at 2022 is quite interesting. For the first time since the China boom, there's a good possibility that we'll see both a strong dry market and a strong tanker market. Given the nature of our business, no company can get the same out of this market situation than KCC. An illustration of this is the dividend potential of the company.
Here we show the dividends per year in totality, per share per year, and linked to the average term sheet earnings of the KCC fleet. Looking to the left at the bottom, you see the dividend yield given the current earnings in second quarter on average $20,500 per day. Showing that in 2022 with no newbuild deliveries, we can double the dividend yield with the same earnings from currently 4% to 8%. If we can achieve high earnings, which I believe is very likely, you see a double-digit dividend yield of this company. To summarize, again, we believe we have an exceptionally good business model providing the lowest carbon shipping solution, low volatility, and high earnings. Outlook is very strong. Thank you, and we look forward to answering your questions.
Seems like everything's clear so far, Engebret. We have no questions.
No questions? Okay, good. Crystal clear. Thank you. Thank you for joining.