Good morning or good afternoon, and welcome to the Nakilat 4Q 2024 results call. My name is Adam, and I'll be your operator today. If you'd like to ask a question in the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. I will now hand the floor to Ahmed Hazem from EFG Hermes to begin.
Hello, good morning, and good afternoon, ladies and gentlemen. This is Ahmed Hazem from EFG Hermes Research, and we'd like to welcome you all today to Nakilat's fourth quarter 2024 results conference call. With us on the line today is Mr. Hani Abuaker, CFO of Nakilat, Mr. Fotios Zeritis, Head of IR and ESG Reporting, and Mr. Kamaran Jomah, financial planning and reporting manager. First off, I'd like to congratulate the Nakilat management team on another solid year of results. And without further delay, I'd like to hand over the call to Fotios. The line is yours.
Thank you, Ahmed. Good afternoon, everyone, and welcome to Nakilat Fiscal Year 2024 Earnings 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, and the media or press is not allowed to attend this investor relations conference call. Many of our remarks contain forward-looking statements, and for factors that cause actual results to differ materially from these forward-looking statements, please refer to 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 earnings results. After, I will give you an overview of the LNG spot market.
Finally, Nakilat CFO Hani Abuaker will walk you through the company's business outlook. Then, we will be happy to address your questions. Now, I would like to hand it over to Mr. Kamaran Jomah, Nakilat's Financial Planning and Reporting Manager. Kamaran, please go ahead.
Thank you, Fotios. Good afternoon, everyone. And again, welcome to Nakilat's fourth quarter 2024 earnings call. To begin, I would like to highlight the key financial results and the performance of Nakilat for the fiscal year 2024. Turning to slide 10 to 11 of the presentation, I am pleased to report that Nakilat delivered another great year of outstanding performance, achieving another record result. Nakilat has reported profits of QAR 1.64 billion , equating to an earnings per share of QAR 0.30 . This represents an impressive year-on-year growth of 5.1%. This continued upward trajectory reflects our operational efficiency, strategic investment, and our unwavering commitment to delivering value to our shareholders. To provide further insight into the results, revenue from operations stood at QAR 4.34 billion for the year, reflecting a slight decrease of 1.5%.
The marginal decline was primarily driven by lower income from our LPG and LNG joint ventures, while the LPG joint venture continued to perform steadily. However, they faced a reduction in charter rates and the impact of the vessels undergoing dry dockings. Similarly, the LNG joint ventures maintained operational excellence despite lower rates on the short-term time charters, also having some vessels undergoing dry dockings during the year. Additionally, as anticipated, the shipyards division recorded a slight decline in income due to the reduced activities. Income from interest, dividend, and other income totaled QAR 184 million, representing a decrease of approximately 24% compared to the QAR 242 million recorded in 2023. This reduction is attributable to the lower interest income, as Nakilat strategically invested available cash towards the new build program announced earlier this year.
Vessel operating expenses totaled QAR 809 million, reflecting a marginal decrease of approximately 1.7% from the QAR 795 million incurred in 2023. This aligns with the planned operational activities and is reflective of annual inflation trends. General and administrative costs decreased by 1%, driven by Nakilat's continuous focus on cost optimization initiatives. Now, taking all factors into account, Nakilat recorded an EBITDA of QAR 3.61 billion, a slight decline of approximately 3.6% compared to the prior year. This decrease, as mentioned, is largely attributable to the lower interest income, reduced contributions from the LNG and LPG joint ventures, and a decrease in the shipping activities, as outlined earlier. Depreciation and amortization costs totaled QAR 839 million, down from the QAR 935 million in 2023, reflecting a decrease of approximately 10.3%.
This reduction was mainly attributable due to the one-off accounting treatment relating to the initial dry dock component booked in 2023, which was partly offset by regular annual depreciation. Finance expenses for the period stood at QAR 1.13 billion, reflecting a reduction of approximately 9.5%. This decrease is primarily due to scheduled repayments of interest-bearing debt, along with capitalized interest on investment related to Nakilat's new build program. Now, turning to slide 12 to discuss the key areas of our balance sheet and how Nakilat continues to strengthen its financial position. Nakilat's property, plant and equipment stands at QAR 24.54 billion, reflecting a growth of QAR 3.54 billion, driven by strategic investment in Nakilat's expansion under the new build program.
