Hello, welcome to Nakilat's 2Q 2024 results call. My name is Alex. I'll be coordinating the call today. If you'd like to ask a question once the presentation is finished, please press star followed by one on your telephone keypad. I'll now hand it over to our host, Ahmed Hazem from EFG Hermes, to begin. Please go ahead.
Thank you, Alex. Hello, everyone. Good morning and good afternoon, wherever you are. This is Ahmed Hazem from EFG Hermes Research, and we'd like to welcome you all to today's Nakilat second quarter 2024 results conference call. With us on the line today is Mr. Hani Abuaker, CFO of Nakilat, Mr. Fotios Zeritis, Head of Investor Relations and ESG Reporting, and Mr. Kamaran Jomah, Financial Planning and Reporting Manager. Without further delay, I'd like to hand over the call to the management. Fotios, please, the line is yours.
Thank you, Ahmed. Good afternoon, everyone, welcome to Nakilat second quarter of 2024 results conference call. For your convenience, the transcript of this call and presentation are available on the company's investor relations section of our website. As a reminder, this conference call is being recorded, the media, or press is not allowed to attend this investor relations conference call. Many of our remarks contain forward-looking statements. For factors that cause actual results to differ materially from these forward-looking statements, please refer to the slide two of the investor relations presentation. In addition, some of our remarks contain non-IFRS financial measures. A reconciliation of this is included in the note of this presentation. Kamaran Jomah, Nakilat's Financial Planning and Reporting Manager, will begin today's call with a brief discussion of the group's earning results. After, I will give to you an overview of the LNG shipping market.
Finally, Nakilat CFO, Hani Abuaker, will walk you through the company's business outlook, then we'll be happy to address your question. Now, we will hand it over to Mr. Kamaran, Nakilat's Financial Planning and Reporting Manager. Kamaran, please go ahead.
Thank you, Fotios. Good afternoon, everyone, and welcome to Nakilat's half year earnings call. It's a pleasure to be able to share Nakilat's financial performance with you today. If you turn to slides 10 to 12 of the presentation, I'm pleased to announce that Nakilat has had a great year so far, reporting profits of QAR 829 million, equating to QAR 0.15 per share. This represents an increase of 7% year-on-year, which reinforces Nakilat's sustained financial performance. To add some context to the results, the total revenue was reported at QAR 2.3 billion for this first six months, which is in line with the previous year's revenue for the same period. The company has marked improvement on the wholly owned LNG vessels. This was offset by lower income from the shipyards due to a reduction in activities during the period.
Nakilat expects to see improved performance from our shipyards during the second half of the year. Income from interest and dividends alongside other income totaled QAR 117 million. This represents a slight increase of approximately 2.9% from the QAR 114 million recorded in its comparative period. This increase was primarily due to Nakilat's continuous strategic utilization of cash reserve to generate interest income from deposits. Vessel operating expenses for the half year totaled QAR 408 million, reflecting a slight increase of approximately 2.9% from the QAR 396 Million incurred during the comparative period. This is in line with the average cost of the last three quarters and reflective of annual inflation. General and administrative costs slightly decreased by 1.6% for the six-month period. This decrease aligns with the planned activities and continuous cost optimization.
Taking everything into account, Nakilat recorded an EBITDA of QAR 1.8 billion for the six-month period, which is a slight decrease of approximately 0.6% compared to the same period in the previous year. This was mainly driven by lower activities in the shipyard, as mentioned earlier. Depreciation and amortization costs totaled QAR 410 million, reflecting a decrease of approximately 8.9%. This is mainly attributable to the one-off accounting treatment for the initial dry dock component, which was booked in 2023. Finance expense for the half year was QAR 595 million, which reflected an approximate reduction of 4.1% compared to the comparative period. This reduction was primarily due to scheduled repayment of interest-bearing debt.
It pleases me to announce that for the first time, Nakilat Board of Directors have proposed an interim cash dividend distribution for the period ending June 30th, 2024, amounting to QAR 388 million at a rate of 7% of capital. This is equivalent to QAR 0.07 per share. This proposal is subject to approval at the upcoming extraordinary general meeting, which is scheduled for Wednesday, the 28th of August 2024. Taking a look at the key areas of our balance sheet. Nakilat's property, plant, and equipment stands at QAR 24.2 billion, which has increased by QAR 3.2 billion, further strengthening our balance sheet. This increase is due to installments towards Nakilat's newbuild program, consisting of 40 new vessels, 31 of which have been previously announced and a further plan to build nine Q-Max vessels, which have been announced during the second quarter.
