My

Linh Vu: Good morning and welcome to Höegh Autoliners' fourth quarter presentations. My name is My Linh Vu, Head of Investor Relation. And with me today, we have our CEO, Andreas Enger; and our CFO, Espen Stubberud. We will walk you through the business and financial updates of the last quarter. [Operator Instructions] And with that, I will leave the stage to you, Andreas.

Andreas Enger: Thank you, My Linh. Yes, welcome to a presentation of another strong quarter from Höegh Autoliners. I'm going to take, go through some highlights a little bit on the market before Espen Stubberud, for the first time, will present our financials. $181 million of adjusted EBITDA makes up another very good quarter. $138 million of net profit, a gross rate above $100 marking a period of record-high rates; dividends of $90 million for the fourth quarter, which makes our total dividend payments in 2024 up to $841 million or $4.4 per share.

The Q4 number in isolation is consistent with our dividend policy of distributing surplus cash at -- on a target cash balance. It's strongly impacted by a accelerated delivery of newbuilds, which we believe is quite good for us. We have had 3 newbuilds delivered in the quarter. And with the newbuild program, we are now paid a total of $280 million in equity installments on newbuilds, which obviously goes out of our dividend capacity. We only have a net of 11 million left, meaning that we are fully funded on our newbuild program.

We remain committed to our dividend policy of not accumulating cash. And we are -- have a strong belief in a high dividend conversion also going forward. Equity ratio, still very strong but somewhat down, obviously, from adding vessels and debt with the 3 newbuilds; and also making us now having 4 of the new Aurora class vessels in operation and operating very well, which is a strength for our future. The agenda of this is the normal, a brief market, commercial update; touch on capacity, sustainability; before we go into financial update and outlook. On the market side, we have had continued strong momentum, with growing volumes out of Asia.

We've continued to increase our contract share. And it's in Q4 approached 80%. We've had record-high contracting development in the quarter. And we also have the highest net rate on record, strengthened by also a strong contract portfolio; slightly -- slight reduction in high and heavy, breakbulk coming out of the very high contracting activity also on new vehicles. Our contracting situation, our contract backlog has been substantially transformed through the quarter.

We now have contract coverage above actually our 80% target both for 2025, 2026. We have a average duration of contracts of 3.5 years. And I also want just -- because there's a little bit confusion on our terms of contract and spot, where our definition is fairly strict in the sense that, unless we do have pricing and volumes committed with clients, we call it spot, meaning that also a lot of our spots are covered by rate agreements and something that you could call contracts. I think it's also important to note that 60% of what we define as spot is high and heavy and breakbulk cargo, which is cargo that traditionally held -- holds sort of high, strong rates through the cycle. But I think the most important thing here is a total transformation of our contracting backlog and portfolio fully in line with our strategy, in the same way as we held back in the beginning of the cycle to make sure that we were able to reprice appropriately.

We're now at a stage where we believe that having a stronger backlog; and having more, relying more on longer-term contracts is a commercially sound way to balance our portfolio. And we've done that, as I said, more successfully this fourth quarter than I think any time in the history of the company. Market-wise. And I think it's the same history as always, steady growth in deep sea, new car volumes, driven by Chinese exports. I think if we should make one market comment for the quarter or actually into this year is that we have been somewhat surprised by the speed and the ability of our Chinese customers to shift their product mix from EVs to hybrid cars in response to tariffs in Europe; just I think illustrating some comments we made earlier, that it seems more likely that those tariffs will delay the electrification of the European car pool rather than necessarily curbing Chinese exports, which I think you'll already see in the automotive numbers.

And so that's a -- maybe a sort of change on the market side. Although it doesn't affect volume, it does affect the sort of the products that are actually onboard our vessels. High and heavy is stable in 2025 in our expectations. We see growth trends. It is, continue to be an important segment for us.