This initiative comprises of 40 state-of-the-art vessels, including 25 conventional carriers, 9 QC-Max vessels, all contracted with QatarEnergy, and four very large gas carriers designed to transport ammonia, along with two state-of-the-art LNG carriers. This was offset by regular depreciation. In line with our dedication to transparency, we have successfully fulfilled approximately 10% of our shipyard commitments as of 2024. Now, looking ahead, we anticipate making further payments of 5%-10% in 2025, 10%-20% in 2026, and due to the delivery of approximately 40% of our vessels in 2027, we plan to contribute a further 25%-35% of our commitments. For 2028 onwards, we expect to make payments of around 10% annually through to 2031. It's important to highlight our intention is to finance these payments through structured financing, which aligns with our business model, maximizing the returns on these projects.
These investments demonstrate Nakilat's ongoing commitment to enhancing operational capacity and reinforcing our market position. This increase was offset by depreciation for the period. Now, Nakilat's cash balance stands at QAR 2.62 billion, reflecting a decrease of approximately 38% compared to December 2023. This reduction is primarily attributable to the strategic investment in Nakilat's fleet expansion, part of Nakilat's newbuild program again. As of the 31st of December 2024, Nakilat's borrowing increased by QAR 1.84 billion. This is primarily due to new loan facilities secured to support the company's newbuild program. This increase was partly offset by Nakilat's disciplined approach in financial management with scheduled loan repayments. The net fair value of interest rate swap shifted from a net liability to a net asset position, increased by QAR 767 million to reach a total of QAR 353 million.
This positive movement, driven by Nakilat's proactive approach in risk management through the implementation of new pre-hedges taken earlier this year, aimed to mitigate interest rate exposure in anticipation of financing activities for the new build program. Additionally, the rise in variable interest rates contributed to the overall increase in our fair value. Thank you for your attention. I'll pass it over to Fotios, who will provide you an overview of the LNG shipping market. Fotios, the floor is yours.
Thank you, Kamaran, and hello everyone. I'm delighted to provide a brief but comprehensive update on the LNG shipping market. The global LNG trade is poised for significant growth between 2025 and 2030, supported by several key drivers. First, the increasing role of LNG in the power sector. Second, accelerated coal to gas switching initiatives. Three, improved LNG supply. Four, ongoing geopolitical uncertainties. Five, advancing technology and operational efficiency in LNG. And six, focus on energy security. Let us now turn to slide 17 of the presentation. With McKinsey forecast robust growth in the global LNG trade, with liquefaction capacity expected to rise from approximately 410 million tons of LNG in 2024 to around 620 million tons of LNG by 2030, a substantial increase of 61%. This surge in global LNG supply is said to drive the demand of LNG shipping demand worldwide.
Moving to slide 18, Clarksons reports that the average spot charter rates for modern two-stroke tonnage in 2024 stood approximately $54,000 per day. The DFDE vessels averaged $42,000 per day, and steam vessels stood at around $26,000 per day in 2024. For the average one-year LNG shipping charter rates in 2024, Clarksons assessed the rates at $69,000 per day for the ME-GI/ X-DF, $54,000 per day for DFDEs, and $33,000 per day for steams. These figures provide a critical benchmark for chartering discussions and demonstrate continued market resilience. Turning to slide 20, Clarksons highlights that the global LNG fleet consists of 729 vessels in operation in 2024, with 326 additional conventional LNG vessels on order book through 2031. This represents a 45% increase in the total LNG fleet, specifically in conventional LNG carriers.
Additionally, the LNG newbuild prices appear to have stabilized in the price range $260 million-$265 million. In summary, the LNG remains a cornerstone of the energy transition as countries shift from traditional energy resources like coal and oil to cleaner alternatives. While we anticipate near-term rate volatility due to the influx of the new vessel deliveries, the long-term outlook for LNG shipping remains fundamentally strong, underpinned by these positive market developments. With that, now I would like to hand over the discussion to Mr. Hani Abuaker, who will share insights into Nakilat's business and outlook. Mr. Abuaker, please, the floor is open.