This increase was offset by depreciation for the period. Nakilat's cash balance stands at QAR 2.6 billion. This expected decrease of approximately 38.4% from December 2023 is as a result of installments associated with Nakilat's new build program. As of June 30th, 2024, Nakilat's borrowing increased by QAR 1.8 billion. This is primarily due to drawdowns of new loan facilities taken to partly finance Nakilat's new build program. This increase was partly offset by Nakilat's scheduled loan repayments. Thank you. I'll pass the floor to Fotios, who will provide you with an overview of the LNG shipping market. Over to you, Fotios.
Thank you so much, Kamaran. Hello, everyone. I'm pleased to provide a concise update on the LNG shipping market. While LNG shipping market participants remain optimistic about global LNG trade, the normalization of the trade in 2023 and during 2024 seems to be emerging sooner than anticipated. Nevertheless, the long-term growth of LNG trade will primarily be driven by China, South and Southeast Asia, effectively offsetting the declining demand from Europe. The expansion in South and Southeast Asia countries, along with China, will be propelled by a significant economic surge over the next five years. This growth is attributable to rapid urbanization, population increase, economic development, and the advancing commercialization of various sectors. Furthermore, LNG's role in power generation and other industries will become increasingly important due to decarbonization objectives.
According to Drewry, Asia's leading importers, China, Japan, South Korea, Taiwan, and India, collectively imported 55.5 million tons of LNG in the second quarter of 2024, an increase of 10% year-on-year. The continent demand skyrocketed due to extreme heat waves, China's economic rebound, and the return of price-sensitive buyers. Additional countries such as Vietnam, Singapore, Thailand, Philippines, and Bangladesh are expected to ramp up LNG imports as natural gas emerge as a primary energy source for both power generation and industrial sectors. Shifting our attention to the slide 16 of the presentation, Wood Mackenzie forecasts a robust growth in the global LNG trade, with liquefaction capacity projected to surge from around 408 million tons in 2023 to approximately 732 million tons by 2030, representing an 80% increase.
This expected surge in global LNG supply is expected to drive the demand for LNG shipping worldwide. Referring to the slide 17, as reported by Clarksons, the average spot charter rates for modern two-stroke tonnages in the second quarter of 2024 was approximately $56,000 per day, around $ 44,000 per day for TFDE, and approximately $30,000 per day for steams. Furthermore, Clarksons assessed the average one-year LNG shipping charter rates for the same period at roughly $78,000 per day for MEGI and X-DF, $62,000 per day for TFDE, and $ 38,000 per day for steams. These figures serve as a valuable benchmark for discussion on chartering opportunities. Moving to page 19, Clarksons reports that the global LNG fleet consists of 704 vessels in operation in the second half of 2024, with an additional 351 conventional LNG vessels on order until 2031.
This represents a 49% increase in the total LNG fleet, particularly in the number of conventional LNG vessels as of the second quarter of 2024. Additionally, LNG carriers' new build price are near at $265 million. In conclusion, the demand for LNG is expected to persist as the world shifts away from coal and oil towards cleaner energy sources. Considering these positive and fundamental developments, we maintain an optimistic outlook for the long-term prospects of the LNG shipping. I would like to invite Mr. Hani Abuaker to provide insights into Nakilat's business outlook. Please proceed, Mr. Hani.
Thank you, Kamaran and Fotios. First of all, I would like to start by congratulating Nakilat and the team on another great quarter. Our results, alongside the recent announcement of the execution of additional 9 QC-Max LNG vessels, which will be chartered by QatarEnergy LNG as part of its North Field expansion, is another outstanding step towards Nakilat's journey.
These achievements signal exciting time for Nakilat and strengthen our position in the LNG market as a global leader. The additional vessels, coupled with the six vessels announced in January 2024 and the 25 LNG conventional vessels previously announced during the first quarter, brings our total new build program to 40 new vessels, reinforcing our existing fleet and Nakilat's future. As previously mentioned by Kamaran, Nakilat 2024 performance has maintained a consistent profit increase, reflected by another outstanding results, achieving a record high profit for the period for the first half of QAR 829 million . This continues Nakilat momentum from the first quarter of 2024, despite of the geopolitical obstacles that we are facing now globally. I want to briefly turn my attention to Nakilat outlook for the remainder of 2024.