We have taken down the share slightly because of the attractiveness of the automotive market. We are adding vessels with market-leading high and heavy and breakbulk capacities, and it's obviously a strong priority on our commercial activities. Capacity is we are now in the middle of sort of the delivery cycle of newbuilds. And 2025 is going to be the year with most deliveries. We have a robust position in the sense that we have come quite far, with 4 of our vessels in operation; 3, 4 more coming within -- 4 more coming within a little more than the next year.

We are getting our capacity renewals in vessels that operate extremely well. We also see that the kind of slightly more balanced market is affecting charter rates, which we generally consider as positive for our operation. We have a strong contract backlog. We've had several years now where we've been unable to use the charter markets to balance our system, which comes at a cost. And we're now seeing an evolution that allows us to a larger degree to use the charter market also to balance our system, which is positive for our operating structure and our ability to deliver a strong product.

We're also starting to see the impact of our strong commitment to reducing our carbon emissions. Obviously this is -- it requires CapEx. It comes gradually, but we've now -- we're now seeing a substantial decrease that will continue and accelerate with delivery of newbuilds. And the newbuilds in the Aurora class is a very important part of that, having 58% lower carbon emission out of yard than an average car carrier and having the potential going all the way to 0. And we will get the first 0-carbon capable vessels already in 2027, but it is important to say that we also have a comprehensive technical upgrade program.

And one of the -- and we've had -- actually we had 11 dry-dockings in 2024, all covered or including substantial technical upgrades for fuel efficiency and economy and carbon footprint reduction; obviously also some CapEx associated with it that is, with our dividend policy, taking out of our dividend capacity, but it's also a situation where we sort of have taken large investments in 2023, 2024. And 2025, we will only have 6 dry docks, so we are sort of coming into a slower pace, but on the environmental side, we're still -- every dry-docking is covering also a substantial technical upgrade to improve performance and fuel consumption and emission on our existing fleet. That ends the first part. And I will then leave it to Espen to take us through the financials in some more detail.

Espen Stubberud: Yes.

Thank you, Andreas. And good morning. Turning to the financials. Our volume in the fourth quarter came in at 3.5 million CBM. Our volume in '24 has been relatively stable.

Comparing to the fourth quarter '23, volumes were meaningful higher, but that was before we decided not to transit through Red Sea. So we've basically been sold out this year, and capacity have constrained any further growth. Looking at the rate side. I think, when our market started to tighten back in '21 and going into '22, spot pricing went up quickly, but the key driver for increased net rates over the last couple of years have been renewal of our contract backlog. And as Andreas already mentioned, we have record-high net rates in the second half of $86.7.

We -- so the top line is driving our EBITDA and net profit. We've seen increased revenue throughout the year, which is also then reflected in the EBITDA result; very stable operating result; and also a stable EBITDA margin just above 50% coming to the end of the year. Net profit is a bit more fluctuating. And then it's worth reminding that, in the fourth quarter in '23, we had gains from selling 1 vessel included. And in the third quarter '24, we had 2 vessels included in the net profit, which is explaining the quarter-on-quarter drop of 28% into the fourth quarter.

Turning to the EBITDA waterfall. It's relatively flat, as already mentioned. We saw some increased revenue from the second to the third quarter based on increased rates and then higher revenues based on higher volumes mainly into the fourth quarter. We've seen somewhat lower fuel prices and also lower consumption, which has also had a positive impact to EBITDA. We have a robust balance sheet.

Net interest-bearing debt was up $326 million as a consequence of the 3 Aurora vessels that we took delivery of; and also paying out dividend, as Andreas mentioned. Still our net debt-to-EBITDA is below 1x, and equity ratio at healthy 56%. We ended the year with $208 million in cash. Then we also have undrawn facilities of $211 million, so total liquidity reserve is $419 million. Fourth quarter, another strong quarter with strong cash generation.