Thank you, Fotios, and thank you, Kamaran. Hello everyone and good afternoon. I'm delighted to announce that 2024 was another landmark year for Nakilat, marked by a strong profitability for our shareholders and a successful expansion of our fleet. We currently have 40 vessels on order, which is comprising of 36 LNG carriers and four VLGC ammonia carriers. This substantial order book will further position Nakilat as the world's leading LNG shipping company. Upon completion of these projects, Nakilat fleet will expand to an impressive total of 114 ships, strengthening our leadership in clean energy transportation and our ability to meet the ever-growing global energy demand.
In light of this company's strong financial performance, while taking into consideration ongoing geopolitical uncertainties and economic volatility, while the board was happy to recommend a cash dividend of QAR 0.07 per share for the second half of 2024, this is in addition to the interim cash dividend of QAR 0.07 that we have already distributed in the first half of 2024. Together, the amount will total around QAR 0.14 per share for the year of 2024, which is consistent with our previous year payout amount. This decision reflects our strong commitment to delivering consistent and sustainable dividends to our shareholders. It underscores Nakilat's strong profitability and robust growth of our balance sheet over the upcoming four years, where we expect it to almost more than double and also in return should really reward our shareholders with an escalated level of dividend payout in this regard.
In response to the fluctuating interest rate, we are carefully evaluating their impact on both financial costs and investment opportunities. To address these challenges, we have prioritized liquidity management, proactively refinancing some of our loans at a lower rate, and securing new financing while adhering to strict capital discipline alongside operational efficiency. These actions not only help mitigate market volatility but also enable us to deliver sustainable value to our shareholders, all while maintaining the continued reliability of our shipping operation. As Kamaran mentioned earlier, Nakilat's performance in 2024 remains strong, achieving another record year of profit of close to QAR 1.64 billion. Looking ahead in 2025, we remain confident in the resilience of our business model and management commitment to maximize fleet utilization. Nakilat is also actively exploring ways to enhance shareholders' return.
One such initiative was securing the pre-hedge for potential loans relating to our newbuild programs, effectively mitigating interest rate exposure. This proactive strategy is reflected in the positive fair value position of these pre-hedges on our balance sheet. By continuing with this approach, we aim to strengthen our cash flow and optimize returns to our recently announced newbuild program, and looking ahead for 2025, our resilient and adaptive business model, combined with the stability of our long-term cash flow, positions us to consistently deliver sustained value to our shareholders. This ability provides the confidence and assurance required to navigate evolving and dynamic market conditions effectively. We remain committed to our strategy to strengthen Nakilat's global leadership in LNG shipping. By leveraging our core strengths, we are confident in our ability to generate strong returns to our shareholders.
With that, I now hand it over to the operator to open the floor for questions. So please go ahead.
Thank you. As a reminder, if you would like to ask a question on today's call, please press star followed by one on your telephone keypad now to enter the queue. In preparing to ask your question, please ensure you are unmuted locally. That's star followed by one. And our first question comes from Alessandra David from Ashmore Group. Alessandra, your line is open. Please go ahead.
Hi. I just had a few questions. The first one is, how do you see the liquidity position evolving over the next couple of years, and when can we kind of expect to reach peak leverage? The second question I have is about the performance of the shipyard segment. So you've mentioned the stabilization activity. Do you foresee any new growth drivers or opportunities that could improve the overall contribution to group profitability? And then my last question is about the significant progress you've reported on your new build program. I was just wondering what percentage of CapEx for the 40 vessels has been paid so far. Are there any unanticipated risks or any risks you foresee with the delivery timelines? And lastly, how are you managing any cost pressures or inflation on the shipbuilding? Thank you.