Nakilat remains confident in continuing its upward trajectory in its financial performance, which is a testament to the business model and our management's ongoing effort to maximize fleet utilization and to mitigate any exposure, such as interest rate exposure. Nakilat shipyard segment is expected to see a stable performance for the second half of the year due to an increased dry dock activity benefiting from Nakilat. Nakilat expect to see another successful year. As we have already announced, Nakilat maintain positive about the long-term opportunities that will continue to benefit our shareholders. Staying true to our commitment to transparency, I'm pleased to announce that as of June 30th, 2024, Nakilat currently has 887 years of high earnings visibility through firm contracts across Nakilat wholly-owned vessels.
This is further broken down to the existing 29 wholly-owned vessels, which are ending around 2035, contributing to 287 years, and 34 vessels chartered to QatarEnergy, which will contribute a further 600 years once delivered. Nakilat has an additional 585 years of cumulative options across all its wholly-owned vessels. This projection, which emphasizes our commitment in providing our shareholders with a robust future supported by decades of consistent and dependable returns. That said, I would like to turn it over to the operator to open the floor for question and answers. Please proceed.
Thank you. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad. Our first question for today comes from Rob Skepper of Ashmore Group. Your line is now open. Please go ahead.
Yeah. Hi, everyone. Good afternoon. Thanks very much for the presentation today. Much appreciated. Yeah, as you were kind of alluding to at the end there, obviously, it's been a busy half for you guys in terms of future growth and the new contracts and all the announcements. It's been really good. I just wondered, in terms of more financial granularity and guidance around that expansion, when do you expect to be able to talk about that more freely?
I think you should look at it sort of like a normal distribution curve, where you start towards the end of 2026 to start to receive number of vessels, and you start to see some sort of a peak towards the 2027, and then starts to 2027 second half and then beginning of 2028. Then in the second half 2028 is the other half of the tail of the distribution that gets into 2029 and 2030. This is exactly how it is. Remember, there's 40 vessels. That is kind of the distribution that we seeing it right now. I'm sure as we move forward, maybe in the next maybe quarter or two, we can start to give a little bit more reasonable expectation about the numbers in a quarter or something like that.
That will allow us to see more visibility, because now we're just trying to ensure that whatever is the delivery range is expected. That is the kind of distribution you should think of. End of 2026, things start to ramp up by second half of 2027, first half of 2028, and then falls down to 2029 and towards 2030. We assure you that we're going to give you a better number of vessels over the next one or two quarters because we can have a little bit more clear visibility.
Got it. Okay, great. Thank you. Yeah, that'd be good. Then I just wanted to ask, if we go back to like, I don't know, if we go back to like a year ago, I think, maybe some people in the market were getting a little bit twitchy whether these announcements were going to happen, for North Field. I remember at that time hearing more comments from you guys about looking outside of the Qatari ecosystem and saying, "Look, we're one of the biggest players globally, and we're not constrained by Qatar and working with QatarEnergy, so we're looking at stuff elsewhere." Then obviously you've now come with these very nice contracts in Qatar, which consumes a lot of the bulk capacity. I wondered, are you still looking outside of Qatar at global opportunities, or is the pipeline pretty much full at this point?
Well, first of all, six of the vessels out of the 42 LNG, which is not really ordered for Qatar, just wants to highlight that, and four is LPGs or VLGCs, which is ammonia LPG vessels. We're still looking at our international portfolio. For us, we don't explore any opportunity that comes our way if it is really good for our shareholders. We continuously looking for something that is so good, and if something just really came and lucrative and matches what we're been doing recently, why not, okay? We've done it before with the global shipping. They currently, commercially and technically operated by ourselves. They lift cargos not from Qatar. They lift cargos abroad. Yes, if an opportunity comes, we are always open. Also we look at our capacity, at our priority. There's different factors.
It's always driven by what's best commercially to our shareholders and to our company. You have to understand, and I hope you really understand it very well, that for us, the capacity is linked a little bit more of us able to secure the long-term charter contract. That allows us to fund as much as we can. It allows us to consider about opportunity in the future. As you rightly said also now, if you're having so many on your plate, maybe our focus a little bit more about the next wave of delivery that will start end of 2026, beginning of 2027. It's not that we're not exploring anything that comes our way. That's not the case for Nakilat. As we said before, we consider ourself one of the largest by capacity in the world. We believe we are a global leader.