We had $184 million from operating activities. Then we had a negative $9 million on -- related to dry-docks and vessel upgrades. Then we have negative a $21 million related to investing activities, which was installments in newbuilds. We have the high CapEx, with $230 million in the quarter paid for newbuilding installments. And we drew $209 million in debt.

Then we had normal mortgage and lease payments. And we paid out dividend of $245 million in the quarter, which included the net proceeds from selling of 2 vessels. Turning to the balance sheet. Quarter-on-quarter, it has increased by 4%. We have added the 3 newbuilds.

And worth pointing out that the 2 leased newbuilds are on the balance sheet as owned vessels and with interest-bearing debt. Interest-bearing debt was up $198 million. Adjusting equity book value to the market value of our fleet, we get the value-adjusted equity per share of NOK 138. And as already mentioned, we are very happy to -- paid out $841 million during 2024 and another $90 million to be paid out in March. Back to you, Andreas.

Andreas Enger: Yes. Thank you. Then the only thing remaining is some brief comments on the outlook, starting with repeating. Strongest -- we have now the strongest contract backlog ever, following a very strong contract-signing activity throughout 2024 but particularly in the fourth quarter. The volume in Q1 is expected to be in line with recent quarters, following what we call sort of a normally -- normal seasonal slowdown in the beginning of the year.

And we expect volumes to gradually pick up also with new capacity and new contracts coming into operation. Delivery of newbuilds will gradually reduce the capacity pressure in our segment, but we expect it, the market, to remain strong. And we have access to more volume than we can carry in our key trade lanes. We monitor the Red Sea situation continuously, and we do maintain contacts with all our relevant stakeholders. We are still seeing uncertainty in that situation that we do not really see an immediate return, but we -- as I said, things are developing and we're following it carefully.

Lots of focus on geopolitical uncertainty and threats of new tariffs. Our direct exposure to the tariffs under discussion is fairly limited, but it's also important to obviously say that we are a business with our main purpose of facilitating global trade. And we are strong believers that, that adds value; and are obviously exposed to dramatic changes in global trades, but we are not seeing that -- seeing those signs for that. And I don't think it meaningful to speculate about some of the processes and discussions going on. And as a result of, as I said, the sort of seasonally slow start to the year, which we also saw last year, we will have a -- expect a Q1 result which is slightly below same quarter last year.

So that concludes our presentation, and we are ready for questions. My Linh?
A - My

Linh Vu: Yes. We have received a few questions during the webcast. And I can see that a lot of question actually is referring to the same topics, so I can try to summarize these questions. So the first question is about capacity and fleet planning.

Do we have any plan for further newbuildings? Or do we have any plan for sales of ships in the future as the newbuilding is coming in?

Andreas Enger: I think -- I mean, first, I think it's important to say that this part of our business -- we continuously assess our fleet structure and our assets, yes, but I think we have also been quite clear that we have a newbuild program adding 12 vessels; market-leading capacity; also, I think, market-leading insights relative to our current operations. We are quite satisfied with that, so we have no immediate plans of additional newbuilds. I think it is fair to say, if you go back to the charter and the statistics, that we have been successfully able to sell some vessels in a strong market. I think, with newbuilds coming and with the market balancing, we do not expect lots of opportunities for that, but I think we will always -- we will obviously always review opportunities. But we actually do not have immediate plans, neither on additional newbuilds nor on additional vessel sales.

And -- but we do have, I think, as you commented on, an intention to work more actively with the charter market. My

Linh Vu: Thank you, Andreas. And the next questions is about the contract and contract renewal. How is the sentiment of renegotiating contracts, long-term contract, with customer these day? How fixed is the volume? And what is the risks to the long-term contracts we recently signed?

Andreas Enger: I've been extremely pleased with the sentiment in our contract discussions because we are discussing -- we've had very good dialogues and processes with strong OEMs on major trade flows, where their main interest is to get the robust cover for their transportation needs. We've had the benefit and the pleasure of taking on new volumes for new OEMs who either have new needs in new trade flows and also some that are less satisfied with existing arrangements and want new suppliers.