Okay. I'll try to take these questions, and maybe I'll ask Kamaran to help if anything. Regarding the liquidity position, I believe we in the presentation attached, as promised last time, we provide you guys approximately the number of vessels, how they're going to be delivered. And also, we provided you with the percentage of payments that is going to be applied across the whole fleet. So you can use that to exactly have a flavor about our payments and liquidity, etc. So that's for the first question. And maybe if Kamaran can add something to that.
Yeah. I mean, to add to Hani's point, Nakilat has always operated on a 90% leverage. So we're always looking at ways to support that and provide the correct financing, especially backed with these long-term contracts. So with that, we'll be able to secure strong financing due to the clear visibility of the future cash flows. Now, in terms of the shipyard performance, I can jump onto that one. The decline was mainly due to the decrease in activities, and that was due to the dry dockings mainly coming from the Nakilat fleet. However, we do see the momentum gaining, as we did see in Q4 compared to the other three quarters of this year, and we do see a stable performance going ahead, and we'll always continue to optimize the resources and operate efficiently going forward to ensure that we maintain these stable performances.
In reference to the progress on CapEx, I think I already mentioned that we have already paid off around 10% of our capital commitments for these new builds. Hani already touched on a slide that we have provided along with this earnings call with the forecasting commitments to the shipyards going forward up until 2031. So that should help guide you into Nakilat's capital commitments going forward. I hope that addresses your question or your three questions, I should say.
Yeah. Maybe I would just touch on the cost pressures. How are you looking to manage them?
Yeah. We don't see any cost pressures. These are contracted shipbuilding contracts. So our prices for building these ships have been already set specific. So we don't see any potential contracted or cost pressure. Just, I want to highlight that. So we don't see any kind of concern there. And also, I will add about the shipyard activities. Remember, as we talked before, 2023 was the peak for the dry dock activities, which is every five years for Nakilat cycle fleet. So we should really expect 2025, some of the activity to start to come in. And hopefully, in 2026, it starts to ramp up. And 2027 and 2028 should be really another upbeat or strong year compared to what we've seen in 2023. And going forward, we are very, very optimistic about our shipyard activities. Why?
Because with that massive number of vessels that is coming up for the whole Qatar production, when they start to really come to our shipyards for their annual or every five years maintenance, that will ensure that any kind of slow years will be mitigated or will ensure a consistent, strong order book going forward from 2027 and 2028, as these almost doubling the size of the fleet of Nakilat and even more than that, that should keep the shipyards busy every year going forward from 2027 and 2028. Also, we have other joint ventures, which is Qatar Fabrication, and as you know, they're mainly being set up as part of the assisting in some of the main strategic projects in the North Field Expansion, and there's a lot of activities. It starts to ramp up there.
So hopefully, in 2025 and 2026, we'll see some good numbers coming from that entity. And hopefully, it will weather any kind of slow activities compared to 2023 and we have seen in Qatar Shipyards. And I hope I answered all your questions.
Thank you.
The next question comes from Mohammed Al-Thunayan from Jadwa Investment. Mohammed, your line is open. Please go ahead.
Yes. Hi, good afternoon . Congratulations on the great set of results. I have three questions. First, regarding the decline in Maran Nakilat JV profitability, I understand this was attributed to the reduced charter rates for LNG vessels as they transitioned off their previous charters. Should we anticipate similar developments impacting additional vessels within Maran or the other JVs in 2025 or 2026? And what should we expect, I mean, from the shipping JVs in terms of ability of financial performance for next year? If you can shed some light on that.
Thank you for the questions. We think, again, 2023 was really an exceptional year. But if you go to 2022 and you look at the Maran performance, it was more or less in line with the 2024 results. So we hope that market is becoming stronger going forward. And that should really reflect to increase our profitability in this specific joint ventures because it has some vessels that they are in a shorter-term time charter contract. So we believe that things will stabilize or it's going to be on the upward trend. And as I said, this is what they've been performing back in 2022. So we don't see any kind of concern. If the other joint ventures, we believe that we are fine and they are still in the long-term charter contract.
And are there any additional vessels, I mean, within Maran or the other JVs that would come off their current charters in 2025, May 2026?