We believe that we've been internationally lifting cargos from different countries other than in this region. We are not limiting ourself. We just always going to be able to really see what's coming our way. Definitely, when you have over 40 vessels, you might be more inclined towards getting more vessels, but you need them to be at a way significant better rate. Honestly, I cannot really answer you, but all I can commit to you that we continuously exploring anything that comes our way. We believe that over the next maybe six to seven years, we're having this delivery of these number of vessels. We're having all that kind of growth that's coming our way. Maybe we're thinking about what's after 2023, and we just want to be preparing ourself.
We need to be always proactive as a global leader, and we will continue to do that. I hope I answered you, but honestly, this is what exactly I have and I've seen on a day-to-day activity.
Yeah. No, that's great. Thanks, guys.
Thank you. As a reminder, if you'd like to ask a question, you can press star one on your telephone keypad. Our next question comes from Santosh Gupta from Drewry Maritime Financial Research. Your line's now open. Please go ahead.
Thank you. Hello, Nakilat team. Can you please suggest how much more new debt you expect to raise in the remaining of this year, 2024, and also possibly in 2025? Thank you.
Yeah. Okay, your question is how more debt we're going to raise, over 2024, 2025. Remember, this is again, as per the milestones that we're going to get from the shipyards, as each milestone will allow us to draw down more debt. Maybe we can look into providing you approximate numbers in the future. Honestly, it's very hard for us right now because the milestones, still we're finalizing them. You should expect to start to see something around 25%-30%, around maybe 20%-25% by 2025, 2026, that will start to really materialize. As we said before, because the problem, they are coming through over, I would say, end of 2026, 2027, 2028, 2029, 2030. It is spread, and it might be mixed with that kind of the drawdown.
We will try to, maybe next quarter, give some sort of approximate for the next couple of quarters about the drawdown. At least you guys can have some sort of visibility. You can do your own calculation. As we said before, usually we do a kind of 50% installments and 50% on delivery. If you think about that distribution that I talked to you earlier at the beginning of the call, you assume the 50% is going to be distributed there. Then if you really approximate over the next 2024 or 2025-2026 is the remaining 50%. Let's assume you spread it over the quarters, should give you a rough number. Thanks.
Great. Thank you.
Thank you. Our next question comes from Mark Adib from CI Capital. Your line is now open. Please go ahead.
Hello. Thank you for the call. I just have a couple of questions from my end, if I may. The first one with regarding to CapEx in second half, would it be sensible to expect an increase in CapEx spending over first half, or would you expect it to be pretty much the same as the first half?
Hi, I can take that one. In terms of CapEx for the installments, you shouldn't see a significant increase for the second half of the year. The majority of our installments already have been covered. Hopefully that answers your question.
Yes, it does. Thank you. My second question with regards to dividends, should we expect any changes in the dividend policy beyond first half?
We don't foresee, as of today, any change in our sustainable dividend distribution. We have said that before in different meetings. We always try to find a way to reward our existing shareholders so they can really benefit from the journey that we're going through. I think our balance sheet, our contracted long-term firm contracts, allow us to engineer a lot of that distribution or balancing our distribution over the next years, despite of the actual growth in the CapEx. As of today, we believe comfortably that we will try our best, as a commitment from the management, to see that we can sustain that dividend distribution. I think that's the best I can tell you as of today. Again, this have been clearly documented or proven by that we have announced half yearly dividend distribution.
That's clear testament that we are committed to that. We are always trying and eager to benefit our shareholders, existing shareholders, to enjoy the journey with us, to enjoy the current dividend distribution, and also to enjoy the growth that is coming up over the years. Okay?
All right. Thank you so much.
Thank you. As a reminder, if you'd like to ask a question, that's star one on your telephone keypad. We have a question from-
Hi, Hani. If I may Geez, Alex, go ahead. Yeah, give the question to whoever asked it one sec.
Oh, thank you. We have a question from Neetika Gupta of U Capital. Your line is now open. Please go ahead.