So we've been able to build -- I think we've renewed almost all the contracts which were up for renewal, in good processes. We've also added contracts from beyond that on several important trades. We've been able to select and focus on contracts that fits well in our trade system, so I think in overall we are very pleased with that. And there is a strong -- we've seen strong interest, in our customer base, to basically create an industrial-strong transportation product. And there are various degrees of commitments in contracts, but generally we've been able to achieve more balanced contracts, more specific commitments than we've had before, so we are confident that we have a stronger contract backlog and a contracting base and contract quality than we've actually ever had.

My

Linh Vu: Thank you, Andreas. And the next questions, next sets of question is actually related to the macro pictures. There has been some signs saying [indiscernible] Red Sea opening, Red Sea may be opened earlier than expected. And the next question is basically about what will be the effect of Red Sea opening for us as business.

Andreas Enger: I think that is difficult to say because in some ways it would add obviously more capacity and take away some capacity strains, but I think, with our current contract portfolio, it would improve the efficiency in operation.

And it would actually allow us to take more volume in cargoes, so I think we are on the balance saying that, I mean, we would really want the Red Sea to open because it will improve the trade flows and the efficiency of our system. We think we have a contract situation and a contract volume that we will -- it will increase our ability to carry cargo. It will obviously also change the market balance over time and add to that, but we believe in -- that would be a good thing for us. My

Linh Vu: Thank you, Andreas. And the next question, about tariff, are just to resonate to what Andreas have been already saying in outlook sessions.

Of course, tariff is in general not good for business, but so far, our exposure is limited. And we continuously monitor the situation. The next questions is about the dividend policies. This is questions coming from our analysts, Petter Haugen. What does it takes for the dividend policies to change? How do you see long term with our dividend policy?

Andreas Enger: No, I don't -- I mean we don't really see any reason to change the dividend policy, but -- and I think it's important to say -- see where that comes from.

As I said, we have created the balance sheet. And we have a financial structure on our newbuild program, so we do not have any CapEx plans that are not fully covered by committed financing. All of that financing has duration beyond 2030. A lot of it has duration 5, 6, 7 years beyond that, so we have a very strong, very competitive financing structure, a lot of it also fixed at fixed income rates at times that has been -- are attractive relative to the current situation. So we have a financial situation that we believe is very robust.

We do not have any additional CapEx plans. And we have taken in the last couple of years 280 million out of our dividend capacity to pay installments on newbuilds. It's 11 million left, so I think we have both -- we are both confident that we have a strong dividend capacity and that we have a financial structure and, most of all, have fully funded CapEx plans that allows us to continue with a very high conversion ratio. So we do not really foresee any change in our dividend policy. You will see quarter-by-quarter fluctuation given that we have set a target for our cash balance and basically said that we pay out surplus.

We don't want to accumulate cash, and we pay out surplus cash. There will be quarters like the fourth quarter where we take -- or I don't think there will be another quarter where we take delivery of 3 vessels in the quarter actually but where we have accelerated newbuild deliveries. And on top of that, I think we basically also have spent almost 10 million on dry docks. We've had an intensive dry dock season. And we have an ambitious program on dry-docking, but again there was twice as many dry docks in 2024 than we will have in 2025, so that's also something that is levering off.

We have had a peak on dry dock activities in 2023 and 2024, which is sort of materializing in -- or also adding newbuilds and selling old vessels is converting into a slightly lower activity in the next couple of years. So no. We have a -- we are comfortable with our dividend policy. We are -- I mean the construction of the dividend policy means that there will be variations from quarter to quarter because it is cash-driven, but we're still committed to it. My

Linh Vu: And yes, I think that these are the main questions we received for the webcast.

And of course, if you have further questions, feel free to send an e-mail to our IR, to our investor relation mailbox at ir@hoegh.com. And we will get back to you. Thank you very much for turning on and watching, and we look forward to see you next time.