Not really. We believe that most of the vessels have gone through that kind of sort of short-term rotation. So even if they did, the rate should be more or less in line. But nothing that is expected to be more, maybe one or two coming out. But not necessarily that they will be chartered at a lower rate. Just we have some two to three vessels that were part of that and they came out. Again, if one or two vessels come out and the market is strong, it might be a good thing for us to lock them on another short-term rate. But I don't see that as a factor that will impact our overall performance. You have to think about the big picture of Nakilat. We are deleveraging our balance sheet.
And every single company, including Maran, they have a project finance, paying down the debt, and these vessels become more competitive in a break-even point of view. So that's usually naturally mitigates the potential risk that's coming their ways, even if the market rate is being lower. So hopefully, if we wish, our wishful thinking is market stays stabilized, be a little bit higher, and then deleverage, the cost of interest is becoming less, more cash is available, and hopefully, we do have better performance.
That's clear. My second question is related to the dry docking activity. I believe, if I heard you correctly, you mentioned that dry docking activity would pick up in 2025 versus 2024, which might be positive for the shipyard JV. But how will that impact the profitability and utilization of your own vessels again?
Dry dock activities, okay. You have to understand our utilization of our wholly owned vessels is not impacted by dry dock activities, okay, because they are in the long term. So during dry dock days or cycle, we get paid. So that's very important to distinguish between both where some vessels are in a very short-term contract, they get off, and then they have to go for a dry dock, similar to what we have in our joint venture with Maran. But the other one, the wholly owned, it doesn't matter. They've been in 2023 through dry dock. We had even in 2024, almost 12 LNG of our vessels went through dry dock. As you can see from our financial results, they were not impacted. Okay?
And the activity in the dry dock is that we're thinking is towards the end of 2025, the cycle starts slowly to pick up into 2026 and 2027, etc. And then the Qatar Shipyard should really perform as very close to what we have seen in 2023. And as I said also as well, we have something called Qatar Fabrication. They are being set up to build platforms and offshore structure for the NFE, which should really start to see some numbers coming in 2025 and 2026. So we believe the medium term and the long term is very promising for us. That's very clear. My last question is related to the company's divestment strategy for all the vessels. I believe you mentioned in the presentation that the total fleet is expected to reach 114 once all the vessels are delivered.
Should we expect any divestment during this period up until 2030 or 2031?
Well, it always depends on the business opportunity, to be honest with you. If something comes to us as we are delivering new tonnage and there's an opportunity to really do that, maybe. But honestly, nothing is on the table and nothing is off the table. We always look at what is the best for us. And usually, when we really let go of some capacity, we add some other capacity somewhere else. But as of now, this is how we are looking at it. But it always depends on the market as we move forward and we start receiving some of the vessels. But as I said, we as a company, we are here and we're going to be here for the long term. And the expansion of the NFE is not really deterring us from capturing very lucrative opportunities as they arise.
So we have the balance sheet, we have the long-term contract, and the cash flow that allows us sometimes to be opportunistic in our securing some additional kind of opportunities to leverage the dynamic of the market. So yes, we're always looking at things to optimize our structure and our fleet. And that should be by adding or sometimes removing if it is necessary. But that's something that depends on the market, obviously.
That's very clear. Thank you. Thank you very much.
As a reminder, that's star followed by one on your telephone keypad to ask a question today. And the next question comes from Santosh Gupta from Drewry Maritime Financial. Santosh, your line is open. Please go ahead.
Thank you. So my question revolves around the environmental regulations. How are you seeing the impact of FuelEU Maritime regulations? Yeah. Thank you.
Hello, Santosh. I think I will take this question. First of all, as you know, Nakilat is compliant with international maritime regulations, so for sure, we'll ensure to comply with regulations. We'll follow any new mandate and the fleet, and we'll have very top-notch technical team and operation team who task force internally to ensure that we manage. For example, you can see we order four LPGs who carry ammonia, so we see the trends. We follow the trends, and we will ensure to comply either any type of ship that we have because we have steams, we have DFDEs, we have Q-Maxes. We have fully diversified fleet, full access to the market in terms of market intelligence, so we have done in the previous 10 years back a conversion with RasGas in our shipyard when not many people at that time were involved in the fueling.