All right. Thank you. Thanks for taking my question. I had a question on the revenue breakdown for the first two quarters. We've seen a modest decline in the share of results from JVs. The trend has been continuing in 1Q 2024 and 2Q 2024. If you could just explain us the reasons behind it and how we should be thinking about it going forward. Thank you.
Yes. I'll take that one. On the JV performance, there were two really main elements. The first one was we had three dry dockings during the first half of the year, two of which are for the LPG vessels and one for one of our LNG JVs. The second part was due to the shipyards, and this was due to reduced activities in the shipyards. Those are the two reasons behind it. Saying that, we do see and we do anticipate an improvement for the remainder of the year due to the increase in these drydock activities and primarily coming from the Nakilat fleet.
All right. Thank you.
Okay.
Hi, Hani. If I may take this chance to ask a question myself. You started already paying the first installment on the new vessels on order, and obviously you took some debt to fund that. Have you started already looking at hedging those initial facilities that you've drawn down on, or are you basically waiting for maybe some correction in rates towards the end of the year or the beginning of next year before you basically lock in those rates? What's your hedging strategy looking like in relation to those debt drawdowns or whenever there's an installment due?
Okay. This is two parts question. I'll start with the first one. Did we start hedging? Yes, we did. Actually, we even hedged forward, and we hedged them at a favorable rate better than what we have assumed in our economics. We already in a better situation going into these kind of contracts, even before we start to draw down the debt. We will continue to do these hedges. Our aim is not to speculate the market. Our aim is to really ensure that we have a solid business that is not impacted by any kind of factors. We started, and we talked about this one before. We said we're going to do it in a staggered way, so we don't take a chance to be exposed.
We started almost from the whole capital spending that we plan over the next, I would say over the next four to seven years. All that expected exposure of interest rate, we started already hedging around 15%-20% of that. As I said, it is hedged at a rate that is lower than what we have assumed in our economics. We really should expect better results. Are we going to continue? Yes. That's something we are monitors quarter by quarter. We should really continue until we reach our maybe targeted, which is similar to the target right now, which is something between 50%-75%. Again, I cannot speculate about how much. If things goes bad.
If interest rate goes significantly lower back to 2% or something, we might go all in and hedge to 100% because that will make our economics again, superior to what we have seen ever in our business. Yeah, we started hedging. We don't take a chance on the market. Our business is sort of secured, and we don't take any chance of exposure. We did around 15%. Well, 15%-20%. We will continue over the next two to three quarters, and later on, we see what has happened in the market. That will increase the amount maybe to 50%, 60%, 70%. There's no commitment right now. Did we start? Yes, we did start. I hope I answered your question, Ahmed.
Very clear. Thank you, Hani, very much. Thank you.
Thank you. We do have a question from Akber Khan of AlRayan Investment. Your line is now open. Please go ahead.
Hello, gentlemen. This is Ejayan Al-Ahbabi from AlRayan Investment. My question is regarding your finance cost. We see an increase in your loan book, but a decrease in your finance cost. Could you give me a color on this and a guidance for the full year? Can we expect finance cost to drop? Is this a reason of the hedging or is there another reason?
Yeah. In terms of the reduction in the finance cost, that's primarily due to the scheduled repayment of our loans. Now, as you rightly said, we've had an increase in our debt on the balance sheet. Of course, the debt taken was primarily associated with the new build program. The money or the interest expense incurred has been capitalized. Therefore, it wouldn't hit the P&L.
The cash flow reductions as well. Could you give us some insight, please?
In terms of the available cash, you mean?
No, the reduction in the interest expense.
On the interest expense on the cash flow.
Yeah. Maybe I will just clarify a bit more.
Yeah.
Remember, we as a company with our debt is like a mortgage style. As we move from period to period and we repay back down the debt, interest expense will continue to decrease. If interest rate doesn't go up significantly high and stays stable as if it is today, you should expect a lower interest expense in the second half of the year because we are repaying down the debt, so the principal is lower, and that will translate to a lower interest expense.
Thank you very much for your answers.
Thank you. At this time, we currently have no further questions, so I'll hand back to Hani Abuaker for any further remarks.
I just would like to thank everyone today for joining us, and hopefully we can see you in the near future in person. Rest assured that we try our best to really have a world-class investor relation program. Please feel free to reach out to the team for [Inaudible] if you have any questions, and thank you very much for joining today.
Thank you for joining today's call. You may now disconnect your line.