So I think Nakilat will ensure to find the best optimum solution. At the moment, many things are on the table for studies. Nothing has been proven for long-term, a fixed solution for everything. But for sure, we'll ensure compliance with IMO regulation, and any mandates or updates will happen on the law. I hope I answered your question.
Sure. Thank you. That's it from me.
The next question comes from Fraser Harle from aberdeen. Fraser, your line is open. Please go ahead.
Hi. Thank you very much for taking the question. Maybe going back to something that was touched on a wee bit earlier about opportunities. I was wondering now with the shift and who's in office in America, and to my understanding, a lift on kind of export of LNG, kind of what sort of engagement you've seen from the projects going on there for further vessels required. I know that QatarEnergy is a shareholder in some of the larger projects over in America. So any sort of comments you could provide on opportunities there, when you think that they might arrive, and the sort of, I guess, the capacity on the balance sheet, really, given sort of the timing for that would be really helpful. Thanks.
Yeah. Maybe I.
Yeah, go ahead. Go ahead.
Okay. First of all, you have to understand that, as we have seen in our presentation and we spoke, there is a massive growth of LNG liquefaction capacity that will come after 2030 and later. So worldwide, we will see a huge growth of LNG, which requires, obviously, LNG shipping requirements. This is the first. Secondly, you can see also that from the United States, they have unfrozen this kind of permits, which potentially you will see more LNG to come from the United States in the following three to five years. This is another positive for LNG shipping industry because we are an LNG ship owner. Because more LNG from the United States means more ton miles for the global market. So I can tell you, as Nakilat, the fundamentals are very strong.
Definitely, in the following five to 10 years, you will see many opportunities for us to grow because the shipping grows. We are the world's largest LNG shipping. But definitely, we have a big order book at the moment. We need to ensure that all the ships will take on time and on budget. But at the same time, we are on the market to leverage our market intelligence, financial strong balance sheet, and to ensure that we are for the right opportunity attracts. Now, I don't know if Hani wants to add something on that.
Yeah. I think we need to remember that we currently, under our global shipping joint venture, we have four vessels that trade in the international market. Actually, almost three of them that they've been for the last many years going back and forth between the United States and somewhere in Europe and some other areas. So Nakilat is already known not only regionally and locally, but known internationally by some of the largest producers about the ability and the capabilities. And they tried us, and they are very quite happy with what we do. So I'm sure Nakilat will be there, and they can be there at any time, at any moment, to leverage any new capacity that comes in and take it into consideration for that opportunity as they arise.
So I think, yes, if anything comes from anywhere in the world, we should really look at these opportunities and leverage on that. Okay?
Okay. Brilliant. Thanks very much.
No further questions at this time. But as a final reminder, that's star followed by one on your telephone keypad. We have a question from Saugata Sarkar from QNB. Saugata, your line is open. Please go ahead.
Hi guys. It's Bobby from QNBFS. How are you? Great set of results. I just had a quick question. What's your view on the global minimum tax and if that applies to you, especially given the fact that the U.S. has effectively pulled out of the deal? Could you please comment on that? Thank you.
Hi, Bobby. Thanks for your question. Yeah. I mean, the global minimum tax, we don't see it having a significant impact on Nakilat. As you know, the OECD rules provide a shipping exemption. So based on that, we do not see any significant impact on Nakilat and its financial performance. Of course, we are observing and monitoring this closely and waiting for the final announcements from Qatar to come out. But as per the OECD rules, we don't see a significant impact at all on our performance.
Okay. Great. Thank you.
The final group of questions, that's star one. We have no further questions, so I'll hand the call back to the management team.
Okay. Thank you all for taking the time to attend today's earnings conference call. We deeply value your continued interest in Nakilat and your engagement with our journey. As we said before, please reach out to Fotios and the IR team. We're here to ask and to answer all your questions. And hopefully, any comments we'll take it internally and we'll try as much as we can going forward to provide further information based on the feedback we receive from you. Thank you very much, and looking forward to seeing you in person in the near future.
This concludes today's call. Thank you very much for your attendance.